The Cigna Group held a conference call to discuss their second quarter financial results and outlook for 2024. The call was led by Ralph Giacobbe, Senior Vice President of Investor Relations, and featured remarks from Chairman and CEO David Cordani, CFO Brian Evanko, and President and CEO of Evernorth Health Services Eric Palmer. The company uses certain financial measures, such as adjusted income from operations and adjusted revenues, in addition to GAAP measures. The call also included a Q&A session.

Cigna Group reported strong performance in the second quarter, with total revenue of $60.5 billion and adjusted earnings per share of $6.72. However, the company acknowledges potential risks and uncertainties that could impact future results. The CEO highlights key strategic drivers of growth and emphasizes the company's commitment to providing quality care and support for their customers.

The company's success is driven by its focus on innovation, execution, and commitment to its mission. The Evernorth Health Service businesses, particularly the specialty and care businesses, saw strong growth in the quarter due to high demand for their services and continued investments in expanding their offerings. The company's specialty business, Accredo, is the market leader in the space and is well positioned to take advantage of the growing biosimilar market. In addition, the company is expanding in areas such as behavioral health, virtual care, and home care to meet increasing demand.

In the summer, Evernorth expanded its behavioral care group to seven additional states and has seen positive patient outcomes with its unique clinician matching capabilities. Express Scripts has continued to innovate, including the EnCircleRx program for high-cost medications and the upcoming Express Scripts oncology benefit services. Cigna Healthcare is also delivering solutions that create value and better outcomes for clients and customers, despite increased utilization in the industry.

The company's results are in line with their expectations and they continue to see growth in their U.S. employer business. They have identified consistent themes in their discussions with clients, including a focus on affordability, improved access to behavioral health services, and the need for leverage of their data and clinical programs. The company's solutions are resonating well with clients and they are gaining share in the market. They offer integrated and tailored benefits through their modular solutions, which incorporate services from Evernorth. Their Pathwell suite of solutions is driving exceptional value and their Pathwell specialty program is reducing costs and improving clinical outcomes for patients. The market recognizes the value of their solutions.

The company is making progress in selling its Medicare Advantage business and plans to close in the first quarter of 2025. The current debate surrounding pharmacy benefit managers is centered around the cost of pharmaceuticals, which are frequently used and result in billions of prescriptions each year. Gene therapies, breakthrough treatments, and personalized medicines are expected to drive significant advancements in healthcare, but there are concerns about affordability. The company's role is to negotiate fair and affordable prices with pharmaceutical manufacturers and pharmacies.

The pharmacy benefit industry works to drive down costs, with new drugs coming to market at unsustainable prices and brand drug price increases exceeding inflation. Express Scripts has kept cost sharing relatively flat for patients and has delivered billions in savings for clients. However, industry negotiations can create friction and the company is working to be more proactive in addressing concerns and finding solutions to make medications more affordable for all patients.

The team is dedicated to providing the best care for patients and clients, and is confident in their ability to meet growth targets. They have a track record of delivering value through innovation and partnerships. The company remains on track to meet financial commitments and has sustainable growth opportunities. Strategic investments are being made to strengthen capabilities and meet evolving needs. The company's strong performance in the first half of the year reflects their balanced portfolio and positions them for sustained growth. Brian will now take over.

Cigna's second quarter 2024 results showed strong growth across Evernorth and Cigna Healthcare, demonstrating the strength and stability of their diversified portfolio. Revenue was at $60.5 billion, a 25% increase from the previous year, and adjusted earnings per share grew by 10%. The company remains confident in their full year 2024 earnings outlook of at least $28.40, representing over 13% year-over-year growth. Evernorth also showed strong performance, with revenue reaching $49.5 billion and pretax adjusted earnings increasing by 7%. Specialty and Care Services saw revenue growth of 18% and pretax adjusted earnings growth of 12%, while Pharmacy Benefit Services also showed strong revenue growth. Overall, the company is pleased with Evernorth's second quarter results and expects continued growth in the second half of the year.

In the second quarter of 2024, Cigna Healthcare's revenues were $13.2 billion and pretax adjusted earnings were $1.2 billion, in line with expectations. The medical care ratio was 82.3%, including a $50 million impact from Medicare Advantage risk adjustment. The company had planned for elevated medical cost trends in 2024 and has seen this reflected in their year-to-date results. The net medical cost payable decreased from the first quarter due to reserves related to the Change Healthcare disruption developing as expected. Cigna Healthcare ended the quarter with 19 million total medical customers and expects growth in the remainder of the year, driven by U.S. employer Select and Middle market segments. Overall, the company delivered consistent results in a dynamic operating environment and their outlook for full year 2024 remains positive.

