The Cigna Group

Ladies and gentlemen, thank you for standing by for the Cigna Group's second quarter 2023 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 will 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 zone. As a reminder, ladies and gentlemen, this call, including the question and answer session, is being recorded. We'll begin by turning the conference over to Ralph Jacoby. Please go ahead.

Thank you. Good morning, everyone. 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, the Cigna Group's Chairman and Chief Executive Officer, Brian Ivanko, Chief Financial Officer, and Eric Palmer, President and Chief Executive Officer of Evernorth Health Services. In our remarks today, David and Brian will cover a number of topics, including our second quarter financial results and our updated financial outlook for 2023. Following their prepared remarks, David, Brian, and Eric will be available for Q&A. As noted in our earnings release, when describing our financial results, we use 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 the CignaGroup.com. We use the term labeled adjusted income from operations and adjusted earnings per share on the same basis as our principle measures of financial performance. In our remarks today, we will be making some forward-looking statements, including statements regarding our outlook for 2023 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. Regarding our results in the second quarter, we recorded after tax special item charges of $5 million or one cent per share for the integration and transaction related costs. Additionally, please note that when we make perspective comments regarding financial performance, including our full year 2023 outlook, we will do so on a basis that includes the potential impact of future share purchases and anticipated 2023 dividends. With that, I will turn the call over to David.

