The Cigna Group

Ladies and gentlemen, thank you for standing by for the Cigna Group's third 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 we'll review procedures on how to enter a 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 Ralph Jacoby. Please go ahead.

Great, thanks. 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 third 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, including 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 principal 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. Before turning over the call, I will cover a few items pertaining to our financial results. In the third quarter, we recorded an after-tax special item charge of $171 million, or 58 cents per share, for charges primarily associated with our Medicare litigation settlement. We also recorded an after-tax special item charge of $19 million, or 6 cents per share, associated with the sale of our international life accidental and supplemental business to Chubb. and an after-tax special item charge of $9 million, or 3 cents per share, for integration and transaction-related costs. As described in today's 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 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'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining today's call. We had another quarter of strong performance, and we remain on pace for a year of sustained momentum in 2023. With the strength of capabilities across our health services and benefits platforms, we are continuing to deliver on our mission for those we serve as we continue to grow our companies. Today, I'll highlight key drivers supporting our performance during the quarter, our priorities and opportunities for expanding our impact and continuing to advance our growth, and our view of 2024, including some of the expected tailwinds and headwinds. Brian will share additional perspective about our third quarter performance, as well as our outlook for the rest of the year. So with that, let's get started. In the third quarter, we delivered $49 billion in total revenue. adjusted earnings per share of $6.77, continued strong cash flow generation across our franchise, all while continuing to reinvest back in our business to fund growth, expansion, and ongoing innovation. These results are strong, and they show how we're continuing our track record of strong, sustained performance. With our Evernorth Health Services and Cigna Healthcare Benefits Platform, we're executing well in a dynamic period. and fueling customer growth with our deep clinical expertise, innovative solutions, and breadth of market-leading capabilities. Our results during the quarter demonstrate how we're continuing to deliver on our commitments for our customers and patients, our clients, as well as our shareholders. We are raising our full year 2023 outlook for UPS, customer and revenue growth, as well as cash flow from operations. With our continued affordability initiatives, we are also now guiding to an improved medical care ratio for 2023. Our businesses are performing well, and we now expect to deliver a adjusted earnings per share of at least $24.75 for full year 2023. Now I'll turn to how we are working to sustain our growth and impact. With our durable strategic growth framework, we harness complementary capabilities from across the Cigna Group. We have scaled mature businesses that drive foundational growth and businesses in faster-growing market segments that contribute accelerated growth. We fuel additional growth through cross-enterprise leverage as we bring together the power of our talent, client relationships, differentiated capabilities, and innovation from across our company. Next, I'll share how we have deliberately shaped our portfolio of businesses that are well-positioned for today's market needs. Additionally, I highlight some of the ways we continue to drive our sustained success as we look to the future. Evernorth Health Services continues to demonstrate a proven ability to create value with differentiated pharmacy, care, and benefits capabilities. We had a strong pharmacy benefit selling season for 2024, and our teams are already actively engaged into 2025 season. We are continuing to innovate and provide our clients with expanded choice as well as market-leading value. Many of the clients we serve leverage Evernorth's unique suite of solutions to support the needs of their customers. Centene is one new relationship we discussed before, and our teams have been collaborating effectively on implementation work, which is going very well as we prepare to serve approximately 20 million Centene customers beginning in January. We have a leadership position in addressing a substantial market opportunity with the expanded wave of pharmacological innovation that is reshaping the healthcare landscape. Many of the treatments that are coming to market are pressuring affordability with high list prices from drug manufacturers. At Evernorth, we are driving better experience, clinical outcome, and affordability for patients and clients given our deep clinical expertise, strong relationships with pharmaceutical manufacturers, as well as with physicians. The surge in demand for the GLP-1 drug class for weight management offers a good example of how we provide value. Our EncircleRx program is an innovative solution that addresses the complexity and costs associated with obesity, diabetes, and cardiovascular disease, a prevalent combination of conditions that's also known as cardio-diabesity. Drawing on Evernote's clinical expertise, breadth and depth of data, and analytical insights, EncircleRx guides patients to the most effective care and helps improve affordability for clients. Beyond the GLP-1 drug class, we expect to see many different manufacturers bringing forth a growing number of new drugs, including gene therapies, additional treatments for cancer, as well as others for Alzheimer's and other conditions. We are uniquely well-positioned to make medicine more accessible, affordable, and clinically coordinated for those we serve, as well as to continue to drive growth