The operator introduces the Cigna Group's Third Quarter 2023 Results Review and turns the call over to Ralph Giacobbe. Giacobbe introduces the speakers and explains that they will cover the company's financial results and updated outlook for 2023. He also mentions the use of certain financial measures and the term "adjusted income from operations" in the discussion. He reminds listeners that the remarks will include forward-looking statements that are subject to risks and uncertainties.

In the second paragraph, the speaker mentions the risks and uncertainties contained in the cautionary note of the earnings release and recent SEC reports. They also discuss special item charges and their exclusion from adjusted income and revenues. The speaker then introduces David Cordani, who will discuss the company's strong performance and growth opportunities. Brian will also share more information on the third quarter results and outlook for the rest of the year.

In the third quarter, the company delivered strong results, with total revenue of $49 billion and adjusted earnings per share of $6.77. They are reinvesting in their business to fund growth and innovation, and their Evernorth Health Services and Cigna Healthcare Benefits platform is driving customer growth. The company is raising their outlook for EPS, customer and revenue growth, and cash flow. They have a strategic growth framework in place and a portfolio of businesses that are well positioned for current market needs. They are also focused on sustained success in the future.

Evernorth Health Services has a strong track record of creating value through their pharmacy care and benefits capabilities. They have had a successful pharmacy benefit selling season for 2024 and are already actively engaged in the 2025 season. They are focused on innovation and providing clients with expanded choices and market-leading value. They have a new partnership with Centene and are well-positioned to address the growing demand for pharmacological innovation. Their InCircle Rx program is an example of how they provide value by addressing the complexity and costs associated with obesity, diabetes, and cardiovascular disease. Through their clinical expertise and data insights, they are able to guide patients to effective care and improve affordability for clients.

The company expects to see a growth in new drugs, including gene therapies and treatments for various conditions. They are well positioned to make medicine more accessible and affordable. They have also expanded their portfolio of solutions and introduced a new affordable health plan for seniors. The company is leveraging innovations and capabilities to expand behavioral health solutions for employers. One of their newer solutions, Confide, has been successful in retaining and winning new business.

Next year, we will launch enhancements to our digital tools that personalize the matching of patients with therapists and offer greater convenience for scheduling. Our focus on vitality highlights the importance of addressing mental health, which can lead to higher engagement, productivity, and lower costs for employers. We are also disrupting care delivery and management to improve patient experience and outcomes, with investments in digital and virtual capabilities. Our specialty pharmacy business, led by Accredo, is a major source of growth for our company with its clinical expertise and home delivery services for specialty drugs.

Cigna's specialty pharmacy services, including the distribution of complex medications, are seeing significant growth. The company's U.S. government portfolio services have also been successful, with a high Medicare stars quality rating. As open enrollment for Medicare Advantage and individual exchange plans begins, Cigna is focused on competitive offerings and maintaining pricing discipline. Looking ahead to 2024, the company expects strong performance and plans to share detailed guidance in their fourth quarter earnings call. Tailwinds, such as the launch of Centene and biosimilar contributions, are expected to contribute to growth, while strategic investments will be made to drive innovation and long-term growth.

The company had a strong quarter with adjusted EPS of $6.77, customer, revenue, and cash flow growth. They have increased their outlook for adjusted EPS for 2023 and 2024. The company is well positioned with a strategic framework and differentiated services. Brian will discuss their performance and outlook for the rest of the year, including highlights of revenue growth, after-tax earnings, and cash flow. The growth platforms, Evernorth and Cigna Healthcare, both performed well with Evernorth showing improved bottom line growth and Cigna Healthcare exceeding expectations.

In the third quarter of 2023, Evernorth continued to perform well with 8% revenue growth and 6% earnings growth, driven by their Specialty Pharmacy business. They are focused on providing affordable and valuable services to customers and clients, while also investing in new clients and expanding existing relationships. Cigna Healthcare also had a strong quarter with 14% revenue growth and 16% earnings growth, and a better-than-expected medical care ratio driven by disciplined pricing and affordability initiatives. They ended the quarter with 19.6 million total medical customers, representing a growth of 1.6 million customers year-to-date.

