The Cigna Group

Ladies and gentlemen, thank you for standing by for the Cigna Group's fourth 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 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 conference, including the Q&A session, is being recorded. We'll begin by turning the conference over to Ralph Jacoby. Please go ahead.

Thank you. Good morning, everyone. Thanks 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 2024 financial results, and our financial outlook for 2025. 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 thesignagroup.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 2025 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 fourth quarter, we recorded net after-tax special item charges of $64 million, or 23 cents per share. Details of the special items are included in our quarterly financial supplement. Additionally, please note that when we make prospective comments regarding financial performance, including our full-year 2025 outlook, we'll do so on a basis that includes the potential impact of future share purchases and anticipated 2025 dividends. With that, I'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call. Today, I'll discuss key headlines from the quarter and our full year 2024 performance. I'll also share more on the actions we are accelerating to build a better and more sustainable healthcare model. And then Brian will provide additional details on our financial results and our 2025 outlook, and we'll take your questions. Before I get into our earnings, I want to start by sharing a few comments on the current environment. During my tenure as a leader of the Cigna Group, there have been a number of periods in our industry where we faced unique challenges, whether the financial crisis, the introduction of the ACA, the global pandemic, or several significant shifts in political, regulatory, and societal landscape. At the Cigna Group, our resilience and the durability of our business models have allowed us not only to overcome obstacles, but to lead through change while focusing on achieving our long-term objectives for sustainable growth. In early December, we were all witness to the tragic murder of Brian Thompson, a leader at the United Health Group. The past several weeks have further challenged us to even more intensely listen to the public narrative about our industry. At the Cigna Group, we were further accelerating improvements and innovations to increase transparency, expand support, and drive even greater accountability. I'll come back to this important topic in a few moments. With that, let me start with a summary of our 2024 results. We delivered full-year revenue growth of 27 percent to approximately $247 billion. Full-year adjusted earnings per share of $27.33, representing an increase of 9 percent year-over-year, but short of our expectations. We returned $8.6 billion to shareholders through dividends and share repurchase. And our Board of Directors declared an 8 percent increase to our quarterly dividend to $1.51 per share and increased our share repurchase authority to $10.3 billion. The Cigna Group also maintained a strong capital position in 2024. We're also nearly complete with the sale of our Cigna Healthcare Medicare business to HCSE, and we continue to expect to close in the first quarter and plan to use the majority of the proceeds for share repurchase. Now turning to our business results and actions, I want to cover just a few headlines. First, Our fourth quarter results were below expectations due to higher than expected medical costs in our stop-loss product within Cigna Healthcare. We are taking corrective actions on this near-term pressure and expect to recapture margin over the next two years. This is a specific issue we identified and are mitigating, and I'll reinforce that we believe our US employer and Cigna Healthcare businesses are strong and remain well-positioned. and we're confident in our long-term growth strategy. Brian will discuss this in greater detail in his remarks. The second headline from the quarter is that Evernorth continues to drive strong results in line with our expectations, primarily driven by our specialty and care services segment. Our continued leadership of biosimilars is a good example of how we are addressing some of the biggest challenges facing clients and patients today. We began dispensing our Humira interchangeable biosimilar last summer. to eligible Acredo patients with $0 cost to our patients. We are pleased that biosimilar use for eligible Humira scripts reached nearly 50% by year-end 2024. We took another step forward as we announced that we will be offering an interchangeable Stellaro biosimilar, again, for $0 cost to our patients. Looking forward, we expect approximately $100 billion of specialty drug spend in the U.S. will be subject to biosimilar and generic competition over the next five years. Our Humira and Solara biosimilar offerings are just the start of this opportunity, and Accredo is well-positioned to lead and continue to deliver real savings for our clients, customers, and patients. Now, stepping back, prescription drug coverage is the most frequently used healthcare benefit. On average, it's used about 15 times per year per person. And how our nation and industry captures the full promise of prescription drug innovation while addressing affordability has been subject to continued debate. Pharmacy benefit managers are essential in helping patients access medications at fair and affordable prices. In fact, approximately 80% of Express Scripts patients spend less than $100 out-of-pocket per year for their prescriptions. Yet, we recognize for those Express Scripts patients who pay more than $100, for some, it's too high. For example, consider the increased use of GLP-1s in the United States. It is the number one driver of drug trend across employers of all sizes since 2024. Despite these medications being relatively cheap to produce, Americans are paying prices that are multiples higher for GLP-1s compared to other countries, even with full pass-through of rebates. Said otherwise, even including all discounts and rebates, the end result is that the U.S. costs are multiples higher than other OECD countries. This is not acceptable nor sustainable. As for innovations, led by Evernorth and ExpressGrips, we are proud that last year our EncircleRx solution grew to approximately 8 million lives enrolled. We are supporting the best possible patient outcomes by providing those on GLP-1s additional lifestyle support and tools to help sustain long-term improvement. Now, the next headline I want to touch on a bit more is the current environment. We have long been on a path to evolve and drive continuous improvement. As we step into 2025, we have further strengthened our urgency and resolve on this path. That means we are accelerating investments that will positively impact the way our customers and patients experience healthcare. To that end, this week, we announced actions we are taking in ExpressGrips, our pharmacy benefit service business within Evernote. Our commitment will help patients directly benefit further from the negotiations we drive to lower out-of-pocket costs, as well as work to further enhance transparency. Let me briefly recap the announcements. Going forward, our standard products will provide patients lower prices at the pharmacy counter, protecting them from paying full list prices for drugs, and they will fully benefit from our lower net negotiated prices. Next, patients will also have improved predictability, especially and importantly in their deductible phase by receiving the benefit of Express Script's negotiated savings like their employer does. We will also expand the benefit summaries and disclosures we provide. Patients will receive a personalized summary that details their annual total prescription drug costs, plan paid amounts, and the savings we delivered. And plan sponsors will also receive an enhanced report beyond what Express Scripts already provides, including additional transparency on costs and pharmacy claim level insights. We know that more can be done within our health plan offering as well for customers and patients as well as clinical partners to further ease access to care timeliness and expand support programs. More specifically, Cigna Healthcare will soon be announcing steps to improve value and address patient points of friction. Our focus is on making prior authorizations faster and simpler and expanding access to advocates for those facing complex health conditions to help them navigate every stage of their care journey. These initiatives will require that we incur additional costs, but we firmly believe these are critical actions for the benefit of customers and patients. We will continue to take a prudent approach to these and future Cigna Healthcare and Evernorth actions in the weeks and months ahead. As we are determined to continue to evolve for the benefit of those we serve, and build a more sustainable healthcare model. Now, let me briefly summarize. Against the backdrop of a dynamic and challenging environment, in 2024, we delivered full-year adjusted earnings per share of $27.33, and we returned $8.6 billion to shareholders through dividends and share repurchase. Looking ahead to 2025, our EPS outlook of at least $29.50 reinforces the sustained growth and strength of our company And we are focused on taking the prudent steps necessary to ensure our company is well positioned for future growth. And we remain confident in our long-term 10% to 14% growth target, fueled by our differentiated capabilities and portfolio of businesses. Finally, we recognize the need for accelerated positive change in our healthcare system to make it simpler and more affordable for everyone. And the Cigna Group is committed to continuing to take action to drive further accountability and transparency as well. With that, I'll turn the call over to Brian. Thank you, David.