The Cigna Group

Ladies and gentlemen, thank you for standing by for the Cigna Group's first quarter 2024 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 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.

Good morning. 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 Evenko, 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 first quarter financial results and our updated 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 or loss, and total revenues, respectively, is contained in today's earnings release, which is posted in the investor relations section of thecignagroup.com. We use the terms 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've been making some forward-looking statements including statements regarding our outlook for 2024 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, I will cover a few items pertaining to our GAAP financial results. In the first quarter, we recorded shareholders' net loss of $277 million, or $0.97 per share. This is driven by non-cash after-tax net realized investment loss of $1.8 billion, or $6.31 per share, primarily related to a village MD impairment charge. This is excluded from adjusted income from operations and adjusted earnings per share in our discussion of financial results. We also recorded an after-tax net special item charge of $3 million or one cent 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, adjusted earnings per share, 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 2024 outlook, we will do so on a basis that includes the potential impact of future share of purchases and anticipated 2024 dividends. With that, I'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call. In the first quarter, our company continued delivering differentiated value for our clients, customers, patients, and partners, and we posted strong results for the quarter, as we continue to build on our momentum coming into 2024. Today, I'll discuss our quarterly performance and key strategic drivers of our growth. Specifically, I'll spend a few minutes talking about our specialty business and our focus on biosimilars to drive greater affordability in the market for the benefit of those we serve. Then Brian will review additional details about our financial results during the quarter, our increased outlook for full year 2024, and our strong capital position. And then we'll take your questions. So let's get started. In the quarter, I'm pleased to report that the Cigna Group delivered total revenue of $57.3 billion, adjusted earnings per share of $6.47, and given our momentum and strong start to the year, we've increased our guidance for full-year adjusted earnings per share to at least $28.40. These positive results demonstrate our differentiated capabilities, innovative approaches, and disciplined execution during a dynamic and disruptive time for our industry. Our results also speak to our diverse and well-balanced portfolio, as we invest in our high-growth businesses, which continue to benefit from secular tailwinds, and ensure our foundational businesses are positioned for continued success. In Evernote Health Services, we're pleased with our results that are in line with our expectations, starting with our pharmacy benefit services, our foundational businesses, Our innovative solutions continue to gain traction with health plans, large commercial employers, and governmental organizations. A recent example of how we continue to drive greater access and affordability in a rapidly evolving pharmaceutical landscape is in CircleRx. This solution focuses on cardio-diabesity, adds value for our clients and patients by providing predictability, reducing cost, and enhancing outcomes related to GLP-1 drug coverage. We're pleased with the strong interest in EncircleRx from our clients with more than 1 million lives already enrolled. EncircleRx is made possible given our decade-plus track record of offering new solutions built on data-driven insights and our deep supply chain expertise. Said otherwise, we have a proven innovation platform. In our accelerated growth specialty care and services businesses, Our results were in line with our expectations, reflecting strong double-digit adjusted revenue growth. As a reminder, this set of businesses is diverse and includes Accredo, CuraScript specialty distribution, and our emerging care service businesses. I'll talk more about specialty in a few moments. In care services, we are investing in a number of areas, including accountable care, virtual, home-based, and behavioral care. We're pleased with the progress our Evernorth Behavioral Care Group is making since its launch in six states plus the District of Columbia, and we have already expanded access and convenience for patients with our program. Insignia Healthcare, our health benefits platform, we achieved another quarter of strong performance. With our focus on affordability and discipline pricing, we're pleased with our strong medical cost performance and medical care ratio, which was 79.9%. Our U.S. employer business is on pace for another good year as we continue to leverage our high-performing networks and digitally-enabled services to expand access and overall value. At our investor day, we discussed the strong results we've seen with our Pathwell suite of solutions, including Pathwell Specialty, which drives value by reducing costs associated with specialty drugs and therapies and improving care experiences and outcomes for patients. Also within