Ladies and gentlemen, thank you for standing by for Cigna's First Quarter 2023 Results Review. At this time, all callers are in a listen-only mode. We will conduct a question-and-answer session later during the conference and review procedures on how to enter queue to ask questions at that time. 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.

Great, good morning everyone, and thanks for joining today's call. I'm Ralph Giacobbe, Senior Vice President of Investor Relations. With me on the line this morning are David Cordani, The Cigna Group's Chairman and Chief Executive Officer; and Brian Evanko, Chief Financial Officer. 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 2023. As noted in our earnings release, when describing our financial results, we use certain financial measures, adjusted income from operations, and adjusted revenues, which are not determined in accordance with accounting principles generally accepted in the United States, otherwise known as GAAP. A reconciliation of these measures to the most directly comparable GAAP measures, shareholders net income, and total revenues respectively, is contained in today's earnings release, which is posted in the Investor Relations section of thecignagroup.com. We use the term labeled adjusted income from operations and adjusted earnings per share on the same basis as our principal measures of financial performance. In our remarks today, we will be making some forward-looking statements, including statements regarding our outlook for 2023 and future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. A description of these risks and uncertainties is contained in the cautionary note in today's earnings release and in our most recent reports filed with the SEC. Regarding our results effective January 01, 2023, we adopted amended accounting guidance for long duration insurance contracts, LDTI, and related amendments, our 2023 full year outlook included the impact of LDTI and prior results have been restated to reflect this change. There has been no material impact to prior results and this change will not materially impact our future operating results. Additionally, please note that when we make prospective comments regarding financial performance including our full year 2023 outlook, we will do so on a basis that includes potential impact of future share repurchases and anticipated 2023 dividends. With that I will turn the call over to David.

