The paragraph is an introduction to the Cigna Group's Third Quarter 2024 Results Review conference call. The operator provides instructions for participants and notes that the session, including the Q&A, is being recorded. Ralph Giacobbe, Senior Vice President of Investor Relations, introduces the call and mentions the presence of key executives: David Cordani, Brian Evanko, and Eric Palmer. David and Brian will discuss the company's third-quarter financial results and outlook for 2024. The call also highlights the use of non-GAAP financial measures, with reconciliations provided in the earnings release, available on the company's investor relations website. After the prepared remarks, there will be a Q&A session.

The paragraph discusses forward-looking statements regarding the company's 2024 outlook and cautions about risks and uncertainties that could affect actual results. It outlines third-quarter financial results, reporting a net income of $739 million or $2.63 per share, which includes a significant non-cash investment loss linked to VillageMD and other special item charges. These figures are excluded from discussions on adjusted income and earnings per share. The paragraph also mentions that future financial performance comments will consider share purchases and 2024 dividends. David Cordani then takes over to discuss the company's third-quarter performance and growth strategy and shares insights about expectations for 2025.

In the third quarter, Cigna Group reported a total revenue of $63.7 billion and adjusted earnings per share of $7.51, reflecting strong performance driven by its two growth platforms, Evernorth Health Services and Cigna Healthcare. Evernorth contributed significantly with strong growth in innovation and affordability initiatives, particularly in specialty and care services, and pharmacy benefits. Cigna Healthcare also maintained momentum, focusing on delivering affordability and healthy outcomes for U.S. employer clients. The company attributes its success to its experienced leadership and infusion of new talent. Cigna sees continued growth opportunities ahead.

The paragraph discusses the company's ongoing plans to sell its Medicare Advantage business to HCSC by early 2025 and use most of the proceeds for share repurchases. The company is satisfied with its Medicare business performance, which maintains a four-star national enrollment rating for 2025. The focus will shift to expanding the Evernorth platform to serve Medicare clients. Amid industry disruptions due to factors like increased medical costs and changes in revenue streams, the company emphasizes its strategic actions rather than commenting on rumors. It highlights its significant share repurchases, amounting to $5.7 billion year-to-date, with plans to continue using its $5.6 billion remaining repurchase capacity in the fourth quarter.

The paragraph outlines several initiatives the company is undertaking to address changes in the healthcare sector while promoting growth. It highlights the increasing rate of pharmacological innovation, notably in gene therapies and treatments, which although beneficial, pose affordability challenges due to high costs. The company’s specialty pharmacy business, Accredo, is experiencing strong growth due to market conditions and its own strengths, with a focus on biosimilars. They started dispensing a biosimilar for Humira, achieving significant penetration among eligible patients, and plan to offer a Stelara Biosimilar in 2025, both with no out-of-pocket costs for eligible patients. Additionally, Express Scripts is addressing cost concerns with the GLP-1 drug class through its EnCircle Rx solution, enhancing medication affordability, access, and patient lifestyle support.

In the recent quarter, EnCircle has almost 8 million enrollees, and the company is focused on countering misconceptions in the pharmacy benefits industry to ensure access to affordable prescriptions. A comprehensive study by Dr. Dennis Carlton confirms that Pharmacy Benefit Managers (PBMs) reduce high drug prices through competition and support independent pharmacies with higher reimbursements. This counters FTC's findings, showing PBMs enhance access to generic and brand-name drugs. Furthermore, there's a rising demand for quality behavioral services, partly due to global geopolitical, economic, and social tensions, with behavioral therapy use doubling over the last five years.

In this paragraph, the article discusses the efforts made by Cigna Healthcare to enhance services and access for customers, including adding providers, launching coaching programs, and implementing online scheduling for prompt appointments. The integration of behavioral health services from Evernorth into Cigna's offerings is highlighted. Additionally, the role of technology, such as AI-powered diagnostics and telehealth services like MDLIVE, in driving personalized care and access is emphasized. The company is capitalizing on these innovations to improve healthcare delivery. The paragraph concludes by mentioning upcoming detailed guidance regarding future challenges and opportunities anticipated for 2025.

