Q1 2024 The Cigna Group Earnings Call

Operator: Ladies and gentlemen, thank you for standing by for the Cigna Group's first quarter 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 we will review procedures on how to enter a queue to ask questions at that time. If you should require assistance during the call, please press star zero on your touch-tone phone.

Ladies and gentlemen, thank you for standing by for the second of group's first quarter 'twenty 'twenty four 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 we'll we'll review procedures on how to enter queue to ask questions at that time.

If you should be acquire assistance during the call. Please press star zero on your touch jumped on it as.

Operator: As a reminder, ladies and gentlemen, this conference, including the Q&A session, is being recorded. We'll begin by turning the conference over to Ralph Giacobbe. Please go ahead.

As a reminder, ladies and gentlemen, this conference, including the Q&A session is being recorded and will.

We'll begin by turning the conference over to Ralph Giacobbe. Please go ahead.

Ralph Giacobbe: Good morning. Thank you 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.

Ralph Giacobbe: Good morning, Thank you for joining today's call I'm, Ralph Jacobi Senior Vice President of Investor Relations with me on the line. This morning are David Cora, Danny Sydney Group's Chairman and Chief Executive Officer, Brian of Banco Chief Finance Officer of the Cigna Group, and President and Chief Executive Officer of Sigma Health care and Eric Palmer.

Ralph Giacobbe: In our remarks today, David and Brian will cover a number of topics, including our first quarter financial results and our updated financial outlook for 2024. Following their prepared remarks, David, Brian, and Eric will be available for Q&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.

Ralph Giacobbe: A reconciliation of these measures to the most directly comparable gap measures, shareholders' net income or loss, and total revenues, respectively, is contained in today's earnings release, which is posted in the Investor Relations section of CignaGroup.com. We use the terms labeled Adjusted Income from Operations and Adjusted Earnings per Share on the same basis as our principal measures of financial performance. In our remarks today, we've been making some forward-looking statements, including statements regarding our outlook for 2024 and future performance.

Ralph Giacobbe: President and Chief Executive officer of ever North Health services.

Ralph Giacobbe: In our remarks today, David and Brian will cover a number of topics, including our first quarter financial results and our updated financial outlook for 2024.

Ralph Giacobbe: Following their prepared remarks, David Brian and Eric who will be available for Q&A.

Ralph Giacobbe: 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.

Ralph Giacobbe: A reconciliation of these measures to the most directly comparable GAAP measures shareholders' net income or loss and total revenues respectively is contained in today's earnings release, which is posted in the Investor Relations section of the Sigma Group Dotcom.

Ralph Giacobbe: 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.

Ralph Giacobbe: In our remarks today will be making some forward looking statements, including statements regarding our outlook for 'twenty 'twenty four and future performance.

Ralph Giacobbe: 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. Before turning the call over to you, I will cover a few items pertaining to our GAAP financial results. In the first quarter, we recorded a shareholders' net loss of $277 million, or $0.97 per share.

Ralph Giacobbe: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations.

Ralph Giacobbe: 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.

Ralph Giacobbe: This is driven by a non-cash after-tax net realized investment loss of $1.8 billion, or $6.31 per share, primarily related to a Village MD impairment charge. This is excluded from adjusted income from operations and adjusted earnings per share in our discussion of financial results. We also recorded an after-tax net special item charge of $3 million, or 1 cent per share. Details of the special items are included in our quarterly financial supplement. As described in today's release, special items are excluded from adjusted income from operations, adjusted earnings per share, and adjusted revenues in our discussion of financial results.

Speaker Change: Before turning the call over I will cover a few items pertaining to our GAAP financial results.

Speaker Change: In the first quarter, we recorded shareholders net loss of $277 million or <unk> 97 per share.

Speaker Change: This is driven by noncash after tax net realized investment loss of $1 $8 billion or $6.31 per share primarily related to a village M. D impairment charge. This.

Speaker Change: This is excluded from adjusted income from operations and adjusted earnings per share and our discussion of financial results.

Speaker Change: We also recorded an after tax net special item charge of $3 million or one cent per share.

Speaker Change: Details of the special items are included in our quarterly financial supplement.

Speaker Change: As described in today's release special items are excluded from adjusted income from operations adjusted earnings per share and adjusted revenues in our discussion of financial results.

Ralph Giacobbe: Additionally, please note that when we make prospective 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 of purchases and anticipated 2024 dividends. With that, I'll turn the call over to David.

Speaker Change: Additionally, please note that when we make prospective 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 2020 for dividends.

Speaker Change: With that I'll turn the call over to David.

David Michael Cordani: Thanks, Ralph. Good morning, everyone, and thank you for joining our call. In the first quarter, our company continued delivering differentiated value for our clients, customers, patients, and partners, and we posted strong results for the quarter. We will continue to build on our momentum going into 2020.

David: Thanks, Ralph Good morning, everyone and thank you for joining our call.

David: The first quarter, our company continued delivering differentiated value for our clients customers patients and partners.

David: And we posted strong results for the quarter as we continue to build on our momentum coming into 2024.

David Michael Cordani: Today I'll discuss our quarterly performance and key strategic drivers of our growth. Specifically, I'll spend a few minutes talking about our specialty business and our focus on biosimilars to drive greater affordability in the market for the benefit of those we serve, and Brian will review additional details about our financial results during the quarter, our increased outlook for full year 2024, and our cash position. And then we'll take your questions.

David: Today, I'll discuss our quarterly performance and key strategic drivers of our growth.

David: Typically I'll spend a few minutes talking about our specialty business.

David: Their focus on Biosimilars to drive greater affordability to the market for the benefit of those we serve.

David: And Brian will review additional details about our financial results during the quarter, our increased outlook for full year 2024, and a strong capital position is that we'll take your questions. So let's get started.

David Michael Cordani: So let's get started. In the quarter, I'm pleased to report that the Cigna Group delivered total revenue of $57.3 billion and adjusted earnings per share of $6.47. And given our momentum and strong start to the year, we've increased our guidance for full-year adjusted earnings per share to at least $28,040. These positive results demonstrate our differentiated capabilities, innovative approaches, and Disciplined Execution during a dynamic and disruptive time for our industry.

Speaker Change: In the quarter I'm pleased to report that the second group delivered total revenue of $57 $3 billion.

Brian: Adjusted earnings per share of $6.47.

Brian: And given our momentum and strong start to the year, we've increased our guidance for full year adjusted earnings per share to at least $28 40.

Brian: These positive results demonstrate our differentiated capabilities.

Brian: Innovative approaches and disciplined execution during it Dan dynamic in disruptive time for our industry.

David Michael Cordani: Our results also speak to our diverse and well-balanced portfolio, as we invest in our high growth businesses, which continue to benefit from secular tailwinds, and ensure our foundational businesses are positioned for continued success. For Evernote Health Services, we're pleased with our results that are in line with our expectations, starting with our pharmacy benefit services, a foundational business. Our innovative solutions continue to gain traction with health plans, large commercial employers, and governmental organizations.

Brian: Our results also speak to our diverse and well balanced portfolio.

Brian: As we invest in our high growth businesses, which continue to benefit from secular tailwind and ensure our foundational businesses are positioned for continued success.

Brian: You never know with health services, we're pleased with our results that are in line with our expectations.

Brian: Starting with our pharmacy benefit services, our foundational businesses, our innovative solutions continue to gain traction with health plans large commercial employers and government organizations.

David Michael Cordani: A recent example of how we continue to drive greater access and affordability in a rapidly evolving pharmaceutical landscape is EncircleRx, which focuses on cardio diabetes and adds value for our clients and patients by providing predictability, reducing cost, and enhancing outcomes related to GLP-1 drug coverage. We're pleased with the strong interest in InCircleRx from our clients, with more than 1 million lives already enrolled, and Circular X is made possible given our decade-plus track record of offering new solutions built on data-driven insights and our deep supply chain expertise. Said otherwise, we have a proven innovation platform.

Brian: A recent example of how we continue to drive greater access and affordability in a rapidly evolving pharmaceutical landscape isn't circle Rx.

Brian: This solution focuses on cardio diabesity as value for our clients and patients by providing predictability, reducing cost and enhancing outcomes related to GOP one drug coverage.

Brian: We're pleased with the strong interest in <unk> from our clients with more than 1 million lives already enrolled.

Brian: And circle Rx's made possible given our decade, plus track record of offering new solutions built on data driven insights and our deep supply chain expertise said, otherwise we have a proven innovation platform.

David Michael Cordani: In our accelerated growth specialty care and services businesses, our results were in line with our expectations, reflecting strong double-digit adjusted revenue growth. As a reminder, this set of businesses is diverse and includes Acredo, CuraScript Specialty Distribution, and our Emerging Care Service business. I'll talk more about specialty in a few moments, in Care Services.

Brian: And our accelerated growth specialty care and services businesses. Our results were in line with our expectations, reflecting strong double digit adjusted revenue growth.

Brian: As a reminder, this set of businesses is diverse and includes Accredo hero script specialty distribution and our emerging care service businesses.

Brian: I'll talk more about specialty in a few moments and care services, we are investing in a number of areas, including accountable care virtual homebase and behavioral care.

David Michael Cordani: We are investing in a number of areas, including accountable care, virtual, home-based, and behavioral care. We're pleased with the progress our Evernorth Behavioral Care Group is making since its launch in six states, plus the District of Columbia, and we have already expanded access and convenience for patients with our program. In Cigna Healthcare, our health benefits platform, we achieved another quarter of strong performance. With our focus on affordability and disciplined pricing, we're pleased with their strong medical cost performance and medical care ratio, which was 79.9%.

Brian: We're pleased with the progress our ever North behavioral care group is making since its launch in six states plus the district of Columbia, and we have already expanded access and convenience for patients with our program.

Brian: And speaking of health care, our health benefits platform, we achieved another quarter of strong performance with our focus on affordability and disciplined pricing. We're pleased with our strong medical cost performance and medical care ratio, which was 79, 9%.

David Michael Cordani: Our U.S. employer business is up-paced for another good year as we continue to leverage our high-performing networks and digitally-enabled services to expand access and overall value. At our investor day, we discussed the strong results we've seen with our PathWalk suite of solutions, including PathWell Specialty, which drives value by reducing costs associated with specialty drugs and therapies and improving care experiences and outcomes for patients. Also within the PathWall suite is our PathWall bone and joint solution, which we piloted in 2023 and is now being rolled out for broader client adoption. For context, one in two adults suffer from a musculoskeletal condition, which results in more than $500 billion of annual spend.

Brian: Our U S employer business is outpace for another good year as we continue to leverage our high performing networks and digitally enabled services to expand access and overall volume.

Brian: At our Investor Day, we discussed the strong results, we've seen with our pathway suite of solutions, including path, while specialty which drives value by reducing costs associated with specialty drugs and therapies and improving care experiences and outcomes for patients.

Brian: Also within the past Wall Street is our pathway bone and joint solution, which we piloted in 2023 and is now being rolled out for broader client adoption.

Brian: For context, one and two adults suffer from a musculoskeletal musculoskeletal condition, which resulted in more than $500 billion of annual spend.

David Michael Cordani: Our solution uses a curated national network combined with clinical and digital services to guide patients with spine, knee, hip, and shoulder conditions to the right pathway of care at the right time. We're already seeing strong results, and our personalized concierge experience has resulted in 96% patient satisfaction, while also delivering meaningful savings for our clients from this innovative program. Turning to international health, our results continue to be strong given our focus on localized health solutions and high quality services for the globally mobile population.

Brian: Our solution uses a curative national network combined with clinical and digital services to guide patients with spine knee hip and shoulder conditions to the right path pathway of care at the right time.

Brian: We're already seeing strong results and our personalized <unk> experience has resulted in 96% patient satisfaction, while also delivering meaningful savings for our clients from this innovative program.

Brian: Turning to the international Health our results continued to be strong given our focus on localized health solutions and high quality services for the globally mobile population.

David Michael Cordani: In our individual exchange business, we continue to sharpen our focus by repositioning our book through targeted actions in certain geographies. It's also important to note we are making good progress toward our sale of our Medicare businesses to HCS. The sale of these businesses to HGSE remains on track with the expiration of the waiting period under the Hart-Scott-Rodino Act, which occurred on April 17th. As such, the regulatory review of this transaction by the DOJ is complete.