Thanks Ralph. Good morning everyone and thanks for joining today’s call. We begin 2023 with momentum and in the first quarter we again delivered strong performance and continued our long track record of innovating for customers, clients, and partners. Today I will discuss some of the key drivers fueling our growth during the quarter and we will also talk about how we are leading the way to address evolving state health care needs with a flexible financial model providing multiple avenues to deliver and capture revenue. Specifically, I will describe how the durable and flexible pharmacy benefit services we offer continue to drive growth in the marketplace. Finally, we will provide additional details about our financial results and discuss our outlook for 2023 and then we will take your questions. With that let’s get started. In the first quarter, we delivered $46.5 billion in total revenues and $5.41 in adjusted earnings per share, and we are raising our full year 2023 guidance for adjusted EPS, revenue, and customer growth. We are pleased with the strong start across Evernorth Health Services and Cigna Healthcare and as we look forward, we expect another very good year for the Cigna Group. Evernorth, comprising pharmacy benefit services, specialty pharmacy, and Evernorth Care, again contributed strong growth while retaining, expanding, and winning new relationships for the employers, health plans, and governmental organizations we serve. Our foundational pharmacy benefit service business continued its strong performance, demonstrating the value we provide to our clients and patients. Specialty pharmacy, which accounts for approximately 40% of Evernorth's total revenue, drove outside its growth with a continued rise in new-to-market specialty drugs and increasing demand. Evernorth Care represents one of our most significant long-term growth opportunities given the growing needs for virtual care, as well as behavioral health services. In Cigna Healthcare, we achieved another quarter of revenue and customer growth with strong performance across our U.S. commercial, U.S. government, and international health businesses. With our focus on affordability and disciplined pricing, we are pleased with their medical cost performance and our medical care ratio, which was 81.3%. Our U.S. commercial business is on pace for another good year. Our affordability initiatives continue to strengthen our overall competitive position, which has helped fuel our strong customer growth. Overall, we're pleased with the quality, strength, and resilience demonstrated in our results and how they position us for another year of sustained growth and attractive value creation. Looking ahead, we are confident in our increased outlook for the year as well as our ability to sustainably deliver 10% to 13% compounded EPS growth over our strategic horizon along with providing an attractive dividend. Today, I want to spend a few minutes on Express Scripts, our pharmacy benefits business within Evernorth, including our recent announcements about how we are continuing to provide greater affordability, choice, and transparency for our clients and customers. Pharmacy services have an essential and impactful role at a time when medical care, whether physical or behavioral, increasingly relies upon the use of pharmaceutical interventions. Successful care coordination programs for pharmacy services often create significant benefit and value for medical services. We recognize the ongoing attention and legislative debate regarding the rising costs of prescription drugs. We are taking an active leadership role and want to be clear about how we are using our differentiated capabilities to create and capture value out of the drug supply chain on behalf of our clients and customers. First is the strength of our model, which is to deliver solutions and care coordination that address specific client needs and expand relationships with our complete suite of services and capabilities, fueling our sustained attractive growth over time. Second, we are committed to enabling and prioritizing choice for our clients as we drive down costs. Third, we continue to build on our long track record of innovation to drive greater affordability, access, transparency, and improved clinical outcomes. Our Pharmacy Benefit Service business is achieving attractive growth because we're able to secure a diverse group of any growing client base, leading with the strength of our supply chain and clinical and care management programs. With our proven model, Express Scripts client retention rates are consistently in the mid-90s or higher and we've been able to continuously grow our pipeline and win new business, from medium-sized to the largest employers, local health plans to national players, and even the largest government-sponsored programs. We are well positioned for continued success. We've expanded our efforts to advocate on behalf of our clients and customers, particularly regarding financing models which are key areas of focus for some of the current legislative proposals. The Express Scripts business model starts with the commitment to enabling and prioritizing choice in benefit design and financing options for clients who are the primary financers of employee benefit programs. This includes providing them the option to finance the cost of their programs by allowing us to share in the discounts we secure on their behalf, be it rebates or spread pricing. Our clients choose amongst these models based on their needs for managing risk and greater predictability for the pharmacy costs, as well as their cash flow. For context, across the breadth of our Express Scripts Pharmacy Benefit Service portfolio today, over 95% of rebate dollars are passed through to clients. The key point is that each client chooses the financing mechanism that works best for them. They have choices in how they pay for the value we deliver and many find that using rebate sharing or spread pricing generates a stronger level of alignment incentives in addition to being able to plan for predictable cash flow that it generates. Proposals to limit the availability and scope of these options will result in