NYSE:CI The Cigna Group Q2 2024 Earnings Report $334.01 +1.00 (+0.30%) Closing price 05/6/2025 03:59 PM EasternExtended Trading$329.54 -4.47 (-1.34%) As of 09:13 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast The Cigna Group EPS ResultsActual EPS$6.72Consensus EPS $6.42Beat/MissBeat by +$0.30One Year Ago EPS$6.13The Cigna Group Revenue ResultsActual Revenue$60.52 billionExpected Revenue$58.30 billionBeat/MissBeat by +$2.23 billionYoY Revenue Growth+24.60%The Cigna Group Announcement DetailsQuarterQ2 2024Date8/1/2024TimeBefore Market OpensConference Call DateThursday, August 1, 2024Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by The Cigna Group Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 1, 2024 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for standing by for The Sigma Group's Q2 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 how to enter queue to ask questions at that time. As a reminder, ladies and gentlemen, this conference, including the Q and A session, is being recorded. We'll begin by turning the call over to Ralph Jacoby. Operator00:00:27Please go ahead. Speaker 100:00:30Thank you. Good morning, everyone. Thanks for joining today's call. I'm Ralph Giacobbe, 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 Evanko, 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. Speaker 100:00:55In our remarks today, David and Brian will cover a number of topics, including our Q2 financial results and our financial outlook for 2024. Following their prepared remarks, David, Brian and Eric will be available for Q and 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 GAAP 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 principal measures of financial performance. Speaker 100:01:52In our remarks today, we will be making some forward looking statements, including statements regarding our outlook for 2024 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 Q2, we recorded an after tax net special item charge of $64,000,000 or $0.23 per share. Details of the special items are included in our quarterly financial supplement. Speaker 100:02:31Additionally, please note that when we will make perspective comments regarding financial performance, including our full year 2024 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2024 dividends. With that, I'll turn the call over to David. Speaker 200:02:50Thanks, Ralph. Good morning, everyone, and thank you for joining our call today. For the Q2, we again delivered strong performance as we continue to build on our momentum. Today, I'll discuss our performance for the quarter and key strategic drivers of our growth, demonstrate how the strength and durable nature of our model is fueling our success, Then Brian will review additional details on our results and our outlook for the rest of the year and we'll move to your questions. So let's get started. Speaker 200:03:16For the Q2, I'm pleased to report that Cigna Group delivered total revenue of $60,500,000,000 and adjusted earnings per share of $6.72 We achieved these positive overall results in a dynamic environment and I'm proud of our team for continuing to focus on those we serve, ensuring that they get the care they need, they get their medications at an affordable cost and to get the support they need in order to make the best decisions about their health and vitality. All of this requires a relentless focus on innovation, disciplined execution and a passionate commitment to our mission. During the quarter, our Evernorth Health Service businesses demonstrated continued strength with our market leading specialty and pharmacy benefit services capabilities. Within EverNorth, I'll start with our accelerated growth specialty and care businesses, which provide specialty drugs for the treatment of complex and rare diseases, distribution of specialty pharmaceuticals, as well as clinical programs to help clients improve health and vitality. We saw strong growth in the quarter with adjusted income growing 12% year over year, reflecting continued demand for our services, while we also continue to invest in broadening our offerings and expanding our reach. Speaker 200:04:32In Accredo, our specialty business, our growth continues to be fueled by secular tailwinds as well as Accredo's differentiated strength, which makes us the market leader in the space. Biosimilars, for example, represent a force of change and a substantial opportunity for continued growth and impact. At the end of June, we began dispensing our interchangeable biosimilar for Humira. Our program has $0 out of pocket cost for patients, saving them on average $3,500 per year. To deliver these savings, we have agreements in place with multiple manufacturers that will produce biosimilars for Evernorth Pharmaceutical distributor, Qualit Pharmaceuticals. Speaker 200:05:12Now the biosimilar opportunity goes well beyond Humira. By 2,030, we expect an additional $100,000,000,000 of annual specialty drug spend in the U. S. Will be subject to biosimilar and generic competition. And Accredo is well positioned to deliver differentiated value for our clients, customers and patients. Speaker 200:05:32In our Care Services businesses, we are continuing to grow and expand in key areas of increased demand, including behavioral health, virtual and home care. For example, summer, we further expanded Evernorth Behavioral Care Group to an additional 7 states. We are seeing positive patient outcomes from our unique clinician matching capabilities based on individual needs and preferences with fully 84% of patients experiencing clinically significant reductions in the depression and anxiety symptoms. Now shifting to Express Scripts, our foundational pharmacy benefit services businesses, we are seeing continued strong client demand given our breadth of clinical and supply chain expertise as well as our proven partnership orientation. This quarter, Express Scripts built on a long track record of innovating for those we serve with continued enhancements and new solutions. Speaker 200:06:27For example, given the high cost of TLP-one drugs, we're continuing to see meaningful interest from our clients in encircle rx, now with more than 2,000,000 lives already enrolled. Our program starts with our longitudinal data to target patients who will most benefit from these medications and we provide patients with resources to make lasting changes, help maximize the effectiveness of these medications, both in the short and long term. Another example of our innovation orientation is a recent announcement of Express Scripts Oncology Benefit Services, which will be available in 2025. Our new solution helps patients navigate the challenges of cancer care by providing a single oncology benefit, integrating pharmacy, medical and behavioral health treatments. Our patient centered approach will help to ensure the earliest possible detection, guide individuals to high quality providers and coordinate care across clinical teams. Speaker 200:07:26Now moving to Cigna Health Care, our health benefits platform, we continue to deliver solutions that create value and better outcome for clients and customers, coupled with highly competitive total cost of care. Similar to others in the industry and as we've anticipated, we are seeing increased utilization in our book of business. I would note that our results are largely in line with the elevated levels in our planning and pricing assumptions. Our U. S. Speaker 200:07:52Employer Foundational Growth business continues to perform in line with our expectations. Over this year, I've met with hundreds of clients across the U. S. And globally. And while the needs of every client are unique, there are a few consistent themes across every discussion. Speaker 200:08:08First, continued focus on affordability, particularly in light of medications like GLP-1s and gene therapies coming to market. Next, an increased need of improved access and importantly coordination of behavioral health services. 3rd is mounting point solution fatigue. And 4th, the opportunity and need for leverage of our longitudinal data and clinical programs to help keep people healthy and vital. Our solutions continue to resonate well, given our highly consultative approach to help clients choose the right set of solutions, our proven capabilities to support the workforce and our innovative programs that help to keep costs down. Speaker 200:08:47As a result, we are further gaining share and continue to see outsized opportunities, for example, in our select segment. Another key ability of our U. S. Employer business to deliver integrated and tailored benefits for our clients and customers are modular solutions that incorporate innovative from Evernorth, including behavioral health, virtual care and pharmacy. Our PathWell suite of solution, which continues to drive exceptional value, is a prime example. Speaker 200:09:16PathWell Specialty is another way we are reducing costs associated with specialty drug therapies, while also providing improved care and clinical outcomes for patients. With our accretive nurses, nearly 50% of our PathWell specialty patients who've transitioned their site of care now receive treatment in the comfort and convenience of their home. We are pleased with how the market continues to recognize the value we are delivering through solutions like PathWell. Turning to our Medicare Advantage business, we continue to make great progress regarding the sale of this business and I'm pleased that we remain on track to close in the Q1 of 2025 as planned. Next, I want to take a few minutes to talk about the current environment surrounding pharmacy benefit managers and the relative landscape. Speaker 200:10:04At the heart of this debate is the cost of pharmaceuticals. As we previously discussed, a key force of change in health care is a surge of pharmacological innovation. For context, prescription drug coverage is the most frequently used care benefit and on average it's used 15 times per year per person, resulting in 1,000,000,000 of prescriptions per year annually in the United States. Today and for the foreseeable future, the most meaningful advances extending and improving quality of life will come through gene therapies, breakthrough in treatments for cancers and other conditions as well as personalized medicines. In the U. Speaker 200:10:41S, for example, there are already more than 20 gene therapy and cell therapies available. However, there are nearly 1,000 more in the pipeline. Additionally, as we know, GLP-1s are growing rapidly, helping to treat diseases and complications that stem from obesity and diabetes. This class of drug is on tap to be the number one pharmacy benefit trend driver for plans of all sizes this year. And the impact will grow with some forecasting nearly 10% of the U. Speaker 200:11:09S. Population using GLP-1s in the next 10 years or sooner. The implications rippling from these fast growing pharmaceutical trends across the entire healthcare system are undeniable. And one of the biggest unanswered questions is how could society afford this continued trajectory? Our role is to negotiate with pharmaceutical manufacturers as well as pharmacies to ensure that individuals are able to access pharmacological innovations at a fair and affordable price. Speaker 200:11:40In fact, pharmacy benefit companies are the only part of the drug supply chain who work to drive costs down. To underscore this, new drugs coming to market with unsustainable prices in 2023 were up $300,000 on a medium basis, up over 35% over 2022. And last year, median brand drug price increases were greater than 5% more than the rate of inflation. Let me repeat this. Last year, the median annual price for new drugs coming to market was $300,000 up 35% over 2022. Speaker 200:12:20Meanwhile, in 2023, Express Scripts change in pace and cost sharing was relatively flat on average. Express Scripts patients with employer sponsored drug coverage pay on average $15 out of pocket for a 30 day supply. And for our clients Express Scripts delivered more than $38,000,000,000 in savings annually. Stepping back, our industry negotiations to drive these results can at times generate friction in the system. Friction that is spilled into and now has reached heightened levels in the political arena and media with industry winners and losers being declared at every report and every headline. Speaker 200:13:00We believe that the facts and results and outcomes delivered to our clients, customers and patients should rule today. However, the environment calls on us to be more proactive. This means ensuring that what we do and the value we bring is more widely and better understood. And we continue to evolve our model to address legitimate pain points and opportunities. For example, in 2023, 1% of the patients in the United States experienced out of pocket costs above $2,000 a year. Speaker 200:13:30From our point of view, that's too many. We accept the responsibility to accelerate innovation make medications more affordable, while continuing to improve health outcomes and finding solutions for every person we serve. Make no doubt, our team will continue to lean into these challenge for the benefit of our patients, clients and the healthcare ecosystem. And we are proud of the work that our team does every day and the role we play and the results we're able to achieve. Now let me pause and summarize before transitioning to Brian. Speaker 200:14:01When you combine our compelling growth potential and strong execution focus, we have confidence in our ability to meet our 2024 and long term growth targets. We have a proven track record of delivering differentiated value for those we serve by innovating new solutions like encircledrx and our PathWell suite, as well as expanding meaningful partnerships. As a result in the Q2, we delivered on our financial commitment with adjusted EPS of $6.72 and we remain on track to deliver our guidance for full year adjusted earnings per share of at least $28.40 for 2024. Further, our company has attractive sustainable growth opportunities over the long term and we remain on track to deliver average annual adjusted EPS growth of 10% to 14%, building on the track record of achieving 13 percent adjusted EPS growth over the last decade, all while we generate cumulative operating cash flow of $60,000,000,000 over the next 5 years, while continuing to meaningfully invest capital for the benefit of shareholders. We also continue to make strategic investments in strengthening our capabilities in our foundational and accelerated growth business and remain focusing on harnessing the breadth of our capabilities of our organization to meet the evolving needs of those we serve. Speaker 200:15:19Overall, our strong performance through the first half of the year reflects the balance in our company portfolio and the significant value creation that positions us for sustained and differentiated growth. With that, I'll turn it over to Brian. Speaker 300:15:33Thank you, David. Good morning, everyone. Today, I'll review Cigna's Q2 2024 results and discuss our outlook for the full year. We're pleased with our strong second quarter results, reflecting growth across Evernorth and Cigna Healthcare. The results underpin the strength and the stability of our diversified portfolio of businesses in a dynamic environment and demonstrate continued execution against our operating and financial commitments. Speaker 300:16:02Key consolidated financial highlights for the 2nd quarter include revenue of $60,500,000,000 which represents 25% year over year growth and adjusted earnings per share of $6.72 or 10% year over year growth. With the strong first half performance, we continue to have confidence in our full year 2024 adjusted earnings per share outlook of at least $28.40 which represents more than 13% year over year growth in EPS. Now turning to our segment results, I'll first comment on Evernorth. Evernorth continues to deliver strong results driven by both of its operating segments. 