Brian: And our individual exchange business, we continue to sharpen our focus by repositioning our book through targeted actions in certain geographies.

Brian: It's also important to note we are making good progress toward our sale of our Medicare businesses to HFC.

Brian: The sale of these businesses to Herc remains on track with the expiration of the waiting period under Hart, Scott Rodino Act, which occurred on April 17th.

Brian: The regulatory review of this transaction by the Doj is complete.

David Michael Cordani: The transaction is expected to close in the first quarter of 2025 as planned. After closing, we will continue to serve Medicare Advantage customers through our Ever North broad suite of high-performing services. And under our agreement with HGSE, these include services for the seniors who will transition with the divestment business. Taken together, we're pleased with our results for the first quarter. These results reflect the quality and strength of our businesses and position us well for another year of sustained growth and attractive value creation.

Brian: The transaction is expected to close in the first quarter of 2025 as planned.

Brian: After closing we will continue to serve Medicare advantage customers through our ever North broad suite of high performing services and under our agreement with HCS see these include services for the seniors who will transition with the divested businesses.

Brian: Taken together, we're pleased with our results for the first quarter.

Brian: They reflect the quality and strength of our businesses and position us well for another year of sustained growth and attractive value creation.

David Michael Cordani: Now I want to spend a few minutes on our specialty businesses within Evernote, which is already a large and well-established portfolio of services, yet represents an accelerated growth opportunity as we look forward. Overall, the specialty market is large at about $400 billion today, and it's fast-growing, and Evernote is the industry leader. Our performance continues to be strong, with double-digit revenue growth in the first quarter.

Brian: Now I want to spend a few minutes on our specialty businesses within <unk>, which is already a large and well established portfolio of services yet represents accelerated growth opportunity as we look forward.

Brian: Overall, the specialty market is large at about $400 billion today and is fast growing and <unk> is the industry leader.

Brian: Our performance continues to be strong with double digit revenue growth in the first quarter.

David Michael Cordani: Our combination of Acredo, CuraScript Specialty Distribution, and Care Path offers something truly unique in the market, built over decades with assets and capabilities that are highly differentiated. And while we are a leader in the industry, we continue to innovate our capabilities and offerings and expand our reach and impact. For example, just last week, Evernorth announced that they will have an interchangeable Humira biosimilar available for $0 out-of-pocket costs for eligible Acredo patients.

Brian: Our combination of Accredo pure scrip specialty distribution and care path offer something truly unique in the market built over decades with assets and capabilities that are highly differentiated.

Brian: And while we are the leader in the industry, we continue to innovate our capabilities and offerings and expand our reach and impact.

Brian: For example, just last week ever North announced that we will have an interchangeable.

Brian: Erode biosimilar available for zero dollars out of pocket cost for eligible accretive patients.

David Michael Cordani: Currently, more than 100,000 Accredo patients use either Humira or one of the biosimilars. They are supported by specially trained pharmacists and nurses in the Credo Therapeutic Resource Center for Inflammatory Conditions, who are available to serve and support these patients around the clock. To meet the individual needs of our patients while driving significant savings for them and their health plans, we will be able to provide both high and low concentration interchangeable biosimilars, or put another way, varying dosage levels based on patient needs.

Brian: Currently more than 100000, accredo patients use either <unk> or one of the biosimilars.

Brian: They are supported by specialty train pharmacists and nurses and accretive therapeutic resource center for inflammatory conditions.

Brian: <unk> to serve and support these patients around the clock.

Brian: Meet the individual needs of our patients while driving significant savings for them and their health plans, we will be able to provide both high and low concentration interchangeable biosimilars or put another way varying dosage levels based on patient needs.

David Michael Cordani: To accomplish this, we have agreements in place with multiple manufacturers who will produce biosimilars for Evernote's private-labeled pharmaceutical distributor, Quamit Pharmaceuticals, which we launched back in 2021. The biosimilars will be priced at about 85% lower than Humira, and we estimate that individual patients will save on average of $3,500 per year.

Brian: To accomplish this we have agreements in place with multiple manufacturers, who will produce biosimilars forever notes private labeled pharmaceutical distributor pharmaceuticals, which we launched back in 2021.

Brian: The biosimilars will be priced at about 85% lower than Humira, and we estimate the individual patients will save an average of $3500 per year.

David Michael Cordani: And, in addition to Acredo patients, all of our Pharmacy Benefit Service clients and patients will have access to these BioAssemblies. Importantly, the biosimilar opportunity goes well beyond Hemaira. By 2030, we expect to see biosimilars or generics introduced for nearly half of the top 25 specialty drugs in the United States. This translates to over $100 billion in annual spend subject to additional choice and competition.

Brian: And in addition to accretive patients all of our pharmacy benefit service clients and patients will have access to these biosimilars.

Brian: Importantly, the Biosimilar opportunity goes well beyond Humira by 2030, we expect to see Biosimilars or generics introduced for nearly half of the top 25 specialty drugs in the United States.

Brian: This translates to over $100 billion in annual spend subject to additional choice and competition.

Brian Evanko: The introduction of biosimilars creates a multi-year tailwind that enables you to drive growth and value creation for the benefit of those we serve. Clearly, we're very excited about the growth opportunities we see ahead in specialty. Our specialty businesses are a cornerstone of the accelerated growth within Evernorth, and our confidence in our leading position and capabilities will continue to fuel innovation, such as the biosimilar launch I just discussed. Now, to wrap up, let me recap our performance for the quarter.

Brian: The introduction of Biosimilars creates a multiyear tailwind that enables us to continue to drive growth and value creation for the benefit of those we serve.

Brian: Clearly, we're very excited about the growth opportunities. We see ahead in specialty our specialty businesses are a cornerstone of the accelerated growth within <unk> and our confidence in our leading position and capabilities will continue to fuel innovation such as the Biosimilar launch I just discussed.

Brian: Now to wrap up let me recap our performance for the quarter in the quarter, we continued to execute well and perform well we met the evolving needs of our clients customers patients and partners in the midst of a dynamic marketplace, we delivered on our financial commitments, including adjusted EPS of $6 47.

Brian Evanko: In the quarter, we continued to execute well and perform well. We met the evolving needs of our clients, customers, patients, and partners in the midst of a dynamic marketplace. We delivered on our financial commitments, including an adjusted EPS of $6.47, and we've increased our guidance for full-year adjusted earnings per share to at least $28.40. This performance puts us toward the higher end of our 10 to 14 percent long-term average annual EPS growth commitment.

Brian: And we've increased our guidance for full year adjusted earnings per share to at least $20 40.

Brian: This performance puts us towards the higher end of our 10% to 14% long term average annual EPS growth commitment.

Brian Evanko: Looking ahead, we remain focused on meeting our commitments as we execute our strategy, by creating value for the benefit of those we serve, by driving greater affordability and access expansion, and delivering innovations that continue to grow market share over time in Evernote and in Cigna Healthcare. With that, I'll turn it over to Brian.

Brian: Looking ahead, we remain focused on meeting our commitments as we execute our strategy by creating value for the benefit of those we serve by driving greater affordability and access expansion and.

Brian: And delivering innovations that continue to grow market share overtime in Evercore and insecure health care with that I'll turn it over to Brian.

Brian Evanko: Thank you, David. Good morning, everyone. We're pleased to report a strong start to the year with first quarter pre-tax adjusted earnings above expectations, reflecting contributions across our two growth platforms, Evernorth and Cigna Healthcare. Key consolidated financial highlights for the first quarter include revenue of $57.3 billion, which represents 23% year-over-year growth. Adjusted earnings per share of $6.47, or 20% year-over-year growth, and cash flow from operations of $4.8 billion.

Brian: Thank you David good morning, everyone.

Brian: We're pleased to report a strong start to the year with first quarter pre tax adjusted earnings above expectations.

Brian: Reflecting contributions across our two growth platforms number north of Cigna health care.

Brian: Key consolidated financial highlights for the first quarter include revenue of $57 3 billion.

Brian: Which represents 23% year over year growth.

Brian: Adjusted earnings per share of $6, 47, or 20% year over year growth.

Brian: And cash flow from operations of $4 8 billion.

Brian Evanko: The continued momentum and strong fundamentals of our businesses give us the confidence to increase our full year 2024 adjusted earnings per share outlook to at least $28.40. Before I turn to our segment results, I'd like to briefly discuss the impact of the changed healthcare disruption in the first quarter. We experienced incremental operating expenses that are reflected in our first quarter results.

Brian: The continued momentum and strong fundamentals of our businesses gave us the confidence to increase our full year 2024 adjusted earnings per share outlook to at least $28 40.

Speaker Change: Before I turn to our segment results I'd like to briefly discuss the impact of the change healthcare disruption in the first quarter.

Speaker Change: We experienced incremental operating expenses that are reflected in our first quarter results.

Brian Evanko: And within Cigna Healthcare, we had some disruption to claim submissions and payments that I'll discuss further in a few moments. Despite these unexpected events, we delivered a very strong start to the year and are proud of our teams managing through a dynamic operating environment. Now, turning to our segment results.

Speaker Change: And within Sigma healthcare, we had some disruption to claim submissions and payments that I'll discuss further in a few moments.

Speaker Change: Despite these unexpected events, we delivered a very strong start to the year and are proud of our team's managing through the dynamic operating environment.

Speaker Change: Now turning to our segment results.

Brian Evanko: First, I'll comment on Evernote. First quarter 2024 Evernorth revenues were $46.2 billion, and pre-tax adjusted earnings were $1.4 billion, in line with expectations. As discussed at our Investor Day in March, starting this quarter, we're providing revenue and pre-tax adjusted earnings for our two operating segments within Evernord, namely Pharmacy Benefit Services and Specialty in Care Services. For the quarter, Pharmacy Benefit Services revenue increased 43%, driven by new business wins, including Centene, starting on January 1st. Pre-tax adjusted earnings were $513 million.

Speaker Change: First I'll comment on <unk>.

Speaker Change: First quarter 2024 hour North revenues were $46 2 billion and pre tax adjusted earnings were $1 4 billion.

Speaker Change: In line with expectations.

Speaker Change: As discussed at our Investor Day in March starting this quarter, we are providing revenue and pre tax adjusted earnings for our two operating segments within ever north, namely pharmacy benefit services and specialty and care services.

Speaker Change: For the quarter pharmacy benefit services revenue increased 43% driven by new business wins, including Centene starting on January one.

Speaker Change: Pre tax adjusted earnings were $513 million.

Speaker Change: Reflecting growth offset by the net impact of client Onboarding and implementation costs.

Speaker Change: Specialty <unk> care services revenue increased 12% and pre tax adjusted earnings grew to $788 million in line with expectations.

Brian Evanko: Reflecting growth offset by the net impact of client onboarding and implementation costs, Specialty and Care Services revenue increased 12%, and Pre-Tax Adjusted Earnings grew to $788 million, in line with expectations. Overall, Evernorth continues to perform well, and we're pleased with the results to start the year. Turning to Cigna Healthcare, first quarter 2024 adjusted revenues were $13.3 billion, and Pre-Tax Adjusted Earnings were $1.3 billion. Cigna Healthcare's first quarter results were better than expectations, driven by a favorable medical care ratio, partially offset by higher SG&A expenses and lower net investment income.

Speaker Change: Overall <unk> continues to perform well and we're pleased with the results to start the year.

Speaker Change: Turning to Cigna healthcare first quarter 2024, adjusted revenues were $13 3 billion.

Speaker Change: And pre tax adjusted earnings were $1 3 billion.

Speaker Change: Cigna health care first quarter results were better than expectations.

Speaker Change: Driven by a favorable medical care ratio.

Speaker Change: Partially offset by higher SG&A expenses.

Speaker Change: And lower net investment income.

Brian Evanko: The first quarter medical care ratio of 79.9% benefited from our focus on affordability initiatives and effective pricing execution as we planned and priced for the continuation of elevated cost trend levels the industry experienced in 2023. As noted earlier, the change healthcare incident caused some disruption to first quarter operations, including claims processing and submission. Within the quarter, we booked approximately $650 million in incremental reserves in Cigna Health Care relating to this disruption. Approximately two-thirds of the incremental reserve pertains to claims that we received but were not paid out as of March 31st. These claims have since been paid out to providers.

