The Cigna Group - CIGNA GROUP

All right. I think we'll go ahead and get started. Welcome, everybody, to our next session. We're really pleased to have the Cigna group with us again this year. Anne Dennison, EVP and Chief Financial Officer, thanks so much, Anne, for doing this again. The company had a recent investor day, positioned Cigna as a leader in complex care and healthcare personalization, and highlighted the combined capabilities of Evernorth and CigNA healthcare to get you there. The business model was combined with a significant discussion around a modernization initiative. Looking at the 2030 targets that you laid out at Invest Today, what will be meaningfully different about Cigna's earnings mix by that time frame? Which business or capabilities do you expect to become much more important? Sure. So, first, let me just say thank you for having us here today. Great to be here, sort of just on the back of earnings and on the back of our Investor Day. So look forward to the conversation. Appreciate you having us. So with respect to our business, so maybe I would like to just start by saying, you know, we talked a lot at Investor Today about our lead to one strategy and how important it is the personalization and our ability to serve those with the most complex conditions. And when you think about our portfolio of businesses that we've deliberately shaped over the last decade plus, we've positioned ourselves really well to serve those areas of need. So if I'm just kind of walking down the businesses, so the specialty business, which is about 37% of our overall earnings, it's 100% serving the needs of complex care. That business, you know, growing 8 to 12%, it's our highest growing business. Then you've got our Cigna Healthcare business, 40% of our business, the 55% of that business is serving complex care patients. And then pharmacy benefit services, 23% of our earnings and 70% of it goes to serving complex care. So with respect to your question in terms of what, you know, looking forward, what's going to look different about the business. We would expect that the specialty business, given that it's the highest-growing business, will become a bigger and bigger portion of our overall earnings and will be about 40% as we look out into 2030. And so that, you Know, coupled with the investments we've made across each of the businesses to serve the complex populations has positioned us well to achieve our long-term objective of 10 to 14 percent in addition to that and you reference in the question as well our accelerate to one program so we've got a three billion dollar gross run rate savings objective productivity and modernization not all of it's going to fall to the bottom line But certainly, we're going to reinvest some of it into the business to drive growth, and some of it's going to fall to the bottom line. So hitting our growth rates, achieving our objectives around Accelerate to One, those things we expect to be true and will support our 10% to 14% growth over the long term. No, that's great. To what extent are those long-term earnings targets dependent upon just the market continuing sort of at its current pace, or you're assuming your relative market performance is going to be better than the underlying market dynamics? Maybe some of that to get to the $45 in 2030. Sure. So when you think about our deliberately shaped portfolio of three businesses, businesses, there's three things that we talked about in Investor Day and that we keep pointing to. There's three elements to delivering. One is core growth. Two is our distinct capabilities that we have in each of our business that help add to the equation. And then execution. And we have to hit on all of those three levers to deliver over time. So if you think about specialty and care, 8% to 12% growth in specialty and care. Some of that will come from secular growth and some of that will come for us as a leader in the market. Same thing for each of our businesses. Okay. Okay. I think you've got a range effectively 10 to 14. Would you, the underlying growth seems like it gets you pretty close to the low end, coupled with your capital deployment priorities, gets you pretty close to that low end. Is that a fair way to think about it? Well, the low-end is not our target. So we had talked about it yesterday that we'd expect to be at a minimum of $45 of VPS by 2030. That assumes we hit the low ends of every range across all of our businesses. And an important thing to note there is we're not relying on any one business to get there right and so um two ways to look at one is that uh you got a lot of hedges naturally that say i can get to that low end 10 growth which is not bad growth in and of itself and then the other way is um well the market momentum and most of your businesses i think would carry you pretty close to that unless there's some big sea change of the market. Do you think that's a fair way to look at it? I think that the market momentum plus our distinct capabilities give us a clear pathway to achieving the 10 to 14, including the four to five that we expect to get from capital deployment, so six to nine from our earnings growth. We feel really confident in that. And if you think about some of the progression on the pharmacy benefit services business, you know, we'd expect 2027 to be sort of the trough year. We're still targeting 4% margins. And so getting to that 10%, I just want to, that $45 assumes we do not grow a single dollar in pharmacy benefit services over the entirety from here to 2030. So that's the floor. Right. On the productivity program, the $3 