2nd quarter 2024 revenues grew to $49,500,000,000 while pretax adjusted earnings grew 7% to $1,600,000,000 slightly ahead of expectations. Speaker 300:16:59Specialty and Care Services showed strong growth with revenue up 18 percent to $22,900,000,000 and pretax adjusted earnings were up 12% to $756,000,000 at the high end of our long term target growth range. This performance is a demonstration of our robust and diversified capabilities as we delivered broad based growth across our specialty businesses, Accredo and Cara Script as well as in our Care Services businesses. Pharmacy Benefit Services also posted strong revenue growth, driven by the addition of new business wins and expansion of existing relationships. Pretax adjusted earnings increased to $798,000,000 as our innovative capabilities continue to drive value for our clients, customers and patients. Overall, we're pleased with Evernorth's 2nd quarter results and continue to expect strong income growth in the second half of the year. Speaker 300:18:02Turning to Cigna Healthcare. 2nd quarter 2024 revenues were $13,200,000,000 and pretax adjusted earnings were $1,200,000,000 2nd quarter earnings were in line with expectations and included approximately $50,000,000 of an unfavorable prior year impact related to Medicare Advantage risk adjustment. The 2nd quarter medical care ratio of 82.3% was within our expected range, inclusive of the aforementioned unfavorable prior year impact of approximately $50,000,000 or 40 basis points on the medical care ratio. Absent this item, the underlying medical care ratio is broadly in line with expectations. As noted previously, we had planned and priced for 2024 medical cost trend to be above 2023 levels, which took into account both unit cost inflation as well as continued elevated utilization. Speaker 300:19:03Year to date, we have seen elevated cost trends consistent with our planning and pricing assumptions. The net medical cost payable at the end of the second quarter was $5,040,000,000 compared to $5,660,000,000 at the end of the first quarter. As noted previously, in the first quarter, we had booked approximately $650,000,000 in incremental reserves relating to the Change Healthcare disruption. Those reserves have since developed in line with expectations and claims payments have returned to more normalized levels, driving the sequential decline in net medical cost payable. Moving to Cigna Healthcare Medical customers, we ended the quarter with 19,000,000 total medical customers. Speaker 300:19:50We expect growth in Cigna Healthcare Medical customers for the remainder of the year, primarily driven by growth in our U. S. Employer select and middle market segments. Overall, Cigna Healthcare delivered consistent results in a dynamic operating environment. Now turning to our outlook for full year 2024. Speaker 300:20:12With our continued strong underlying performance in Evernorth and Cigna Healthcare, we are reaffirming our full year 2024 expectation for consolidated adjusted income from operations of at least $8,065,000,000 or at least $28.40 per share. Regarding cadence of earnings, we expect the 3rd quarter adjusted earnings per share to be approximately 25% of the full year outlook. Now turning to our 2024 outlook for each of our growth platforms. In Evernorth, we continue to expect full year 2024 pretax adjusted earnings of at least $7,000,000,000 This reflects continued momentum into the second half with 3rd quarter Evernorth earnings expected to accelerate to high single digit year over year growth, in part due to an increase in adoption of our interchangeable biosimilar offering. For Cigna Healthcare, continue to expect full year 2024 pretax adjusted earnings of at least $4,775,000,000 And we expect the 3rd quarter adjusted earnings to be approximately 25% of the full year outlook. Speaker 300:21:27We continue to expect the full year medical care ratio within the range of 81.7% to 82.5%. With the first half medical care ratio coming in at 81.1%, the midpoint of our guidance implies an 83.1% medical care ratio for the second half of the year. We would expect the 3rd quarter to be slightly below that level. Turning to our 2024 capital management position. As of July 31, we have repurchased 14,700,000 shares of common stock or approximately $5,000,000,000 consistent with our previous commentary. Speaker 300:22:10We continue to expect at least $11,000,000,000 of cash flow from operations. Our balance sheet and cash flow outlook remains strong, benefiting from our efficient asset light framework that drives attractive returns on capital. Now to recap, our first half twenty twenty four consolidated results reflect strong contributions and execution from both Evernorth and Cigna Healthcare. Our 2024 outlook reflects the sustained momentum and strong fundamentals of our 2 growth platforms, which gives us confidence to deliver on our full year 2024 adjusted earnings per share outlook of at least $28.40 With that, we'll turn it over to the operator for the Q and A portion of the call. Operator00:23:16Our first question comes from Justin Lake with Wolfe Research. You may ask your question. Speaker 400:23:21Thanks. Good morning. Good morning. Appreciate the commentary on cost trend. Maybe you can give us an update on what you're seeing by business line and also how things have trended 2Q versus 1Q. Speaker 400:23:35When you say it's in line with your pricing and your expectations, is that a year to date discussion or is that where trend is running today coming out of the Q2? Is that in line or is that more or less elevated versus what you expected? Thanks. Speaker 300:23:58Good morning, Justin. It's Brian. So I start by saying we're pleased to have delivered another solid quarter of MCR performance at Cigna Healthcare, which ran towards the lower end of our MCR guidance range when you exclude the prior year Medicare risk adjustment revenue impacts in the quarter that I mentioned earlier. Now within the quarter, total cost of care was broadly in line with expectations. There are a few puts and takes that I call out, if we get into specific cost drivers. Speaker 300:24:24So we continue to see elevated usage of facility based services including emergency room. Additionally, we saw a continuation of elevated utilization of mental healthcare services, which we do see as a positive over the longer term given the correlation to whole person health. You'll recall in the Q1, I highlighted slowing growth in surgical costs. During the Q2, we continued to see abatement in the rate of growth of surgical costs, although costs still did grow. Now taken altogether, we are seeing sustained high cost trends, yet these are broadly in line with our guidance as we planned and priced for the elevated utilization levels that began in 2023 to continue throughout 2024. Speaker 300:25:06Now specifically in the second quarter, we did not witness aggregate acceleration or deceleration of care patterns within the quarter. I also would not note any month to month variability relative to the year to date experience that we've seen. So overall, we remain confident in the full year MCR range outlined in our guidance. Speaker 500:25:28Thank Operator00:25:29you. And this question comes from Lisa Gill with JPMorgan. You may ask your question. Speaker 600:25:35Good morning and thank you. I want to start with the 2025 selling season on the pharmacy side. You made comments around GLP-1s. We continue to see new indications there. I'm just curious, 1, when we think about the opportunities in 2025, how would you characterize that? Speaker 600:25:532, what kind of programs are people buying going into 2025? And then lastly, David, you made a comment that the facts need to be more widely understood when it comes to the pharmacy business. What are your plans around making those facts more widely known? Because as you know, I agree with you that both Congress as well as the media reports don't fairly reflect what the benefits are of the business. Speaker 500:26:22Good morning, Lisa. It's Derek. I'll start then maybe invite David to add some additional comments on the end here. But overall, our foundational pharmacy benefit services business Express Scripts is off to a really good start for 2025. We've got strong new sales and our 2025 retention rate is going to be consistent with recent years in the mid-90s or better. Speaker 500:26:45Stepping back a little bit, Evernorth overall is continues to be well positioned to grow. Specialty business is also positioned for strong growth with significant growth driven by our pharmacy benefits clients electing to use our specialty capabilities as well as strong growth in services sold directly to health systems and other health plans. So overall, we are quite excited about the strength of the solutions and how they continue to resonate with the market overall. The themes or specific programs that I would point to come back to areas that help to make the value of the dollars spent on medicines more effective, right? So programs like our encircleRx program that helps to effectively manage, weight loss medications GLP-one or our most recent oncology benefit offering that David mentioned a bit ago in his prepared remarks. Speaker 500:27:39So targeted specific types of programs that work really well with the broader suite of benefit offerings continue to resonate really well in that scenario we continue to invest in. David, do you want to take a bit on the broader environment comment? Speaker 200:27:52Sure. Eric, thank you. Good morning, Lisa. And Lisa, I appreciate the call out. 1st and foremost, let me reiterate, we're proud of the work we do daily and I'm greatly appreciative of our team that gets up every day serving our patients and customers through employer relationships, health line relationships, governmental entity relationships, and increasingly through partnerships and collaborations with healthcare professionals. Speaker 200:28:152nd, we will and need to continue to innovate for the benefit of those we serve, whether that's through the likes of ClearCareRx, our patient insurance program, our EnCircle program, our independent pharmacy program, all of which are first in the space. Now specific to your question, we challenge ourselves to be much more aggressive and complete relative to communication and engagement in support of our clients be they employers or health line customers, collaborating even more deeply and intensely with the independent pharmacies and sub segmenting the independent pharmacists who are truly independent and rural, working on the hill of course. And then lastly, more aggressively leveraging a credible 3rd party independent analysis of what our industry does and specifically what we do on behalf of those we serve in a fact based incredible way. So you should expect to see us a bit more complete and aggressive ensuring that we're amplifying that. Make no doubt we also need to continue to innovate as we have and we will continue to innovate for the benefit of those we serve. Speaker 200:29:16Thanks for your question. Operator00:29:19Thank you. And this question comes from A. J. Rice. Your line is open. Operator00:29:22You may ask your question with UBS. Speaker 700:29:26J. Rice:] Thanks. Hi, everybody. I might just flip over and ask you about the any distinctives you're seeing in the health benefit selling season across your book, I know, large group and Select, etcetera. And then also you called out for quite a while now, fatigue on point solutions. Speaker 700:29:48I wonder I understand how you're addressing affordability and I understand how you're addressing behavioral health integration. But on the point solution question, is there anything that this or do you think you'll consider buying some of these point solutions and then offering them as part of your integrated offering? Do you sort of see yourself getting in the middle of helping employers choose between the myriad of point solutions? How are you addressing that? Speaker 300:30:18Morning, AJ, it's Brian. I'll start on the Cigna Healthcare selling season and buying pattern dynamic and then I think David will pick up on the second part of your question relative point solutions and some of our inorganic activities. So as it relates to the Cigna Healthcare selling season, I'll concentrate my comments on the larger end of the U. S. Employer market just given the time of the year. Speaker 300:30:39We're seeing a relatively consistent number of RFPs this year in comparison to last year at this time. And similarly, in terms of our existing clients, we have a similar amount out to bid as we did last year at this time. So just for some context on the numbers. Now each of these larger employer clients tend to have unique needs. There's a few areas that thematically I'd call out in terms of what our teams are seeing out in the market. Speaker 300:31:03One, as David made reference to earlier, affordability continues to be a key area of focus, particularly with the wave of drug innovation, including GLP-1s and gene hitting the market. Speaker 800:31:12Secondly, to Speaker 300:31:13your point, some of the larger employers are seeking to consolidate vendors or point solutions with those who can supply more integrated offerings. 