Cigna is reaffirming their full year 2024 expectation for consolidated adjusted income from operations of at least $8.065 billion or $28.40 per share, with the third quarter expected to make up 25% of this outlook. In Evernorth, they expect pretax adjusted earnings of at least $7 billion, with third quarter earnings expected to accelerate due to an increase in adoption of their interchangeable biosimilar offering. For Cigna Healthcare, they expect pretax adjusted earnings of at least $4.775 billion, with the third quarter expected to make up 25% of this outlook. They also expect a medical care ratio of 81.7% to 82.5% for the full year, with the first half coming in at 81.1%. They have repurchased $5 billion of common stock and expect at least $11 billion in cash flow from operations. Overall, their first half 2024 results reflect strong performance from both Evernorth and Cigna Healthcare.

Cigna's 2024 outlook is positive due to sustained momentum and strong fundamentals in their growth platforms. They are confident in their ability to meet their adjusted earnings per share outlook of at least $28.40. During the Q&A portion of their call, they discussed the cost trend, which was in line with their expectations and pricing. The MCR performance at Cigna Healthcare was solid, with total cost of care being broadly in line with expectations. Some drivers of costs included elevated usage of facility-based services and mental health care services, while surgical costs continued to slow down.

The company is seeing high cost trends in line with their guidance for 2024. There was no significant change in care patterns in the second quarter and the company remains confident in their full year MCR range. They are expecting strong growth in their pharmacy benefit services business for 2025 and have a high retention rate. The company plans to make the benefits of their pharmacy business more widely known.

The speaker is excited about the strength of their solutions and how they are resonating with the market. They mention specific programs that help make the value of medicine more effective, such as EnCircleRx and their oncology benefit offering. They also mention the importance of innovation and collaboration in their work, and their focus on communication and engagement with clients and independent pharmacies. They plan to use third-party analysis to showcase the benefits of their industry and their company's work.

Cigna is expected to be more aggressive in amplifying their services and will continue to innovate for their customers. In the healthcare selling season, there has been a consistent number of RFPs and existing clients out to bid. Cigna is seeing unique needs from larger employer clients and is addressing affordability and behavioral health integration. There may be potential for Cigna to acquire point solutions and offer them as part of their integrated offering.

The focus of Cigna Healthcare is on affordability, consolidation of vendors, mental health and substance abuse benefits, and digitally enabled care navigation capabilities for large employers. The company has seen strong growth in their under 500 Select segment. They are also working on connecting various capabilities through their digital health formulary and programs like Encircle and their upcoming oncology program. These initiatives aim to provide coordinated and patient-centric care.

David Cordani, CEO of Cigna, discusses the changes to Part D and how it will impact Evernorth, the company's pharmacy benefits management arm. He mentions the Inflation Reduction Act and its potential to cause PDP premiums to rise, leading to disruption for seniors. He then asks Eric, presumably another executive, to explain how the company is helping clients navigate these changes.

CMS has assessed bids for Medicare Part D plans and has created a short-term window for bid adjustments due to the acceleration of premiums required. Evernorth and Express Scripts have a track record of supporting health plans in offering Medicare Part D plans and are making investments to help ensure their success. The recent changes from the Inflation Reduction Act, such as copay smoothing, are important for the business. There was a risk adjustment true-up for the marketplace in 2023, but the net impact on earnings is unclear. The company is also monitoring cost trends.

Brian Evanko, speaking on behalf of Cigna, provided an update on the performance of their individual exchange business. He stated that the business is performing as expected in 2024 and that the risk adjustment for the 2023 performance year was not a significant factor in the second quarter results. The preliminary industry data for the 2024 performance year confirmed their previous assumptions. Overall, Cigna is on track to meet their improved margin profile for 2024, but expects to land slightly below their long-term target margin range of 4% to 6%. In response to a question about the decline in exchange business members, Evanko did not provide a specific reason for the decrease.

The speaker, Brian Evanko, responds to a question about the decline in Cigna Healthcare customer volumes compared to the previous year. He explains that the primary reason for this decline is the repositioning of the individual exchange business in 2024, which included pricing actions to improve profitability. This has resulted in a reduction in customer volumes, particularly in the second quarter due to non-payment of premiums. However, the company expects to see continued growth in the U.S. employer under 500 Select segment and overall sequential growth in customer lives for the rest of the year. Looking ahead to 2025, the company has completed all pricing and rate filings and is pleased with the balance in the Cigna Healthcare portfolio.