Cigna Healthcare saw growth in medical customers across all businesses in the third quarter, exceeding expectations. For full year 2023, the company expects consolidated adjusted revenues of at least $192 billion and adjusted earnings of at least $24.75 per share. In Evernorth, adjusted earnings are expected to be at least $6.4 billion, while in Cigna Healthcare, medical customer growth is expected to be at least 1.6 million and the medical care ratio is expected to improve. The company plans to increase investments in both Evernorth and Cigna Healthcare, resulting in an increase in the enterprise adjusted SG&A ratio. The adjusted tax rate for 2023 is expected to be between 20.5% and 21%. So far in 2023, the company has repurchased approximately 7.7 million shares of common stock for $2.2 billion.

The company is confident in its cash generation and has increased its expected cash flow for 2023. They have also updated their guidance for 2023 and expect strong results in 2024. The company's tailwinds include revenue growth, the launch of a new relationship, and biosimilar opportunities. However, they will also be making strategic investments to drive long-term growth. The call then opened up for questions from the audience.

David Cordani discusses potential PBM legislation and the opportunities for InCircle Rx in the self-insured market. He emphasizes the company's engagement in the ongoing dialogue and its ability to thrive under various environments. He also stresses the importance of maintaining choice for employers and health plans. Cordani expresses support for transparency as long as it is targeted and constructive. He concludes by highlighting the company's strong position in the market for innovation.

Express Scripts has taken deliberate actions in the past few years, such as acquiring Evernorth and investing in specialty capabilities, to position themselves for current and future drug innovations. The InCircle Rx program, a comprehensive solution that combines supply chain and clinical expertise, has generated significant interest from clients and is expected to drive growth in self-funded markets in the future. This was discussed by David and Eric in response to a question from analyst Justin Lake.

Justin Lake asks about the increase in membership in the individual market and if it is driving the 200,000 member guidance increase. Brian Evanko clarifies that the strong momentum in the health care book, particularly in the U.S. commercial business, is driving the increase. They have also seen growth in the U.S. government businesses and have not seen the expected disenrollment levels. Overall, they are pleased with the projected 9% customer growth in Cigna Healthcare, partially due to the individual exchanges and partially due to the strength in the U.S. commercial business.

Cigna's individual exchange margin profile is expected to be approximately $5 billion in 2023, with a target margin of 4% to 6%. The increased risk adjustment payable in Texas and Georgia is a primary driver of lower margins, but price increases in these states are expected to improve margins in 2024. The company also expects revenue growth from the Centene launch and other one-time items, and overall growth in line with long-term targets. There are no specific headwinds or tailwinds to revenue growth for other businesses.

The speaker discusses the company's consistent EPS CAGR and how the recent investments have affected it. They mention that the growth from the Centene contract will push them to the high end of their EPS growth range. They also touch on potential tailwinds for next year, including the potential for the Centene drag to go away and the biosimilar market. The speaker notes that they will provide more detailed guidance on their fourth quarter call.

Brian Evanko discusses the economics of the Centene relationship and expects to spend $200 million this year and break even next year. Eric Palmer talks about the slow adoption of biosimilars and the expected savings for customers and clients. He also mentions the potential for increased competition in the specialty market in the future.

The speaker discusses the company's strong performance in the third quarter, particularly in regards to the medical care ratio (MCR). They mention that the company had planned for more normalized utilization levels in 2023 and that their claims experience is consistent with that. They note that the government product lines performed as expected, while the U.S. commercial business drove favorability in the MCR. The company has improved their full year MCR outlook by 15 basis points due to the favorable third quarter, but there is no significant change in their fourth quarter outlook.

The speaker discussed the company's favorable performance in the third quarter, attributing it to various factors such as inpatient favorability and successful site of care strategies. They also mentioned the consistent MCR expectations for the fourth quarter. The speaker was then asked about commercial large group membership and the traction of VillageMD in commercial markets compared to Medicare markets. The speaker responded by stating that they did not mention commercial large group membership in their prepared remarks and proceeded to compare and contrast the traction of VillageMD in commercial and Medicare markets, mentioning the pull for demand and the success of presenting their arrangements to large employers.