less choice for thousands of employers, health plans, and government entities, the clients we serve, and increase their costs over time. As it relates to Express Scripts, we are confident in our ability to earn sustainable and attractive margins for our services under a variety of legislative scenarios. We create value through the breadth of our capabilities from supply chain to benefit design, driving competition amongst drug manufacturers to bring costs down, and delivering better health outcomes through our clinical programs. To put this in context, we expect about 20% of Evernorth's 2023 pretax adjusted earnings to come from Express Scripts retention of rebates and retail spread. This percentage has trended down over time, and we expect it to continue trending downward as we innovate and diversify our Evernorth businesses. I would also remind you that these financing options that we provide to clients are developed in exchange for lower service fees. So in other words, if these programs decrease further over time, fee-based income would increase. Therefore, we are confident that if some of these payment vehicles were reduced or removed by regulatory change or client preference, Express Scripts has a broad set of capabilities that create value and will continue to earn an attractive return. Let me provide some specific examples that reinforce our flexibility and durable model and how we tap into our long track record of innovation for better outcomes on behalf of our customers and clients who are seeking greater affordability and transparency for prescription drugs. First, we're taking several steps to expand transparency. Express Scripts’ new ClearCareRX fully demonstrates the flexibility we have for prescription drug benefits where clients pay exactly what Express Scripts pays pharmacies for prescriptions. They receive 100% of drug rebates that Express Scripts obtains by negotiating with pharmaceutical companies. They pay one service fee to cover the administration of pharmacy benefits, product services, reporting, analytics, and the program is supported by a fully auditable mechanism. In addition, clients also benefit from guarantees to keep Express Scripts accountable for clinical and financial performance measures, including improvements in overall adherence rates and patient outcomes. Additional steps to drive even greater transparency include providing clients with enhanced financial and fee disclosures regarding their spread pricing programs when they exist. Along with today's release about our first quarter financial results, you will also find additional disclosures we are providing about Express Scripts model in our quarterly regulatory filings and on our new microsite. We will also offer a new digital pharmacy benefits statement for customers starting in 2024. The statement will share drug pricing information, out-of-pocket costs, and the net value delivered by Express Scripts on behalf of customers. With respect to the broader issue of drug pricing, to be clear, we are fully aligned with lowering costs of prescription drugs for customers. For example, Express Scripts’ Patient Assurance program, launched in 2019, capped out-of-pocket costs for eligible members of select diabetes and cardiovascular medications. In 2022 alone, customers taking insulin saved more than $18 million because of this program. Now with the introduction of our new copay assurance plan, we are taking further action to cap out-of-pocket costs for customers in client prescription drug benefits at $5 for generic drugs, $25 for preferred brand medications, and $45 for preferred specialty medications. Finally, we also have a series of groundbreaking initiatives to further support pharmacists in rural communities across the United States. We are offering increased reimbursement to true independent pharmacists and partnering in opportunities to expand their clinical practices to further support care needs of the local communities. We are also convening an advisory committee of community pharmacists. These initiatives will encourage better care, expanded access to lower prices for rural Americans, as well as increase a more sustainable revenue stream for independent pharmacists. We are encouraged by how our recent actions have been received by a wide range of stakeholders, including clients, our pharmacy network partners, and policymakers. They recognize our commitment as a leader and trusted partner that can create value through our deep expertise in designing programs for specific client needs, driving innovation, and broadening our reach. In summary, we are demonstrating our leadership in the competitive pharmacy benefits market that is a critical building block for the American healthcare system. We are serving specific client needs through the strength of our model and the effectiveness of our care coordination programs, allowing us to drive sustained attractive growth. We are continuing to advocate for clients and their ability to choose the appropriateness of programs that work best for the business as we help lower costs. We are continuing to innovate to drive greater affordability, transparency, and improved outcomes for those we serve. Now let me briefly recap our performance for the quarter and our outlook. In the first quarter, we continued to execute and perform well. We delivered for our customers, clients, and partners and our business kept our commitment to our shareholders. We delivered adjusted EPS of $5.41 per share and we're pleased to have increased our full year outlook for adjusted EPS, revenue, and customer growth, as well as an improved medical care ratio. We are confident in our ability to continue to deliver and capture value in the dynamic and changing environment. We've shaped our business model to navigate varying economic conditions and our differentiated capabilities within Evernorth provide us with the flexibility to meet unique client needs and potential changes caused by regulatory requirements. Additionally, our business is driving growth that is generating strong cash flows, and we are confident that we will further create value through successful and effective capital deployment.