Speaker Change: The first quarter medical care ratio of 79, 9% benefited from our focus on affordability initiatives and effective pricing execution.

Speaker Change: As we planned and price for the continuation of elevated cost trend levels the industry experienced in 2023.

Speaker Change: As noted earlier the change healthcare incident caused some disruption to first quarter operations, including claims processing and submissions.

Speaker Change: Within the quarter, we booked approximately $650 million in.

Speaker Change: Mental reserves and Cigna healthcare relating to this disruption.

Speaker Change: Approximately two thirds of the incremental reserve pertains to claims that we received but were not paid out as of March 31.

Speaker Change: These claims have since been paid out to providers.

Brian Evanko: The balance of the incremental reserve represents an estimate of first-quarter claims incurred but not yet reported, specifically pertaining to the change healthcare disruption. We remain confident in our reserve posture and cost trend projections over the balance of the year. Moving to Cigna Healthcare Medical Customers, we ended the quarter with 19.2 million total medical customers. This is in line with our expectations and includes a reduction to our individual exchange enrollment following the repositioning of our book in certain geographies to improve overall profitability.

Speaker Change: The balance of the incremental reserve represents an estimate of first quarter claims incurred but not yet reported specifically pertaining to the change healthcare disruption.

Speaker Change: We remain confident in our reserve posture and cost trend projections over the balance of the year.

Speaker Change: Moving to Sigma healthcare medical customers, we ended the quarter with $19 2 million total medical customers.

Speaker Change: This is in line with our expectations.

Speaker Change: It includes a reduction to our individual exchange enrollment following the repositioning of our book in certain geographies to improve overall profitability.

Brian Evanko: Overall, Cigna Healthcare delivered strong results in the quarter. Our Cigna results continue to benefit from our decade-plus track record of value-based care. We have continued to further evolve this strategy with Evernorth Accountable Care and remain committed to driving affordability and quality outcomes for our clients and patients through our partnership-oriented value-based care framework. As Ralph mentioned in his opening comments, during the quarter, we recognized a non-cash impairment charge related to Village MD, which is excluded from our adjusted earnings.

Speaker Change: Overall, Cigna health care delivered strong results in the quarter.

Speaker Change: Our Sigma healthcare results continue to benefit from our decade, plus track record of value based care.

Speaker Change: We have continued to further evolve this strategy with ever north accountable care and remain committed to driving affordability and quality outcomes for our clients and patients through our partnership oriented value based care framework.

Speaker Change: As Ralph mentioned in his opening comments during the quarter, we recognized a noncash impairment charge related to village MD, which is excluded from our adjusted earnings.

Brian Evanko: This accounting item does not alter our forward-looking value-based care strategy, where we continue to make progress in aligning incentives with providers, including with Village MD. Our partnership has already launched and targeted geographic markets, and we will seek to build upon that early progress. Now, turning to our outlook for full year 2024, we continue to expect strong underlying growth in Evernorth and Cigna Healthcare. We now expect full-year 2024 consolidated adjusted income from operations to be at least $8.065 billion, or at least $28.40 per share, an increase from our prior outlook.

Speaker Change: This accounting item does not alter our forward looking value based care strategy.

Speaker Change: We continue to make progress in aligning incentives with providers, including with village MD.

Speaker Change: Our partnership is already launched in targeted geographic markets and we will seek to build upon that early progress.

Speaker Change: Now turning to our outlook for full year 2024.

Speaker Change: We continue to expect strong underlying growth in <unk>, north and Cigna health care.

Speaker Change: We now expect full year 2020 for consolidated adjusted income from operations to be at least 8.065 billion.

Speaker Change: We are at least $28 40 per share an increase from our prior outlook.

Speaker Change: We expect the 2024 adjusted earnings per share cadence to be approximately 45% in the first half and the remaining 55% in the second half.

Brian Evanko: We expect the 2024 Adjusted Earnings Per Share cadence to be approximately 45% in the first half and the remaining 55% in the second. Now turning to our 2024 outlook for each of our growth platforms. For Evernorth, we continue to expect full year 2024 adjusted earnings of at least $7 billion. We expect Evernard's second quarter pre-tax adjusted earnings to grow mid-single digits year-over-year.

Speaker Change: Now turning to our 2020 for outlook for each of our growth platforms.

Speaker Change: And ever North we continue to expect full year 2024, adjusted earnings of at least $7 billion.

Speaker Change: We expect second quarter pretax adjusted earnings to grow mid single digits year over year.

Brian Evanko: For Cigna Healthcare, we now expect full-year 2024 adjusted earnings of at least $4.775 billion, an increase from our prior guidance to reflect the strength of our first quarter results and continued confidence for the rest of the year. We expect Cigna Healthcare pre-tax adjusted earnings in the second quarter to be approximately 25% of full-year pre-tax adjusted earnings. We also now expect our full-year 2024 medical care ratio to be in the range of 81.7% to 82.5%, an improvement of 20 basis points from the high end of the prior range.

Speaker Change: For sticking to health care, we now expect full year 2024, adjusted earnings of at least $4 775 billion.

Speaker Change: An increase from our prior guidance to reflect the strength of our first quarter results and continued confidence for the rest of the year.

Speaker Change: We expect Cigna healthcare pre tax adjusted earnings in the second quarter to be approximately 25% of full year pretax adjusted earnings.

Speaker Change: We also now expect our full year 2020 for medical care ratio to be in the range of 81, 7% to 82, 5% an improvement of 20 basis points from the high end of the prior range.

Brian Evanko: Additionally, we expect our second quarter medical care ratio to be within our full year guidance range. Turning to our 2024 capital management position, our debt to capitalization ratio is 44.3% as of March 31st, compared to 40.1% as of December 31st, 2023. The increase primarily reflects the timing of debt issuance, in part due to the accelerated share repurchase agreements we entered in February.

Speaker Change: Additionally, we expect our second quarter medical care ratio to be within our full year guidance range.

Speaker Change: Turning to our 2024 capital management position.

Speaker Change: Our debt to capitalization ratio was 44, 3% as of March 31 <unk>.

Speaker Change: Compared to 41% as of December 31, 2023.

Speaker Change: The increase primarily reflects the timing of that issuance in part due to the accelerated share repurchase agreements we entered into February.

Operator: We continue to target a long-term debt-to-capitalization ratio of approximately 40 percent. We continue to expect at least $11 billion of cash flow from operations, and we continue to expect to use the majority of our discretionary cash flow for share repurchase this year. Additionally, our guidance continues to assume full-year weighted average shares outstanding to be in the range of 282 million to 286 million shares. Our balance sheet and cash flow outlook remains strong.

Speaker Change: We continue to target a long term debt to capitalization ratio of approximately 40%.

Speaker Change: We continue to expect at least $11 billion of cash flow from operations and we continue to expect to use the majority of our discretionary cash flow for share repurchase this year.

Speaker Change: Additionally, our guidance continues to assume full year weighted average shares outstanding to be in the range of 282 million to 286 million shares.

Speaker Change: Our balance sheet and cash flow outlook remains strong driven by the strength of our highly efficient service based model.

Operator: We are driven by the strength of our highly efficient service-based model. Now, to recap. Our first quarter consolidated results were ahead of expectations, driven by the strength of our medical care ratio within Cigna Healthcare. And our 2024 outlook reflects the sustained momentum and strong fundamentals of our two growth platforms, Evernorth and Cigna Healthcare, while continuing to maintain a prudent posture in this dynamic environment. We're confident in our ability to deliver on our updated full-year 2024 adjusted earnings of at least $28.40 per share. And with that, we'll turn it over to the operator for the Q&A portion of the call.

Speaker Change: Now to recap.

Speaker Change: Our first quarter consolidated results were ahead of expectations driven by the strength of our medical care ratio within Cigna health care.

Speaker Change: And our 2024 outlook reflects the sustained momentum and strong fundamentals of our two growth platforms, <unk> and Cigna healthcare, while continuing to maintain a prudent posture in this dynamic environment.

Speaker Change: We're confident in our ability to deliver on our updated full year 2024 adjusted earnings of at least $28 40 per share.

Speaker Change: With that I'll turn it over to the operator for the Q&A portion of the call.

David Michael Cordani: Ladies and gentlemen, at this time, if you do have a question, please press star 1 on your touch-tone phone. If someone asks your question ahead of you, you can remove yourself from the queue by pressing star 2. Also, if you're using a speakerphone, please pick up your handset before pressing the button. One moment, please, for the first question. Our first question comes from Justin Lake with Wolf Research. Your line is open, sir.

Speaker Change: Ladies and gentlemen at this time if you do have a question. Please press star one on your touch chunk phone.

Speaker Change: I would ask your question ahead of you you can remove yourself from the queue by pressing star two.

Speaker Change: So if you're using a speakerphone please pick up your handset before pressing the button.

Speaker Change: One moment please for the first question.

Speaker Change: Our first question comes from Justin Lake with Wolfe Research. Your line is open Sir.

Justin Lake: Thanks, Good morning.

Justin Lake: Wanted to ask about.

Justin Lake: Our early view odd membership for N P. B M kind of RFP cycle into 2025.

Speaker Change: Just given the strength you've had this year curious of your view on 2025 kind of Rfps any kind of big wins or losses that you kind of know about so far in terms of.

Speaker Change: Maybe on the managed care side your bigger RFP stuff on the P. P M and then the national accounts.

Speaker Change: Yeah.

Eric Palmer: Good morning Justin, it's David. Let me ask Eric to start with the Evernote framework for live activity, and then Brian to come in from the Cigna Healthcare, specifically National Accounts, framework.

Speaker Change: Good morning, Justin It's David Let me ask Eric to start through the Aeronautics framework for five activity and then Brian to come in from the Sigma healthcare, specifically national accounts framework.

Eric Palmer: Good morning, Justin. It's Eric.

Eric Palmer: Morning, Justin it's Eric.

Eric Palmer: Overall, I would note that the selling season's off to a good start. We operate in a competitive market, and the strength of our solutions continues to resonate, so I feel good about our positioning. There are no specific transactions that I would call out on either the win or the loss side, but I would note that we're feeling quite good about our ability to continue to retain our existing clients. Our retention rates are remaining really strong.

Eric Palmer: Overall I would note that the selling season is off to a good start we operate in a competitive market. The strength of our solutions continues to resonate so feel good about our positioning there is no specific transactions that I would call out.

Eric Palmer: The win or the loss side, but would note that we are feeling quite good about our ability to continue to retain our existing clients. Our retention remains with our retention rates are remaining really strong we expect it will.

Eric Palmer: We expect we'll end up in the mid-90s or better for 2025, consistent with our performance in the last number of years from a number of perspectives. I would also note that our portion of our book of business out to bid for 2025 is actually a little bit smaller as we look at 2025 when compared to prior years as well. But in aggregate, I'm feeling quite good about the positioning. No major headwinds or tailwinds or specific clients I'd call out, and we'll deliver a strong retention result going into the year next year. Bryan

Eric Palmer: And up in the mid nineties are better for 2025, consistent with our performance in the last number of years from.

Eric Palmer: From an overall perspective I would also note that our portion of our book of business out to bid for 2025 is actually a little bit smaller as we look at 2025, when compared to prior years as well, but in aggregate I'm feeling quite good about our positioning no major headwinds or tailwind or specific clients I would call out and we will deliver a strong retention.

Eric Palmer: Going into the year next year, Brian signal care. Thanks, Eric Good morning, Justin relative to Cigna health care in terms of 2025 to David's point, we're really only deep into the cycle for our national accounts business, which certainly is an important component of our U S employer business, but also less than half of our total segment health care customers.

Brian Evanko: Brian, from Cigna Healthcare. Thanks, Eric. Good morning, Justin.

Eric Palmer: That said a few points that offer we do have an uptick in RFP volumes. This year compared to last year at this time, which is directionally. Good just in terms of the number of at bats. If you will that we have and in terms of our existing clients. We have a similar amount that's out to bid at this point in the year as we did last year at this time now each of these national accounts tend to have unique.

