All right. I think we'll go ahead and get started. Welcome everybody to our next session. We're really pleased to have The Cigna Group with us again this year. Ann Dennison, EVP and Chief Financial Officer. Thanks so much, Ann, for doing this again. The company had a recent Investor Day, positioned Cigna as a leader in complex care and healthcare personalization, and highlighted the combined capabilities of Evernorth and Cigna Healthcare to get you there. The business model was discussed, the combined significant. The business model was combined with a significant discussion around a modernization initiative. Looking at the 2030 targets that you laid out at Investor Day, what will be meaningfully different about Cigna's earnings mix by that timeframe? Which business or capabilities do you expect to become much more important?
Sure. First, let me just say thank you for having us here today. Great to be here, just on the back of earnings and on the back of our Investor Day. Look forward to the conversation. Appreciate you having us. With respect to our business, maybe I would like to just start by saying we talked a lot at Investor Day about our Lead to One strategy and how important it is, the personalization, and our ability to serve those with the most complex conditions. When you think about our portfolio of businesses that we've deliberately shaped over the last decade plus, we've positioned ourselves really well to serve those areas of need. If I'm just kind of walking down the businesses, the specialty business, which is about 37% of our overall earnings, it's 100% serving the needs of complex care.
That business, growing 8%-12%, it's our highest-growing business. Then you've got our Cigna Healthcare business, 40% of our business. 55% of that business is serving complex care patients. Then pharmacy benefit services, 23% of our earnings, and 70% of it goes to serving complex care. With respect to your question in terms of what, looking forward, what's going to look different about the business, we would expect that the specialty business, given that it's the highest growing business, will become a bigger and bigger portion of our overall earnings and will be about 40% as we look out into 2030. That, coupled with the investments we've made across each of the businesses to serve the complex populations, has positioned us well to achieve our long-term objective of 10%-14%.
In addition to that, and you referenced in the question as well, our Accelerate to One program. It's got a $3 billion gross run rate savings objective, productivity, and modernization. Not all of it's going to fall to the bottom line, but certainly, we're going to reinvest some of it into the business to drive growth, and some of it's going to fall to the bottom line. Hitting our growth rates, achieving our objectives around Accelerate to One, those things we expect to be true and will support our 10%-14% growth over the long term.
No, that is great. To what extent are those long-term earnings targets dependent upon just the market continuing sort of at its current pace, or are you assuming your relative market performance is going to be better than the underlying market dynamics? Maybe what is some of that to get to $45 in 2030?
Sure. When you think about this, our three deliberately shaped portfolio of three businesses, there are three things that we talked about at Investor Day and that we keep pointing to. There are three elements to delivering. One is core growth, two is our distinct capabilities that we have in each of our business that help add to the equation, and then execution. We have to hit on all of those three levers to deliver over time. If you think about specialty and care, 8%-12% growth in specialty and care, some of that will come from secular growth, and some of that will come from us, sorry, us as a leader in the market. Same thing for each of our businesses.
Okay. I think you have got a range effectively, 10%-14%. The underlying growth seems like it gets you pretty close to the low end, coupled with your capital deployment priorities, gets you pretty close to that low end. Is that a fair way to think about it, or?
The low end is not our target. We had talked about at Investor Day that we would expect to be at a minimum of $45 of EPS.
Right
By 2030. That assumes we hit the low end of every
Right
Range across all of our businesses. An important thing to note there is we're not relying on any one business to get there.
Right.
And so—
Two ways to look at it.
Two ways to look at it.
One is that you got a lot of hedges naturally that say I can get to that low end 10% growth," which is not bad growth in and of itself. The other way is, the market momentum in most of your businesses, I think, would carry you pretty close to that unless there's some big sea change in the market. You think that's a fair way to look at it?
I think that's a fair way to look at it. I think that the market momentum, plus our distinct capabilities, give us a clear pathway to achieving the 10%-14%, including our capital, the 4%-5% that we expect to get from capital deployment, so 6%-9% from our earnings growth.
Right.
We feel really confident in that. If you think about some of the progression on the pharmacy benefit services business, we'd expect 2027 to be the trough year. We're still targeting 4% margins. Getting to that 10%, I just want to That $45.