The paragraph highlights Cigna's optimistic outlook for 2024 and 2025, driven by strong performances from its Evernorth and Cigna Healthcare platforms. Key positive factors include the expansion of biosimilar offerings, new client partnerships, and financial benefits from selling its Medicare business. However, challenges include reduced investment income due to the loss of dividends from VillageMD and some overhead from the Medicare sale. Despite these, Cigna anticipates strong growth with an expected EPS increase of at least 10% in 2025. The company credits its success to its disciplined execution, innovative leadership, and a robust corporate structure, achieving an adjusted EPS of $7.51 in the third quarter and staying on target for full-year earnings of at least $20.40 per share in 2024.

The paragraph discusses Cigna's positive financial performance for the third quarter of 2024 and its outlook for the full year. The company is confident in its long-term growth potential, projecting an average annual EPS increase of 10% to 14%. Cigna reported third-quarter revenue of $63.7 billion and adjusted earnings per share of $7.51. For the full year, they expect adjusted EPS of at least $28.40, which would be a growth of over 13% compared to the previous year. The Evernorth segment showed strong performance with revenues reaching $52.5 billion and pre-tax adjusted earnings increasing by 9% to $1.9 billion, despite a $33 million reduction in net investment income due to the lack of a VillageMD dividend.

Evernorth experienced strong growth in the third quarter, with specialty and care services revenue reaching $23.8 billion and adjusted earnings at $825 million, both up 23% year-over-year. This growth was driven by increased adoption of specialty medications and Humira biosimilars, benefiting both patients and clients by reducing costs. Approximately one-third of eligible Humira prescriptions switched to biosimilars. Evernorth, a leader in the specialty market, is optimistic about long-term profitable growth due to a strong drug innovation pipeline and its proven business model. Pharmacy benefit services also saw significant revenue growth from new business, expanded relationships, and demand for new drugs. Pre-tax adjusted earnings rose to $1 billion, as its capabilities deliver affordability and value. Overall, Evernorth's results exceeded expectations, and it anticipates further growth in the fourth quarter. Cigna Healthcare reported third-quarter 2024 revenues of $13.3 billion.

In the paragraph, Cigna reports pre-tax adjusted earnings of $1.2 billion and a medical care ratio (MCR) of 82.8% for the quarter, which met expectations. The company experienced increased trends in specialty medications within Cigna Healthcare and its Evernorth business, reflecting its strategic, diversified portfolio designed for growth. For the full-year 2024, Cigna reaffirms expectations of consolidated adjusted earnings per share of at least $28.40. In Evernorth, they forecast pre-tax adjusted earnings of at least $7 billion, driven by strong specialty volumes and Humira biosimilar adoption, despite lower net investment income. Cigna Healthcare's full-year 2024 pre-tax adjusted earnings are expected to be at least $4.775 billion, with an MCR towards the higher end of 81.7% to 82.5%, due to increased specialty medication use. They plan to offset the higher MCR with operational efficiencies.

The company expresses confidence in its 2024 financial position, highlighting a strong balance sheet and consistent cash flow due to its efficient asset-like strategy. Despite timing-related impacts on third-quarter cash flow from operations, they anticipate a significant increase in the fourth quarter while maintaining their capital deployment priorities. Year-to-date by October 30, 2024, they've repurchased roughly 16.9 million shares for about $5.7 billion, including $715 million in October, with more repurchases expected, reflecting confidence in their business's strength and growth. They project at least $28.40 in adjusted earnings per share (EPS) for 2024, marking over 13% year-over-year growth, and anticipate at least 10% EPS growth in 2025. The company attributes its consistent financial performance to strategic execution and portfolio management, emphasizing sustainable long-term growth. The paragraph concludes by transitioning to a Q&A session.

The paragraph discusses the current and future strategies of Cigna Healthcare in managing commercial trends and partnership dynamics. AJ inquires about the company's pricing strategy continuity for 2025 and potential pushback from employers, as well as the company's plans with VillageMD amid changing circumstances. David Cordani involves Brian Evanko, who indicates satisfaction with the performance of Cigna Healthcare's U.S. employer business, noting its largely self-funded nature and strong performance within target margins for 2024. He describes the external market as competitive yet rational, emphasizing Cigna's disciplined pricing strategy. Meanwhile, Cordani hints at Evernorth's ongoing value-based care strategy, particularly concerning primary care.