Brian Evanko: So relative to Cigna Healthcare in terms of 2025, to David's point, we're really only deep into the cycle for our national accounts business, which certainly is an important component of our U.S. employer business, but also less than half of our total Cigna Healthcare customers. That said, there are a few points I'd offer. We do have an uptick in RFP volumes this year compared to last year at this time, which is directionally good, just in terms of the number of FFAPs, if you will, that we have.

Brian Evanko: And in terms of our existing clients, we have a similar amount that's out to bid at this point in the year as we did last year at this time. Now, each of these national accounts tend to have unique needs, as you can appreciate, but there are a few themes that continue to bubble up that I think are indicative of where the market's headed. Many large employers tend to be looking for opportunities to consolidate vendors or point solutions, something we've been calling point solution fatigue.

Brian Evanko: <unk> needs as you can appreciate but a few themes that continue to bubble up that I think are indicative of where the market's headed many large employers tend to be looking for opportunities to consolidate vendors or point solutions something we've been calling point solutions fatigue, we're also seeing more and more demand for mental health and substance abuse benefits, particularly.

Eric Palmer: And after effects from the pandemic and then finally, there is continued demand for digitally enabled care navigation capabilities.

Brian Evanko: We're also seeing more and more demand for mental health and substance abuse benefits, particularly as an after effect from the pandemic. And then finally, there's continued demand for digitally enabled care navigation capabilities, along with consumer empowerment. So those are themes we're seeing, but bigger picture, feeling good about where we sit here as we prepare ourselves for 2025.

Brian Evanko: Along with consumer empowerment. So those are themes, we're seeing but big picture. We are feeling good about where we sit here as we prepare ourselves for 2025.

Operator: Thank you. Our next question comes from Lisa Gill with J.P. Morgan. You may ask your question.

Brian Evanko: Thank you. Our next question comes from Lisa Gill with Jpmorgan you May ask your question. Good morning, and thanks for taking my question I really wanted to focus on the specialty business for a minute and the Biosimilar opportunity you talked about the humira.

David Michael Cordani: Thank you for taking my question. I really want to focus on the specialty business for a minute and the biosimilar opportunity. You talked about the Humira opportunity that you brought to the market, but I really want to understand the profitability. So, as we think about, you know, David, you talked about $100 billion by 2030.

David Michael Cordani: To me that <unk> brought to the market, but I really want to understand the profitability. So as we think about you know David you talked about 100 billion by 2000, 2030, and when I think about that opportunity over the next several years can you maybe just lay out how we see the margin progression is just a better margin opportunity is there's a better opportunity to get incremental.

Speaker Change: Sure when we think about the specialty business and the benefits to the patient. So if you can just help us to lay some of those opportunities out.

David Michael Cordani: When I think about that opportunity over the next several years, can you maybe just lay out how we see the margin progression? Is this a better margin opportunity? Is this a better opportunity to grow? Is this an opportunity to get incremental market share when we think about the specialty business and the benefits to the patient? So, if you can just help us to lay some of those opportunities out.

Speaker Change: Please so good morning, David Let me start and then I'll ask Eric to expand a little bit.

Speaker Change: I think some of the attributes you put in your framing are quite helpful. So stepping back.

David Michael Cordani: We've called this opportunity for quite some time, we've also been very clear that this would be an evolutionary and accelerating phase.

David Michael Cordani: Not a nice which cut over 124 were or prior to that and we're into that phase pretty meaningfully I think there are three things that way.

David Michael Cordani: At a macro level, one first and foremost the specialty marketplace as the sand today is quite largest $400 billion and it's growing meaningfully high single digit our growth rate is above that given the breadth of our capabilities to the innovations that are coming forward require significant both precise.

David Michael Cordani: Use of data supply chain relationships, but clinical expertise and physician engagement and pharmacists engagement expertise, which we have to be able to facilitate programs like our humira zero dollar co pay at a variety of dosage levels on a go forward basis, and then lastly, directionally as I hand, it over to Eric I'd ask you to think about as we've.

David Michael Cordani: <unk> before the.

David Michael Cordani: The profitability to us is highly correlated on our ability obviously to create value for our clients and patients we see the specialty in the biosimilar opportunity to be equal or potentially greater per unit. So long as we're able to create that differentiated value.

David Michael Cordani: From a contribution per unit of service as we go forward so high growth very attractive place to a significant amount of capabilities that one needs that we have.

Speaker Change: We see both the demand and opportunity to create value is significant aircrafts, you Peel that back a little bit great. Thanks, David and good morning, Lisa I think Dave had set up a really great framework. There. They said theres, maybe two dynamics I'd call out.

David Michael Cordani: Lisa, good morning. It's David.

David Michael Cordani: Let me start, then I'll ask Eric to expand a little bit. First, I think some of the attributes you put in your framing are quite helpful. So, stepping back, we've called this opportunity out for quite some time. We've also been very clear that this would be an evolutionary and accelerating phase, not a nice switch cut over 1-1-24 or prior to that. And we're into that phase pretty meaningfully.

David Michael Cordani: As places where ever notes, particularly well positioned to create value for our clients and that enables us to earn attractive margins and our ability one of those is in the capabilities. We've assembled around these complicated rare high cost conditions right and there is a tremendous pipeline of.

David Michael Cordani: I think there are three things I would highlight at a macro level. One, first and foremost, the specialty marketplace as it stands today is quite large. It's $400 billion, and it's growing meaningfully. High single-digit growth rate, our growth rate is above that, given the breadth of our capabilities. Two, the innovations that are coming forward require significant, both precise use of data, supply chain relationships, but clinical expertise and physician engagement and pharmacist engagement expertise, which we have to be able to facilitate programs like our QMIRA $0 copay at a variety of dosage levels on a go-forward basis.

David Michael Cordani: And then lastly, directionally, as I hand it over to Eric, I'd ask you to think about, as we've discussed this before, the profitability to us is highly correlated with our ability, obviously, to create value for our clients and patients. We see the specialty and the biosimilar opportunity to be equal or potentially greater per unit. So long as we're able to create that differentiated value from a contribution per unit of service, as we go forward.

David Michael Cordani: So high growth, very attractive, plays to a significant amount of capabilities that one needs that we have. And we see both the demand and the opportunity to create value as significant. Eric, I'll ask you to peel that back a little bit. Great. Thanks, David. And good morning, Lisa.

Eric Palmer: I think David set up a really great framework there. Lisa, there's maybe two dynamics I'd call out as places where Evernote is particularly well-positioned to create value for our clients and that then enables us to earn attractive margins on our ability. One of those is in the capabilities we've assembled around these complicated, rare, high-cost conditions. And there's a tremendous pipeline of drugs coming in the coming years, as I'm sure you

Eric Palmer: Drugs coming.

Lisa: Yes, so as I'm sure you know.

Eric Palmer: We have the capabilities to get those all the way from the manufacturer, through CuraScript, to our capabilities at Acredo, to a patient with the right controls around all of the handling, with the things that are temperature-sensitive, et cetera. The logistics that are required in some of these therapies are really quite intense. So the capabilities we have there position us to uniquely serve the market. And when we're in a position to uniquely serve the market, that sets us up to drive an attractive result.

Eric Palmer: We have the capabilities to get those all the way from the manufacturer <unk> script to our capabilities at Accredo to a patient with the right controls around all of the handling with the things that our temperature sensitive et cetera that the logistics that are required in some of these therapies are related I am quite intact. So the.

Eric Palmer: Capabilities, we have there position us to uniquely serve the market and when we're in a position to uniquely serve the market that sets us up to drive.

Eric Palmer: Similarly, on biosimilars, the sets of capabilities that we've assembled, our most recent example here, in terms of the options we're bringing to market for Hemira, are another good example of capabilities we've assembled that put us in a position to uniquely drive superior value. Our proposition for Hemana, at $0 patient out-of-pocket, has an attractive plan sponsor cost, and, together, we think, is a really As that hits the market, it drives attractive margins.

Eric Palmer: Unattractive result, similarly on Biosimilars the sets of capabilities that we've assembled our most recent example here in terms of the.

Eric Palmer: The options were bringing to market for Humira are another good example of capabilities we've assembled.

Eric Palmer: That's in a position to uniquely drive superior value proposition for Humana.

Eric Palmer: Zero dollar patient out of pocket as an attractive plan sponsor cost and brought together. We think is a really attractive offering as that hits the market that drives attractive margins now those are all factor into the margins that we've set and the expectations. We set for the segment, but those are a couple of the areas that will be tailwind over.

Eric Palmer: Now, those are all factored into the margins that we've set and the expectations we've set for the segment, but those are a couple of the areas that will be tailwinds over a multi-year basis for the Evernorth specialty businesses in the coming years, and we think we're positioned really well there.

Eric Palmer: Or a multi year basis for <unk> specialty businesses in the coming years, and we think we're positioned really well there.

Speaker Change: That's helpful. Thank you so much.

Operator: Thank you. Our next question comes from Andrew Mogg with Barclays. Your line is open, so you may ask your question.

Eric Palmer: That's helpful. Thank you so much. Thank you. Our next question comes from Andrew Mogg with Barclays. Your line is open. You may ask your question.

Eric Palmer: Thank you. Our next question comes from Andrew Mok with Barclays. Your line is open you may ask your question.

Andrew Mok: Hi, I was hoping you could elaborate on MLR trends in the quarter can you share which segments or cost categories came in better than expectations. And then can you help us understand where your individual ACA margins are tracking relative to your target range of 4% to 6%.

Brian Evanko: Morning, Andrew. It's Brian.

Eric Palmer: Good morning, Andrew It's Brian So first off I'd just reiterate how pleased we are to have delivered another strong quarter of medical care ratio performance better than expectations, which helped to lead to our income outperformance in the quarter and despite the disruption associated with the change healthcare incident, we delivered good results and Cigna health care.

Brian Evanko: So, first off, I just reiterate how pleased we are to have delivered another strong quarter of medical care ratio performance better than expectations, which helped to lead to our income outperformance in the quarter. And despite the disruption associated with the Change Healthcare incident, we delivered good results in Cigna Healthcare in the quarter. So, as it relates specifically to utilization patterns across the product lines, there are just a few highlights that I'd share. Within our U.S.

Brian Evanko: Employer Book of Business, inpatient facility claims remained elevated throughout the first quarter, but that was consistent with expectations. We did see some modest favorability in the U.S. Employer book in the outpatient as well as surgical categories, where the cost trends showed some level of deceleration in comparison to recent periods and also relative to projections. But in light of the changed healthcare disruption, the quarter-end reserves include a provision for IB&R that's based upon historical patterns of utilization in these categories. So taken all together, the first quarter U.S.

Brian Evanko: In the quarter, so as it relates specifically to utilization patterns across the product lines are a few highlights that I'd share within our U S. Employer book of business inpatient facility claims remained elevated throughout the first quarter, but that was consistent with expectations. We did see some modest favorability in the U S employer book in the outpatient.

Brian Evanko: As well as surgical categories.

Brian Evanko: The cost trends showed some level of deceleration in comparison to recent periods and also relative to projections, but.

Brian Evanko: But in light of the change healthcare disruption the quarter end reserves include a provision for <unk> <unk>.

Brian Evanko: Based upon historical patterns or utilization in these categories. So taken altogether, the first quarter U S. Employer performance is broadly in line with expectations as well as our pricing assumptions now within the individual exchange book, we did have a mix related timing benefit in the first quarter more specifically, we have a higher person.

Brian Evanko: Employer performance is broadly in line with expectations as well as our pricing assumptions. Now, within the individual exchange book, we did have a mix-related timing benefit in the first quarter. More specifically, we have a higher percentage of bronze plans in 2024 than we had projected, which resulted in a greater degree of seasonality this year.

Brian Evanko: <unk> of bronze plans in 2024 than what we had projected which resulted in a greater degree of seasonality. This year. So that created a timing related benefit in the Sigma healthcare MCR and income in the first quarter, but I would note that the underlying performance of the individual exchange business was broadly in line with expectations before.

Brian Evanko: So that created a timing-related benefit in the Cigna Healthcare MCR and income in the first quarter. But I'd note that the underlying performance of the individual exchange business was broadly in line with expectations for that book. And then finally, our Medicare and international businesses were also broadly in line with expectations for the first quarter. As it relates to the margins on the individual exchange business and kind of how that is shaping up, let me just start with some context.