3rd, we're seeing mental health and substance abuse benefits and programs becoming more and more important each year, particularly given some of the downstream effects of the pandemic. And finally, many of these larger clients are interested in digitally enabled care navigation capabilities to drive either further study care optimization or consumer empowerment. So taken all together, our Cigna Healthcare offerings are well positioned to address these themes and demands from large employers. And importantly, we also continue to see strong traction net growth in our under 500 Select segment as you'll see in the statistical supplement 7% year over year growth in customers within our Cigna Healthcare Select segment specifically. Speaker 300:32:01David maybe you want to pick up on the point solution question? Sure. Speaker 200:32:04A. J, good morning. So first, if you think about some of the solutions we identified, both in today's call and in prior conversations, you can think about our digital health formulary as a way that we connect capabilities and work to connect them seamlessly. You can think about the way the encircle program is designed. It's designed to have actually coordination and continuity that's patient centric. Speaker 200:32:26The oncology program that we will roll out in 2025 is another example of taking a specific care need or episode of care and redesigning the pathway to care in a much more coordinated basis, staying focused on the patient and the health care professional. The Cigna behavioral group offering that I referenced has much more continuity and coordination of the care experience starting from the access to the medical professional, the matching and the coordination and there'll be new offerings. You can think about all those as largely having been built organically we continue to invest back in the organization. To the core of your question through acquisition, you can think about that as well you never rule it out largely not fueled through acquisition, although there could be episodic coordination of point solutions. And then I would graph in the middle. Speaker 200:33:14I'd remind you that we operate the Cigna Ventures organization where we have a now meaningful track record of partnering with organizations where they are by definition almost point solutions and helping collaboratively to co innovate with them as we go forward. So stepping back, largely organically driven, proven track record and the acceleration of new innovations that are coming to market for the benefit of those we serve to meet that demand. A. J, thanks for the question. Operator00:33:45Thank you. Our next question comes from Andrew Mok with Barclays. Your line is open. You may ask your question. Speaker 800:33:52Hi, good morning. With all the changes coming to Part D, there could be significant changes, not only to membership, but also formulary management for next year. How does the shifting risk to Part D sponsored risk impact Evernorth more broadly? And how are you helping clients navigate these changes? Thanks. Speaker 200:34:09Good morning, Andrew. It's David. Let me comment briefly on the PDP macro environment and then ask Eric to walk through our capabilities and our proven track record of supporting our clients relative to their PDP offerings. As you step back, it was clear that the Inflation Reduction Act as it was designed and the ultimate implementation of it was going to cause PDP premiums to rise meaningfully. And most likely that was going to create some meaningful disruption for seniors. Speaker 200:34:36Now as the bids have gone in, CMS has assessed those bids and has drawn apparently some of the similar conclusions relative to the acceleration of the bids and the acceleration of the premiums required given the design features. And after reviewing those has created a short term window for some bid adjustments that we unlike others are going through that on an accelerated basis. So that disruption was designed from the Inflation Reduction Act in the marketplace is reacting to that. I'm going to ask Eric to talk more specifically to our capabilities and how we work. It's important in many cases our health plan clients in their PDP book of business to ensure we deliver the right quality and overall affordability. Speaker 200:35:17Eric? Speaker 500:35:17Thanks, David. Good morning, Andrew. Evernorth and Express Script specifically has a long history of supporting health plans who offer Medicare Part D plans. We've got a great track record of achieving strong STARS outcomes for them and supporting our plans and their offerings and helping them with the tools to manage formularies and model the impacts of changes, for example. We're continuing to make investments to help ensure our plans are well positioned with the continued evolution of Part D coverage even with the most recent round of changes from the IRA like the administrative requirements associated with the copay smoothing just as one example. Speaker 500:35:52So this continues to be an important part of the Evernorth and Express Scripts business that we're positioned to continue to help our plans succeed and thrive as they work through these changes. Operator00:36:06Thank you. Our next question comes from Scott Fidel with Stephens. Your line is open. You may ask your question. Speaker 900:36:13Hi, thanks. Good morning. I was hoping to maybe just touch on the marketplace and a couple of things there. One, just with the HIFS 2023 risk adjustment true ups, if you can tell us what the net impact was to earnings, if there was any relative to how you had accrued for that? And then also just when thinking about the commentary on cost trends, maybe if you could overlay that into the marketplace in terms of if you're seeing a similar trend there and how that's influencing your view on exchange margins for the full year. Speaker 900:36:51I think that your prior view had been probably still a bit below long term target there for marketplace margins this year, just interested in an updated view on margins for the year. Thanks. Speaker 300:37:05Good morning, Scott. It's Brian. Maybe I'll try to just take a big picture view of the individual exchange business in aggregate and hit your risk adjustment question as part of that. So the headline on SE Takeaways, broadly speaking, our individual exchange book is performing as we expected in 2024. As it relates to the final 2023 individual exchange risk adjustment true up, we had already been accrued for a sizable risk adjustment payable. Speaker 300:37:31And in the second quarter results, we did have a small unfavorable true up that was recorded in the Cigna Healthcare P and L. But overall, this was not a meaningful performance driver in the Q2 for us. And then as it relates to the 2024 performance year, we did receive our first look the industry wide risk adjustment data for the specific states we participate as we closed up the 2nd quarter books and the preliminary industry data confirmed that our previous 2024 risk adjustment assumptions were reasonable. My earlier commentary on cost trends broadly applicable to the individual exchange business as well. So when you put all the pieces together, we are tracking towards the improved 2024 margin profile we outlined during our Q1 call. Speaker 300:38:16And therefore, we'd expect to land the year slightly below our long term target margin range of 4% to 6 for the individual exchange business. Thanks for the question. Operator00:38:27Thank you. Our next question comes from Ryan Langsam with TD Cowen. Your line is open. You may ask your question. Speaker 1000:38:34Hey, good morning. Just looks like the exchange business was down maybe 99,000 to 100,000 members sequentially. Certainly understand why it was down versus 23 year end, but wasn't exactly expecting that sequential move. Anything to call out there? And maybe a little early, but I'll ask just any expectations on 2025 in terms of growth trajectory and perhaps even margin profile? Speaker 1000:38:58Thanks. Speaker 300:39:01Good morning, Ryan. It's Brian. And congratulations on your new role. As it relates to the individual exchange lives intra year, maybe I'll just step back and give you kind of a year to date perspective and then I'll get into the sequential component of your question. So as we discussed during our Q1 results call, the primary driver of the year to date change in Cigna Healthcare customer volumes is our individual exchange book. Speaker 300:39:25You'll recall that we repositioned this business in 2024, including taking some needed pricing actions in certain geographies in order to improve profitability. And we expected to see a reduction in customer volumes as we have witnessed. And sequentially, the individual exchange business drove the majority of the modest decline in the Q2 customer volumes. Now you should think of the primary driver of that being non payment of premiums as a result of some of the pricing actions we took in a couple of the larger geographies. So it's essentially the delayed effect of those grace periods kicking in. Speaker 300:39:58I mean, it was an immaterial impact to our financial results in the quarter. Over the course of the balance of this year, we would expect to see continued strong growth within our U. S. Employer under 500 Select segment, which should result in sequential growth in U. S. Speaker 300:40:12Employer and Cigna Healthcare lives for the balance of the year. So taken altogether, we're pleased with the the pricing and rate filings and network design. And until we really see all the competitive dynamics, it's hard to know how that will shake through. We would expect our margins to be similar or potentially a little bit better next year in the individual exchange book as we look forward, but too early to know exactly how we'll shake out from a membership standpoint. Speaker 1100:40:44Thanks. Operator00:40:46Thank you. The next question comes from Josh Raskin with Nephron Research. You may ask your question. Speaker 900:40:53Hi, thanks. Good morning. I'd be curious to get your views on the potential for ICRA and specifically how that could impact the small group or select market and maybe how does stop loss fit into that equation? Speaker 300:41:09Good morning, Josh. It's Brian. I'll take that one as well. So, we see the ICRA market in its current form as likely being a niche market, but one that we're monitoring closely. So more specifically, we see the ICRA market as something that could be an appealing option smaller employers who tend to be more commoditized buyers. Speaker 300:41:30And we expect this is most likely to be an attractive option for employers with less than 50 employees, which is a market segment that is financially immaterial for us today. And within the under-fifty market, the average employer there has fewer than 10 employees, so very small employers typically. Now all that said, our individual exchange business represents an opportunity for us to participate in the ICRA space should it gain more momentum. Again, I'd end though where I started in that we see this most likely being a niche market. Our stop loss offerings to your question are fully integrated with our select segment business. Speaker 300:42:08They should not think of that as something that is a net threat to us in the select market provided that the under-fifty concentration transpires the way that I described earlier. Thanks for the question. Operator00:42:22Thank you. Our next question comes from George Hill with Deutsche Bank. You may ask your question. Speaker 1100:42:28Yes, good morning guys. I thought I'd just ask a question on what I consider to be your cost of goods sold line, which is there continues to be a lot of discussion from the retail pharmacy side of the business around trying to negotiate new payment models or changes in terms. I don't know if there's any update that you can provide on how those conversations are progressing. Speaker 500:42:48Good morning, George. It's Eric. Thanks for the question. Of course, I'm not going to comment on specific negotiations with any pharmacies or things along those lines. But as you know, we've got a wide array of choices and options for our clients. Speaker 500:43:01That extends to how we've constructed our network as we look to balance access and affordability that best meets the needs of our clients and their patients. So we work to assemble a range of different network options under a range of different reimbursement types that match up with the needs for cost access and the associated trade offs and such there for our clients. So overall that approach has served us well. We work to continue to innovate to bring new solutions to market. An example of a new solution there would be late last year we announced our Clear Network solution. Speaker 500:43:33Clear Network provides a comprehensive simple solution and that the pricing is based off of independent externally created index and then it's got a simple margin that's shared between us and the pharmacy. So it's a new offering we put in the market last year that's generating interest. But again, overall, the portfolio of offerings that we continue to pull together resonates with our buyers and is part of the reason we've continued to grow the pharmacy benefits services chassis so nicely over the last few years. Speaker 1100:44:07Appreciate the color. Operator00:44:10Thank you. Our next question comes from Kevin Fischbeck with Bank of America. You may ask your question. Speaker 800:44:16Hey, this is Adam on for Kevin. So you raised guidance in Q1 on what seemed like a smaller beat at least for Street expectations, but you didn't raise guidance this quarter. Can you give a little more color on why maybe you wouldn't raise and how things came in versus your expectations? And if there's anything to read into on the PYD or on the maybe on DCPs being down, but any color would be helpful. Thanks. Speaker 300:44:45Good morning, Adam. It's Brian. So first off, we're pleased to have delivered another strong quarter results on both the top and bottom lines with overall results slightly ahead of our expectations in the Q2. Now within the quarter, we did have some timing related benefits, including tax items that contributed to the strength in the EPS line. And we're pleased to reaffirm our full year guidance as well as all key supporting metrics considering this dynamic environment. Speaker 300:45:11And importantly, both Evernorth and Cigna Healthcare are delivering against their respective commitments. Taking into account the environment, we're being prudent with this attractive full year EPS outlook of at least $28.40 representing over 13% growth near the high end of our long term average annual EPS growth rate range of 10% to Operator00:45:3414%. Thank you. Our next question comes from Erin Wright with Morgan Stanley. You may ask your question. Speaker 1200:45:41Thanks so much. So you called out the strength across specialty and services at Evernorth. I guess, how do we think about the Hugh Myers strategy contributing to the results now? And then how does that influence sort of the quarterly