Right.
Assumes we do not grow a single dollar in pharmacy benefit services over the entirety from here to 2030.
Right.
That's the floor.
Right. On the productivity program, the $3 billion, I think there's been some confusion about that, some debate around that. How do we think about where that is coming from, first of all, and second of all, the trade-off between letting some of that fall through the bottom line versus reinvesting?
Yeah. There's three main categories as part of the overall productivity and modernization initiative. One is around automation and process re-engineering. The second is around talent effectiveness, and then the third is around our vendor ecosystem, vendors, and suppliers. You can think about 70%-80% of the gross savings coming from those first two buckets, from the use of AI, our process re-engineering, more efficiency. We're going to drive 70% to 80% of that $3 billion. The remaining 20%-30% is going to come from optimization on the vendor side. And we are committed to hitting the 10 to 14, so you can think about the Accelerate to One program as belts and suspenders for us to be able to hit our long-term growth goals.
And we will be judicious about what we invest back in, assuming we are meeting our goals and we see an organic opportunity that makes sense for us to invest in where the return is going to be worth it.
Okay. Just to do a couple of questions on Evernorth. Going back to some of the comments you made on the third quarter conference call, as you laid out the Evernorth headwinds for 2027, it looks like, if I have this right, you are anticipating that operating income in this business will be down in the high single-digit range year-to-year, which we estimate would be something like down about $200 million or so. Are we thinking about that correctly? And if so, how much is due to the rollout of the Signature model or something else?
Sure. Just as a reminder, coming out of the third quarter, we provided some shaping.
Right
For 2027. We look forward to giving specific guidance in the fourth quarter. But with respect to Evernorth, what we have signaled is that we expect overall Evernorth to be up low single digits. We said two things. We said overall Evernorth to be up low single digits, and we said specialty and care to be within its 8%-12% growth range but to be at the lower end of the range. That implies roughly what you described as a decline for pharmacy benefit services.
Pharmacy, yeah. Right.
Pharmacy benefit services itself. That is in the range. I would describe that we pointed to two headwinds that we see. The two most prominent headwinds there are the moderation of coverage on GLP-1s in the corporate space, which we have seen a decline in employers covering GLP-1s. It was roughly 50%, and we have seen a couple points drop, and we expect that to drop a couple more points.
Okay
Going into next year. The second headwind is just the overall gross rebate pool shrinking. Most substantially, most of that goes back to our clients, but a portion of it will affect us for next year.
Maybe just to drill down on that, if you do not mind. You called those two out for 2027 in the thinking about the PBM side. Is this the entirety of the headwind for 2027 when we think about that year-to-year decline on the PBM, or is there anything else? At this point, will the GLP-1 pool be pretty de minimis when you take into account where you are at now? Will it still be a contributor? I am also going to ask you about the rebate pool in a second too, maybe.
I mean, we still expect a healthy amount of employers to continue coverage on the GLP-1, so we are not expecting it to go to zero, if that was your question.
From your perspective on what you are earning on it, I am just trying to say, you are still
Yeah, we still expect earnings.
Okay
From that portion. I mean, there is always smaller puts and takes. What we are calling out are the two largest headwinds that we see.
Right.
We think with those headwinds, we can achieve a 1%-2% growth overall, or low single-digit growth overall, for Evernorth for 2027. So, there will be puts and takes across the board there. We are really excited about Signature and the investments that we are making this year to drive some of the activity that we will start to see coming through the P&L in 2028.
When you think about the comment about the reduced rebate pools, what specifically is driving that?
Yeah. So, we pointed to the IRA as probably the biggest driver of reducing prices and therefore reducing the rebate pools. Again, most of that is our clients' money. So the gross amount is shrinking, and we do earn a small amount there, and so we will see the pressure from that reducing next year.
When you move back to flat to 4% growth on the PBS side, 2028 and beyond, what will be the key swing factor that will allow you to start to have growth in that business again?
Signature. Signature will be launching, with the exception of our fully insured book for the Cigna Healthcare portion of the ecosystem, Signature does not launch until 1/1/2028.
Okay.