Brian Evanko: For that book and then finally, our Medicare and International businesses were also Brian broadly in line with expectations for the first quarter as it relates to the margins on the individual exchange business and kind of how that is shaping up.

Brian Evanko: Let me just start with some context you might recall during 2023, we had about $5 billion of premium in that business was running below our long term target profit margins of 4% to 6% and specifically that was weighed down by two large states, where we had a higher than expected risk adjustment payable. So we subsequently took corrective pricing action.

Brian Evanko: You might recall that during 2023, we had about $5 billion in premium, and that business was running below our long-term target profit margins of 4% to 6%. And specifically, that was weighed down by two large states where we had a higher-than-expected risk adjustment payable. So we subsequently took corrective pricing actions that were designed to improve our margins, understanding that this would likely result in some customer loss. And this strategy is broadly playing out as we expected.

Brian Evanko: Actions that were designed to improve our margins understanding that this would likely result in some customer loss and this strategy is broadly playing out as we expected. So you see our membership is down sequentially, but we are tracking towards margin improvement in the book for 2024, and our current planning assumptions are assuming that margins will land slightly below.

Brian Evanko: So you see, our membership is down sequentially, but we are tracking toward margin improvement in the book for 2024. And our current planning assumptions are assuming that margins will land slightly below the target margin range of 4% to 6%. What we saw in the first quarter is consistent with that expectation.

Brian Evanko: The target margin range of 4% to 6% what we saw in the first quarter is consistent with that expectation.

Speaker Change: Great. Thanks for all the color.

Operator: Thank you. Our next question comes from Scott Fidel with Stevens. You may ask your question.

Brian Evanko: Thank you. Our next question comes from Scott Fidel with Stephens you May ask your question.

David Michael Cordani: Hi, thanks. Good morning.

Scott J. Fidel: Hi, Thanks, good morning.

Scott J. Fidel: Just maybe if you could double click on the village at the situation I know that Brian talked about the strategy being the same post the impairment, but just in the context that there may be sort of more limited resources to some degree.

David Michael Cordani: I was hoping, just maybe, if you could double click on the Village MD situation. I know that Brian talked about the strategy being the same post-impaired, but just in the context that there may be sort of more limited resources to some degree for Village Health, maybe can you talk about what your key priorities would be to see Village focusing on right now that would align the best with what you've been hoping to get out of that investment?

David Michael Cordani: <unk> village Health, maybe can you talk about what your key priorities would be to see village focusing on right now.

David Michael Cordani: That would align best with with what <unk> been hoping to get added that investment and then just on the investment itself.

David Michael Cordani: And then just on the investment itself, wondering if you could just give us the updated carrying value of the investment and then how the dividend stream at this point would be working. I know originally there was going to be a 5.5% dividend stream, so just curious if there's any impact on that from the non-cash write-down. Thanks.

David Michael Cordani: Wondering if you could just give us the updated carrying value of the investment and then how the dividend stream at this point.

David Michael Cordani: Would be working.

David Michael Cordani: Originally there was going to be a five 5% dividend streams. So just curious if there's any impact to back off from the noncash write down opex.

David Michael Cordani: Scott, good morning, it's David. Let me start on the first part of your question, then I'll ask Brian to pick up the second part of your question. First, at the macro level, our strategic direction in terms of what we are seeking to innovate with Village has not changed, despite the write-down of the asset. No one likes a write-down of an asset.

David Michael Cordani: Scott Good morning, It's David Let me start on the first part of your question and then I'll ask Brian to pick up the second part of your question.

David Michael Cordani: First at the macro level.

David: Our strategic direction in terms of what we're seeking to innovate we village has not changed.

David Michael Cordani: Despite the write down of the asset no one likes a write down in the asset if you step back the write down is largely driven by some broader market dislocation that is hitting the space no doubt relative to that as well as village determining that they are going to I would say pulling the supply lines.

David Michael Cordani: If you step back, the write-down is largely driven by some broader market dislocation that is hitting the space, no doubt relative to that, as well as Village determining that they are going to, I would say, pull in the supply lines and constrain some of the growth in some of the new clinics that they were establishing that, as I like to put it, were more thin footprints versus their go-deep markets or highly-established value-based care To that end, our strategy with Village is to take our proven value-based care model that aligns incentives and uses data to drive more precision in terms of, in most cases, specialty and subspecialty engagement to improve overall quality and affordability, but a highly data-driven and precise process, and then care extenders to build off of Village's very strong performance already in their go-deep markets and accelerate that performance even further.

David Michael Cordani: And constraining some of the growth in some of the new clinics that there were establishing as I would like to put it we're more thin footprint.

David Michael Cordani: Versus their go deep markets were highly established value based care markets.

David Michael Cordani: To that point, our strategy with village is to take our proven value based care model that aligns incentives that uses data to drive more precision in terms of <unk>.

David Michael Cordani: In most cases specialty and subspecialty engagement to improve overall quality and affordability, but highly data driven and precise process and then care extenders to build off of villages very strong performance already in the go deep markets and accelerate that performance. Even further that's off of the <unk> accountable care chassis and then as we.

David Michael Cordani: That's off of the Evernorth Accountable Care Chassis. And then as we build that process, as we're building in four of their go-deep markets, which continue to evolve at a very positive pace, those capabilities are able to be brought to other care providers that we would partner with going forward with risk-bearing entities and the precision of our MSO capabilities and our value-based care capabilities. So, in a nutshell, while we don't like a write-down of an asset, the strategic direction hasn't changed because our focus has been on the highly-established go-deep markets where Village continues to grow and perform well, and we're helping to accelerate some of that performance. Brian, I'll hand it to you to talk more about the investment itself. Yeah, good morning, Scott.

Brian Evanko: Buildup of processes, we are building in four of their go deep markets, which continue to evolve at a very positive pace those capabilities are able to be brought to other care providers that we would partner with going forward with risk bearing entities and the precision of our NSO capabilities in our value based care capabilities. So in a nutshell.

Brian Evanko: We don't like the write down of an asset the strategic direction Hasnt change because our focus has been on the highly established go deep markets.

Brian Evanko: Village continues to grow and perform well.

David Michael Cordani: And we're helping to accelerate some of that performance, Brian <unk> talk more about the investment itself yes.

Brian Evanko: Yeah, good morning, Scott. On the financial components, the new carrying value is just slightly above $900 million on the balance sheet. And as it relates to the dividend, as part of the impairment assessment, we have concluded that the dividend is collectible when due to us in the future, and we continue to accrue that within the net investment income line in the P&L.

Brian Evanko: Hey, good morning, Scott on the financial components, the new carrying value is just slightly above $900 million on the balance sheet and as it relates to the dividend as part of the impairment assessment. We have concluded that the dividend is collectible when due to us in the future and we continue to accrue that within the net investment income line in the P&L.

Brian Evanko: Thank you. Our next question comes from Sarah James with Cantor. You may ask your question, please. Thank you. So you've talked about the importance of having varied dosages available.

Brian Evanko: Okay.

Operator: Thank you. Our next question comes from Sarah James with Cantor. You may ask your own question.

Brian Evanko: Thank you. Our next question comes from Sarah James with Cantor You May ask your question.

Sarah James: Thank you so you've talked about the importance of having very dosages available for the Humira Biosimilar I'm wondering in this new venture are you able to take that one step further using data AI and look at dose stage efficiency is there something to be gained there.

Sarah James: And maybe if you could give us an idea what are the next couple of big jobs categories, we should be looking at.

Sarah James: After shneur.

David Michael Cordani: Sir, good morning. It's David.

Operator: Sure. Good morning, It's David let me start by with your first question and then ask Eric to expand a little bit on the second dimensioning for your question.

David: A couple of different points, you made I think you referenced new capabilities or new structure important to note that.

David Michael Cordani: Let me start with your first question and ask Eric to expand a little bit on the second dimension of your question. A couple different points you made. I think you referenced new capabilities or new structure. It is important to note that our specialty business from Acredo through Curascript, through Qualant, which we made reference to, was established back in 2021. The breadth of our capabilities is well established, and our performance is proven. So the capabilities are not new.

David Michael Cordani: Our specialty business from Accredo through carrier script through calls that we made reference to your point was established back in 2021.

David Michael Cordani: The breadth of our capabilities is well established.

Eric Palmer: And our performance has proven so the capabilities are not new the opportunities that we're talking to with the precision of your question, our new opportunities, but we've been well established for quite some time.

David Michael Cordani: The opportunities that we're talking about with the precision of your question are new opportunities, but we've been well established here for quite some time. Second, I'm going to appreciate you coming into the variety of dosage levels. Important point one before I come to the AI dimension is that dosage levels put us in a position to be able to support patients at all need levels, not just to support patients at some need levels. And that's very important.

David Michael Cordani: Second I appreciate you coming into the variety of dosage levels important one before I come to the AI dimension is the dosage levels put us in position to be able to support patients at all need levels not to support patients at some need levels and thats very important and thats, our our multi manufacturer relationship that we've been able to establish.

David Michael Cordani: And that's the multi-manufacturer relationship that we've been able to establish. Now, lastly, to the last part of your question and the core of it, the way we think about the AI opportunity that sits in front of us, starting from machine learning through AI, through generative AI, we think about it in terms of there being a three-tier dimension to oversimplify it. One example, outside of your question, generative AI, for example, presents the opportunity for us to do what we do today better, faster, more efficiently, and for better value.

David Michael Cordani: The last part of your question in the core of it the way we think about the opportunity that sits in front of us starting from machine learning to Reais regenerative AI AI, we think about it in terms of Theres, a three tiered dimension to oversimplify. One is outside of your question is regenerative AI for example presents the opportunity for us to do what we do.

David Michael Cordani: Today, better faster more efficiently better value and there's a variety of initiatives as you might expect that are driving through in the industry and for us that will create additional value second tranche is more personalization.

David Michael Cordani: And there's a variety of initiatives, as you might expect, that are driving through in the industry and for us that will create additional value. The second tranche is more personalization, the decision to take more variability out or more averages out and drive more specific personalization back to individual solutions, networks, interventions, and predictability, which points a little bit to where you came from.

David Michael Cordani: The decision to take more variability out or more averages out and drive more specific personalization backed it individual solutions networks interventions predictability, which point to a little bit to where you came through and then third is in clinical intervention, either predictability of clinical intervention or precision in terms of direction.

David Michael Cordani: And then third, in clinical intervention, either predictability of clinical intervention or precision in terms of direction. If you think about where we are on the curve, we're furthest along in the first, entering in the second, in the second, and cautiously testing the third, because the third requires a significant amount of human oversight and intervention as we go forward. Having said that, there's a significant amount of promise to bring in even more precision as we go forward, and we're excited about that, and the breadth of our capabilities is well positioned to be able to do so. Eric, I'll ask you to expand a little bit more on the dosages. Yeah, great. Thanks, David, and good morning, Sarah.

Eric Palmer: You think about where we are in the curve, we're furthest along in the first.

Eric Palmer: Entering in second in the second and cautiously testing the third because the third requires significant amount of human oversight.

David Michael Cordani: Intervention as we go forward, having said that there's a significant amount of promise to bring it even more precision as we go forward and we're excited about that and the breadth of our capabilities are well positioned to be able to do so Eric I'll ask you to expand a little bit more on the dosing just great. Thanks, David and good morning, Sarah I think this actually touches on exactly.

Eric Palmer: Yeah, I think this actually touches on exactly an area where we're focused on positioning EverNorth. EverNorth has the positioning with the capabilities, the information, the data, the clinical depth, and the touch points with both the prescribers and the patients to really have direct impact and such. So that's an exciting opportunity broadly. Specific to your question, our solution that we introduced last week is the first solution to bring interchangeable biosimilar adalimumab across all concentrations.

Eric Palmer: Where we're focused on positioning <unk> ever north has the positioning with the capabilities the information and the data the clinical depth and the touch points with both prescribers and patients to really have a direct impact and such are so so.

Eric Palmer: It's an exciting opportunity broadly are specific to your question. Our solution that we introduced last week is the first solution to bring interchangeable biosimilar at <unk> across all the concentrations. We've got the maximum number of available dosages and the market.