billion, I think there's been some confusion about that, some debate around that. How do we think about where that is coming from, first of all? And second of all, the tradeoff between letting some of that fall through the bottom line versus reinvesting? Yeah. So there's three main categories as part of the overall productivity and modernization initiative. One is around automation and process reengineering. The second is around talent effectiveness. And then the third is around our vendor ecosystem, vendors and suppliers. So you can think about, you know, 70% to 80% of the saving, gross savings coming from those first two buckets, from, you know, the use of AI, our process reengineering, more efficiency, we're going to drive 70% or 80% of that $3 billion. The remaining 20% to 30% is going to come from optimization on the vendor side. and you know we are committed to hitting the 10 to 14 so you can think about you know the the accelerate to one program as belts and suspenders for us to be able to hit our long-term growth goals and you will be judicious about what we invest back in assuming we're meeting our goals and we see an organic opportunity that makes sense for us invest in where the return is going to be you know worth it okay okay um just to make a couple do a couple questions on ever north um going back to some of the comments you made on the third quarter conference call as you laid out uh the ever north headwinds for 27 it looks like if i have this right you're anticipating that operating income in this business will be down in the high single digit range year to year which we estimate be something like down about 200 million or so are we thinking about that correctly? And if so, how much is due to the rollout of the signature model or something else? Sure. So just as a reminder, coming out of the third quarter, we provided some shaping for 27. We look forward to giving specific guidance in the fourth quarter. But with respect to Evernorth, what we've signaled is that we expect overall Evernoth to be up low single digits. And so we said two things. We said overall Evernorth to be up low single digits, and we said specialty and care to be within its 8% to 12% growth range, but to be at the lower end of the range. So that implies roughly what you described as a decline for pharmacy benefit services itself. And that's in the range, and I would describe that. we pointed to two headwinds that we see. The two most prominent headwind there are the moderation of coverage on GLP-1s in the corporate space, which we've seen a decline in employers covering GLP1s. So it was roughly 50%. And we've seeing a couple of points drop, and we expect that to drop a couple more points going into next year. And then the second headwind is just the overall gross rebate pool shrinking um most substantially all most of that goes back to our clients but a portion of it um will affect us okay next year maybe just to drill down on that if you don't mind um uh you call those two out uh for 27 in the thinking about the pbm side um is this the entirety of the headwind for 27 when we think about that um year-to-year decline on the pbn or Is there anything else? And at this point, will the GLP-1 pool be pretty de minimis when you take into account where you're at now? Will it still be a contributor? I'm also going to ask you about the rebate pool in a second, too, maybe. I mean, we still expect a healthy amount of employers to continue coverage on the GLp-1, so we're not expecting it to go to zero, if that was your question. And from your perspective on what you're earning on it, I'm just trying to say you're still – Yeah, we still expect earnings from that portion. I mean, there's always, you know, smaller puts and takes. What we're calling out are the, you now, the two largest headwinds that we see. And we think, you know, with those headwinds, we can achieve a 1% to 2% growth overall for, you know, or low single-digit growth overall forever north for 27. So there'll be puts and takes across the board there. But we're really excited about Signature and the investments that we're making this year, you know, to drive some of the activity that we'll start to see coming through the P&L in 2028. And when you think about the comment about the reduced rebate pools, what specifically is driving that? Yeah, so we pointed to the IRA as probably the biggest driver of reducing prices and therefore reducing the rebate pool. But again, most of that is our clients money um so the gross amount is shrinking and um we do earn a small amount there and so we'll see that you know the pressure from not from that reducing next year and when you move back to flat to four percent growth on the pbs side uh uh 28 and beyond what is what will be the case swing factor that'll allow you to get do start to have growth in that business again Signature. So Signature will be launching, you know, with the exception of our fully insured book for the Cigna Healthcare portion of the ecosystem. Signature doesn't launch until 1-1-28. And so Signature is the, you know, the difference maker. We have had a strong selling season for 2027, and we are targeting for, you know, put aside the mega clients, we're targeting 4% margin on those clients. And then Signature, Signature.com is where we see sort of, you know, coming out of the trough in 27 into growth for PBS as we look out to 2030. Okay. And then speaking about the specialty business, I think you said you expected growth to moderate versus 26 as the pipeline for new specialty drugs and biosimilars is not quite as robust next year as it was