progression across Evernorth in the back half of the year? And just the strategy around Humira and how that's playing out relative to your expectations? Speaker 1200:46:03Have you, for instance, in sourced Humira virus similar and across your curoscope business, does it make sense to in source more than the 50% for instance that you're targeting on that front? Okay. Thanks. Speaker 200:46:16Hey, good morning. It's David. Let me start. You have a lot in your question and appreciate it given the importance of the space. First just to reiterate the Specialty and Care part of the portfolio represents fully 30% of our enterprise today. Speaker 200:46:31And we're quite excited about the growth potential for that business. We see the broader business portfolio as a provision of care business that leverages in many cases and we're talking about the specialty services. As noted, we had strong growth in the Q2 of 12%. And as we discussed for quite some time, the breadth of our capabilities position us well relative to changes in the marketplace more specifically the biosimilar opportunity. Now I had multiple questions there that I'll ask Eric to peel back a little bit relative to this more specific opportunities we see both in terms of our core business through Accredo as well as through Cura Script as we're expanding our capabilities in our portfolio. Speaker 500:47:09Eric? Thanks, David. Good morning, Eric. So just stepping back a little bit again as well. Biosimilars are a really important opportunity to improve affordability of these high cost specialty medicines, and we're really well positioned to help to connect our clients and their customers with these therapies. Speaker 500:47:26Our approach here has been consistent in that we offer choice and value to best align with our clients' needs. And we're focused on getting to low net cost fueling competition and aligning incentives for everyone involved, the patients, our clients, our plan sponsors and the pharma supply chain. As you made reference to in your question, through Qualit Pharmaceuticals, our private label distributor was contracted with multiple manufacturers for patients and attractive cost to patients and attractive cost to plan sponsors. We began shipping this product at the very end of June. So just a few weeks ago, We've already seen meaningful uptake in the last few weeks consistent with our expectations. Speaker 500:48:09We expect the customer adoption to continue to grow over the balance of the year. And it's early, 5 weeks in really or so, but we see biosimilars having about a 20% share of our book at this point after just shipping this product for the last 5 weeks. So overall, we continue to see that this is a real opportunity for us to improve the affordability of health care for the benefit of our clients and our plan sponsors. Operator00:48:40Thank you. Our next question comes from Stephen Baxter with Wells Fargo. You may ask your question. Speaker 800:48:46Yes. Hi, thanks. One of the questions has been asked, but wanted to ask about in group membership trends. It does seem like we're starting to see more mixed data on the job front. Could you spike out a little bit what you're seeing within group trends? Speaker 800:48:57And do you think your sequential membership changes are generally a good reflection of that? Thanks. Speaker 200:49:03Steve, good morning. It's David. As we discussed back in 2023, as the year was unfolding, just by way of context, we were very mindful of the potential for some softening of the employer marketplace and then to your point in group trends softening a little bit. And while we stayed quite close to monitoring it, it didn't really manifest itself in any material way, given employers were still working to get to full level of employment. For 2024, we've taken a similar cautious curious monitoring approach and built a little bit of consideration relative to softening. Speaker 200:49:40And by and large, we have not seen that to date. So, the membership headlines that we've delivered represent good fundamental strength. As Brian noted previously, the change in our membership is largely driven by our as expected dampening of the marketplace as you would call it our individual exchange business. But we remain close in monitoring any dampening tied to the economy and thus far haven't seen anything material to call out there. Operator00:50:09Thank you. Our next question comes from Dave Windley with Jefferies. You may ask your question. Speaker 1300:50:14Hi, good morning. Thanks for taking my question, which is on MLR progression. Brian, in your comments, I think I heard you say that the excess reserves from 1Q have basically developed in line with your expectations. I think I also heard you say that you didn't see any say intra quarter trends or particular month in the quarter that stood out as an anomaly. And I think in looking at our at your progression, it looks like MLR implied for the second half is maybe in the neighborhood of 200 basis points above the first half, historical normal maybe about half of that. Speaker 1300:50:52So just wanted to understand, if the higher MLR expectation for the second half is kind of cautious posture or if you're expecting certain things to accelerate in the second half that would drive that? And then maybe a last question would be relative to pricing, would you view yourselves as pricing to forward view of trend as you head into next year? Or would you be pricing to expand margin? Thanks. I know a long question. Speaker 300:51:27No problem, Dave. Good morning. So as it relates to the second half MCR guidance, I think your question was in a year over year context. Really three factors that I'd highlight if you're looking at it relative to the back half of twenty twenty three. You may recall from our Q1 earnings release, we discussed that the 2024 seasonality would be more similar to pre pandemic norms with the MCR increasing as the year unfolded, in part driven by our individual exchange business metal tier mix, which has skewed more bronze this year. Speaker 300:51:57Additionally, we had some favorable stop loss utilization in the Q4 of 2023 that we Q3 specifically for that. So all those factors combined to generate a higher second half MCR year over year. But again, we remain comfortable and confident with the full year MCR guidance range that we provided here. As it relates to the pricing environment and I'll comment specifically in our U. S. Speaker 300:52:34Employer business. As a reminder, this is a book that's nearly 85 percent ASO or self funded. So therefore, we have earnings levers that go well beyond a pure risk based MCR. But that said, our U. S. Speaker 300:52:48Employer book is currently operating from a position of strength as we've been performing within target margin ranges. We've remained disciplined with our own pricing strategy in the current environment. We continue to price to our best estimate of forward looking cost trends. To your point, don't need additional margin recapture at the book level. We are seeing the impact of inflation work its way through our provider contracts. Speaker 300:53:12As these contracts renew, we continue to expect elevated levels of utilization through 2024. So when you put all those pieces together, our all in pricing trend for 2024 slightly higher than what we had assumed a year ago for the corresponding 2023 pricing cycle. And we're confident in our ability to secure appropriate pricing for 2025 and beyond. So long answer to your long question. Thank you. Operator00:53:38Thank you. Our next question comes from Jessica Tassman with Piper Sandler. You may ask your question. Speaker 600:53:44Hi. Thank you so much for taking the question. I'm curious how you're thinking about the possibility that SKYRIZI and RINVOQ substitutions could maybe foreclose the Humira biosimilar opportunity. And I guess just what recourse do you have to ensure that the biosimilar products that you've got in the market succeed? I think you've given us plenty of evidence that they're the best for the patients. Speaker 600:54:05So just, yes, how are you thinking about the possibility of foreclosure? And what can you do to kind of prevent or mitigate that? Thank you. Speaker 500:54:14Jessica, it's Eric. So I guess stepping back our approach is focused on getting offering choice and value and getting to the lowest cost and best available solution from a patient perspective. So couple of things I would note. First of all, our biosimilar offering is interchangeable. And so that facilitates easier election if a patient chooses to choose a biosimilar, it's an easier process by it being interchangeable. Speaker 500:54:45So that would be one thing I would note as a differentiator for us. More broadly, we're here to facilitate and ensure patients have access to the medicines that they need. So if they need SKYRIZI or INVOQ, we'll be in a position to fulfill that as well. But overall, we're working to make sure that we've got the right access to all the medication. As we look ahead, I'm ensuring we've got a full on a fully developed portfolio of all of the available biosimilar offerings will be important and we'll continue to be in a position to lead here. Operator00:55:24Thank you. Our last question comes from Lance Wilkes with Bernstein. Your line is open. You may ask your question. Speaker 400:55:30Great. Thanks guys. Could you just give me a little more color on some of the faster growth areas in Evernorth? In particular, if you could talk a little bit about GLP-one coverage outlook for during the selling season for next year. Also fee growth has been really strong. Speaker 400:55:48How much of that is coming from traditional PBM versus care services growth? And are you seeing any of that in accretive? Thanks a lot. Speaker 500:55:57Good morning, Lance. It's Eric. So let me start and just talk a little bit about Encircle and then I'll add ask Brian to talk a little bit more about the some of the numerical dimensions of things. So within the encircle program, we've got over 2,000,000 uncovered lives at this point. So that's growing nicely. Speaker 500:56:15Stepping back a little bit in terms of just looking at the coverage for GLP-1s for weight loss indications overall. In the Express Scripts business, we've now got essentially 50% or so of planned sponsors covering for way loss indications. So we've seen continued incremental growth there. The underlying utilization levels also continue to grow nicely. We've seen growth there consistent with what you might have seen from an industry growth perspective or things along those lines. Speaker 500:56:44Looking ahead, we expect the use of these medications to continue to grow and that is part of the growth algorithm for Evernorth overall. Stepping away from GLP-one specifically, we see broader growth opportunity in specialty with continued growth both through new therapies, through biosimilars coming to market, as well as us continuing to expand our relationships, whether that's through our Brian, do you want to pick up the second part of Lance's question? Speaker 200:57:27Sure, Eric. Speaker 300:57:27Good morning, Lance. So as it relates to the fees and other revenue line in Evernorth, which is up 14% quarter over quarter, think of a number of different areas contributing to the strong performance. Contributions from our EverNorth Care businesses are reflected here. So think of eviCoreMD Live, to the core of your question, we are seeing continued growth in service based solutions within the pharmacy benefit services business where clients are electing more fee based orientations with us. So finally, the other contributor to this is the cross enterprise leverage that we're driving with Cigna Healthcare results in revenue from Cigna Healthcare showing up in fees and other revenue in Evernorth and then being eliminated at the corporate level. Speaker 300:58:10So all those contribute to that strong growth in the fees and other revenue line. Speaker 400:58:15Great. Thanks. Operator00:58:17Thank you. I will turn the call back over to David Cordani for closing remarks. Speaker 200:58:23First, let me thank you all for your engagement today, your time and your questions. I just want to highlight a few headline points. With our momentum, we are confident that we will deliver on our EPS outlook of at least $28.40 for 20.24, which represents over 13% growth rate from 2023. Additionally, before we close, I want to recognize and express appreciation to our 70,000 coworkers across the globe. It's their continued focus, dedication and commitment to support our clients, our customers, our patients and our partners that enable us to deliver on our commitments including those to you our shareholders. Speaker 200:58:58We're proud of what we've achieved and we're excited about the opportunities that stand as we look ahead. And as always we look forward to our future discussions. Have a great day. Thanks. Operator00:59:09Ladies and gentlemen, this concludes the Cigna Group's Q2 2024 results review. Sigma Investor Relations will be available to respond to additional questions shortly. A recording of this conference will be available for 10 business days following this call. You may access the recorded conference by dialing 800-839-1190 or 20 33693031. There is no passcode required for this replay. Operator00:59:37Thank you for participating. We will now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallThe Cigna Group Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) The Cigna Group Earnings HeadlinesMorgan Stanley Increases The Cigna Group (NYSE:CI) Price Target to $390.00May 7 at 5:19 AM | americanbankingnews.comThe Cigna Group (NYSE:CI) Price Target Raised to $382.00 at BarclaysMay 7 at 4:37 AM | americanbankingnews.comGold Hits New Highs as Global Markets SpiralWhen Trump took office in 2017, gold was just $1,100 an ounce. By the time he left, it had soared to $1,839. Now… as new tariffs take effect, gold is breaking records again. You've hopefully already seen this in action… but gold is surpassing $3,000 per ounce for the first time EVER.May 7, 2025 | Premier Gold Co (Ad)CFRA: Cigna Group ’faces industry-wide cost pressures’May 6 at 3:22 PM | finance.yahoo.comPiper Sandler Increases The Cigna Group (NYSE:CI) Price Target to $374.00May 6 at 2:25 AM | americanbankingnews.comGuggenheim Reiterates Buy Rating for The Cigna Group (NYSE:CI)May 6 at 2:25 AM | americanbankingnews.comSee More The Cigna Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like The Cigna Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on The Cigna Group and other key companies, straight to your email. Email Address About The Cigna GroupThe Cigna Group (NYSE:CI), together with its subsidiaries, provides insurance and related products and services in the United States. Its Evernorth Health Services segment provides a range of coordinated and point solution health services, including pharmacy benefits, home delivery pharmacy, specialty pharmacy, distribution, and care delivery and management solutions to health plans, employers, government organizations, and health care providers. The company's Cigna Healthcare segment offers medical, pharmacy, behavioral health, dental, and other products and services for insured and self-insured customers; Medicare Advantage, Medicare Supplement, and Medicare Part D plans for seniors, as well as individual health insurance plans; and health care coverage in its international markets, as well as health care benefits for mobile individuals and employees of multinational organizations. In addition, it offers permanent insurance contracts sold to corporations to provide coverage on the lives of certain employees for financing employer-paid future benefit obligations. The company distributes its products and services through insurance brokers and consultants; directly to employers, unions and other groups, or individuals; and private and public exchanges. The company was formerly known as Cigna Corporation and changed its name to The Cigna Group in February 2023. The Cigna Group was founded in 1792 and is headquartered in Bloomfield, Connecticut.View The Cigna Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Archer Stock Eyes Q1 Earnings After UAE UpdatesFord Motor Stock Rises After Earnings, But Momentum May Not Last Broadcom Stock Gets a Lift on Hyperscaler Earnings & CapEx BoostPalantir Stock Drops Despite Stellar Earnings: What's Next?Is Eli Lilly a Buy After Weak Earnings and CVS-Novo Partnership?Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's Earnings Upcoming Earnings Monster Beverage (5/8/2025)Coinbase Global (5/8/2025)Brookfield (5/8/2025)Anheuser-Busch InBev SA/NV (5/8/2025)ConocoPhillips (5/8/2025)Shopify (5/8/2025)Cheniere Energy (5/8/2025)McKesson (5/8/2025)Enbridge (5/9/2025)Petróleo Brasileiro S.A. - Petrobras (5/12/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 14 speakers on the call. Operator00:00:00Ladies and gentlemen, thank you for standing by for The Sigma Group's Q2 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 how to enter queue to ask questions at that time. As a reminder, ladies and gentlemen, this conference, including the Q and A session, is being recorded. We'll begin by turning the call over to Ralph Jacoby. Operator00:00:27Please go ahead. Speaker 100:00:30Thank you. Good morning, everyone. Thanks for joining today's call. I'm Ralph Giacobbe, 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 Evanko, 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. Speaker 100:00:55In our remarks today, David and Brian will cover a number of topics, including our Q2 financial results and our financial outlook for 2024. Following their prepared remarks, David, Brian and Eric will be available for Q and 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 GAAP 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 principal measures of financial performance. Speaker 100:01:52In our remarks today, we will be making some forward looking statements, including statements regarding our outlook for 2024 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 Q2, we recorded an after tax net special item charge of $64,000,000 or $0.23 per share. Details of the special items are included in our quarterly financial supplement. Speaker 100:02:31Additionally, please note that when we will make perspective comments regarding financial performance, including our full year 2024 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2024 dividends. With that, I'll turn the call over to David. Speaker 200:02:50Thanks, Ralph. Good morning, everyone, and thank you for joining our call today. For the Q2, we again delivered strong performance as we continue to build on our momentum. Today, I'll discuss our performance for the quarter and key strategic drivers of our growth, demonstrate how the strength and durable nature of our model is fueling our success, Then Brian will review additional details on our results and our outlook for the rest of the year and we'll move to your questions. So let's get started. Speaker 200:03:16For the Q2, I'm pleased to report that Cigna Group delivered total revenue of $60,500,000,000 and adjusted earnings per share of $6.72 We achieved these positive overall results in a dynamic environment and I'm proud of our team for continuing to focus on those we serve, ensuring that they get the care they need, they get their medications at an affordable cost and to get the support they need in order to make the best decisions about their health and vitality. All of this requires a relentless focus on innovation, disciplined execution and a passionate commitment to our mission. During the quarter, our Evernorth Health Service businesses demonstrated continued strength with our market leading specialty and pharmacy benefit services capabilities. Within EverNorth, I'll start with our accelerated growth specialty and care businesses, which provide specialty drugs for the treatment of complex and rare diseases, distribution of specialty pharmaceuticals, as well as clinical programs to help clients improve health and vitality. We saw strong growth in the quarter with adjusted income growing 12% year over year, reflecting continued demand for our services, while we also continue to invest in broadening our offerings and expanding our reach. Speaker 200:04:32In Accredo, our specialty business, our growth continues to be fueled by secular tailwinds as well as Accredo's differentiated strength, which makes us the market leader in the space. Biosimilars, for example, represent a force of change and a substantial opportunity for continued growth and impact. At the end of June, we began dispensing our interchangeable biosimilar for Humira. Our program has $0 out of pocket cost for patients, saving them on average $3,500 per year. To deliver these savings, we have agreements in place with multiple manufacturers that will produce biosimilars for Evernorth Pharmaceutical distributor, Qualit Pharmaceuticals. Speaker 200:05:12Now the biosimilar opportunity goes well beyond Humira. By 2,030, we expect an additional $100,000,000,000 of annual specialty drug spend in the U. S. Will be subject to biosimilar and generic competition. And Accredo is well positioned to deliver differentiated value for our clients, customers and patients. Speaker 200:05:32In our Care Services businesses, we are continuing to grow and expand in key areas of increased demand, including behavioral health, virtual and home care. For example, summer, we further expanded Evernorth Behavioral Care Group to an additional 7 states. We are seeing positive patient outcomes from our unique clinician matching capabilities based on individual needs and preferences with fully 84% of patients experiencing clinically significant reductions in the depression and anxiety symptoms. Now shifting to Express Scripts, our foundational pharmacy benefit services businesses, we are seeing continued strong client demand given our breadth of clinical and supply chain expertise as well as our proven partnership orientation. This quarter, Express Scripts built on a long track record of innovating for those we serve with continued enhancements and new solutions. Speaker 200:06:27For example, given the high cost of TLP-one drugs, we're continuing to see meaningful interest from our clients in encircle rx, now with more than 2,000,000 lives already enrolled. Our program starts with our longitudinal data to target patients who will most benefit from these medications and we provide patients with resources to make lasting changes, help maximize the effectiveness of these medications, both in the short and long term. Another example of our innovation orientation is a recent announcement of Express Scripts Oncology Benefit Services, which will be available in 2025. Our new solution helps patients navigate the challenges of cancer care by providing a single oncology benefit, integrating pharmacy, medical and behavioral health treatments. Our patient centered approach will help to ensure the earliest possible detection, guide individuals to high quality providers and coordinate care across clinical teams. Speaker 200:07:26Now moving to Cigna Health Care, our health benefits platform, we continue to deliver solutions that create value and better outcome for clients and customers, coupled with highly competitive total cost of care. Similar to others in the industry and as we've anticipated, we are seeing increased utilization in our book of business. I would note that our results are largely in line with the elevated levels in our planning and pricing assumptions. Our U. S. Speaker 200:07:52Employer Foundational Growth business continues to perform in line with our expectations. Over this year, I've met with hundreds of clients across the U. S. And globally. And while the needs of every client are unique, there are a few consistent themes across every discussion. Speaker 200:08:08First, continued focus on affordability, particularly in light of medications like GLP-1s and gene therapies coming to market. Next, an increased need of improved access and importantly coordination of behavioral health services. 3rd is mounting point solution fatigue. And 4th, the opportunity and need for leverage of our longitudinal data and clinical programs to help keep people healthy and vital. Our solutions continue to resonate well, given our highly consultative approach to help clients choose the right set of solutions, our proven capabilities to support the workforce and our innovative programs that help to keep costs down. Speaker 200:08:47As a result, we are further gaining share and continue to see outsized opportunities, for example, in our select segment. Another key ability of our U. S. Employer business to deliver integrated and tailored benefits for our clients and customers are modular solutions that incorporate innovative from Evernorth, including behavioral health, virtual care and pharmacy. Our PathWell suite of solution, which continues to drive exceptional value, is a prime example. Speaker 200:09:16PathWell Specialty is another way we are reducing costs associated with specialty drug therapies, while also providing improved care and clinical outcomes for patients. With our accretive nurses, nearly 50% of our PathWell specialty patients who've transitioned their site of care now receive treatment in the comfort and convenience of their home. We are pleased with how the market continues to recognize the value we are delivering through solutions like PathWell. Turning to our Medicare Advantage business, we continue to make great progress regarding the sale of this business and I'm pleased that we remain on track to close in the Q1 of 2025 as planned. Next, I want to take a few minutes to talk about the current environment surrounding pharmacy benefit managers and the relative landscape. Speaker 200:10:04At the heart of this debate is the cost of pharmaceuticals. As we previously discussed, a key force of change in health care is a surge of pharmacological innovation. For context, prescription drug coverage is the most frequently used care benefit and on average it's used 15 times per year per person, resulting in 1,000,000,000 of prescriptions per year annually in the United States. Today and for the foreseeable future, the most meaningful advances extending and improving quality of life will come through gene therapies, breakthrough in treatments for cancers and other conditions as well as personalized medicines. In the U. Speaker 200:10:41S, for example, there are already more than 20 gene therapy and cell therapies available. However, there are nearly 1,000 more in the pipeline. Additionally, as we know, GLP-1s are growing rapidly, helping to treat diseases and complications that stem from obesity and diabetes. This class of drug is on tap to be the number one pharmacy benefit trend driver for plans of all sizes this year. And the impact will grow with some forecasting nearly 10% of the U. Speaker 200:11:09S. Population using GLP-1s in the next 10 years or sooner. The implications rippling from these fast growing pharmaceutical trends across the entire healthcare system are undeniable. And one of the biggest unanswered questions is how could society afford this continued trajectory? Our role is to negotiate with pharmaceutical manufacturers as well as pharmacies to ensure that individuals are able to access pharmacological innovations at a fair and affordable price. Speaker 200:11:40In fact, pharmacy benefit companies are the only part of the drug supply chain who work to drive costs down. To underscore this, new drugs coming to market with unsustainable prices in 2023 were up $300,000 on a medium basis, up over 35% over 2022. And last year, median brand drug price increases were greater than 5% more than the rate of inflation. Let me repeat this. Last year, the median annual price for new drugs coming to market was $300,000 up 35% over 2022. Speaker 200:12:20Meanwhile, in 2023, Express Scripts change in pace and cost sharing was relatively flat on average. Express Scripts patients with employer sponsored drug coverage pay on average $15 out of pocket for a 30 day supply. And for our clients Express Scripts delivered more than $38,000,000,000 in savings annually. Stepping back, our industry negotiations to drive these results can at times generate friction in the system. Friction that is spilled into and now has reached heightened levels in the political arena and media with industry winners and losers being declared at every report and every headline. Speaker 200:13:00We believe that the facts and results and outcomes delivered to our clients, customers and patients should rule today. However, the environment calls on us to be more proactive. This means ensuring that what we do and the value we bring is more widely and better understood. And we continue to evolve our model to address legitimate pain points and opportunities. For example, in 2023, 1% of the patients in the United States experienced out of pocket costs above $2,000 a year. Speaker 200:13:30From our point of view, that's too many. We accept the responsibility to accelerate innovation make medications more affordable, while continuing to improve health outcomes and finding solutions for every person we serve. Make no doubt, our team will continue to lean into these challenge for the benefit of our patients, clients and the healthcare ecosystem. And we are proud of the work that our team does every day and the role we play and the results we're able to achieve. Now let me pause and summarize before transitioning