Eric Palmer: We've got the maximum number of available dosages in the market, and those elements, coupled with our robust supply chain, coupled with the proposition we put together, will be really effective for the market overall. So we're excited about that, I think, and that clinical opportunity, coupled with our data, coupled with the technology to ensure we're working with precision to get our patients the medicines they need is really the theme at Heavy Takeaway. In terms of other things in the pipeline, just a handful that come to mind. Think about Nelasta, Stelara, Prolea, Solaris, Ilea, all those things coming in the next couple of years.

Eric Palmer: Those elements, coupled with our robust supply chain, coupled with the proposition when put together will be really effective for the market. Overall. So so we're excited about that I think in the clinical.

Eric Palmer: Clinical opportunity coupled with our data coupled with the technology to ensure we are well.

Eric Palmer: We're working with precision to Golar patients the medicines. They need is really the thing that heavy takeaway in terms of other things in the pipeline.

Eric Palmer: Handful that come to mind that think about laughter solara earlier.

Eric Palmer: So our resi Leah all of those things coming in the next couple of years and as David noted in his prepared remarks, if you look at the top 25 specialty.

Eric Palmer: And as David noted in his prepared remarks, you know, if you look at the top 25 specialty drugs by spend, we see biosimilar or biosimilar options coming to market for 50% or more of that spend over the course of the next five or six years. So, I am really excited about the opportunity for this to be a lever to drive improved access and improved affordability to these life-changing medicines for the benefit of our patients and plant sponsors.

Eric Palmer: Drugs by spend we see biosimilar or biosimilar options coming to market or 50% or more of that spend over the course of the next five or six years. So really excited about the opportunity for this to be a lever to drive improved access and improved affordability to these life changing medicines for the benefit of our patients and plan sponsors.

Eric Palmer: Thank you. Thank you. That was very helpful. Your next question comes from Kevin Fischbeck with Bank of America. You may ask... Great, thanks. I could do a couple of questions here. I guess first, on change. You mentioned there's some extra costs related to that.

Speaker Change: Very helpful. Thank you.

Operator: Very helpful. Thank you. Thank you. Our next question comes from Kevin Fischbeck with Bank of America. You may ask your question.

Eric Palmer: Thank you. Our next question comes from Kevin Fischbeck with Bank of America, You May ask your question.

Kevin Mark Fischbeck: Great. Thanks, if I could.

Kevin Mark Fischbeck: Do a couple of questions here I guess first unchanged you mentioned there are some extra costs related to that.

Kevin Mark Fischbeck: Can you spike out how much that was and just to get a sense today, where you think your visibility and claim submission.

Operator: Is.

Kevin Mark Fischbeck: Post change and then a question on the specialty care and services.

Kevin Mark Fischbeck: I think it's the first time, we're seeing kind of the margins the margins were down year over year I get why the pharmacy margins were down the implementation costs is there a similar dynamic on specialty or is there something else driving the margin there.

David Michael Cordani: Kevin, good morning. Let me just give you a little bit on the macro aspect of change and then ask Brian to peel back the specifics of your question. First and foremost, indisputably, the disruption was felt across the industry, and I just want to underscore how proud I am of how our team prioritized, first and foremost, access to care. In addition to that, member service and then working tirelessly relative to health care, professional service, and support.

Kevin Mark Fischbeck: Kevin Good morning, let me just frame a little bit on the macro aspect of change and then ask Brian to Peel back the specifics of your question.

David Michael Cordani: First and foremost indisputably the disruption was felt across the industry.

David Michael Cordani: To underscore how proud I am of how our team prioritize first and foremost access to care prioritization.

David Michael Cordani: Addition to that member service and then working tirelessly relative to health care professional service and support and our team as you might expect flex a variety of programs operational leverage where possible flex other vendors to enable us to be able to continue to do what we need to do and then expand staffing levels.

David Michael Cordani: And our team had to, as you might expect, flex a variety of programs, operational leverage, and, where possible, flex other vendors to enable us to be able to continue to do what we need to do and then expand staffing levels. Part of that comes back to your cost dimension. As Brian steps in, we'll go through the reserve piece that he walked through, but I'll ask him to reamplify the way we looked at the medical cost side of the equation. And then our SG&A ratio is up in the first quarter, and we ensure that we were in a position to deliver the services that were necessary. Part of that is influenced by the change disruption

David Michael Cordani: Part of that comes back to your cost dimension as Brian <unk> will.

David Michael Cordani: We will separate through the reserving piece that he walked through but I'll ask him to re amplify.

David Michael Cordani: The way, we looked at the medical cost side of the equation and then our SG&A ratio was up in the first quarter.

David Michael Cordani: We ensure that we were in position to deliver the services necessary part of that is influenced by the change disruption Brian Yes, Thanks, David and good morning, Kevin.

Brian Evanko: Brian? Yeah, thanks, David. Good morning.

Brian Evanko: Yeah, thanks, David. Good morning, Kevin.

Brian Evanko: These comments might be a little bit redundant with what I covered earlier, Kevin I think it's important to reemphasize. So we did have some disruption to claim submissions and payments in the quarter and we did have some level of incremental operating expenses across the enterprise all of which we are able to manage through successfully and are reflected in our results. The 650.

Brian Evanko: So, these comments might be a little bit redundant with what I covered earlier, Kevin, but I think it's important to re-amplify. So, we did have some disruption to claim submissions and payments in the quarter, and we did have some level of incremental operating expenses across the enterprise, all of which we were able to manage through successfully and are reflected in our results. The $650 million of additional reserves that I flagged earlier, specifically associated with the changing healthcare dynamic, about two-thirds of that is purely a timing issue where the claims were submitted late in the quarter and had not yet been paid.

Brian Evanko: Of additional reserves that I had flagged earlier specific specifically associated with the change healthcare dynamic about two thirds of that is purely a timing issue where the claims were submitted late in the quarter and have not yet been paid those are now essentially all paid so that's kind of purely a timing issue. The other call. It one third of the incremental reserve.

Brian Evanko: Those are now essentially all paid. So, that's kind of purely a timing issue. The other, call it one-third of the incremental reserve associated with the change healthcare item is our estimate of claims that were incurred but not yet reported over and above the normal IBNR due to disrupted provider workflows. Now, we're a month plus out from the end of the quarter and have a better level of visibility as it relates to all of that, feel good about the full-year outlook we've put forward, and feel good about our cost trend expectations and our reserving posture.

Brian Evanko: Associated with the change healthcare item is our estimate of claims that were incurred but not yet reported over and above the normal IV and are due to disrupted provider workflows now we're a month plus out from the end of the quarter and have a better level of visibility as it relates to all of that and feel good about the full year outlook, we've put forth.

Brian Evanko: <unk> feel good about our cost trend expectations in our reserving posture I'd also note that during the quarter, our clinical programs and protocols operated as expected.

Brian Evanko: I'd also note that during the quarter, our clinical programs and protocols operated as expected. So, while we certainly prioritized access to care when the disruption occurred, we do not estimate that it resulted in higher utilization than what would otherwise have transpired within the quarter. We're proud of the way the CYGNA team rallied here and delivered a good quarter despite the disruption.

Brian Evanko: So while we certainly prioritize access to care when the disruption occurred we do not estimate that it resulted in higher utilization than what would've otherwise transpired within the quarter. So we're proud of the way the <unk> team rallied here and delivered a good quarter. Despite the disruption.

Brian Evanko: As it relates to the specialty and care services segment within Evernorth, we're first of all very pleased with the performance of this business. You can see it over a multi-year period, and our 8 to 12 percent average annual growth for the specialty and care services operating segment going forward is something that we feel really good about, as was indicated by some of the prior questions as well. You'll also note there was 12 percent year-over-year revenue growth in the first quarter after several years of double-digit revenue growth previously.

Brian Evanko: As it relates to the specialty and care services segment within ever North.

Brian Evanko: First of all very pleased with the performance of this business you can see it over a multiyear period and our 8% to 12% average annual growth for the specialty and care services operating segment going forward is something that we feel really good about as was indicated by some of the prior questions as well. You'll also note there was 12% year over year revenue growth in the first quarter.

Brian Evanko: After several years of double digit revenue growth previously now income at the operating segment level within ever North will show some quarter to quarter variability and in particular, the first quarter growth rate in income for specialty and care services was impacted by a particularly strong first quarter of 2023 income performance in this operating.

Brian Evanko: Now, income at the operating segment level within Evernorth will show some quarter-to-quarter variability, and in particular, the first quarter growth rate in income for specialty and care services was impacted by a particularly strong first quarter 2023 income performance in this operating segment, which included some timing-related impacts in SG&A and other items. So, while the margin is down a bit year-over-year, I would not read anything into that in terms of any one-time factors that caused it. It's more a matter of quarter-to-quarter variability.

Brian Evanko: Segment, which included some timing related impacts in SG&A and other items. So while the margin is down a bit year over year I would not read anything into that in terms of any one time factors that caused it to more of a matter of quarter to quarter variability.

Operator: Thank you. Our next question comes from A.J. Rice with UBS. You may ask your question now.

Brian Evanko: Thank you. Our next question comes from AJ Rice with UBS you May ask your question.

David Michael Cordani: Hi everybody. Maybe go back to the beginning or go to the capital deployment questions. I know, Brian, you mentioned that the majority of discretionary cash flow for the back half of the year would go to repurchases. I know coming into the year, you guys gave a target for how much you would do in share repurchases in the first half. Do you have an updated estimate as to how much you might end up doing for the entirety of 2024? And then, as you think about the landscape and the market, have you any thoughts on capital priorities or the ability to potentially do transactions that would fit those priorities? Any updated thoughts on all of that?

Albert Rice: Hi, everybody.

David Michael Cordani: Maybe go back to the Argo to the capital deployment questions I know, Brian you mentioned that the majority of discretionary cash flow for the back half of the year would go to repurchases coming into the year you guys gave a target for how much you would do in share repurchases in the first half do you have an updated estimate as to how.

David Michael Cordani: How much you might end up doing for the entirety of 2024, and then as you think about that.

David Michael Cordani: Landscape in the market.

David Michael Cordani: Is anything on capital priorities or.

David Michael Cordani: The ability to potentially do transactions they would.

David Michael Cordani: Hum.

David Michael Cordani: Those priorities.

David Michael Cordani: Any updated thoughts on all of that.

David Michael Cordani: Hey Jay, good morning. It's David.

David Michael Cordani: Hey, Jay Good morning, It's David Let me take the second part of your question first and then ask Brian to pick up on the <unk>.

David: First portion of your question.

David Michael Cordani: Let me take the second part of your question first and then ask Brian to pick up on the first portion of your question. The second part of your question concerns our capital priorities. Big picture, capital priorities have not changed. Continue to ensure the business has the assets it needs to grow, innovate, et cetera. So capital underlying our growth, CapEx budget, et cetera. Second, we always systematically continue to look at opportunities for M&A. I'll come back to that.

David: A portion of your question was around our capital priorities Big picture capital priorities have not changed.

David Michael Cordani: Continue to ensure the business has the assets it needs to grow innovate et cetera, So capital underlying our growth capex budget et cetera.

David Michael Cordani: We always systematically continue to look at opportunities for M&A I'll come back to that strategic and financially attractive and third return excess capital to shareholders 2024 is another year, where a significant portion of our excess capital will be returned to shareholders through share repurchase on top of our very attractive dividend specific to the M&A.

David Michael Cordani: Strategic and financially attractive. And third, return excess capital to shareholders. 2024 is another year where a significant portion of our excess capital will be returned to shareholders through share repurchase on top of our very attractive dividend. Specific to the M&A portion of the priorities, as we discussed in our recent investor day, the underpinnings of our growth strategy are grounded in our proven organic growth model. So our ability to continue to harness the performance of our foundational businesses and continue to innovate them and bring new services to market, coupled with the acceleration of our attractive accelerated businesses, complements and drives our very attractive sustained organic growth profile.

Brian Evanko: Portion of the priorities as we discussed at our recent Investor day.

David Michael Cordani: The underpinnings of our growth strategy is grounded in our proven organic growth model. So our ability to continue to harness the performance of our foundational businesses and continue to innovate them.

David Michael Cordani: And bring new services to market, coupled with the acceleration of our attractive accelerated businesses couples and drives our very attractive sustained organic growth profile and we're excited about the outlook our cash flow production is estimated to be about.

