The Cigna Group

Ladies and gentlemen, thank you for standing by for the Cigna Group's fourth 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 review procedures on how to enter queue to ask questions at that time. If you should require assistance during the call, you may 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, operator. 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 of the Cigna Group and President and Chief Executive Officer of Cigna Healthcare, 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 fourth quarter and full year 2023 financial results and our financial outlook for 2024. 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 gap 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 2024 and future performance. These statements are subject to risk 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. Pertaining to our financial results, In the fourth quarter, we recorded a net after tax special item charge of $552 million or $1.88 per share. Details of the special items are included in our quarterly financial supplement. 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 2024 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2024 dividends. With that, I'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thanks for joining our call today. 2023 was a very strong year for our company with consistent performance and sustained growth. We execute it with discipline across our businesses. We deliver it for our customers and patients, our employer clients, our health plan partners, and the others we serve. And with our expertise and diverse breadth of capabilities, we continue to improve affordability and clinical outcomes, as well as continue our work to expand access and choice. As we look forward, we're carrying momentum into 2024, and we expect another strong year of performance and growth. Now, today I'll focus my comments on key strategic drivers of our performance last year and how we continue to evolve and advance our business to sustain our impact and growth. Brian will then walk through additional details about our performance for 2023, as well as our outlook for 2024. Then we'll take your questions. Now, before I go into our results, I want to comment on the announcement we made earlier this week. We reached a definitive agreement to sell our Medicare businesses to HCSE. We expect this transaction to close in early 2025, following customary legal and regulatory approvals. And while we continue to see the seniors market as an attractive growth market, we concluded that our Medicare businesses, while large at about $12 billion in revenue, would require sustained investments and focus and capital, as well as dedicated resources, that were disproportionate with their size within the second group's portfolios. Additionally, with Evernorth's broad high-performing service portfolio, we will continue to serve the needs of seniors and grow our business. I would note that as part of our agreement, HGSE will be served by Evernorth for continued services for the customers we are selling. Additionally, we are expanding the reach of Evernorth's portfolio and see significant continued growth opportunities in government services, including Medicare. Now, as we consider the performance of our Medicare Advantage business in 2023, in the fourth quarter, results were in line with our expectations. And for the year, we balanced high-quality and competitive benefits offerings, continued target market expansion, and disciplined pricing activity. Now, with that, let's move into our 2023 headlines. Broadly for 2023, we exceeded our financial commitments. Full-year total revenue, we delivered $195.3 billion. Whole-year adjusted earnings per share was $25.09 and cash flow from operations of $11.8 billion. This performance extends our track record of delivering consistent and positive results in the face of dynamic market conditions. It speaks to the power of our franchise and the purposeful way we've constructed our company, continuing to build on the strength of Cigna Healthcare while also shaping and expanding our Evernorth Health Services platform to lead the way in addressing evolving needs in the marketplace. As a result of our focus, discipline, and sustained execution, over the past decade, we've delivered adjusted EPS growth of more than 13% on an annualized basis. In the five years since our acquisition of Express Scripts, we've achieved or surpassed every goal we established for the combined company. Through 2023, we've grown revenue by over $50 billion and met or exceeded our adjusted EPS objectives each year. And we've returned $27 billion to shareholders through share repurchase as well as attractive dividend payments. In 2023, after increasing our outlook for adjusted EPS twice over the course of the year, we had a strong finish and delivered full-year adjusted EPS that was better than expectations. In short, we've demonstrated the ability to profitably evolve our business and services that we provide over many years, which enable us to continue to deliver on our commitments and grow. Now I'll discuss our performance in greater detail. I'll start with Evernorth. In our Express Scripts business, we successfully implemented the single largest contract ever in the pharmacy benefits industry. Throughout 2023, thousands of coworkers collaborated and worked with dedication, so we'd be ready to begin fulfilling well over 400 million annual prescriptions for 20 million Centene customers starting at the beginning of this year. Additionally, Centene was amongst hundreds of additional clients that we're ready to serve in 2024, and I'm proud to say we're off to a strong start. The good work of our team has helped us meet the needs of our customers and reinforce the trust that Zantini and other clients place in our company. Another revenue highlight for 2023 is that we once again advanced industry-leading innovation. Last spring, we launched a series of innovations, including ClearCare Rx to support affordability, additional transparency, and broader choice, as well as Independent Rx to partner and enable more closely with independent pharmacies. Then in November, we went further in expanding choice for clients, funding their pharmacy benefits. With Express Script's Clear Network, we were the first to launch a scaled pharmacy network model offering cost-based pricing. In addition, our accelerated growth businesses within Evernorth fueled our momentum as well. Accelerated growth in Accredo Specialty Pharmacy and Curescript SD businesses and in our care services businesses contributed to Evernorth's strong top and bottom line results. With the Credo and Curescript SD, we are supporting patients and providers with safe and effective use of a growing volume of high-cost, clinically complex specialty drugs. We