Thank you, David and good morning, everyone. Today, I'll review Cigna's first quarter 2023 results and discuss our updated outlook for the full year. We're pleased with our strong start to the year. The first quarter adjusted earnings per share were above our expectations, demonstrating focused execution across our high-performing Evernorth and Cigna Healthcare businesses. Looking at the quarter specifically, some key consolidated financial highlights include revenue growth of 6% to $46.5 billion, after-tax adjusted earnings of $1.6 billion, adjusted earnings per share of $5.41, and cash flow from operations of $5 billion. This performance gives us the confidence to increase our full year adjusted earnings outlook to at least $24.70 per share. Before I discuss our Evernorth results, I'll build on David's comments regarding our recent announcement to advance transparency around our PBM and I'll provide incremental details on our earnings drivers. First, our operating platforms split approximately 60% of earnings for Evernorth and about 40% for Cigna Healthcare. Within Evernorth, our Express Scripts PBM is a foundational asset with a diverse set of earnings sources including service and administrative fees, clinical programs, value-based care arrangements, along with retained rebates and retail spread. These earnings sources are a function of the choices made by our clients. As David referenced, approximately 20% of Evernorth's adjusted pretax earnings are comprised of PBM retained rebates and retail spread. This percentage has decreased over time as we continue to expand fee-based client relationships and as our Evernorth portfolio becomes more diverse and continues to grow. Importantly, as Evernorth's business mix has changed over the years, margins have remained stable. This speaks to our flexibility to adapt to an ever-changing market and gives us confidence in our ability to navigate the disruption of the operating or regulatory environment. Shifting to our current period Evernorth results, first quarter 2023 revenues grew 8% to $36.2 billion, and pretax adjusted earnings were $1.3 billion, in line with our expectations. Evernorth results in the quarter were driven by continued strong growth in our high-performing specialty pharmacy business and our focus on affordability and delivering lowest net cost solutions for our customers and clients. Additionally, we continue to build our cross-enterprise leverage capabilities, providing an additional avenue for growth as we further deepen our relationships across Evernorth and Cigna Healthcare. We also continue to make strategic investments, which will strengthen and grow our client relationships, expand our portfolio of products and services, and advance our digital capabilities. As it relates to our strategic partnerships, we remain on track in our implementation of the Centene contract that begins in 2024. Our collaboration with VillageMD is progressing and provides us an attractive opportunity to further accelerate our value-based care programs and capabilities. We will continue to expand these value-based solutions for the benefit of our Cigna Healthcare, U.S. commercial, and U.S. government clients as well as other provider partners and Evernorth health plan clients. Additionally, we remain confident around the multiyear accelerating biosimilar opportunity with high visibility into expected savings for customers and clients in the second half of this year, consistent with our prior expectations and regardless of utilization shifts for product approvals in the market. Overall, Evernorth continues to perform very well. Our diversified set of earnings streams, along with flexible financing models enable us to innovate and adapt through dynamic environments. Turning to Cigna Healthcare, first quarter 2023 adjusted revenues grew 12% to $12.7 billion, and pretax adjusted earnings were $1.1 billion, slightly above our expectations. The medical care ratio of 81.3% was better than expectations as overall utilization came in slightly favorable. This was reinforced by our clinical engagement models and related affordability initiatives as well as our continued pricing discipline. Turning to medical customers, we ended the quarter with 19.5 million total medical customers, growth of approximately 1.5 million customers since the end of 2022. This strong growth demonstrates the continued differentiation of our market-leading products and services. Our commercial customers increased 8% year-to-date aided by the addition of a large fee-based health plan client that expands upon an existing Evernorth relationship. Even excluding this client win, we drove organic customer growth across all of our U.S. commercial market segments. In our U.S. government business, we saw considerable growth in our U.S. Individual and Medicare Advantage customers, with MA growth of 10% on a year-to-date basis. Overall, Cigna Healthcare is off to a strong start in 2023 as we continue to deliver differentiated value and affordability to our customers and clients. Across our Evernorth and Cigna Healthcare platforms, we delivered strong first quarter financial results driven by our diversified portfolio of foundational and accelerated growth businesses, further bolstered by cross enterprise leverage. Now turning to our outlook for full-year 2023. We have increased our expectations for full-year 2023 consolidated adjusted revenues to at least $188 billion, enabled by continued growth and deepening customer relationships in Cigna Healthcare and Evernorth. We are also increasing our adjusted earnings per share outlook to at least $24.70 per share. Consistent with our prior commentary, we expect earnings this year to be back half weighted, largely driven by Evernorth's earnings ramp over the course of the year, with second half EPS contributing slightly below 55% of full-year EPS. In Evernorth, we expect continued strong performance while investing in growth and innovation. We continue to expect Evernorth full-year 2023 adjusted earnings of at least $6.4 billion. In Cigna Healthcare, we are raising our medical customer growth expectation to at least 1.3 million customers, an increase of 100,000 lives. We are improving our 2023 medical care ratio outlook to a range of 81.5% to 82.3%, and we are raising our expected full-year 2023 adjusted earnings to at least $4.425 billion. Despite the dynamic macroeconomic environment, we have yet to see material impacts to Cigna Healthcare enrollment levels. We remain prudent with respect to our enrollment outlook for the rest of the year as evidenced by our full-year guidance relative to the first quarter customer growth results. To be clear, we continue to expect underlying organic employer client growth as we move through the year. Our outlook continues to assume some elevated disenrollment in the second half of the year corresponding with some expected softening in the economy. Additionally, our outlook does not contemplate incremental customer growth from Medicaid redeterminations. Finally, when contemplating the Cigna Group's performance under various future economic scenarios, it's important to keep in mind that we have strategically positioned the company's portfolio of businesses to be more diversified than it was in prior economic downturns. This gives us confidence and resilience to weather dynamic macroeconomic environments. Switching gears, let's move to our 2023 capital management position and outlook. Our debt to capitalization ratio was 42.2% as of March 31st. We expect to lower this ratio over the balance of the year and we continue to target a long-term debt to capitalization ratio of approximately 40%. Year-to-date through May 4, 2023, we have repurchased approximately 3.7 million shares of common stock for approximately $1.1 billion. For full-year 2023, we continue to expect at least $9 billion of cash flow from operations. Our balance sheet and cash flow outlook remain strong benefiting from our highly efficient service-based model that drives strategic flexibility, strong margins, and attractive returns on capital. So now to recap. First quarter results were above our expectations, reflecting strong contributions across our diversified portfolio of complementary businesses. Evernorth continued to deliver strong results with the first quarter in line with our expectations. While Cigna Healthcare had a strong start to the year, giving us confidence to deliver on our increased 2023 EPS guidance of at least $24.70. We continue to expect 2024 adjusted EPS of at least $28 consistent with our prior commentary. Over the long run, we continue to expect average annual EPS growth of 10% to 13% and are confident in our ability to adapt to the operating and regulatory backdrop with our diversified business mix and complementary capabilities across Evernorth and Cigna Healthcare.