to Brian. Speaker 200:14:01When you combine our compelling growth potential and strong execution focus, we have confidence in our ability to meet our 2024 and long term growth targets. We have a proven track record of delivering differentiated value for those we serve by innovating new solutions like encircledrx and our PathWell suite, as well as expanding meaningful partnerships. As a result in the Q2, we delivered on our financial commitment with adjusted EPS of $6.72 and we remain on track to deliver our guidance for full year adjusted earnings per share of at least $28.40 for 2024. Further, our company has attractive sustainable growth opportunities over the long term and we remain on track to deliver average annual adjusted EPS growth of 10% to 14%, building on the track record of achieving 13 percent adjusted EPS growth over the last decade, all while we generate cumulative operating cash flow of $60,000,000,000 over the next 5 years, while continuing to meaningfully invest capital for the benefit of shareholders. We also continue to make strategic investments in strengthening our capabilities in our foundational and accelerated growth business and remain focusing on harnessing the breadth of our capabilities of our organization to meet the evolving needs of those we serve. Speaker 200:15:19Overall, our strong performance through the first half of the year reflects the balance in our company portfolio and the significant value creation that positions us for sustained and differentiated growth. With that, I'll turn it over to Brian. Speaker 300:15:33Thank you, David. Good morning, everyone. Today, I'll review Cigna's Q2 2024 results and discuss our outlook for the full year. We're pleased with our strong second quarter results, reflecting growth across Evernorth and Cigna Healthcare. The results underpin the strength and the stability of our diversified portfolio of businesses in a dynamic environment and demonstrate continued execution against our operating and financial commitments. Speaker 300:16:02Key consolidated financial highlights for the 2nd quarter include revenue of $60,500,000,000 which represents 25% year over year growth and adjusted earnings per share of $6.72 or 10% year over year growth. With the strong first half performance, we continue to have confidence in our full year 2024 adjusted earnings per share outlook of at least $28.40 which represents more than 13% year over year growth in EPS. Now turning to our segment results, I'll first comment on Evernorth. Evernorth continues to deliver strong results driven by both of its operating segments. 2nd quarter 2024 revenues grew to $49,500,000,000 while pretax adjusted earnings grew 7% to $1,600,000,000 slightly ahead of expectations. Speaker 300:16:59Specialty and Care Services showed strong growth with revenue up 18 percent to $22,900,000,000 and pretax adjusted earnings were up 12% to $756,000,000 at the high end of our long term target growth range. This performance is a demonstration of our robust and diversified capabilities as we delivered broad based growth across our specialty businesses, Accredo and Cara Script as well as in our Care Services businesses. Pharmacy Benefit Services also posted strong revenue growth, driven by the addition of new business wins and expansion of existing relationships. Pretax adjusted earnings increased to $798,000,000 as our innovative capabilities continue to drive value for our clients, customers and patients. Overall, we're pleased with Evernorth's 2nd quarter results and continue to expect strong income growth in the second half of the year. Speaker 300:18:02Turning to Cigna Healthcare. 2nd quarter 2024 revenues were $13,200,000,000 and pretax adjusted earnings were $1,200,000,000 2nd quarter earnings were in line with expectations and included approximately $50,000,000 of an unfavorable prior year impact related to Medicare Advantage risk adjustment. The 2nd quarter medical care ratio of 82.3% was within our expected range, inclusive of the aforementioned unfavorable prior year impact of approximately $50,000,000 or 40 basis points on the medical care ratio. Absent this item, the underlying medical care ratio is broadly in line with expectations. As noted previously, we had planned and priced for 2024 medical cost trend to be above 2023 levels, which took into account both unit cost inflation as well as continued elevated utilization. Speaker 300:19:03Year to date, we have seen elevated cost trends consistent with our planning and pricing assumptions. The net medical cost payable at the end of the second quarter was $5,040,000,000 compared to $5,660,000,000 at the end of the first quarter. As noted previously, in the first quarter, we had booked approximately $650,000,000 in incremental reserves relating to the Change Healthcare disruption. Those reserves have since developed in line with expectations and claims payments have returned to more normalized levels, driving the sequential decline in net medical cost payable. Moving to Cigna Healthcare Medical customers, we ended the quarter with 19,000,000 total medical customers. Speaker 300:19:50We expect growth in Cigna Healthcare Medical customers for the remainder of the year, primarily driven by growth in our U. S. Employer select and middle market segments. Overall, Cigna Healthcare delivered consistent results in a dynamic operating environment. Now turning to our outlook for full year 2024. Speaker 300:20:12With our continued strong underlying performance in Evernorth and Cigna Healthcare, we are reaffirming our full year 2024 expectation for consolidated adjusted income from operations of at least $8,065,000,000 or at least $28.40 per share. Regarding cadence of earnings, we expect the 3rd quarter adjusted earnings per share to be approximately 25% of the full year outlook. Now turning to our 2024 outlook for each of our growth platforms. In Evernorth, we continue to expect full year 2024 pretax adjusted earnings of at least $7,000,000,000 This reflects continued momentum into the second half with 3rd quarter Evernorth earnings expected to accelerate to high single digit year over year growth, in part due to an increase in adoption of our interchangeable biosimilar offering. For Cigna Healthcare, continue to expect full year 2024 pretax adjusted earnings of at least $4,775,000,000 And we expect the 3rd quarter adjusted earnings to be approximately 25% of the full year outlook. Speaker 300:21:27We continue to expect the full year medical care ratio within the range of 81.7% to 82.5%. With the first half medical care ratio coming in at 81.1%, the midpoint of our guidance implies an 83.1% medical care ratio for the second half of the year. We would expect the 3rd quarter to be slightly below that level. Turning to our 2024 capital management position. As of July 31, we have repurchased 14,700,000 shares of common stock or approximately $5,000,000,000 consistent with our previous commentary. Speaker 300:22:10We continue to expect at least $11,000,000,000 of cash flow from operations. Our balance sheet and cash flow outlook remains strong, benefiting from our efficient asset light framework that drives attractive returns on capital. Now to recap, our first half twenty twenty four consolidated results reflect strong contributions and execution from both Evernorth and Cigna Healthcare. Our 2024 outlook reflects the sustained momentum and strong fundamentals of our 2 growth platforms, which gives us confidence to deliver on our full year 2024 adjusted earnings per share outlook of at least $28.40 With that, we'll turn it over to the operator for the Q and A portion of the call. Operator00:23:16Our first question comes from Justin Lake with Wolfe Research. You may ask your question. Speaker 400:23:21Thanks. Good morning. Good morning. Appreciate the commentary on cost trend. Maybe you can give us an update on what you're seeing by business line and also how things have trended 2Q versus 1Q. Speaker 400:23:35When you say it's in line with your pricing and your expectations, is that a year to date discussion or is that where trend is running today coming out of the Q2? Is that in line or is that more or less elevated versus what you expected? Thanks. Speaker 300:23:58Good morning, Justin. It's Brian. So I start by saying we're pleased to have delivered another solid quarter of MCR performance at Cigna Healthcare, which ran towards the lower end of our MCR guidance range when you exclude the prior year Medicare risk adjustment revenue impacts in the quarter that I mentioned earlier. Now within the quarter, total cost of care was broadly in line with expectations. There are a few puts and takes that I call out, if we get into specific cost drivers. Speaker 300:24:24So we continue to see elevated usage of facility based services including emergency room. Additionally, we saw a continuation of elevated utilization of mental healthcare services, which we do see as a positive over the longer term given the correlation to whole person health. You'll recall in the Q1, I highlighted slowing growth in surgical costs. During the Q2, we continued to see abatement in the rate of growth of surgical costs, although costs still did grow. Now taken altogether, we are seeing sustained high cost trends, yet these are broadly in line with our guidance as we planned and priced for the elevated utilization levels that began in 2023 to continue throughout 2024. Speaker 300:25:06Now specifically in the second quarter, we did not witness aggregate acceleration or deceleration of care patterns within the quarter. I also would not note any month to month variability relative to the year to date experience that we've seen. So overall, we remain confident in the full year MCR range outlined in our guidance. Speaker 500:25:28Thank Operator00:25:29you. And this question comes from Lisa Gill with JPMorgan. You may ask your question. Speaker 600:25:35Good morning and thank you. I want to start with the 2025 selling season on the pharmacy side. You made comments around GLP-1s. We continue to see new indications there. I'm just curious, 1, when we think about the opportunities in 2025, how would you characterize that? Speaker 600:25:532, what kind of programs are people buying going into 2025? And then lastly, David, you made a comment that the facts need to be more widely understood when it comes to the pharmacy business. What are your plans around making those facts more widely known? Because as you know, I agree with you that both Congress as well as the media reports don't fairly reflect what the benefits are of the business. Speaker 500:26:22Good morning, Lisa. It's Derek. I'll start then maybe invite David to add some additional comments on the end here. But overall, our foundational pharmacy benefit services business Express Scripts is off to a really good start for 2025. We've got strong new sales and our 2025 retention rate is going to be consistent with recent years in the mid-90s or better. Speaker 500:26:45Stepping back a little bit, Evernorth overall is continues to be well positioned to grow. Specialty business is also positioned for strong growth with significant growth driven by our pharmacy benefits clients electing to use our specialty capabilities as well as strong growth in services sold directly to health systems and other health plans. So overall, we are quite excited about the strength of the solutions and how they continue to resonate with the market overall. The themes or specific programs that I would point to come back to areas that help to make the value of the dollars spent on medicines more effective, right? So programs like our encircleRx program that helps to effectively manage, weight loss medications GLP-one or our most recent oncology benefit offering that David mentioned a bit ago in his prepared remarks. Speaker 500:27:39So targeted specific types of programs that work really well with the broader suite of benefit offerings continue to resonate really well in that scenario we continue to invest in. David, do you want to take a bit on the broader environment comment? Speaker 200:27:52Sure. Eric, thank you. Good morning, Lisa. And Lisa, I appreciate the call out. 1st and foremost, let me reiterate, we're proud of the work we do daily and I'm greatly appreciative of our team that gets up every day serving our patients and customers through employer relationships, health line relationships, governmental entity relationships, and increasingly through partnerships and collaborations with healthcare professionals. Speaker 200:28:152nd, we will and need to continue to innovate for the benefit of those we serve, whether that's through the likes of ClearCareRx, our patient insurance program, our EnCircle program, our independent pharmacy program, all of which are first in the space. Now specific to your question, we challenge ourselves to be much more aggressive and complete relative to communication and engagement in support of our clients be they employers or health line customers, collaborating even more deeply and intensely with the independent pharmacies and sub segmenting the independent pharmacists who are truly independent and rural, working on the hill of course. And then lastly, more aggressively leveraging a credible 3rd party independent analysis of what our industry does and specifically what we do on behalf of those we serve in a fact based incredible way. So you should expect to see us a bit more complete and aggressive ensuring that we're amplifying that. Make no doubt we also need to continue to innovate as we have and we will continue to innovate for the benefit of those we serve. Speaker 200:29:16Thanks for your question. Operator00:29:19Thank you. And this question comes from A. J. Rice. Your line is open. Operator00:29:22You may ask your question with UBS. Speaker 700:29:26J. Rice:] Thanks. Hi, everybody. I might just flip over and ask you about the any distinctives you're seeing in the health benefit selling season across your book, I know, large group and Select, etcetera. And then also you called out for quite a while now, fatigue on point solutions. Speaker 700:29:48I wonder I understand how you're addressing affordability and I understand how you're addressing behavioral health integration. But on the point solution question, is there anything that this or do you think you'll consider buying some of these point solutions and then offering them as part of your integrated offering? Do you sort of see yourself getting in the middle of helping employers choose between the myriad of point solutions? How are you addressing that? Speaker 300:30:18Morning, AJ, it's Brian. I'll start on the Cigna Healthcare selling season and buying pattern dynamic and then I think David will pick up on the second part of your question relative point solutions and some of our inorganic activities. So as it relates to the Cigna Healthcare selling season, I'll concentrate my comments on the larger end of the U. S. Employer market just given the time of the year. Speaker 300:30:39We're seeing a relatively consistent number of RFPs this year in comparison to last year at this time. And similarly, in terms of our existing clients, we have a similar amount out to bid as we did last year at this time. So just for some context on the numbers. Now each of these larger employer clients tend to have unique needs. There's a few areas that thematically I'd call out in terms of what our teams are seeing out in the market. Speaker 300:31:03One, as David made reference to earlier, affordability continues to be a key area of focus, particularly with the wave of drug innovation, including GLP-1s and gene hitting the market. Speaker 800:31:12Secondly, to Speaker 300:31:13your point, some of the larger employers are seeking to consolidate vendors or point solutions with those who can supply more integrated offerings. 