also continue building on our care service platforms to ensure patients can access care when and how they need it, while also remaining connected with physical sites of care. Our MDLive virtual platform, for example, is now available to over 60 million individuals as part of their benefits offering, and it's supporting a growing volume of care, including over 2.2 million virtual visits in 2023. Our results clearly demonstrate that with Evernorth's leading capabilities, we're a valued and flexible partner for health plans, employers, governmental organizations, and healthcare providers. In significant healthcare, we drove revenue and customer growth through disciplined pricing and medical cost management. We serve employers and individuals who trust us to guide them through the healthcare system. Our leading clinical care programs continue to support our customers and patients, equipping them with the right information and insights they need to make the best choices for their health and vitality. Our ongoing pricing and continued progress in affordability initiatives in 2023 resulted in a medical care ratio that was better than expectations. Our U.S. commercial employer business had an outstanding year with continued strong growth. This was driven by our team's continued success in strengthening our competitive position through improved affordability and leveraging our high-performance networks and digitally-enabled services as we expand care access, coordination of care, and overall value. Our individual exchange business performed broadly in line with our expectations for the fourth quarter, and with the actions we've taken, we are on track to deliver improved profitability in 2024. And in international health, we achieved another positive top and bottom line result. Our high quality and localized health solutions supported by our global provider network continue to resonate very well with the global mobile population and employees of multinational corporations as well as intergovernmental organizations. Now turning to 2024. We will sustain our growth and high performance by sharply focusing on the greatest opportunities with a well-balanced portfolio complementary businesses and a clear, durable, strategic growth framework. First, we will drive continued steady, predictable growth from our high-performing foundational growth businesses, pharmacy benefit, U.S. commercial employer, and our international health business. Our clients depend on pharmacy services, for example, and our expertise, as well as our leadership in lowering costs for prescription drugs and addressing growing needs such as the high demand for the GLP-1 class of drugs for weight loss and diabetes. We have a long history of guiding appropriate access to medications and providing specialized clinical support, and we will continue to build on these efforts with new programs, such as our EncircleRx program. We're also supporting customers in additional ways, including by offering enhanced digital tools to help them better understand the value of their pharmacy benefits. We've been successful in growing our U.S. commercial employer business for more than a decade and continue to view this as a growth market for the Cigna Group. We continue to leverage our strength in coordinating a growing number of point solutions for our clients and improving clinical outcomes for our clients. Additionally, we continue to act as a disruptive innovator for small and middle-sized client needs. Second, we will build on further momentum for our accelerated growth portfolio. Our fast-growing, scaled specialty pharmacy business and our care service businesses. We have tremendous opportunities in these large and expanding markets with our differentiated specialty capabilities, supporting patients with high-cost and clinically complex treatments. And within care services, we're advancing our capabilities in behavioral health, virtual, and home care, as well as coordinated care programs for specific conditions. In summary, for 2024, we will grow our customer and revenue base again and our earnings and operating cash flow at the higher end of our long-term strategic targets. We've increased our expectations for full-year 2024 adjusted EPS to at least $28.25. We expect our consolidated adjusted revenues to grow at least 20 percent, and we expect to generate at least $11 billion of operating cash flow. And we will continue to return capital to our shareholders, including a 14 percent increase in our quarterly dividend. Now, before I wrap it up and turn it over to Brian, I also wanted to mention the announcements we made last month about expanding roles for Brian and Eric. Brian's been a Chief Financial Officer for the past three years and will continue in that role. He will also expand his responsibilities as President and CEO of Cigna Healthcare. Eric is expanding his responsibilities as Executive Vice President of Enterprise Strategy for the Cigna Group, while also continuing as President and CEO of Evernote Services. Brian and Eric's expanded positions, as well as other leadership changes we announced, provide further clarity of our priorities and strategy, as well as the extent of reach and impact we hope that you'd have. Importantly, It also reinforces the depth of our management bench. At our investor day on March 7th in New York City, you'll hear more from me, Brian, and Eric, as well as other key leaders from across our company. We look forward to sharing with you our views of the expanded addressable markets we see and how we position the Signet Group to advance our next chapters of attractive growth. Now, I'll briefly summarize. With the momentum we carried out in 2023, we are raising our guidance for EPS in 2024. we were building on a strong gear of discipline execution, performance, and growth across our company. We delivered for our customers and clients and partners. We kept our commitments to our shareholders, including delivering adjusted EPS for 2023 of $25.09, which was above our outlook. And we generated $11.8 billion of cash flow from operations. We have sharpened the focus of our portfolio further to ensure that we are positioned to drive another strong gear for our company. We are building on a consistent track record of discipline execution, innovation, and differentiated partnerships. We've increased our outlook for 2024 and now expect EPS of at least $28.25, and we will continue to advance the strategic deployment of capital, including using the majority of our discretionary cash flow for share repurchase in 2024. We'll have another strong year of performance, continue our track record for more than a decade, of delivering against our 10 to 13% long-term adjusted EPS growth target while maintaining an attractive dividend. And with that, I'll turn it over to Brian.