David Michael Cordani: And we're excited about the outlook. Our cash flow production is estimated to be about $60 billion over the next five years as we look forward and project. And as it relates to M&A, as we discussed on investor day, we'll continue to be open, yet disciplined, relative to evaluating either capability or reach expansion, addressable market expansion capabilities. But again, the growth strategy is grounded in that strong, performing organic portfolio. Brian, I'll ask you to talk about our share repurchase and the outlook for the year. Good morning, AJ. So broadly.

Brian Evanko: About $60 billion over the next five years.

Brian Evanko: As we look forward and project.

Brian Evanko: As it relates to M&A as we discussed at Investor Day, We will continue to be open yet disciplined relative to evaluating either capability or reach expansion addressable market expansion capabilities, but again the growth strategy is grounded in a strong performing organic portfolio Bryan I'll ask you to talk about our share repurchase and the outlook for the year, yes. Good morning Ajay.

Brian Evanko: Good morning, AJ. So, broadly speaking, what we conveyed at our investor day continues to guide our actions in terms of our framework for capital deployment. So, our capital health remains very strong. We continue to expect at least $11 billion of cash flow from operations here in 2024. And our strong cash generation is one of the company's greatest strengths. Therefore, our capital deployment priorities continue to focus first and foremost on internal reinvestment.

Brian Evanko: So broadly speaking what we conveyed at our Investor Day continues to guide our actions in terms of our framework for capital deployments are capital health remains very strong we continue to expect at least $11 billion of cash flow from operations here in 2024, and our strong cash generation is one of the company's greatest strengths. So the capital deployment priorities continue to focus first on.

Brian Evanko: Foremost internal reinvestment following that we remain committed to an attractive shareholder dividend of course, we will repay debt to maintain our targeted 40% debt to cap ratio over time, and then the balance of our deployable capital be utilized for strategic M&A or share repurchase now specific to 2024, we remain on track to execute against the <unk>.

Brian Evanko: Following that, we remain committed to an attractive shareholder dividend. And, of course, we'll repay debt to maintain our targeted 40% debt to cap ratio over time. And then the balance of our deployable capital will be utilized for strategic M&A or share repurchase. Now, specific to 2024, we remain on track to execute against the share repurchase plans for the year, which includes completing at least $5 billion by the end of June as related to share repurchase.

Brian Evanko: Share repurchase plans for the year, which includes completing at least $5 billion by.

Brian Evanko: By the end of June as it relates to share repurchase and as David said, we continue to expect the majority of our discretionary cash flow in 2024 to be used for share repurchase and that's all reflected in our full year weighted average shares outstanding guide as well as the EPS guidance. Thanks for the question.

Brian Evanko: And as David said, we continue to expect the majority of our discretionary cash flow in 2024 to be used for share repurchase, and that's all reflected in our full year weighted average number of shares outstanding guide as well as the EPS guide.

Brian Evanko: Thanks.

Operator: Thank you. Our next question comes from George Hill with Deutsche Bank. You may ask your question.

Operator: Thank you for the question. Thank you. Our next question comes from George Hill with Deutsche Bank. You may ask your question. Good morning, guys, and thanks for taking the question. I guess I'd like to ask a little bit more about the specialty opportunity, particularly as it relates to Humira, and I guess, as you would,

Brian Evanko: Thank you. Our next question comes from George Hill with Deutsche Bank, You May ask your question.

George Hill: Good morning, guys and thanks for taking the question I guess I would like to ask a little bit more about the specialty opportunity, particularly as it relates to humira.

George Hill: And I guess as you evaluate the different strategies in the market.

George Hill: I guess, David maybe would you talk about do you see a better opportunity to more align with a limited number of manufacturers or is the better opportunity kind of around.

George Hill: Maybe even a single manufacturer or kind of using the <unk>.

George Hill: The sole source strategy.

George Hill: As a way to both kind of drives lower cost for patients and to kind of drive margin for the company.

Eric Palmer: George, it's Eric. Good morning. Thanks for the question. You know, stepping back a bit here, we have set up our portfolio. We've set up, I'll say, our approach here, broadly, as one that's grounded in providing choice and working to ensure that we've got choice. And that applies to the maximum number of choices available.

Operator: George It's Eric Good morning, Thanks for the question.

Eric Palmer: Stepping back a bit.

Eric Palmer: I have set up our portfolio of set up that are I would say our approach here broadly is one that is grounded in providing choice and working to ensure that we've got a choice in that that applies to the maximum number of choices available in this space that applies to how we have our clients fund their benefit programs et cetera, but specifically on <unk>.

Eric Palmer: Specialty the approach we've taken here is one that works to assemble.

Eric Palmer: In this phase, it applies to how we have our clients fund their benefit programs, etc. But specifically on specialty, the approach we've taken here is one that works to assemble a robust set of supply and suppliers and not become dependent on a single thread or sole source sort of approach. And so this is an approach that, again, we think positions us really well. We think we've assembled a really attractive value proposition here on the biosimilar Humira, as I noted before, with the zero dollar patient cost share, an attractive price for plan sponsors that will save people money, you know, on average $3,500 per patient when taken all together per year.

Eric Palmer: Robust set of supply and suppliers and not become dependent on a single thread or.

Eric Palmer: A source sort of approach and so this is an approach that.

Eric Palmer: Again, we think positions us really well, we think we've assembled a really attractive value proposition here on the Biosimilar humira.

Eric Palmer: I noted before with the zero dollar patient.

Eric Palmer: Cost cost share an attractive price for plan sponsors that will say $4 on average $3500 per patient.

Eric Palmer: So that approach, we think, will drive maximal choice, maximum clinical effectiveness, and maximum flexibility for us to continue to stay well positioned as new entrants and new therapies continue to come to the market. Thank you. Our next question comes from Aaron Wright with more... You may ask your questions... Hi, thanks.

Erin Wilson Wright: When taken altogether so per year so that.

Erin Wilson Wright: With it will drive maximal choice maximum clinical effectiveness.

Erin Wilson Wright: Maximum flexibility for us to continue to stay well positioned as new entrants and new therapies continue to come to the market.

Operator: Thank you. Our next question comes from Erin Wright with Morgan Stanley. You may ask your

Erin Wilson Wright: Thank you. Our next question comes from Erin Wright with Morgan Stanley You May ask your question.

Erin Wilson Wright: Alright, thanks, and a little bit on DLP wines, and just can you talk a little bit about the traction youre seeing the economics around the program and how that's playing out relative to your expectation.

Erin Wilson Wright: Do you see similar opportunities as Im sorry, if I can follow up on other therapeutic categories.

Erin Wilson Wright: San DLP went out a little bit unique so thanks.

Eric Palmer: Good morning, Aaron. It's Eric.

Operator: Good morning, Erinn, it's Eric Yes, so with respect to <unk> as you can imagine there is significant interest in need from our clients here Theyre looking for help with managing the affordability of these medicines.

Erin Wilson Wright: And circle RF solution, which we've talked about for a bit of time now and we really highlighted at our Investor day is a solution that's set up to be really a value for our clients. Here is first of its kind of brings together our supply chain and procurement expertise and our clinical capabilities and works to get.

Eric Palmer: Yes, so with respect to GLP-1s, as you can imagine, there's significant interest and need from our clients here. They're looking for help with managing the affordability of these medicines. Our EnCircleRx solution, which we've talked about for a bit of time now and really highlighted at our investor day, is a solution that sets up to be really valuable for our clients here. It's the first of its kind. It brings together our supply chain and procurement expertise and our clinical capabilities and works to get patients with the right clinical markers managed within the right pharmacy network constructs and then supports them with additional clinical resources to help make sure that the impacts are lasting.

Eric Palmer: Patients with the right clinical markers managed within.

Eric Palmer: The rate pharmacy network constructed constructs and then supports them with additional clinical resources to help make sure that the.

Eric Palmer: The impacts are lasting when you put that altogether, our capabilities position us to be in a position to guarantee outcomes to our clients and that's formed and.

Eric Palmer: When you put that all together, our capabilities position us to be in a position to guarantee outcomes for our clients, and that's formed in a guarantee that is based on the fees our clients pay to us to effectively manage this program. If we don't meet our commitments to our clients, our clients get their fees back or get a return guaranteed on those fees. So this is unique in this space on GLP-1s, but I would note this is not the first time we've done a program like this.

Eric Palmer: Guarantee that is based in the fees our clients pay to us to effectively manage this program and if we don't meet up to our commitments to our clients our clients get their feedback or I'll get off.

Eric Palmer: Return guaranteed on those fees. So this is unique.

Eric Palmer: Unique in this space on <unk>, but I would note. This is not the first time, we've done a program like this.

Eric Palmer: Express Scripts and Evernote have a long history of clinically-oriented, value-based, outcomes-oriented programs on specific conditions or to move on specific markers, and we think we're well-positioned to deliver on this. David, anything else you'd add? Sure, Eric. Thank you.

David: Express scripts number north of a long history of clinically oriented value based outcomes oriented programs on specific conditions or to move on specific markers and we think we're well positioned to to to deliver against us David anything else you'd add sure Eric. Thank you Erinn just to put the wrap over the top of it.

David Michael Cordani: And Aaron, just to wrap it up, as we've discussed before, we identified many years ago that we believed that the pathway of pharmacological innovation was gonna define the next decade. You could use the GLP-1 conversation we just had as an illustration of that, or earlier, the biosimilar conversation, or reflect back on the fact that there are 21 gene therapies on the market today and almost 1,000 in the pipeline.

David Michael Cordani: As we've discussed before we identified many years ago that we believe that the pathway of pharmacological innovation was going to define the next decade, you could use the GOP one conversation, we just had as an illustration of it where previously the biosimilar conversation or reflect back on the fact that there is 21 gene therapies in the market today and almost 1000 in the pipeline.

David Michael Cordani: So the point is the ability to harness the capabilities of a data-driven, clinically-precise, physician-engaged, patient-centric model is mission-critical for the future, and we're very pleased with the multiple years of investment that we've made to put us in a position today, and the GLP-1s are a great example of how we're able to translate good innovation for the benefit of clients today and into the future

David Michael Cordani: The point is the ability to harness the capabilities a data driven clinically precise physician engaged patient centric model is mission critical to the future and we're very pleased with the multiple years of investments that we've made to put us in a position today in the <unk> ones are a great example of how we're able to convert good.

Operator: Thank you. Our next question comes from Gary Taylor with Cowan. You may ask your question.

Gary Paul Taylor: Innovation for the benefit of clients today and into the future.

Operator: Thank you. Our next question comes from Gary Taylor with Cowen You May ask your question.

Brian Evanko: Hi, good morning. A three-parter, but all just numbers related. First, on MA, I know Brian said it was in line with expectations, but was there a material MA MLR headwind absorbed in the quarter, and I know it's held for sale on the balance sheet as of 3-31, will MA continue to be included in both the adjusted and unadjusted P&L the rest of the year? Two, the fourth quarter had a big benefit from a stop-loss true-up.

Gary Paul Taylor: Hi, good morning.

Gary Paul Taylor: Three parter, but all just numbers related first on M&A I know, Brian said in line with expectations, but.

Brian Evanko: Was there a material.

Brian Evanko: MLR headwind absorbed.

Brian Evanko: In the quarter and I know, it's held for sale on the balance sheet as of $3 31 will it may continue to be included in the.

Brian Evanko: Both adjusted and Unadjusted P&L, the rest of the year to fourth quarter had a big benefit from a stop loss true up are we back to sort of a normal year to year stop loss.

Brian Evanko: Are we back to sort of a normal year-to-year stop-loss? MLR, and then finally to Kevin's question on the specialty margin. I heard Brian's answer but just wondered how we think about seasonality in that business? Would it normally be just ramping all year long like the PBM business, or would it reflect kind of a stronger first quarter and fourth quarter in general?

Brian Evanko: MLR.

Brian Evanko: And then finally to Kevin's question on the specialty margin.

Brian Evanko: <unk> heard Brian answer.

Brian Evanko: But just wonder how do we think about seasonality in that business would normally be just ramping all year long like the ppm business or would it reflect kind of stronger first quarter fourth quarter in general.

Brian Evanko: Hey, Gary. It's Brian.