3rd, we're seeing mental health and substance abuse benefits and programs becoming more and more important each year, particularly given some of the downstream effects of the pandemic. And finally, many of these larger clients are interested in digitally enabled care navigation capabilities to drive either further study care optimization or consumer empowerment. So taken all together, our Cigna Healthcare offerings are well positioned to address these themes and demands from large employers. And importantly, we also continue to see strong traction net growth in our under 500 Select segment as you'll see in the statistical supplement 7% year over year growth in customers within our Cigna Healthcare Select segment specifically. Speaker 300:32:01David maybe you want to pick up on the point solution question? Sure. Speaker 200:32:04A. J, good morning. So first, if you think about some of the solutions we identified, both in today's call and in prior conversations, you can think about our digital health formulary as a way that we connect capabilities and work to connect them seamlessly. You can think about the way the encircle program is designed. It's designed to have actually coordination and continuity that's patient centric. Speaker 200:32:26The oncology program that we will roll out in 2025 is another example of taking a specific care need or episode of care and redesigning the pathway to care in a much more coordinated basis, staying focused on the patient and the health care professional. The Cigna behavioral group offering that I referenced has much more continuity and coordination of the care experience starting from the access to the medical professional, the matching and the coordination and there'll be new offerings. You can think about all those as largely having been built organically we continue to invest back in the organization. To the core of your question through acquisition, you can think about that as well you never rule it out largely not fueled through acquisition, although there could be episodic coordination of point solutions. And then I would graph in the middle. Speaker 200:33:14I'd remind you that we operate the Cigna Ventures organization where we have a now meaningful track record of partnering with organizations where they are by definition almost point solutions and helping collaboratively to co innovate with them as we go forward. So stepping back, largely organically driven, proven track record and the acceleration of new innovations that are coming to market for the benefit of those we serve to meet that demand. A. J, thanks for the question. Operator00:33:45Thank you. Our next question comes from Andrew Mok with Barclays. Your line is open. You may ask your question. Speaker 800:33:52Hi, good morning. With all the changes coming to Part D, there could be significant changes, not only to membership, but also formulary management for next year. How does the shifting risk to Part D sponsored risk impact Evernorth more broadly? And how are you helping clients navigate these changes? Thanks. Speaker 200:34:09Good morning, Andrew. It's David. Let me comment briefly on the PDP macro environment and then ask Eric to walk through our capabilities and our proven track record of supporting our clients relative to their PDP offerings. As you step back, it was clear that the Inflation Reduction Act as it was designed and the ultimate implementation of it was going to cause PDP premiums to rise meaningfully. And most likely that was going to create some meaningful disruption for seniors. Speaker 200:34:36Now as the bids have gone in, CMS has assessed those bids and has drawn apparently some of the similar conclusions relative to the acceleration of the bids and the acceleration of the premiums required given the design features. And after reviewing those has created a short term window for some bid adjustments that we unlike others are going through that on an accelerated basis. So that disruption was designed from the Inflation Reduction Act in the marketplace is reacting to that. I'm going to ask Eric to talk more specifically to our capabilities and how we work. It's important in many cases our health plan clients in their PDP book of business to ensure we deliver the right quality and overall affordability. Speaker 200:35:17Eric? Speaker 500:35:17Thanks, David. Good morning, Andrew. Evernorth and Express Script specifically has a long history of supporting health plans who offer Medicare Part D plans. We've got a great track record of achieving strong STARS outcomes for them and supporting our plans and their offerings and helping them with the tools to manage formularies and model the impacts of changes, for example. We're continuing to make investments to help ensure our plans are well positioned with the continued evolution of Part D coverage even with the most recent round of changes from the IRA like the administrative requirements associated with the copay smoothing just as one example. Speaker 500:35:52So this continues to be an important part of the Evernorth and Express Scripts business that we're positioned to continue to help our plans succeed and thrive as they work through these changes. Operator00:36:06Thank you. Our next question comes from Scott Fidel with Stephens. Your line is open. You may ask your question. Speaker 900:36:13Hi, thanks. Good morning. I was hoping to maybe just touch on the marketplace and a couple of things there. One, just with the HIFS 2023 risk adjustment true ups, if you can tell us what the net impact was to earnings, if there was any relative to how you had accrued for that? And then also just when thinking about the commentary on cost trends, maybe if you could overlay that into the marketplace in terms of if you're seeing a similar trend there and how that's influencing your view on exchange margins for the full year. Speaker 900:36:51I think that your prior view had been probably still a bit below long term target there for marketplace margins this year, just interested in an updated view on margins for the year. Thanks. Speaker 300:37:05Good morning, Scott. It's Brian. Maybe I'll try to just take a big picture view of the individual exchange business in aggregate and hit your risk adjustment question as part of that. So the headline on SE Takeaways, broadly speaking, our individual exchange book is performing as we expected in 2024. As it relates to the final 2023 individual exchange risk adjustment true up, we had already been accrued for a sizable risk adjustment payable. Speaker 300:37:31And in the second quarter results, we did have a small unfavorable true up that was recorded in the Cigna Healthcare P and L. But overall, this was not a meaningful performance driver in the Q2 for us. And then as it relates to the 2024 performance year, we did receive our first look the industry wide risk adjustment data for the specific states we participate as we closed up the 2nd quarter books and the preliminary industry data confirmed that our previous 2024 risk adjustment assumptions were reasonable. My earlier commentary on cost trends broadly applicable to the individual exchange business as well. So when you put all the pieces together, we are tracking towards the improved 2024 margin profile we outlined during our Q1 call. Speaker 300:38:16And therefore, we'd expect to land the year slightly below our long term target margin range of 4% to 6 for the individual exchange business. Thanks for the question. Operator00:38:27Thank you. Our next question comes from Ryan Langsam with TD Cowen. Your line is open. You may ask your question. Speaker 1000:38:34Hey, good morning. Just looks like the exchange business was down maybe 99,000 to 100,000 members sequentially. Certainly understand why it was down versus 23 year end, but wasn't exactly expecting that sequential move. Anything to call out there? And maybe a little early, but I'll ask just any expectations on 2025 in terms of growth trajectory and perhaps even margin profile? Speaker 1000:38:58Thanks. Speaker 300:39:01Good morning, Ryan. It's Brian. And congratulations on your new role. As it relates to the individual exchange lives intra year, maybe I'll just step back and give you kind of a year to date perspective and then I'll get into the sequential component of your question. So as we discussed during our Q1 results call, the primary driver of the year to date change in Cigna Healthcare customer volumes is our individual exchange book. Speaker 300:39:25You'll recall that we repositioned this business in 2024, including taking some needed pricing actions in certain geographies in order to improve profitability. And we expected to see a reduction in customer volumes as we have witnessed. And sequentially, the individual exchange business drove the majority of the modest decline in the Q2 customer volumes. Now you should think of the primary driver of that being non payment of premiums as a result of some of the pricing actions we took in a couple of the larger geographies. So it's essentially the delayed effect of those grace periods kicking in. Speaker 300:39:58I mean, it was an immaterial impact to our financial results in the quarter. Over the course of the balance of this year, we would expect to see continued strong growth within our U. S. Employer under 500 Select segment, which should result in sequential growth in U. S. Speaker 300:40:12Employer and Cigna Healthcare lives for the balance of the year. So taken altogether, we're pleased with the the pricing and rate filings and network design. And until we really see all the competitive dynamics, it's hard to know how that will shake through. We would expect our margins to be similar or potentially a little bit better next year in the individual exchange book as we look forward, but too early to know exactly how we'll shake out from a membership standpoint. Speaker 1100:40:44Thanks. Operator00:40:46Thank you. The next question comes from Josh Raskin with Nephron Research. You may ask your question. Speaker 900:40:53Hi, thanks. Good morning. I'd be curious to get your views on the potential for ICRA and specifically how that could impact the small group or select market and maybe how does stop loss fit into that equation? Speaker 300:41:09Good morning, Josh. It's Brian. I'll take that one as well. So, we see the ICRA market in its current form as likely being a niche market, but one that we're monitoring closely. So more specifically, we see the ICRA market as something that could be an appealing option smaller employers who tend to be more commoditized buyers. Speaker 300:41:30And we expect this is most likely to be an attractive option for employers with less than 50 employees, which is a market segment that is financially immaterial for us today. And within the under-fifty market, the average employer there has fewer than 10 employees, so very small employers typically. Now all that said, our individual exchange business represents an opportunity for us to participate in the ICRA space should it gain more momentum. Again, I'd end though where I started in that we see this most likely being a niche market. Our stop loss offerings to your question are fully integrated with our select segment business. Speaker 300:42:08They should not think of that as something that is a net threat to us in the select market provided that the under-fifty concentration transpires the way that I described earlier. Thanks for the question. Operator00:42:22Thank you. Our next question comes from George Hill with Deutsche Bank. You may ask your question. Speaker 1100:42:28Yes, good morning guys. I thought I'd just ask a question on what I consider to be your cost of goods sold line, which is there continues to be a lot of discussion from the retail pharmacy side of the business around trying to negotiate new payment models or changes in terms. I don't know if there's any update that you can provide on how those conversations are progressing. Speaker 500:42:48Good morning, George. It's Eric. Thanks for the question. Of course, I'm not going to comment on specific negotiations with any pharmacies or things along those lines. But as you know, we've got a wide array of choices and options for our clients. Speaker 500:43:01That extends to how we've constructed our network as we look to balance access and affordability that best meets the needs of our clients and their patients. So we work to assemble a range of different network options under a range of different reimbursement types that match up with the needs for cost access and the associated trade offs and such there for our clients. So overall that approach has served us well. We work to continue to innovate to bring new solutions to market. An example of a new solution there would be late last year we announced our Clear Network solution. Speaker 500:43:33Clear Network provides a comprehensive simple solution and that the pricing is based off of independent externally created index and then it's got a simple margin that's shared between us and the pharmacy. So it's a new offering we put in the market last year that's generating interest. But again, overall, the portfolio of offerings that we continue to pull together resonates with our buyers and is part of the reason we've continued to grow the pharmacy benefits services chassis so nicely over the last few years. Speaker 1100:44:07Appreciate the color. Operator00:44:10Thank you. Our next question comes from Kevin Fischbeck with Bank of America. You may ask your question. Speaker 800:44:16Hey, this is Adam on for Kevin. So you raised guidance in Q1 on what seemed like a smaller beat at least for Street expectations, but you didn't raise guidance this quarter. Can you give a little more color on why maybe you wouldn't raise