Signature is the difference maker. We have had a strong selling season for 2027, and we are targeting for, put aside the mega clients, we are targeting 4% margin on those clients. Signature is where we see coming out of the trough in 2027 into growth for PBS as we look out to 2030.
Okay. Speaking about the specialty business, I think you said you expected growth to moderate versus 2026, as the pipeline for new specialty drugs and biosimilars is not quite as robust next year as it was this year. I wondered how much visibility do you have coming into the year? You pretty much have visibility on what the new launches will be at this point. Was this year's launch from the beginning of the year to the end of the year, did you see much movement there?
Yeah. We have good visibility into what is coming to the market on both the pharmacy and medical side. If you look back from 2023 to 2026, our specialty earnings grew 13%, so above the top end of the range, or our implied 2026 numbers grew at a CAGR of 13%, so above the top end of our long-term growth range. There are a couple of things. It is not just about the number of drugs coming to market, it is also the size of the drugs, the pool coming to market. We had through the end of 2025 and 2026, Stelara, Humira, and the specialty generic Revlimid, which were big drivers of, or tailwinds to the growth. We do have launches in 2027. We have visibility out to 2030 on what we expect to come to market.
2027, there's quite a few coming to market, but the relative size of the launches are smaller than what we saw in 2026.
Okay. A lot of discussion about your Signature model. Now everyone's talking about transparent PBMs. When a client compares the Signature model with other transparent PBM offerings, what's the decisive difference in the purchasing decision? Give us just some thoughts about that. Any obstacles to overcome in customer adoption?
Sure. We're really excited to be leading the market here. There's a lot of benefits to the Signature model, holistically. Maybe I start with the patient benefits. The patient gets the lowest price at the counter. They also get access to what we call our Price Assure program. So no matter how the funding is working, whether it's copay, insurance paid, cash pay, they will get the lowest price under any model. That's a benefit to the patient, also a benefit to the employer, meaning their employees are getting the best price. From an employer perspective, this model is a completely transparent, fee-based, predictable model. They know exactly what they're going to pay on a per member per month basis under the new model.
They also get the benefit, obviously, of all of our safety protocols, the formulary, our network access, and our ability to get the best price for the patient as part of that. The other thing that clients are increasingly becoming concerned about are their fiduciary responsibilities, and Signature to sort of help get at some of those concerns. In terms of obstacles, this is an entire change in the way that the market is working. We are working really closely with our clients around benefit construction, education, and taking them along the journey with us on the vision for the market. Then there's also a lot happening, this is not an obstacle, but just an observation, in the regulatory space that is creating that interest from clients to have more and more conversations about the optionality with Signature.
Okay. You think things like, we hear large employers like to hold onto the rebates, they've sort of come, the market's moving in this direction, and they're sort of understanding that that's the way the market's going, or is that a big impediment for you?
Those are the conversations that we're having with clients around the CAA, just how the entire ecosystem is moving, and there's a lot of openness from our clients to have those conversations, and they're thinking more about fiduciary part of the equation as they're making their decisions. I'd expect we'll see more and more pickup as we go through 2027 and 2028, and we're looking forward to being a leader here.
Yeah. You've been incurring transitional costs, and as you think about the rollout of your own book next year to the outside world in 2028, how do those transition costs wind down? When will we be sort of in a steady state of economics for the business?
Yeah. We're incurring transition costs this year. We would not expect to incur any incremental costs next year, so we're kind of at a steady state. In terms of when we'd start to see reductions in the investment, we look forward to talking more about that coming out of next year. There's still a lot of investment to be made. Nothing from a run rate perspective incremental to what we've already shared.
At some point, there would be some tapering off probably?
At some point, I would expect some moderation.
Okay
Probably longer term.
There is some interest in CuraScript. How do you see that growing over the next few years? Competitors are expanding as well. Some of them have some reach into the physician practices. What strategic gap is Evernorth Wholesale Distribution, which you talked about at the Investor Day and got some attention on, expect to meet versus distribution arrangements that you can get already in place?