this year. I wondered how much visibility do you have coming into the year? You pretty much have visibility on what new launches will be at this point. Was this year's launch from the beginning of the year to the end of the years? Did you see much movement there? Yeah. So we have good visibility into what's coming to the market on both the pharmacy and medical side. So if you look back from 23 to 26, our specialty earnings grew 13%. So above the top end of the range, or our implied 26 numbers grew at a CAGR of 13%.So above the top end of our long-term growth range. So there's a couple of things. It's not just about the number of drugs coming to market. It's also the size of the drugs, the pool coming to market. So we had through the end of 25 and 26, Stelara, Yamara, and then the specialty generic Revlimid, which were big drivers of, you know, or tailwinds to the growth. And so we do have launches in 27. We have visibility out to 2030 on what we expect to come to market 27. There's quite a few coming to market, but the relative size of the launches are smaller than what we saw in 26. Okay. So a lot of discussion about your signature model. Now everyone's talking about transparent PBMs. When a client compares the signature model with other transparent PBM offerings. What's the decisive difference in the purchasing decision? And yeah, give us just some thoughts about that. Any obstacles to overcome in customer adoption? Sure. So, I mean, we're really excited to be leading the market here. There's a lot of benefits to the signature model, like holistically. And maybe I start with the patient benefits. So the patient gets the lowest price at the counter. And they also get access to our, you know, what we call our Price Assured Program. So, no matter how the funding is working, whether it's co-pay, insurance paid, cash pay, they will get the lowest price under any model. So that's a benefit to the patient, also a benefit for the employer, meaning their employees are getting the best price. From an employer perspective, this model is a completely transparent, fee-based, predictable model. So they know exactly what they're going to pay on a per-member, per-month basis under the new model. They also get the benefit, obviously, of all of our safety protocols, the formulary, our network access, and our ability to get the best price for the patient as part of that. The other thing that clients are increasingly becoming concerned about are their fiduciary responsibilities and signature to sort of help get at some of those concerns. And so in terms of obstacles, this is an entire change in the way that the market is working. So we are working really closely with our clients around benefit construction, education, and taking them along the journey with us on the vision for the market. And there's also a lot happening. This is not an obstacle, but just an observation in the regulatory space that, you know, is creating, you know, that interest from clients to have more and more conversations about the optionality with signature. Okay, okay. And you think things like, you now, we hear large employers like to hold on to the rebates. They've sort of come, the market's moving in this direction, and they're sort of understanding that that's the way the market is going, or is that a big impediment for you? Those are the conversations that we're having with clients around, you know, the CAA, just how the entire ecosystem is moving, and there's a lot of openness from our clients to have those conversations, and they're thinking more about the fiduciary part of the equation as they're making their decisions. So I'd expect, you know, we'll see more and more pickup as we go through 27 to 28, and we're looking forward to being a leader here. Yeah. You've been incurring transitional costs. And as you think about the rollout, your own book next year to the outside world in 2028, how do those transition costs wind down? When will we be sort of in a steady state of economics for the business? Yeah, so we're incurring transition costs this year. We would not expect to incur any incremental costs next year, so we're kind of at a steady state. In terms of when we start to see reductions in the investment, we look forward to talking more about that coming out of next year. There's still a lot of investment to be made, nothing from a run rate perspective incremental to what we've already shared um but but you know um at some point with those there would be some tapering off probably moderation but okay um probably longer longer term okay um there's some interest in cura script uh how do you see that growing over the next few years uh competitors are expanding as well some of them have some reach into the physician practices what strategic gap is ever north wholesale distribution which you talked about the investor day and got some attention on uh expect to meet versus distribution arrangements that you can get uh already in place yeah we're really excited about the um about curious script 25 billion dollar revenue business that's grown um at you know 20 percent in each of the last five years. And so, we've recently added the Evernorth wholesale as part of, you know, the ecosystem. And, so, the opportunities that we see, you know, we expect to add at least $20 billion by 2030 to that revenue amount. The opportunities that we See in front of us are around expanding the relationship between Acredo and CuraScript. So Curescript is not currently doing all the distribution for the Acredo specialty business. We also see, you know, if you think about that, the