Thanks, Ralph. Good morning, everyone. Thanks for joining our call today. For the second quarter, again, we delivered a strong performance fueled by continued growth across our diverse portfolio of businesses. Today, I'll review key strategic drivers contributing to our momentum and why we believe we're well-positioned to sustain our growth as we continue to support the health and vitality of those we serve with our differentiated solutions and capabilities. Brian will cover additional details about our financial performance in the quarter, and our 2023 outlook. As part of our ongoing efforts for you to hear more from members of our leadership team, Eric Palmer, President and Chief Executive Officer of Evernote Health Services, will be joining our call and is available to take your questions. With that, let's get started. In the second quarter, we delivered total revenues of $48.6 billion, adjusted earnings per share of $6.13, and cash flow from operations of $2.5 billion. We're pleased with our performance overall during the quarter and through the first half of the year. With focus on affordability and innovation, we are continuing to strengthen our competitive position and grow our businesses. In Ever North Health Services, we saw another strong quarter of our market-leading pharmacy, care, and benefits portfolio. Express Scripts, our pharmacy benefits business, harnesses our deep relationships, extensive clinical expertise, and is delivering innovations and innovative solutions for those we serve. We've long been a leader in supporting access to prescription drugs, and to further enhance our efforts, we took a series of actions in the quarter, including launching co-pay assurance to support further affordability for patients, and ClearCare Rx to provide our clients with broader choice. We also introduced Independent Rx, which is a first-of-its-kind support program for rural pharmacists that recognizes the critical role they play in improving access for millions of Americans. We will continue to lead the way through the current environment of elevated legislative and regulatory activity, and we're encouraged by the positive recognition of our work to make safe, effective, and affordable access of prescription drugs within reach for millions of people who need them. Our client retention is also strong, and we're continuing to build and expand new relationships. For example, we're making good progress for our implementation with Centene, which begins in January of 2024. Our teams are working collaboratively, and we are on track as we prepare to further improve affordability in serving 20 million Centene customers. In the quarter, we had strong growth in Accredo, our specialty pharmacy business. In a moment, I'll profile the deep clinical expertise and capabilities that make Accredo a differentiated leader in the space. Turning to Cigna Healthcare, we delivered another quarter of organic customer growth, reinforcing how well our consultative approach and capabilities continue to resonate in the market. Our U.S. commercial business continues to build momentum. We've had sustained success with commercial customer growth outpacing the overall market, and 2023 is shaping up to be another very strong year for this business. With our affordability initiatives and deep consultative sales approach, we're delivering highly competitive total cost of care for employer clients, as well as providing programs supporting healthy, engaged workforces that they need. In U.S. government, our Medicare Advantage business is achieving above-market customer growth with high-quality, affordable plans and targeted investments that we continue to make to further strengthen our network and offerings. In our individual exchange business, we will continue taking a focused approach by engaging customers to improve health outcomes and managing risk. in the expanding population we serve. In the quarter, while our medical care ratio is generally in line with expectations, we did have an increase to our 2023 risk adjustment payable. Relative to the risk adjuster impact, we expect this to be a 2023 event, and we've already taken actions for 2024. And in our international health business, we drove continued innovation and growth in target markets with solutions for the global mobile population and employees of multinational corporations as well as intergovernmental organizations. Overall, our second quarter results show that the Cigna Group is performing well with underlying strength in our complementary businesses. We believe we are well positioned to continue growing our company and delivering on our commitments. With the strength of our results, we are increasing our outlook for full-year revenue and customer growth as well as cash flow from operations And we are reaffirming that we are on track to deliver adjusted EPS of at least $24.70 for full year 2023. Now we'll talk about how we are working to sustain our momentum with our differentiated and diversified capabilities and our durable strategic growth framework. Our framework guides us in continuing to respond to customer, patient, and client needs, as well as capturing growth opportunities within our foundational businesses and our accelerated growth businesses. Additionally, we harness the power of our talent, client relationships and partnerships, as well as an expanding technology portfolio for cross-enterprise leverage. Technology increasingly provides us with opportunities to accelerate innovation and growth. Artificial intelligence and machine learning, for example, are capabilities further enhancing ways for us to support patients and their clinical care teams, as well as drive additional efficiency initiatives. Today, I'll talk more about one of our accelerated growth businesses, Accredo, our flagship specialty pharmacy, where we have a competitive advantage in an area of growing need and opportunity. Earlier this summer, we welcomed a group of investors to Warrendale, Pennsylvania, at one of our Accredo clinical care sites. The visit provided an opportunity to see the breadth of our specialty capabilities and the depth of our clinical expertise. a critical driver for the positive outcomes and impact we achieve for patients requiring complex and high-cost treatments for chronic conditions. Here are a few headlines from the day in Warrendale. First, Accredo has a proven track record of growth. Nearly five years ago, when Express Scripts combined with Cigna, Accredo was approximately a $30 billion business. Today, Accredo has grown to approximately $60 billion, and in 2023, serves approximately 900,000 patients with some of the most complex conditions and needs. Acredo now represents about 40% of Evernorth's total revenue, and because of its unique strengths, Acredo has grown faster than the overall marketplace. Second, its secular tailwinds in the market create significant growth opportunities as we look to the future. Those who need specialty drugs make up about 5% of the population, and they drive more than 40% of total health care costs across medical, behavioral, and pharmacy services. This is fueling expected mid to high single-digit annual growth in what is already a specialty pharmaceutical market of approximately $380 billion. Biosimilars represent a force of change and a substantial opportunity for further growth and impact, and we will leverage them for greater affordability for clients and patients. We've long been a leader in supporting greater adoption of biosimilars as we did with the wave of generic medications when they became available decades ago. And like generics, we believe biosimilars will drive much-needed affordability improvements for those we serve and thereby create more financial capacity to pay for new pharmaceutical innovations today and as we look to the future. Third is the breadth of our clinical capabilities and use of data that further fuels precision and impact. We've built and strengthened our clinical capabilities and far-reaching operating model over decades. Within Accredo, we have therapeutic resource centers with clinical teams of pharmacists, nurse, dieticians, and social workers specializing in different disease states such as blood and neurological disorders and multiple types of cancers. Unlike many of our competitors, we directly employ hundreds of field-based infusion nurses, Today they are located within 75 miles of approximately 90% of the U.S. population. And as they care for patients inside their homes, they provide better, more coordinated, and personalized experiences, including addressing social determinants of health. With a clinical care model focused on each individual patient, we're able to provide a level of personalized clinical support that is vital in specialty pharmacy. Many of the high cost drugs for oncology Gene therapies and rare conditions are coming to market, further pressuring affordability for clients and requiring greater support for patients that take these complex medications safely and effectively. I would note drug manufacturers also recognize our expertise and capabilities, as well as our superior outcomes that we produce with our unique coordinated clinical model. Putting all this together, we're excited about the accelerated growth opportunities we have with the Credo's differentiated specialty pharmacy. and view it as a powerful growth engine for our company today and into the future. Now, stepping back to the enterprise level, I'll briefly recap. We drove strong earnings that built on our momentum from the first quarter and last year. We delivered adjusted EPS of $6.13, strong customer, revenue, and cash flow growth. Our progress gives us confidence to reaffirm our guidance of adjusted EPS of at least $24.70 for full year 2023, And we also remain on track for adjusted EPS of at least $28 in 2024. This reinforces how we are creating value for our customers and clients and leveraging differentiated capabilities to give us flexibility to continue performing well in a dynamic environment. Now, Brian will share additional perspective about our performance in the quarter and our outlook for the rest of the year. Brian?