Yeah, we're really excited about CuraScript, a $25 billion revenue business that's grown at 20% in each of the last five years. We've recently added the Evernorth Wholesale as part of the ecosystem. The opportunities that we see, we expect to add at least $20 billion by 2030 to that revenue amount. The opportunities that we see in front of us are around expanding the relationship between Accredo and CuraScript. CuraScript is not currently doing all of the distribution for the Accredo specialty business. We also see, if you think about the ecosystem, it's a $480 billion ecosystem, 40% of that on the medical benefit side.
Right.
We've only got about 7% share, so a lot of runway for us to grow in that space, to expand our relationships with health plans and providers, in particular through our investment in Shields. We see opportunity to access some of the health plans that Shields is doing operations for, to expand in that way. With Evernorth Wholesale, it opens up other areas of distribution that weren't available under the CuraScript construct outside of the health plans to more of the direct-to-provider side of that.
Okay. Let's talk about Cigna Healthcare for a minute, the commercial business. How has that trended? I know you've talked about elevated costs, but your price to that elevated cost, so how's MCR and utilization performing relative to your expectations over the course of this year? Some of your peers have talked about the IDR process being an issue. What are you seeing there?
Sure. Trend and MCR are tracking exactly where we expected them to throughout this year. We've talked about before the three biggest drivers on the trend side being pharmacy, specialty, and behavioral. That continues to hold, meaning we continue to see that. It's tracking as we expected. The IDR, we support the concept of the IDR and the regulation itself, but the process, as many of our peers have spoken about, needs fixing, for lack of better terminology. We've experienced about 60 basis points of trend pressure from the IDR process in this year. We expect that with the regulations changing and it becoming cheaper to submit in the IDR process, we expect that to be higher next year, and we've planned and priced for that. We planned and priced for the 60 this year, and we're tracking in line.
We are happy with the analytics that we put in place, and we expect trend next year to remain elevated, but fairly stable.
For your pricing for next year, you have taken the 2026 trend and just extrapolated it forward for next year. Is that a broad way to characterize it?
I think it is more complicated, obviously, than that.
Right.
We have also increased our expectations on what we think IDR is going to contribute to trend, and there are some moving pieces. I would say it is largely stable.
You did call out on the third quarter conference call some new business wins in Cigna Healthcare, and also some improved stop-loss margins. Can you expand on that? Where are you seeing the business wins, and anything to comment on the stop-loss business and how that has been repriced?
Sure. We are on track. I will start with the stop-loss. We are on track with respect to our margin recapture plan. We had talked about coming out of 2024, where we had a disruption in stop-loss that we would expect to recover 75% by the end of this year, and then the remaining 25% going into 2027. We are on track for that. We have seen good. We are pricing and planning for trend that is matching up with our expectations, and we have seen good receptivity in the market. We are helped by the fact that we sell an integrated offering, and clients are looking for different solutions, and so our products are resonating in the market. You asked about where we are seeing success.
We continue to see success in the Select segment, so that is the under 500 employee segment where clients are looking for creative solutions to help construct their benefits. We continue to see success there and continue to expect that to be one of the drivers that helps us achieve our long-term objectives, Cigna Healthcare at 6%-9%.
Yeah. Just a technical question on the MLR outlook. I know there is a lot of moving parts and you have not given formal guidance, but you are exiting the exchange business. Is it fair to just think mechanically, getting rid of the exchange business should help you, all things being equal, get a lift or improvement on the MLR next year, as that is out of the mix?
Just as a reminder, we target a margin on the Individual and Family Plans business of 4%-6%. We do not expect to hit that for this year, but we do expect the business to be profitable. The MLR for that business is lower than the rest of the Cigna Healthcare portfolio.
Okay.
Removing that will have, I think, the opposite.
It will have a negative?
impact of what you are describing. We would expect it to increase once that business.
Have you sized how much of a headwind that is?
We haven't sized that yet.
Okay.
We will reflect that in our guide for 2027 when we guide at the end of this year.
Okay. The Cigna fully insured book is going to the Signature model next year. Does that have any impact on Signature, on Cigna Healthcare's margin by making that move?
We planned and priced for the changes that we're contemplating for 2027. The fully insured book will be, as of 1/1/2027, fully in Signature, and we would not expect to have any positive or negative financial implications of that transition to Cigna Healthcare.
Okay.
Yeah.