The speaker discusses the potential impact of ICRA on the small group or select market, stating that it is likely to be a niche market. They also mention the possibility of participating in the ICRA space through their individual exchange business. The speaker reassures that their stop-loss offerings are integrated with their Select segment business and should not be seen as a threat. They also mention that the average employer in the under 50 market has fewer than 10 employees.

The speaker, Eric Palmer, responds to a question about negotiations with retail pharmacies and updates on their progress. He mentions their wide array of choices and options for clients and their efforts to balance access and affordability. He also mentions a new solution called ClearNetwork that was announced last year and is generating interest. Overall, their portfolio of offerings has resonated with buyers and contributed to growth in the pharmacy benefits services. The company did not raise guidance this quarter, despite beating street expectations in the first quarter.

The speaker discusses the company's strong quarterly results and reaffirms their full year guidance. They mention timing-related benefits and being prudent in their outlook. They also address the strength of Evernorth and the impact of their Humira strategy on the results. The speaker states that Specialty and Care represents 30% of the company's portfolio.

The company is excited about the growth potential of their product business portfolio, which leverages specialty services. They have strong growth in the second quarter and are well positioned for the biosimilar opportunity. They offer choice and value to clients and are focused on getting low net cost fuel and competition. They have recently begun shipping interchangeable biosimilar Humira and have seen meaningful uptake. They expect customer adoption to continue to grow over the year.

The speaker discusses the early success of biosimilars, which currently make up about 20% of their business after only five weeks of being on the market. They believe this presents a real opportunity to improve healthcare affordability for their clients. The next question asks about trends in in-group membership and the speaker explains that they have not seen any significant changes in this area despite some potential softening in the employer marketplace. They remain cautious and closely monitoring any potential dampening tied to the economy. The speaker also notes that the change in membership is largely due to expected dampening in their individual exchange business. The next question asks about trends in in-group membership and the speaker explains that they have not seen any significant changes in this area despite some potential softening in the employer marketplace. They remain cautious and closely monitoring any potential dampening tied to the economy. The speaker also notes that the change in membership is largely due to expected dampening in their individual exchange business.

David Windley asks Brian Evanko about the excess reserves in the first quarter and if there were any trends or anomalies in the quarter. Brian responds by stating that the second half MLR is expected to be about 200 basis points above the first half, with about half of that being due to normalizing factors such as metal tier mix and stop loss utilization. He also mentions that there is one additional business day in the third quarter, which contributes to the higher MCR in the second half.

The speaker is confident in the company's full year guidance and pricing strategy for their U.S. employer business. They have earnings levers beyond just risk-based MCR and are seeing the impact of inflation in their provider contracts. They expect elevated levels of utilization through 2024 and are confident in securing appropriate pricing for 2025 and beyond. In response to a question about the possibility of Skyrizi and Rinvoq substitutions foreclosing the Humira biosimilar opportunity, the speaker emphasizes their focus on offering choice and value for patients and getting to the lowest cost and best available solution.

The speaker notes that their biosimilar offering is interchangeable, making it easier for patients to choose. They are focused on ensuring patients have access to the medicines they need, including Skyrizi and Rinvoq. They are working towards developing a full portfolio of available biosimilar offerings. The questioner asks about the growth areas in Evernorth, specifically regarding GLP-1 coverage outlook and fee growth. The speaker mentions that Encircle has over 2 million covered lives and 50% of plan sponsors cover GLP-1s for weight loss indications. The underlying utilization levels are also growing.

David Cordani, CEO of Evernorth, discusses the growth potential for the company's specialty medications and the overall growth strategy. Brian Evanko, CFO, highlights the 14% increase in fees and other revenue, attributing it to contributions from Evernorth Care businesses, increased fee-based solutions, and cross-enterprise leverage with Cigna Healthcare. Cordani concludes by expressing confidence in meeting the company's EPS outlook for 2024, which represents a growth rate of over 13% from 2023.

The speaker expresses gratitude to the company's 70,000 employees for their hard work and dedication in supporting clients and delivering on commitments. They are proud of their achievements and optimistic about future opportunities. The call concludes, and the conference recording will be available for 10 days.

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