ecosystem, right, it's a $480 billion ecosystem, 40% of that on the medical benefits side. Right. And we've only got about 7% share. So a lot of runway for us to grow in that space to expand our relationships with health plans and providers, in particular through our investment in Shields. We see opportunity to access some of the health plans that Shields is doing operations for to expand in that way. And then with Evernorth Wholesale, it opens up other areas of distribution that weren't available under the CureScript construct outside of the health plans to more of the direct-to-provider side of VAL. Okay. Let's talk about Cigna Healthcare for a minute, the commercial business. How is that trended? I know you've talked about elevated costs, but your price to that elevated costs. So how's MCR and utilization performing relative to your expectations over the course of this year? A lot of some of your peers have talked about the IDR process being an issue. What are you seeing there? Sure. So TREND and MCR are sort of tracking exactly where we expected them to, you know, throughout this year. we've talked about before the sort of the maybe the three biggest drivers on the trend side being pharmacy specialty and behavioral that that continues to hold meaning you know we continue to see that it's um it's it's tracking as we expected um the idr you know we support the concept of the idrr and the regulation itself but the process as, you know, many of our peers have spoken about, you know, needs fixing, for lack of better terminology. We've experienced about 60 bps of trend pressure from the IDR process in this year. We expect that with the, you know, regulations changing and it becoming cheaper to submit, you know, in the IDR process, we expect that to be higher next year, and we've planned and priced for that and we planned and price for the 60 this year and it's and it we're tracking in line um so we're you know we're happy with sort of the analytics that we we put in place and we expect trend next year to remain elevated but but fairly stable and so for your pricing for next year you sort of took um you've taken the 26 trend and just extrapolated it forward for next year? Is that a broad way to characterize it? I think it's more complicated, obviously, than that. But we've also, like, increased our expectations on what we think IDR is going to contribute to trend. So there's some moving pieces. But I'd say it's largely stable. Okay. Okay, you did call out on a third quarter conference call some new business wins in Cigna Healthcare and also some improve stop-loss margins. Can you expand on that? Where are you seeing the business wins? And anything to comment on the stop- loss business and how that's been repriced? Sure. So, we are on track. I'll start with the stop loss. We're on track with respect to our margin recapture plan. We had talked about coming out of 24 where we had the disruption in stop- cover kind of 75% by the end of this year, and then another, you know, the remaining 25% going into 2027. And so we're on track for that. We've seen, you know, good, you know, we're pricing and planning for trend that is matching up with our expectations, and we've seen good receptivity in the market. We're helped by the fact that we sell an integrated offering and clients are looking for, you know, different solutions. And so our products are resonating in the market. And So you asked about, you Know, where we're seeing success, you know, we continue to see success in the select segment. So that's the, you know, under 500 employee segment where clients are looking for creative solutions to, you know, to help construct their benefits. So we continue to see success there and continue to expect that to be one of the um the drivers you know that helps us uh achieve our our long-term objectives in healthcare and six to nine percent yeah uh just a technical question on the mlr outlook i know there's a lot of moving parts and you haven't given formal guidance but you are exiting the exchange business is it fair to just think mechanically getting rid of the exchange business should help you all things being equal get a lift and our improvement on the MLR next year is that's out of the mix so just as a reminder we target a margin on the individual and family plan business of four to six percent we we don't expect to hit that for this year but we do expect the business to be profitable The MLR for that business is lower than the rest of the Cigna Healthcare portfolio. So removing that will have, I think, the opposite impact of what you're describing. We'd expect it to increase once that business. Have you sized how much of a headwind that is? We haven't sized that yet, but we'll certainly as part of our guide for – we will reflect that in our guide for 27 when we guide at the end of this year. Okay. And the Cigna fully insured book is going to the signature model next year. Does that have any impact on signature – on CigNA health care's margin by making that move? So we planned in price for the changes that we're contemplating for 2027, and so the fully insured book will be, as of 1-1-27, will be fully in signature, and we would not expect to have any positive or negative financial implications of that transition to Cigna Healthcare. Okay, okay. A big announcement last week about CVS planning to split its retail and health benefits in PBM business. That's garnered attention in the market. How does that change, in your view, anything either strategically you guys are thinking about or the competitive landscape? Yeah, so obviously that came as a surprise