In the paragraph, the speaker discusses the expectations for cost trends in 2025, anticipating higher rate increases than in 2024 due to high cost trends, competitive market conditions, and the need to maintain margins. David Cordani then addresses the strategy around Value-Based Care (VBC) and the importance of aligning incentives and leveraging resources to enhance quality and value. Within Cigna Healthcare, the focus is on collaborative accountable care relationships, supported by some of Evernorth's capabilities. The attempt to accelerate progress through VillageMD was poorly timed due to market disruptions. Moving forward, Evernorth plans to continue exploring and expanding accountable care relationships, notably making progress with CuraScript capabilities.

In this part of the discussion, Justin Lake from Wolfe Research asks about capital deployment, specifically regarding share repurchases in 2024 and potentially 2025. David Cordani responds by clarifying that detailed guidance for 2025 has not been provided yet and will be shared in their fourth quarter call. He emphasizes the importance of clear communication given the current disruptions in the space and notes that more information will be forthcoming. Eric will be addressing the broader question about the Specialty business environment.

The paragraph discusses the company's strategy and performance in terms of stock repurchase and growth in the specialty market. The company, led by Brian and David, has been actively repurchasing shares and plans to continue doing so into the fourth quarter of 2024, having repurchased $24 billion over the last four years. This was part of a strategic plan during a time of organizational transitions. Looking forward, they plan to provide more comprehensive guidance for 2025, emphasizing their history of responsible capital management to enhance shareholder value. Eric Palmer highlights the company's strong position in the $400 billion and growing Specialty market, noting success in dispensing biosimilar Humira and expanding business with existing clients. There is significant growth in therapies for inflammatory conditions, oncology, and neurology, with a 23% growth noted, driven by new volumes, customers, and available therapies.

The paragraph discusses the growth and potential of the EnCircleRx program, highlighting its rapid increase in coverage from 3-5 million to nearly 8 million lives in a short period. This growth is driven by the demand from clients seeking solutions for managing GLP-1 affordability and related conditions. Eric Palmer expresses excitement about the program's first-of-its-kind offering, which targets the appropriate patient population and delivers guaranteed clinical outcomes and strong returns on investment. The early performance of the program is positive, indicating that it is meeting client needs effectively.

The paragraph discusses the impact of new treatments, specifically GLP-1s, on market trends and client engagement, emphasizing affordability challenges and a "start and stop" pattern among patients affecting treatment outcomes. David Cordani highlights the significance of value-based care and supportive frameworks, like behavioral support, in addressing these challenges. Ryan Langston then introduces a question from Lisa Gill regarding the 2025 selling season in the pharmaceutical benefit management (PBM) sector. Lisa inquires about the influence of biosimilars on contract economics and asks David for his opinion on the FTC report and a related University of Chicago study.

In the paragraph, David Cordani and Eric Palmer discuss Evernorth's strong position and growth within the pharmacy benefit services market for 2025. They highlight the company's ability to offer choice and flexibility, leading to a high client retention rate in the mid- to high-90s percentage range. Innovations like EnCircleRx and oncology benefit services are contributing to this success. Palmer notes that while there's interest in exploring different service and financing options, there's no significant change in customer purchasing behavior. Cordani briefly addresses potential legislative changes and acknowledges the importance of understanding the regulatory landscape, mentioning the FTC.

The paragraph discusses the role of the pharmacy benefit management (PBM) and pharmacy benefit service industry in providing sustained value through improved affordability and access to services, particularly for patients with chronic conditions. The company boasts high client retention rates, expecting them to be even higher in 2025. They highlight innovations like EnCircleRx and biosimilars as critical to delivering value with new treatments. The company disagrees with the FTC report's assertions but emphasizes engaging in fact-based discussions. There is no mature legislation on the horizon, but the company remains actively engaged in discussions, confident in its business model and ability to innovate and grow in both the pharmacy benefit and specialty space.