Our first question comes from Ms. Lisa Gill with J.P. Morgan. You may ask your question.

Thanks very much, good morning. David, thank you for all the comments around the PBM and profitability. I guess my first question is really to understand where you think the disconnect is from a legislative standpoint versus how the PBMs actually operate? And then secondly, when we think about an employer, it feels to me that a lot of this legislation is going to take away that decision-making by the employer, what are employers saying to you around legislation, what are they saying to you around the selling season, and then also if you can just give us an update as to how you're thinking about the 2024 selling season?

Lisa, you put a lot in there. Good morning, and thanks for the questions. Let me try to touch on each. First, as we step back, as I noted, we're quite proud of the results that we have delivered and continue to deliver in view of the PBMs using that acronym, but the pharmacy service organizations are the organizations that relentlessly work to improve affordability for the benefit of a broad constituency group. If we step back, we could point to tremendous results in terms of clinical trends, outcomes, and affordability on average, less than a $1 increase in out-of-pocket costs for individuals. We do recognize, and I think this is part of the legislative energy, that the programs still don't work for everyone. For example, while the programs are designed to generate overall affordability, if there’s a high deductible plan, someone may have significant out-of-pocket pharmaceutical experience that creates a financial dislocation for an individual; that’s a failure of the system. We need to step up to that and innovate because that’s an unintended consequence of the failure of a system. We could talk about the averages that we're proud of from an affordability standpoint, but we need to make sure we continue to innovate until it works for everyone or we could talk about our leading breadth of network access through our pharmacy networks, coupled with our home delivery. Yet when you look at the uniqueness of America, some rural locations may not have the access in a specific case. Hence, you see some of the innovations we have stepped forward on. Our copay assurance program directly addresses out-of-pocket predictability for individuals under a variety of circumstances. Our efforts for independent pharmacies in rural areas go directly to support individuals. Our retention rates and new business growth rates reinforce the fact that employers see us as being successful. I would note that our ClearCareRx program was two years in design, and we worked with about a dozen sophisticated large employers to design those programs that work for them and work for us, and how we can roll those out and scale. We have hundreds of clients together with our Evernorth team and Express Scripts team discussing future innovations. There remains high receptivity to the advancements we're making in terms of transparency in clinical programs, and employers like having the choice of financing mechanisms. Finally, regarding the 2024 selling season, we expect it will be another year of growth for us in the Evernorth service portfolio. We will see strong retention; our retention has historically been in the mid-90s or better. We will see strong retention and good growth as our products and programs resonate in the marketplace. Lisa, thanks for the questions.