Brian Evanko: Hey, Gary it's Brian I'll try to take each of those questions. One by one here. So as it relates to Medicare that continues to be reflected in the Sigma healthcare segment until the business is divested <unk> and you can see for example in our quarterly financial supplement you will see on page nine I think.

Brian Evanko: I'll try to take each of those questions one by one here. So, as it relates to Medicare, that continues to be reflected in the Cigna Healthcare segment until the business is divested to HCSC. And you can see, for example, in the quarterly financial supplement, you'll see on page nine, I think it is the premium breakdown. It represents about 20 percent of the overall premium for Cigna Healthcare.

Brian Evanko: It is the premium breakdown it represents about 20% of the overall premium for Cigna health care. So just given the relatively small presence it doesn't move the needle as much relative to the overall cigna healthcare results as our U S employer business, which represents the majority as I said the overall performance of that business is broadly in line with expectations three.

Brian Evanko: So, just given the relatively small presence, it doesn't move the needle as much relative to the overall Cigna Healthcare results as our U.S. employer business, which represents the majority. As I said, though, the overall performance of that business was broadly in line with expectations through the fourth quarter of the year, which comes back to the fact that we had anticipated higher levels of utilization in 2023 and that continuing into 2024. And you can also see, associated with that, our membership is down a bit, whereas the overall market is up, and some others are up more than that.

Brian Evanko: The fourth quarter of the year, which comes back to the fact that we had anticipated higher levels of utilization in 2023 and that continuing into 2024 and you can also see associated with that membership is down a bit.

Brian Evanko: Whereas the overall market's up and some others up more than that.

Brian Evanko: As it relates to the stop-loss book of business, you're right. In the fourth quarter, we had some favorable claims experience that came through and actually drove that product line to be above target profitability in 2023. And our 2024 expectation is that it will normalize back to target profit margin levels. So far, that's consistent with what we're seeing.

Brian Evanko: As it relates to the stop loss book of business you are right in the fourth quarter. We had some favorable claims experienced that came through and actually drove that product line to be above target profitability in 2023, and our 2024 expectation is that it will normalize back to target profit margin levels. So far that's consistent with what we're seeing it's early in the year.

Brian Evanko: It's early in the year, and obviously, we have the appropriate level of prudence in our guidance on both the medical care ratio and the income for the full year, but so far, so good as it relates to stop-loss performance. And then finally, as it relates to the specialty and care services, the margin profile, income seasonality, et cetera, to your point about the pharmacy benefit services operating segment, that business tends to see a wildly profitable income over the course of the year.

Brian Evanko: And then obviously, we have the appropriate level of prudence in our guidance on both the medical care ratio in the income for the full year, but so far so good as it relates to stop loss performance and then finally as it relates to the specialty and care services margin profile income seasonality et cetera to your point about the pharmacy benefit services operating.

Brian Evanko: That business tends to see a ramp that income over the course of the year. So more specifically when you think about how to how to model that the pharmacy benefit services income will show sequential growth in income every quarter through the end of the year, the specialty and care services business tends to have more variability from quarter to quarter.

Brian Evanko: So more specifically, when you think about how to model that, pharmacy benefit services income will show sequential growth in income every quarter through the end of the year. The specialty and care services business tends to have more variability from quarter to quarter. So as you think about how to model that for 2024, it's not quite as much of an upward slope, but over time, we fully expect the 8% to 12% average annual income growth rate in that business to be achieved.

Brian Evanko: So as you think about how to model that for 24, it's not quite as much of an upward slope, but over time, we fully expect the 8% to 12% average annual income growth rate in that business to be achieved.

Brian Evanko: Okay.

Operator: Thank you. Our last question comes from Lance Wilkes with Bernstein. You may ask your question.

Brian Evanko: Thank you. Our last question comes from Lance Wilkes with Bernstein. You may ask your question. Great, thanks so much. Guys, I've got a question on going to market strategy and insights, and I was just wondering about value-based care, what are the costs.

Brian Evanko: Thank you our last question comes from Lance Wilkes with Bernstein, you May ask your question.

Lance Arthur Wilkes: Great. Thanks, so much.

Lance Arthur Wilkes: I've got a question on go to market strategy and insights and it was just wondering for value based care. What are the characteristics of employers that are interested in those sorts of solutions with you and then similarly on your GOP one.

Lance Arthur Wilkes: Guaranteed product are there particular characteristics of employers or size or whatnot that are more interested in that and maybe as a tag along if you could just give your update on where coverage trends for GOP ones look like for 25 that would also be helpful. Thanks.

David Michael Cordani: Lance, good morning. It's David.

Brian Evanko: Lance good morning, it's David let.

Speaker Change: Let me take the first portion of your question relative to the BBC, a little bit more broadly and then ask Eric to talk about the GOP one questions specifically.

David: Youre looking for employer characteristics, which is an interesting question I think I would click it down a couple of notches in terms of the value creation. So rbbc strategy our value creation opportunity you think about it is twofold first broadly for the commercial portfolio as an illustration we've been at this for about 15 years partnering with.

David Michael Cordani: Let me take the first portion of your question relative to the VBC a little bit more broadly, and then ask Eric to talk about the GLP-1 questions specifically. You're looking for employer characteristics, which is an interesting question. I think I would click it down a couple notches in terms of value creation. So our VBC strategy, our value creation opportunity, if you think about it, is twofold. First, broadly, for the commercial portfolios and illustration, we've been at this for about 15 years, partnering with medical cost professionals, working to align incentives, data flows, and care extenders to help to close gaps in care at a more accelerated level and or bring more precision to specialty care interventions, more likely than not, to get the best possible quality outcome and overall affordability and value.

David: Medical cost professionals working to align incentives data flows and care extenders to help to close gaps in care at a more accelerated level and or bring more precision to specialty care interventions more likely than not to get the best possible quality outcome, and overall affordability and value. It manifests itself in a variety of items, including Ava.

David Michael Cordani: It manifests itself in a variety of items, including avoided emergency room visits, less one-day admits, less readmissions, and a whole variety of items that come through relative to that. So that broad-based approach resonates with most employers because it's not restrictive. It's not a network restrictive. It's not a product restrictive design in any way, shape, or form.

David Michael Cordani: <unk> emergency room visits last one day admits less readmissions and a whole variety of items that come through relative to that so that broad based approach resonates with most employers.

David Michael Cordani: Because it's not restrictive is not a network restrictive it's not a product restricted design in any way shape or form.

David Michael Cordani: I'd add to that for a moment now our PathWall program, which in some ways you could view as value-based care because it also takes an episode of care or a unique, specific care state, and it seeks to redesign not the health plan offering in totality, but for that care state, taking data and guiding with more precision to the highest performance, highest quality outcome. Those employers tend to be initially larger employers that are spending a bit more time on the precision of their benefit design, and our ability is to now package those solutions and have them in a more coordinated way for small to mid-sized employers going forward. As I noted, we're really pleased that patient satisfaction, for example, in the musculoskeletal program was fully 96%.

David Michael Cordani: A moment now our passport program, which in some ways you could view as value based care.

David Michael Cordani: It also takes now an episode of care or unique specific care state and it seeks to redesign that the health plan offering in totality, but for that care state, taking data and guiding with my appreciation to the highest performance highest quality outcome those employers tend to be initially larger employers.

David Michael Cordani: They're spending a bit more time in the precision of their our benefit design and our ability is to now packaged solutions and have them in a more coordinated way for small to midsized employers going forward as I noted, we're really pleased that patient satisfaction for example, and the muscular skeletal program was fully 96%. So so broadly speaking.

Eric Palmer: So broadly speaking, the opportunity to create more value; our VBC strategy is not restrictive. It's inclusive from a network standpoint, brings more precision, and hence resonates broadly with employers. PathWall brings a level of trade-offs in terms of how an employer wants to factor that in, and we're able to essentially begin to package that within our select segment as well. I'll ask Eric to talk a little bit more broadly about your GLP-1 question.

Eric Palmer: The opportunity to create more value.

Eric Palmer: <unk> strategy is good not restrictive it's inclusive from a network standpoint brings more precision, hence resonates broadly speaking with employers aswell brings a level of trade offs in terms of how an employer wants to factor that in and we're able to essentially begin to begin to package out within our select segment as well I'll ask Eric to talk a little bit more.

Eric Palmer: Probably about <unk> one question great. Thanks, David Good morning, Lasse, <unk> broadly covering DLP ones for weight loss specifically.

Eric Palmer: It's certainly true in our book of business that larger clients tend to cover more and how do we think about.

Eric Palmer: Grounded not just in the size of the number of employees, but really on the approach that an employer wants to take to their benefits and I would note that thats in turn driven by whether or not they tend to have lower or higher amounts of employee turnover tend to see more spectrum more coverage for employers with lower <unk>.

Eric Palmer: Levels of turnover, we tend to see.

Eric Palmer: We tend to see variations depending on the underlying clinical needs and clinical conditions of the employee base and their dependents and so on as well. So it really does come down to an employer-by-employer type of decision, but those would be a couple of the dimensions that come to mind.

Eric Palmer: Ah variations, depending on the underlying clinical needs and clinical conditions of the employee base and their dependents in touch as well. So so it really does come down to an employer by employer type of decision, but those will be a couple of the dimensions that come to mind in terms of the overall coverage levels. We had noted last year that we saw.

Eric Palmer: In terms of the overall coverage levels, we had noted last year that in the Express Scripts employer book, about 40 to 50 percent of our employer relationships covered GLP-1s for weight loss. That has actually trended moderately higher. I call it about 50 percent now. So moving up from 40 to 50, right to about 50 percent. So a modest increase. And as I noted earlier, and David noted in his prepared remarks, we saw a high degree of interest and engagement with the ENCIRCLE program. And so I expect that we'll continue to provide additional access for patients over time.

Eric Palmer: In the express scripts employer book about 40% to 50% of the of our employer relationships hovering <unk> for weight loss, that's actually trended moderately higher I'd call. It about 50% now so moving up from 40 to 50 right to about 50% so a modest increase.

Eric Palmer: As I noted earlier and David noted in his prepared remarks, seeing a high degree of interest and engagement with the <unk> program.

Eric Palmer: So expect that we'll continue to provide additional access for.

Eric Palmer: For patients over time.

David Michael Cordani: Thank you. I will now turn the call back over to David Cordani for his closing remarks.

Eric Palmer: Thank you I will now turn the call back over to David <unk> for closing remarks.

Operator: Thanks, Kit, for your time this morning. I just want to make a few points to wrap it up. Broadly speaking, we're pleased to have delivered another strong quarter, which builds on a track record of growth, and we were able to increase our guidance for adjusted earnings per share to at least $28.40. Our team continues to navigate a very dynamic environment and is executed with focused discipline across our portfolio of businesses, and we seek to accelerate our momentum further into 2024.

David Michael Cordani: Thanks again for your time. This morning, I just want to make a few points to wrap up broadly speaking we're pleased to have delivered another strong quarter, which built on our track record of growth and we were able to increase our guidance for adjusted earnings per share to at least $28 40.

Operator: Our team can you could you use to navigate a very dynamic environment and has executed with focus and discipline across our portfolio of businesses and we seek to accelerate our momentum further into 2024 and you want to pause and thank my colleagues around the world wakes up every day on behalf of our clients our customers our patients and partners with the objective of serving.

Operator: I do want to pause and thank my colleagues around the world who wake up every day on behalf of our clients, our customers, our patients, and partners with the objective of serving, and I'm proud of what we've delivered and the positive difference we make in people's lives each and every day. Thank you for your time, and we look forward to talking to you again as we continue to execute against our strategy.

Operator: And I am proud of what we've just delivered in the positive difference we make in People's lives each and every day. We thank you for your time and we look forward to talking to you again as we continue to execute against our strategy.

Operator: Ladies and gentlemen, this concludes the Cigna Group's first quarter 2024 results review. Cigna 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 866-407-9272 or 203-369-0617. There is no passcode required for this replay. Thank you for participating. We will now disconnect.

Speaker Change: Ladies and gentlemen, this concludes the Cigna group's first quarter 2024 results review Cigna Investor Relations will be available to respond to additional questions. Shortly.

Operator: This conference will be available for 10 business days. Following this call you may access the recorded conference by dialing 86640792722033690617. There is no pass code required for this replay. Thank you for participating we will now disconnect.