In the paragraph, Brian Evanko discusses Cigna's investment strategy, which includes allocating significant discretionary capital towards internal reinvestments, particularly in technology. This involves investing approximately $1.5 billion beyond the core administrative expenses of around $20 billion. Most of the investment is directed towards enhancing customer, provider, and broker-facing technologies. Evanko emphasizes the importance of these investments in the context of the long-term growth opportunities in the specialty market, which is a $400 billion addressable market. The company adjusts its discretionary capital expenditure according to its growth strategy needs, especially in the specialty space. Erin Wright from Morgan Stanley then shifts the discussion to focus on Cigna's specialty segment and their strategy regarding the Humira biosimilar.

In the paragraph, Eric Palmer discusses the company's strategy for launching biosimilars, using their experience with the Humira biosimilar as a model. They plan to launch a no-cost alternative to Stelara in 2025 and intend to apply a similar approach to future biosimilars. The company aims to enhance affordability and accessibility in the specialty market, with nearly half of it expected to have biosimilar alternatives. Palmer highlights the importance of adapting strategies based on the specific clinical needs and availability of products, emphasizing their strong position to lead and innovate in the biosimilar market.

David Cordani emphasizes the specialty market's role in mitigating elevated medical cost pressures through high-performing capabilities, such as Accredo and CuraScript, which act as a hedge against such pressures. This strategic structuring of the corporation offers both risk mitigation and growth opportunities. Scott Fidel from Stephens then asks for an update on inpatient cost trends relative to expectations and seeks insights on the competitive landscape for exchanges in 2025, noting intensified competition with some major carriers showing negative rates for their plans.

In the paragraph, Brian Evanko discusses Cigna Healthcare's solid performance in medical cost ratio (MCR), meeting expectations due to planned pricing for elevated utilization levels projected to last through 2024. He notes that affordability initiatives helped offset increased specialty drug utilization, while surgical costs showed some deceleration. Inpatient costs were as expected, not a concern. The elevated demand for specialty drugs benefited Cigna's Evernorth business, particularly in specialty and care services. Evanko also highlights Cigna's ongoing commitment to the individual exchanges market, emphasizing a focus on margin expansion for 2024 with fewer customers but higher profit margins compared to 2023.

The paragraph discusses expected changes in customer rate increases and specialty drug utilization for a healthcare company. For 2025, the company anticipates a low double-digit percentage rate increase, influenced by geographic and competitive factors. Despite this, they view the business as a growth engine, forecasting 10% to 15% annualized growth. In a separate discussion about managed care, they note an increase in Medical Loss Ratio (MLR) guidance due to specialty drug utilization across various therapeutic areas, such as inflammatory conditions, oncology, and neurology, impacting all product lines, including commercial, Medicare, and individual exchanges. The questioner inquires about the impact of the Inflation Reduction Act (IRA) on Medicare and commercial sectors.

The paragraph discusses the performance and outlook of the Medicare Advantage (MA) market, with David Cordani addressing a question from George Hill of Deutsche Bank. Cordani acknowledges that while Medicare volumes are slightly elevated, they are not significantly divergent in terms of root cause. He emphasizes that the Medicare Advantage portfolio is generally meeting expectations. In response to Hill's inquiry about Cordani's differing comments regarding the MA market, Cordani clarifies that the current challenges are a statement of fact but maintains that MA is strategically important and will continue to be a key offering, with challenges being evaluated as either cyclical or structural.

The paragraph addresses the current state of the Evernorth portfolio, highlighting that about a third of its products and services engage with government-sponsored programs, such as Medicare Advantage (MA). The speaker notes disruptions in the marketplace that align with their previous statements about using discretionary cash flow for share repurchases. Despite challenges like increased medical costs and changes in program ratings, they view these issues as transitional. The speaker emphasizes the value of MA, particularly for lower-income individuals, in providing better clinical coordination and affordability. Although the MA market is going through a turbulent period, it is expected to stabilize, and industry leaders are anticipated to navigate through the challenges successfully.

