The Cigna Group

Ladies and gentlemen, thank you for standing by for the Cigna Group's third quarter 2025 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 the queue to ask questions at that time. If you should require assistance during the call, please press star zero on your touch-tone 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 Evenko, President and Chief Operating Officer, and Anne Dennison, Chief Financial Officer. In our remarks today, David, Brian, and Anne will cover a number of topics including including our third quarter 2025 financial results and our financial outlook for 2025. Following their prepared remarks, David, Brian, and Ann 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 signagroup.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 third quarter, we recorded a net after-tax special item benefit of $61 million, or 23 cents per share. Additional 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 will 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. In a highly disrupted market at the Cigna Group, we continue our track record of sustained growth in 2025. And I'm pleased to report that in the third quarter, the Cigna Group delivered strong results in a continued dynamic environment. Today, I'll briefly walk through how we will sustain our growth by accelerating innovation to meet the needs of our customers, clients, and partners. We're also introducing new solutions create meaningful value and impact, including our announcement earlier this week of a new rebate-free model for pharmacy benefits. Then Brian will provide an update on our performance on our growth platforms, as well as provide some perspective on 2026. Then Ann will share some more details on our financial results for the quarter. Then we'll open up for your questions. Now let's get started. During the quarter, we delivered revenue of $69.7 billion and adjusted earnings of $7.83 per share. all while continuing to strategically invest in our business to drive growth and innovation. We've also taken further strategic actions to expand our addressable markets and position the company for future growth. One example is our recent investment in Shields Health Solutions, completed earlier in September. Brian will share more details on this shortly. Our performance this quarter also underscores that we continue to deliver for those we serve, consistently navigating through dynamic and challenging environments. For example, this year alone, we publicly committed in February to a series of actions to further ease access to care in a coordinated way for patients and their physicians. Then we stepped forward to partner with HHS Secretary Kennedy and CMS Administrator Oz, along with others, on a broad set of initiatives that will create a more seamless access to care environment and care continuity for Americans, for example, when they switch health plans. Additionally, earlier this month, Ever North Fertility Pharmacy has worked with the Trump administration and EMD Serrano to make fertility treatments more accessible for Americans struggling to start or expand their families. And just this week, we announced our transformative new rebate-free D-Link model. Our pharmacy benefit services here are designed to improve healthcare affordability and the experience for tens of millions of Americans. Our durable business model is designed to evolve, flex, and thrive through a variety of changes, whether economic, regulatory, legislative, or evolving technologies. Today, the powerful forces of change across healthcare are accelerating and converging around longstanding challenges, particularly balancing access and affordability for consumers and patients. Drug pricing continues to create a significant affordability challenge and has become an even more intense part of the public dialogue in 2025. One area where we've helped address affordability relates to generic drugs, with Americans today enjoying the lowest prices in the world for these medications. In fact, generic drugs now account for 90% of all prescriptions. And on average, they are one-third cheaper than in the United States and in other countries. And pharmacy benefit managers and the industry as a whole have played a key role in contributing to these lower costs by leveraging a competitive environment for clinically equivalent drugs. Now, on the other hand, Prices for brand name medications continue to skyrocket with those drugs that do not have a generic equivalent costing four times as much as the same drug in European markets. And in 2025, it's estimated that the median price set by drug companies for new FDA approved drugs is projected to be approximately $390,000 per treatment course. As a result of these marketplace dynamics, Even though brand name drug medications comprise only 10% of overall pharmaceutical volumes in the United States, they account for 88% of the spend. In recent weeks, President Trump announced a series of initiatives aimed at lowering the cost of brand name medications, bringing the U.S. prices in line with those paid in other developed countries. We are aligned with these efforts and seek to expand access for all our clients, from employers to health plans and governmental plans, so that even more Americans can benefit from fair pricing on the prescriptions. Additionally, similar to our work to reduce pricing in generics, we continue to advocate for necessary changes to accelerate and broaden access to biosimilars, which boosts competition and lowers prices further. For example, the list price of Humira is approximately $7,000 a month. That approaches $85,000 a year for this single medication. Thanks to our innovative offering, we provide customers with Humira at a biosimilar level, at no cost to the individual consumer. From a consumer point of view, that's real value, and that's innovation that matters. Even with these efforts, we continue to advance change for the benefit of our customers, clients, and patients. We've deliberately shaped our well-balanced portfolio of businesses across two growth platforms at the Cigna Group, Cigna Healthcare and Evernorth Health Services. As a reminder, Cigna Healthcare is approximately 40% of our enterprise earnings. And in Evernorth, specialty and care and pharmacy benefit services are approximately 30% each. So 70% of our portfolio, Cigna Healthcare and specialty and care services remain well positioned for growth in 2026 and beyond. And to future-proof our company within our pharmacy benefit services, we continue to take significant actions. First, we proactively secured a number of long-term large client renewals and extensions including the U.S. Department of Defense, Crime Therapeutics, and Centene. We're pleased to be able to serve them and their customers and patients now and through the end of the decade and beyond. Second, we've stepped forward with our new simple and transparent model for pharmacy benefit services, which will replace the complex post-purchase rebate process with a simple upfront discount, which will enable customers and patients to automatically pay the lowest price at the counter, whether through their benefit or on a cash pay basis, and apply their payments through the deductible. And importantly, continue to provide approximately 18,000 clinical safety checks, as well as care coordination programs, which are essential for Americans who are taking multiple prescription medications that may have dangerous interactions. To make the benefits of this model even more evident, consider this. For Americans in health plans where they pay the full cost of medications, including, for example, high deductible plans, Our new model will reduce the cost for a brand-name drug prescription on average 30%. This will be real savings for the consumers, and they'll see it right at the counter. Cigna Healthcare will adopt this model 100% for fully insured lives beginning in 2027, and it will become our standard offering broadly for the Cigna Group to the marketplace starting in January of 2028. And we expect to transition at least 50% of our book of business into this new model by the end of 2028. Consistent with this direction, we're also creating a more sustainable economic model for independent pharmacists we contract with. We understand the critical role these clinicians play in healthcare, particularly in rural at-risk communities, and commit to continuing to support them with fair competitive pricing reimbursements for dispensing medications, as well as clinical services they provide for customers and patients. Further, the combination of market forces and our capabilities position us to proactively drive these long-term strategic renewals, extensions, and program transformations to positively impact the marketplace for years to come. Now, over the next two years, we will invest to support these renewals, extensions, and innovations. These investments will support recontracting efforts across many clients and supply chain partners, technology improvements, process reengineering, as well as building and further enhancing data and analytical capabilities. Additionally, given the significant financial and affordability pressures for partners operating heavily in government programs, we have proactively improved the economic terms of the contracts for the benefit of these long-term strategic clients. As a result of these factors, we expect margin pressure within our pharmacy benefit service segment over the next two years. To be clear, we expect a sustained and durable growth trajectory over the long term for the business. I also want to be clear, even with these significant investments, we expect to grow EPS in 2026. Brian will discuss this further in a few minutes when he addresses our tailwinds and headwinds. All these actions demonstrate the commitment and resolve from the Cigna Group to build a better future and sustain our growth and impact. Now to wrap up. Against the backdrop of a dynamic and challenging environment, our third quarter results and our reaffirmed EPS outlook of at least $29.60 underscores the strength of our diverse portfolio of businesses and sustained discipline, execution, and focus. With that, I'll turn the call over to Brian.