for our company. Now, in our international health business, another foundational business within our portfolio, we are supporting continued growth in target markets and expanding our portfolio solutions. During the quarter, for example, we introduced a new affordable health plan customized specifically for the globally mobile seniors population. Additionally, in the foundational portfolio, our U.S. commercial business continues to harness cross-enterprise leverage capabilities for the benefit of their clients. As we look forward in 2024, we know that in addition to affordability, one of the top priorities for many employers is expanding access, coordination, and overall effectiveness of behavioral health programs and solutions. To benefit our commercial clients and customers, we are leveraging innovations and capabilities that exist in our accelerated businesses. For example, stress, anxiety, and other mental health conditions create challenges for employers who need a healthy, engaged workforce, and we continue to expand the behavioral health solutions we offer through Evernorth care businesses. One of the newer solutions is CONFIDE Behavioral Health Navigator. It's resonating well with clients, helping us both retain and win new business. CONFIDE is guided by a proven model of a more proactive, high-touch service level, effective monitoring, and targeted follow-up engagement. We will launch additional enhancements next year to provide digital tools that are personalized to the needs of individual patients that improve matching them with the right therapist and also offer greater convenience and accelerated scheduling opportunities. Additionally, as we continue to advance our focus on vitality, including our latest research addressing the capacity of individuals across multiple dimensions, it reinforces that mental health, for example, is one of the most significant drivers. We know that adults without significant mental health challenges are 10 times more likely to have high vitality. Now, if you're an employer, this means higher engagement, higher productivity, lower turnover, as well as lower medical costs. In addition to addressing growing behavioral health needs in Evernote Care, we're also acting as a positive disruptor in care delivery and care management to improve experience, outcomes, and access from a patient's perspective. We're developing innovative care models and clinical programs with continued investments, for example, to expand our digital and virtually-led capabilities while making sure they are coordinated and connected with physical sites of care. For example, we continue to innovate and build on MDLive's leading virtual care platform and plan to further accelerate new capabilities in 2024. Turning to another accelerated growth business, I'll touch on specialty pharmacy. Last quarter, we talked with you about Acredo's extensive clinical expertise and the assets that provide us with a competitive advantage in this fast-growing specialty pharmacy market, which continues to be an important source of growth for our company. We also have additional capabilities contributing to our leadership and growth opportunities in this space. Acredo focuses predominantly on supporting patients who receive specialty drugs in their home. Sometimes, these complex medications also need to be administered in physicians' offices or hospital outpatient settings. Today, we support providers and health systems with our CuroScript specialty distribution capability, and we continue to see meaningful growth in this aspect of our specialty pharmacy services. Finally, an additional accelerated business is our U.S. government portfolio of services. We are pleased with our recent Medicare STARS quality rating, showing that we, again, have over two-thirds of our members in four-star or higher plans. This is recognition of the value we provide the seniors in supporting access as well as high-quality care. With open enrollment now underway for both Medicare Advantage and the individual exchange business, we are balancing competitive benefit offerings, targeted market expansion, and pricing discipline activity. So to summarize, we are performing well across our diverse enterprise, and these highlights reinforce Our strategic framework guides us in accelerating innovation, expanding client relationships, and continuing to broaden our reach. Now, as we look to 2024, we expect another strong year of performance for the Cigna Group as we build on momentum with EPS, revenue, and cash flow growth. We'll share more detailed guidance with you on our fourth quarter earnings call, as we always do. The tailwinds and headwinds we expect in the year ahead remain largely consistent with our prior conversation. and we continue to be confident in our ability to deliver adjusted EPS of at least $28 per share in 2024. Notable tailwinds include growth-related contributions, including the full launch of Centene, which starts on January 1st, a growing positive impact of biosimilar contributions, and an improved margin profile in our individual exchange business. In terms of headwinds, we will continue to make strategic investments across our portfolio businesses to drive sustained innovation, as well as position ourselves for long-term growth. Now I'll just briefly summarize our performance for the quarter. We had another strong quarter, and it builds on good momentum throughout the course of the year. We delivered adjusted EPS of $6.77, as well as strong customer, revenue, and cash flow growth. Our company continues to deliver for the benefit of those we serve, And we have been able to increase our outlook for adjusted EPS to at least $24.75 for full year 2023. And we expect to deliver adjusted EPS of at least $28 in 2024, which is consistent with our past discussions. We are well positioned with a clear, durable strategic framework that leverages the power of our differentiated services within our benefits portfolio and services portfolio. And now Brian will share additional perspectives about our performance in the quarter and our outlook for the rest of the year. Brian?