The paragraph discusses the company's strategy and timing for share buybacks, emphasizing that the cadence is influenced by cash flow timing rather than clarity in their Medicare Advantage business. David Cordani explains that cash flow doesn't occur evenly throughout the year, with significant capital deployment expected in both the early and later parts of the year, particularly the high cash flow in the fourth quarter. The company is actively repurchasing shares as of October. Brian Evanko adds that favorable development in the third quarter was higher than usual, without specifying particular drivers.

The paragraph is part of a financial discussion involving Cigna Healthcare, focusing on the net P&L impact of reserve development from previous periods. It explains that the gross prior year development doesn't directly impact the net P&L due to factors like client sharing and MLR rebates. The net P&L effect was not a major driver of Cigna Healthcare's income in the third quarter. Lance Wilkes from Bernstein asks about capital deployment and M&A criteria, seeking insights on management stability and volatility considerations. David Cordani from Cigna responds, affirming that their M&A criteria remain unchanged, centered on strategic alignment, financial attractiveness, and a clear path to close.

The paragraph discusses financial considerations, particularly focusing on EPS accretion, capital efficiency, and return on invested capital for evaluating financial attractiveness. It highlights the importance of assessing stability and visibility in a volatile environment when seeking strategic value creation. Furthermore, Brian Evanko addresses employer reactions to rising cost trends, emphasizing affordability as a key concern. Employers are adopting more precise strategies, such as specialty pharmacy capabilities and mental health programs, to manage costs effectively. The paragraph underscores a track record of creating shareholder value and the increased interest in tailored affordability initiatives.

The paragraph features a discussion about Cigna Healthcare's efforts to address the link between mental and physical health and the interest in more precise provider network configurations to optimize costs and align quality incentives. Programs like Pathwell Specialty and Pathway Bone & Joint are highlighted as being of increased interest to employers. Michael Ha from Baird asks about the factors that could help achieve at least 10% EPS growth in 2025 and the adoption trends of HUMIRA biosimilars and their impact on Evernorth's earnings growth. David Cordani begins to respond to these inquiries.

The paragraph discusses the company's strategy and outlook for the coming years. First, it introduces the headwind-tailwind framework, which will be further detailed in a forthcoming quarterly call where the 2025 outlook will be presented. The speaker emphasizes that while 2024 is expected to be a strong and competitive year, the company plans to exercise prudence and guide at the lower end of their growth range for 2025, maintaining the growth algorithm. Brian Evanko then elaborates on the three tailwinds anticipated for 2025: ongoing biosimilar adoption, advancements in large PBS client relationships, and the onboarding of new, significant clients. These factors contribute to the company's confidence in meeting their projected growth.

The paragraph discusses the financial impacts and expectations for 2025, primarily focusing on the deployment of Medicare sale proceeds, which is anticipated to have a low single-digit positive effect on EPS. However, this is counteracted by three main challenges: the absence of the 2025 VillageMD dividend, resulting in a $130 million impact on Evernorth segment income; $150 million in stranded overhead costs from the Medicare divestiture, split between Cigna Healthcare and Evernorth; and the costs associated with continued investments for long-term growth. Additionally, Eric Palmer discusses the adoption of biosimilar HUMIRA, noting that 33% of eligible patients had adopted it by the end of the third quarter, showing strong growth likely to continue.

The paragraph discusses Cigna Group's strategic positioning to capitalize on pharmacological innovation, focusing on their subsidiary Evernorth. They have repeatedly increased Evernorth's long-term growth projection, now aiming for 5% to 8% growth, emphasizing their role in making healthcare more affordable and accessible. David Cordani, delivering closing remarks on a call, highlights Cigna's strong third-quarter performance and their EPS outlook for 2024. He credits the success to the dedication of their 70,000 global employees and their leadership team, expressing optimism for the company's future performance.

The paragraph is a conclusion to the Cigna Group's third quarter 2024 results review. It expresses pride in their achievements and future outlook. An operator announces that the conference call has ended, informs participants that Cigna Investor Relations will be available for further questions, and provides details on how to access a recording of the call for 10 business days without a passcode.

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