and how things came in versus your expectations? And if there's anything to read into on the PYD or on the maybe on DCPs being down, but any color would be helpful. Thanks. Speaker 300:44:45Good morning, Adam. It's Brian. So first off, we're pleased to have delivered another strong quarter results on both the top and bottom lines with overall results slightly ahead of our expectations in the Q2. Now within the quarter, we did have some timing related benefits, including tax items that contributed to the strength in the EPS line. And we're pleased to reaffirm our full year guidance as well as all key supporting metrics considering this dynamic environment. Speaker 300:45:11And importantly, both Evernorth and Cigna Healthcare are delivering against their respective commitments. Taking into account the environment, we're being prudent with this attractive full year EPS outlook of at least $28.40 representing over 13% growth near the high end of our long term average annual EPS growth rate range of 10% to Operator00:45:3414%. Thank you. Our next question comes from Erin Wright with Morgan Stanley. You may ask your question. Speaker 1200:45:41Thanks so much. So you called out the strength across specialty and services at Evernorth. I guess, how do we think about the Hugh Myers strategy contributing to the results now? And then how does that influence sort of the quarterly progression across Evernorth in the back half of the year? And just the strategy around Humira and how that's playing out relative to your expectations? Speaker 1200:46:03Have you, for instance, in sourced Humira virus similar and across your curoscope business, does it make sense to in source more than the 50% for instance that you're targeting on that front? Okay. Thanks. Speaker 200:46:16Hey, good morning. It's David. Let me start. You have a lot in your question and appreciate it given the importance of the space. First just to reiterate the Specialty and Care part of the portfolio represents fully 30% of our enterprise today. Speaker 200:46:31And we're quite excited about the growth potential for that business. We see the broader business portfolio as a provision of care business that leverages in many cases and we're talking about the specialty services. As noted, we had strong growth in the Q2 of 12%. And as we discussed for quite some time, the breadth of our capabilities position us well relative to changes in the marketplace more specifically the biosimilar opportunity. Now I had multiple questions there that I'll ask Eric to peel back a little bit relative to this more specific opportunities we see both in terms of our core business through Accredo as well as through Cura Script as we're expanding our capabilities in our portfolio. Speaker 500:47:09Eric? Thanks, David. Good morning, Eric. So just stepping back a little bit again as well. Biosimilars are a really important opportunity to improve affordability of these high cost specialty medicines, and we're really well positioned to help to connect our clients and their customers with these therapies. Speaker 500:47:26Our approach here has been consistent in that we offer choice and value to best align with our clients' needs. And we're focused on getting to low net cost fueling competition and aligning incentives for everyone involved, the patients, our clients, our plan sponsors and the pharma supply chain. As you made reference to in your question, through Qualit Pharmaceuticals, our private label distributor was contracted with multiple manufacturers for patients and attractive cost to patients and attractive cost to plan sponsors. We began shipping this product at the very end of June. So just a few weeks ago, We've already seen meaningful uptake in the last few weeks consistent with our expectations. Speaker 500:48:09We expect the customer adoption to continue to grow over the balance of the year. And it's early, 5 weeks in really or so, but we see biosimilars having about a 20% share of our book at this point after just shipping this product for the last 5 weeks. So overall, we continue to see that this is a real opportunity for us to improve the affordability of health care for the benefit of our clients and our plan sponsors. Operator00:48:40Thank you. Our next question comes from Stephen Baxter with Wells Fargo. You may ask your question. Speaker 800:48:46Yes. Hi, thanks. One of the questions has been asked, but wanted to ask about in group membership trends. It does seem like we're starting to see more mixed data on the job front. Could you spike out a little bit what you're seeing within group trends? Speaker 800:48:57And do you think your sequential membership changes are generally a good reflection of that? Thanks. Speaker 200:49:03Steve, good morning. It's David. As we discussed back in 2023, as the year was unfolding, just by way of context, we were very mindful of the potential for some softening of the employer marketplace and then to your point in group trends softening a little bit. And while we stayed quite close to monitoring it, it didn't really manifest itself in any material way, given employers were still working to get to full level of employment. For 2024, we've taken a similar cautious curious monitoring approach and built a little bit of consideration relative to softening. Speaker 200:49:40And by and large, we have not seen that to date. So, the membership headlines that we've delivered represent good fundamental strength. As Brian noted previously, the change in our membership is largely driven by our as expected dampening of the marketplace as you would call it our individual exchange business. But we remain close in monitoring any dampening tied to the economy and thus far haven't seen anything material to call out there. Operator00:50:09Thank you. Our next question comes from Dave Windley with Jefferies. You may ask your question. Speaker 1300:50:14Hi, good morning. Thanks for taking my question, which is on MLR progression. Brian, in your comments, I think I heard you say that the excess reserves from 1Q have basically developed in line with your expectations. I think I also heard you say that you didn't see any say intra quarter trends or particular month in the quarter that stood out as an anomaly. And I think in looking at our at your progression, it looks like MLR implied for the second half is maybe in the neighborhood of 200 basis points above the first half, historical normal maybe about half of that. Speaker 1300:50:52So just wanted to understand, if the higher MLR expectation for the second half is kind of cautious posture or if you're expecting certain things to accelerate in the second half that would drive that? And then maybe a last question would be relative to pricing, would you view yourselves as pricing to forward view of trend as you head into next year? Or would you be pricing to expand margin? Thanks. I know a long question. Speaker 300:51:27No problem, Dave. Good morning. So as it relates to the second half MCR guidance, I think your question was in a year over year context. Really three factors that I'd highlight if you're looking at it relative to the back half of twenty twenty three. You may recall from our Q1 earnings release, we discussed that the 2024 seasonality would be more similar to pre pandemic norms with the MCR increasing as the year unfolded, in part driven by our individual exchange business metal tier mix, which has skewed more bronze this year. Speaker 300:51:57Additionally, we had some favorable stop loss utilization in the Q4 of 2023 that we Q3 specifically for that. So all those factors combined to generate a higher second half MCR year over year. But again, we remain comfortable and confident with the full year MCR guidance range that we provided here. As it relates to the pricing environment and I'll comment specifically in our U. S. Speaker 300:52:34Employer business. As a reminder, this is a book that's nearly 85 percent ASO or self funded. So therefore, we have earnings levers that go well beyond a pure risk based MCR. But that said, our U. S. Speaker 300:52:48Employer book is currently operating from a position of strength as we've been performing within target margin ranges. We've remained disciplined with our own pricing strategy in the current environment. We continue to price to our best estimate of forward looking cost trends. To your point, don't need additional margin recapture at the book level. We are seeing the impact of inflation work its way through our provider contracts. Speaker 300:53:12As these contracts renew, we continue to expect elevated levels of utilization through 2024. So when you put all those pieces together, our all in pricing trend for 2024 slightly higher than what we had assumed a year ago for the corresponding 2023 pricing cycle. And we're confident in our ability to secure appropriate pricing for 2025 and beyond. So long answer to your long question. Thank you. Operator00:53:38Thank you. Our next question comes from Jessica Tassman with Piper Sandler. You may ask your question. Speaker 600:53:44Hi. Thank you so much for taking the question. I'm curious how you're thinking about the possibility that SKYRIZI and RINVOQ substitutions could maybe foreclose the Humira biosimilar opportunity. And I guess just what recourse do you have to ensure that the biosimilar products that you've got in the market succeed? I think you've given us plenty of evidence that they're the best for the patients. Speaker 600:54:05So just, yes, how are you thinking about the possibility of foreclosure? And what can you do to kind of prevent or mitigate that? Thank you. Speaker 500:54:14Jessica, it's Eric. So I guess stepping back our approach is focused on getting offering choice and value and getting to the lowest cost and best available solution from a patient perspective. So couple of things I would note. First of all, our biosimilar offering is interchangeable. And so that facilitates easier election if a patient chooses to choose a biosimilar, it's an easier process by it being interchangeable. Speaker 500:54:45So that would be one thing I would note as a differentiator for us. More broadly, we're here to facilitate and ensure patients have access to the medicines that they need. So if they need SKYRIZI or INVOQ, we'll be in a position to fulfill that as well. But overall, we're working to make sure that we've got the right access to all the medication. As we look ahead, I'm ensuring we've got a full on a fully developed portfolio of all of the available biosimilar offerings will be important and we'll continue to be in a position to lead here. Operator00:55:24Thank you. Our last question comes from Lance Wilkes with Bernstein. Your line is open. You may ask your question. Speaker 400:55:30Great. Thanks guys. Could you just give me a little more color on some of the faster growth areas in Evernorth? In particular, if you could talk a little bit about GLP-one coverage outlook for during the selling season for next year. Also fee growth has been really strong. Speaker 400:55:48How much of that is coming from traditional PBM versus care services growth? And are you seeing any of that in accretive? Thanks a lot. Speaker 500:55:57Good morning, Lance. It's Eric. So let me start and just talk a little bit about Encircle and then I'll add ask Brian to talk a little bit more about the some of the numerical dimensions of things. So within the encircle program, we've got over 2,000,000 uncovered lives at this point. So that's growing nicely. Speaker 500:56:15Stepping back a little bit in terms of just looking at the coverage for GLP-1s for weight loss indications overall. In the Express Scripts business, we've now got essentially 50% or so of planned sponsors covering for way loss indications. So we've seen continued incremental growth there. The underlying utilization levels also continue to grow nicely. We've seen growth there consistent with what you might have seen from an industry growth perspective or things along those lines. Speaker 500:56:44Looking ahead, we expect the use of these medications to continue to grow and that is part of the growth algorithm for Evernorth overall. Stepping away from GLP-one specifically, we see broader growth opportunity in specialty with continued growth both through new therapies, through biosimilars coming to market, as well as us continuing to expand our relationships, whether that's through our Brian, do you want to pick up the second part of Lance's question? Speaker 200:57:27Sure, Eric. Speaker 300:57:27Good morning, Lance. So as it relates to the fees and other revenue line in Evernorth, which is up 14% quarter over quarter, think of a number of different areas contributing to the strong performance. Contributions from our EverNorth Care businesses are reflected here. So think of eviCoreMD Live, to the core of your question, we are seeing continued growth in service based solutions within the pharmacy benefit services business where clients are electing more fee based orientations with us. So finally, the other contributor to this is the cross enterprise leverage that we're driving with Cigna Healthcare results in revenue from Cigna Healthcare showing up in fees and other revenue in Evernorth and then being eliminated at the corporate level. Speaker 300:58:10So all those contribute to that strong growth in the fees and other revenue line. Speaker 400:58:15Great. Thanks. Operator00:58:17Thank you. I will turn the call back over to David Cordani for closing remarks. Speaker 200:58:23First, let me thank you all for your engagement today, your time and your questions. I just want to highlight a few headline points. With our momentum, we are confident that we will deliver on our EPS outlook of at least $28.40 for 20.24, which represents over 13% growth rate from 2023. Additionally, before we close, I want to recognize and express appreciation to our 70,000 coworkers across the globe. It's their continued focus, dedication and commitment to support our clients, our customers, our patients and our partners that enable us to deliver on our commitments including those to you our shareholders. Speaker 200:58:58We're proud of what we've achieved and we're excited about the opportunities that stand as we look ahead. And as always we look forward to our future discussions. Have a great day. Thanks. Operator00:59:09Ladies and gentlemen, this concludes the Cigna Group's Q2 2024 results review. Sigma Investor Relations will be available to respond to additional questions shortly. A recording of this conference will be available for 10 business days following this call. You may access the recorded conference by dialing 800-839-1190 or 20 33693031. There is no passcode required for this replay. Operator00:59:37Thank you for participating. We will now disconnect.Read morePowered by