Big announcement last week about CVS planning to split its retail and health benefits and PBM business. That's garnered attention in the market. How does that change, in your view, anything either strategically you guys are thinking about or the competitive landscape?
Yeah. So, obviously, that came as a surprise to us. It doesn't change anything about the way we think about our business strategically, meaning we've talked about this, but deliberately shaped the portfolio of our three core businesses. CVS's announcement doesn't change our strategy or the opportunities that we see in front of us.
Capital deployments, as we talked about earlier, is a key feature of the Cigna story. I know you're focused on getting the leverage down to 40%, but how should we think about when we might see that buyback re-accelerate, how much of a contributor it is next year versus your long-term targets about what it'll contribute?
Sure. Just as a reminder, we did the Shields transaction. We've been on a journey to delever. We took about 100 basis points out of the debt-to-cap ratio Q2 to Q3, and so we do expect to get to 40% by the end of 2026, at which point that gives us more flexibility around driving for that 4%-5% of growth that we want to drive from capital deployment, repurchases being part of it. I'd expect 2027 to look more like our long-term guide.
Okay. When considering sort of the earnings trajectory between here and the 2030 targets, you talked a little bit about the PBM dynamic. What else could add volatility as opposed to making that sort of an even trajectory?
Sure. I mean, when you look at, obviously we have ranges for the reason that there's always going to be sort of puts and takes depending on the business and the particular year. I think specialty is a great example of this. We talked about 2023 through 2026 being above the top end of the range, and then going into 2027, we're going to expect that to be towards the low end of the range. So, that's the sort of volatility just given market dynamics that I would expect. In the short term, we'd expect Cigna Healthcare to perform better because we're still on the stop loss margin recovery journey. So, 25% of that recapture will happen in 2027, and so that will create a mixed difference than sort of our normal.
But the ranges exist for this very reason, meaning sometimes we'll be at the high end, we could be below or above, at the high end, in the middle, but over the long term, we expect to be in the range.
Okay. I know the company's discussed the potential to expand its specialty care services in terms of the client side, particularly one of your larger customers. Is there any update on that about where it stands or other opportunities along those lines?
Yeah, I mean, sure. We are always looking to partner or expand services, especially with our largest clients. I will not comment on a specific client, but the one particular client I think you're referencing, we only serve about 20% of their specialty business, and so there's opportunity to expand that relationship and expand that over time. But no particular update I can give you with respect to the specific arrangements.
You also talked about upside opportunities at the Investor Day to take the PBM relationship with clients and cross-sell Cigna Healthcare into that. Talk about that opportunity. I assume that that would be primarily upside to at least the baseline forecast, or is that you factoring much of that into your outlook?
I mean, we take an integrated approach, and we want to sell Cigna as one organization in every client conversation. So, we do see the opportunity to leverage that in a more powerful way, but that's contemplated in our long-term '10 to '14.
Okay. When you think about We talked about the share repurchase part of capital deployment. There's been a lot of discussion over the years where Cigna's looking at various things. That's been less of a topic other than the Shields investment and things like that. Any update on capital deployment priorities that we should think about? Obviously, the share repurchase, obviously the reinvestment of the business, but beyond that?
Yeah, I mean, you could think about, we talked about at Investor Day $50 billion of cash flow from operations through 2030, and you can think about like 20%-25% of that investing organically to drive growth in the business, 20% on dividend, then the remainder is share repurchases, M&A, and other opportunities. We're focused on, as we've said, both on opportunities that have good returns and that are strategically aligned, sort of in the ballpark of what we're already doing. So, not outside, adjacent, or outside capabilities. So nothing specific I'd point to, but our capital priorities are consistent with what we talked about, and nothing has changed.
As we wind down here, I happen to ask every company that's coming in because we had a big event last week with the election. I assume you'd say that that probably doesn't change any of your strategic priorities, or you haven't thought about pivoting in any way, but any reaction, any comments that you could make on that?
Only that we've been in business for 234 years, and there's been a lot of different leadership regimes during our existence. In terms of our business, no strategic change as it relates to the results of last week's election.
Okay. That is what I figured it would be. All right. Well, thanks so much for Cigna participating this year in the conference. Thanks, everybody.