The speaker addresses the commercial marketplace and their outlook for the 2024 selling season. They are pleased with their results for 2023 and expect another year of growth for the Cigna Group. The select and middle market segments are performing well, with strong retention and new business. The National Accounts segment is expected to have more normalized growth in 2024, as their strategy focuses on maintaining share and expanding their portfolio of specialty services. The speaker also mentions their evolving relationship and strategic work with Village.

The Cigna Group is expected to have another strong year of growth in 2024, with the commercial portfolio being led by the select and middle market business. The partnership with Village and the recent acquisition of Village Summit has already provided significant value to commercial clients, and the teams are working together to further enhance the value-based care traction. This partnership is seen as a strategic and financial opportunity for both parties, with a focus on building an ecosystem of high-performing providers and utilizing data and insights to ensure patients receive the best care. This approach is applicable to both commercial and government plans.

The company has been focusing on the commercial market and is pleased with their progress. They are also expanding into other markets and have had a good year of growth. They are on track for their market expansion plans in 2024. They are also pleased with the growth in their MA book and are currently up 13%. They are working towards their long-term target for 2023 and are investing in their capabilities.

The company has expanded its geographic footprint in the Medicare Advantage business since 2019, and plans to further expand in 2024. They have employed a micro market approach to maintain stable benefits in most areas, but have made targeted pullbacks in some areas due to funding constraints. The company expects to see net customer growth in 2024, but margins will continue to be below their long-term target range due to investment in geographic and product expansion. They will provide more detailed guidance during the fourth quarter call. In regards to the exchange business, the question is asked about expectations for next year.

Nathan Rich is asking about the potential value of Evernorth in delivering GLP-1 through obesity treatment for clients.

David Cordani, CEO of Cigna, discusses the discussions they are having with drug manufacturers to lower the pricing of weight management drugs and expand access. He mentions that currently, only 10-20% of their clients have coverage for weight management outside of diabetes drugs, but the percentage is higher in their Evernorth portfolio due to a larger commercial employer landscape. Eric Palmer, also from Cigna, adds that their Evernorth portfolio's capabilities in data, clinical coordination, and relationships with manufacturers and physicians will help in achieving their goal of improving affordability.

The speaker discusses the effectiveness and expense of therapies, stating that they are engaging with pharmaceutical manufacturers to improve affordability and access. They also mention that government utilization, particularly in Medicare Advantage, is in line with expectations, and they have had success in managing utilization through their Pathwell program. They expect utilization levels to normalize in 2023.

The MA book has seen elevated utilization in outpatient and professional services, but it was within expected levels. The government lines ran as expected and the U.S. commercial business drove favorability. The company's 2023 guidance and 2024 bids anticipate these dynamics to continue. The company has been working on moving inpatient to outpatient and utilizing virtual services. The Pathwell Specialty program is another example of this strategy. For the PBM within Evernorth, the strategic role of Part D for driving MA business was discussed. There were drops in adjusted home delivery and specialty scripts, possibly due to the prime relationship and in-sourcing efforts.

David Cordani, CEO of the company, answered a question about the drivers of their recent move. He stated that while Part D is an important aspect of their portfolio, it is not a significant part of their overall enterprise. They believe there is potential to convert PDP lives into MA, but they have not fully utilized this opportunity. The PDP landscape is disrupted, but they have the tools to manage within their portfolio. Brian Evanko, CFO, added that there were multiple factors driving the growth in adjusted home delivery and specialty scripts, including the growth of specialty scripts and the impact of home delivery.

The speaker is pleased with the company's performance for the quarter and the momentum they have carried through 3 quarters. They have increased their outlook for adjusted EPS, revenue, customer lives, and cash flow based on their strong performance. The speaker also thanks their colleagues for their hard work in making a positive difference in the communities they serve.

The Cigna Group concludes their third quarter results review and looks forward to future conversations and dialogues with investors. The conference call will be available for 10 days and can be accessed by dialing a specific number. No passcode is required for the replay. The call ends and the operator disconnects.

This summary was generated with AI and may contain some inaccuracies.