to us. It doesn't change anything about the way we think about our business strategically, meaning we've talked about this but deliberately shaped the portfolio of our three core businesses. And so CBS's announcement doesn't changed our strategy or the opportunities that we see in front of us. And capital deployments, as we talked about earlier, is a key feature of the Cigna story. I know you're focused on getting the leverage down to 40%, but how should we think about when we might see that buyback re-accelerate, how much of a contributor it is next year versus your long-term targets about what it will contribute? Sure. So, just as a reminder, you know, we did the Shields transaction. We've been on a journey to de-lever. We took about 100 points out of the debt-to-cap ratio, Q2 to Q3. And so, we do expect to get to 40 by the end of 2026, at which point that, you know, gives us more flexibility around driving for that 4% to 5% of growth that we want to drive from capital deployment, repurchases being part of it. So, I'd expect 2027, you know, to look more like our long-term guide. Okay. Okay. And when considering sort of the earnings trajectory between here and the 2030 targets, you've talked a little bit about the PBM dynamic. What else could add volatility as opposed to making that sort of an even trajectory? Is there? Sure. I think, I mean, when you look at, you know, obviously we have ranges for the, you know, for the reason that there's always going to be sort of puts and takes depending on the business and the particular year. And so I think specialty is a great example of this. We talked about 23 through 26 being above the top end of the range. And then, you Know, going into 27, we're going to expect that to be at the, You Know, towards the low end of The range. So, that's the sort of volatility, just given market dynamics, that I would expect. In the short term, we'd expect Cigna Healthcare to be, you know, to perform better because we're still on the stop-loss margin recovery journey. So, you Know, 25% of that recapture will happen in 2027, and so, you know, that will create a mixed difference than sort of our normal. But the ranges exist for, you know, for this very reason, meaning, you know, sometimes we'll be at the high end. We could be below or above at the high end in the middle. But over the long term, we expect, you know, to be in the range. I know the company's discussed the potential to expand its specialty care services in terms of the client side, particularly one of your larger customers. Is there any update on that about where it stands or other opportunities along those lines? Yeah, I mean, sure. We are always looking to partner or expand services, especially with our largest clients, for not comment on a specific client, but the one particular client I think you're referencing, we only serve about 20% of their specialty business. And so there's opportunity to expand that relationship and expand that over time. But no particular update I can give you with respect to the specific arrangements. And you also talked about upside opportunities at the Investor Day to take the PBM relationship with clients and cross-sell Cigna Healthcare into that. Talk about that opportunity. I assume that that would be primarily upside to at least the baseline forecast, or is that you factor much of that into your outlook? I mean, we take an integrated approach, and we want to sell Cigna as one organization in every client conversation. And so we do see the opportunity to leverage that in a more powerful way. But that's contemplated in our long-term 10 to 14. Okay. When you think about – we talked about the share repurchase part of capital deployment. You know, there's been a lot of discussion over the years where Cigna's looking at various things. That's been less of a topic other than, you know, the Shields investment and things like that. Any update on capital deployment priorities that we should think about? Obviously, the share repurchase, obviously, the reinvestment of the business, but beyond that? Yeah, I mean, you could think about, you know, we talked about it yesterday, $50 billion of cash flow from operations through 2030. And you can think about like 20%, 25% of that investing organically to drive growth in the business, 20% on dividend, and the remainder is share repurchases, M&A, and other opportunities. We're focused on, as we've said, both on opportunities that have good returns and that are strategically aligned sort of in the ballpark of what we're already doing, so not adjacent or outside capabilities. So nothing specific I'd point to, but our capital priorities are consistent with what we've talked about, and nothing has changed. So as we wind down here, I happen to ask every company that's coming in, because we had a big event last week with the election. I assume you'd say that that probably doesn't change any of your strategic priorities or you haven't thought about pivoting in any way, but any reaction, any comments that you could make on that? Only that. We've been in business for 234 years, and there's been a lot of different leadership realms during our existence. And so in terms of our business, no strategic change as it relates to the results of last week's election. Okay. That's what I figured it would be. All right. Well, thanks so much for Cigna participating this year in the conference. uh uh thanks everybody um and next up in this room let me just uh see who we have you're sticking here uh i'm gonna go but i was just gonna mention to people what it was um i think next up and here is verisite