Brian Evanko: Yeah. Good morning, A.J. 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. So the capital deployment priorities continue to focus first and foremost on internal reinvestment. Following that, we remain committed to an attractive shareholder dividend. 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 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 guide. Thanks for the question.
A.J. Rice: Thanks.
Operator: 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’d like to ask a little bit more about the specialty opportunity, particularly as it relates to Humira. And I guess as you evaluate the different strategies in the market, 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 maybe even a single manufacturer or kind of using the sole-source strategy as a way to both kind of drive lower-cost for patients and kind of drive margin for the company?
Eric Palmer: George, it’s Eric. Good morning. Thanks for the question. Stepping back a bit here, we have set up our portfolio, set-up — I’ll say our approach here broadly is 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 in this space, that applies to how we have our clients fund their benefit programs, et cetera. 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 a 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 $0 patient cost-share, an attractive price for plant sponsors that will save multiple dollars on average $3,500 per patient when taken altogether so — per year.
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.
Operator: Thank you. Our next question comes from Erin Wright with Morgan Stanley. You may ask your question.
Erin Wright: Hi, thanks. A little bit on GLP-1s and just can you talk a little bit about the traction you’re seeing in the economics around sort of the program, how that’s playing out relative to your expectations? And just do you see similar opportunities as it sort of unfolds in other therapeutic categories? I understand GLP-1s are a little bit unique though. Thanks.
Eric Palmer: Good morning, Erin. It’s Eric. 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 we really highlighted at our Investor Day, is a solution that’s set up to be really of value for our clients here. It’s a 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 kind of network constructs and then supports them with additional clinical resources to help make sure that the impacts are lasting.
When you put that all together, our capabilities position us to be in a position to guarantee outcomes to our clients and that’s formed in a 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 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. Express Scripts and Evernorth 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 against this. David, anything else you’d add?
David Cordani: Sure, Eric. Thank you. And, Erin, just to put the wrap over-the-top of it, 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 GLP-1 conversation we just had as an illustration of it or previously the biosimilar conversation or reflect back on the fact that there’s 21 gene therapies in the market today and almost 1,000 in the pipeline. So 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 investment that we’ve made to put us in position today and the GLP-1s are a great example of how we’re able to convert good 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.
Gary Taylor: Hi. Good morning. Three-parter, but all just numbers related. First, on MA, I know Brian said 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 03/31. Will MA continue to be included in the both the adjusted and unadjusted P&L for the rest of the year? Two, 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 MLR? And then finally, to Kevin’s question on the specialty margin, I heard Brian’s answer, but just wonder how do 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 stronger first quarter, fourth quarter in general?
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 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 9, I think it is the premium breakdown. It represents about 20% of the overall premium for Cigna Healthcare, such as given the relatively small presence, it doesn’t move the needle as much relative to the overall Cigna Healthcare results as our US employer business, which represents the majority. As I said, the overall performance of that business is broadly in line with expectations through the first 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 up more than that. 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. It actually drove that product line to be above target profitability in 2023 and our 2024 expectation, because that will normalize back to target profit margin levels. So far, that’s consistent with what we’re seeing, it’s early in the year. And obviously, we have an 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 the 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 segment, that business tends to see a ramp in income over the course of the year.
So more specifically, when you think about 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, tend to have more variability from quarter-to-quarter. So as you think about how to model that for ’24, it’s not 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.
Operator: Thank you. Our last question comes from Lance Wilkes with Bernstein. You may ask your question.
Lance Wilkes: Great. Thanks so much. I’ve got a question on go-to-market strategy and insights. And I 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 GLP-1 guaranteed product, are there particular characteristics of employers or employer size or whatnot, that are more interested in that? And maybe as a tag along, if you could just give your update on what coverage trends for GLP-1s look like for ’25, that would also be helpful. Thanks.
David Cordani: Lance, good morning. It’s David. 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 of notches in terms of the value creation. So our VBC strategy, our value creation opportunity, you think about it as twofold. First, broadly, for the commercial portfolios [and] (ph) illustration. We’ve been at this for about 15 years, partnering with medical cost professionals working to align incentives, data flows and care extenders, help to close gaps in care in 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 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 restricted design in any way, shape or form. I add to it for a moment now our Pathwell program, which, in some ways, you could view is value-based care. It also takes now an episodic care or 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.
They are spending a bit more time in the precision of their — our benefit design. And our ability is to now package those 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 musculoskeletal program was fully 96%. 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, hence, resonates, broadly speaking with employers. Pathwell brings a level of trade-offs in terms of how an employer wants to factor that in, and we’re able to essentially to 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: Great. Thanks, David. Good morning, Lance. So, on GLP-1s broadly, covering GLP-1s for weight loss specifically, it’s certainly true in our book of business that larger clients tend to cover more. But how you think about have it 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, that’s in turn driven by whether or not they tend to have lower or higher amounts of employee turnover, tend to see more spend, more coverage for employers with lower levels of turnover. We tend to see variation depending upon the underlying clinical needs and clinical conditions of the employee base and their dependence and such as well.
So it really does come down to an employer buying, employer type of decision but those would be a couple of the dimensions that come to mind. In terms of the overall coverage level, we noted last year that we saw in the Express Scripts employer book, about 40% to 50% of our employer relationships covering GLP-1s 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. And as I noted earlier and David noted in his prepared remarks, seeing a high degree of interest and engagement with the Encircle program, and so we expect that will continue to provide additional access for patients over time.
Operator: Thank you. I will now turn the call back over to David Cordani for closing remarks.
David Cordani: Thank you 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 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. 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. 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.