the PathWell suite is our PathWell bone and joint solution, which we piloted in 2023 and is now being rolled out for broader client adoption. For context, one in two adults suffer from a musculoskeletal condition, which results in more than $500 billion of annual spend. Our solution uses a curated national network combined with clinical and digital services to guide patients with spine, knee, hip, and shoulder conditions to the right pathway of care at the right time. We're already seeing strong results, and our personalized concierge experience has resulted in 96% patient satisfaction while also delivering meaningful savings for our clients from this innovative program. Turning to international health, our results continue to be strong given our focus on localized health solutions and high-quality services for the global mobile population. In our individual exchange business, we continue to sharpen our focus by repositioning our book through targeted actions in certain geographies. It's also important to note we are making good progress toward our sale of our Medicare businesses to HCSE. The sale of these businesses to HCSE remains on track with the expiration of the waiting period under Hart-Scott-Rodino Act, which occurred on April 17th. As such, the regulatory review of this transaction by the DOJ is complete. The transaction is expected to close in the first quarter of 2025 as planned. After closing, we will continue to serve Medicare-advantaged customers through our Evernorth broad suite of high-performing services. And under our agreement with HCSC, these include services for the seniors who will transition with the divested businesses. Taken together, we're pleased with our results for the first quarter. They reflect the quality and strength of our businesses and position us well for another year of sustained growth and attractive value creation. Now I want to spend a few minutes on our specialty businesses within Evernorth, which is already a large and well-established portfolio of services, yet represents accelerated growth opportunity as we look forward. Overall, the specialty market is large at about $400 billion today and is fast-growing, and Evernorth is the industry leader. Our performance continues to be strong with double-digit revenue growth in the first quarter, Our combination of Acredo, CuraScript Specialty Distribution, and CarePath offer something truly unique in the market, built over decades with assets and capabilities that are highly differentiated. And while we are the leader in the industry, we continue to innovate our capabilities and offerings and expand our reach and impact. For example, just last week, Evernorth announced that we will have an interchangeable Humira biosimilar available for $0 out-of-pocket costs for eligible Acredo patients. Currently more than 100,000 Acredo patients use either Humira or one of the biosimilars. They are supported by specially trained pharmacists and nurses in Acredo's therapeutic resource center for inflammatory conditions. We're available to serve and support these patients around the clock. Meet the individual needs of our patients while driving significant savings for them and their health plans, we'll be able to provide both high and low concentration interchangeable biosimilars. Or put another way, varying dosage levels based on patient needs. To accomplish this, we have agreements in place with multiple manufacturers who will produce biosimilars for Evernote's private labeled pharmaceutical distributor, Qualmet Pharmaceuticals, which we launched back in 2021. The biosimilars will be priced at about 85% lower than Humira, and we estimate that individual patients will save on average of $3,500 per year. And in addition to accretal patients, all of our pharmacy benefit service clients and patients will have access to these biosimilars. Importantly, the biosimilar opportunity goes well beyond Humira. By 2030, we expect to see biosimilars or generics introduced for nearly half of the top 25 specialty drugs in the United States. This translates to over $100 billion in annual spend subject to additional choice and competition. The introduction of biosimilars creates a multi-year tailwind that enables us to continue to drive growth and value creation for the benefit of those we serve. Clearly, we're very excited about the growth opportunities we see ahead in specialty. Our specialty businesses are a cornerstone of the accelerated growth within Evernorth, and our confidence in our leading position and capabilities will continue to fuel innovation, such as the biosimilar launch I just discussed. Now to wrap up, let me recap our performance for the quarter. In the quarter, we continued to execute well and perform well. We met the evolving needs of our clients, customers, patients, and partners in the midst of a dynamic marketplace. We delivered on our financial commitments, including adjusted EPS of $6.47, and we've increased our guidance for full-year adjusted earnings per share to at least $28.40. This performance puts us toward the higher end of our 10% to 14% long-term average annual EPS growth commitment. Looking ahead, we remain focused on meeting our commitments as we execute our strategy by creating value for the benefit of those we serve, by driving greater affordability and access expansion, and delivering innovations that continue to grow market share over time in Evernorth and Insignia Healthcare. With that, I'll turn it over to Brian.