Thank you Ms. Gill. Our next question comes from Mr. Steven Valiquette with Barclays. You may ask your question.

Great, thanks. Good morning. So regarding the Evernorth results in the first quarter, you mentioned they were in line with expectations. Just with the script volume being down, just curious to get more color on that? And also, I know you're not giving script volume guidance for the full year, but just curious if the trends in the first quarter are good run rates for the full year? Thanks.

Good morning, Steve, it's Brian. Yes, our Evernorth results are very much in line with expectations for the quarter. One thing that's important to keep in mind is that David mentioned 40% of revenue in Evernorth now is derived from our specialty pharmacy business. Specialty pharmacy script counts end up being dwarfed by the generics and the higher-volume script counts that come through the PBM. So it's a little misleading to look at the aggregate script counts for those reasons. And I'd note our specialty pharmacy revenue grew mid-teens year-over-year, so it was a very strong grower. You saw strong script growth in specialty, but it was dwarfed when looking at the big picture of the PBM generic volumes moving around a bit. As we look forward to 2024, obviously, we prepare to onboard Centene, and you'll see a meaningful step-up in that metric. With the specialty pharmacy growing at such an attractive rate, it's a bit masked when you look purely at the script count metrics. Hopefully, that helps.

Thank you Mr. Valiquette. Our next question comes from Mr. Nathan Rich with Goldman Sachs. You may ask your question.

Thanks, good morning. I wanted to go back to the PBM and the regulatory focus; David, you mentioned that not all pharmacy benefit designs work for everyone. The target, I think, of much of the legislation is focused on lowering out-of-pocket costs for patients. You've had plan options in the past that address some of these areas. I know you said that clients like having that choice. But are there any middle grounds in terms of different solutions that you couldn't maybe roll out more broadly that would address some of these pain points kind of proactively ahead of maybe being forced legislatively? If we did see legislation go in place, how quickly could you shift your clients to new payment models?

Good morning, Nate. First, on affordability in out-of-pocket costs, choices have been in the marketplace for some time. Importantly, on average, those programs are working well in terms of overall affordability. Plan sponsors made trade-offs in terms of how much is put into premiums, how much into benefits, etc. Regarding actions we could take, in 2019 we rolled out the first-of-its-kind Patient Assurance program for insulin-dependent diabetics, capping monthly costs at $25, which benefits 11 million people today. We need to step up innovations continually, as some copay assurance programs may not work in certain regulatory requirements. Our commitment remains to offer choice for employers and flexibility with our financing models, and to reassure you, we have ample flexibility to pivot quickly if needed.

Thank you Mr. Rich. Our next question comes from Mr. A.J. Rice with Credit Suisse. You may ask your question.

Hi everybody. I guess I'll try to pivot away from the PBM question. In the prepared remarks, you mentioned your ongoing discussions with VillageMD about putting in place value-based contracting. I wonder if you could give us any further update on that. When you start to think about your 2024 bids commercially and MA, will any of those arrangements be part of the package that you offer or a factor in your bids?

A.J., good morning. You tucked a lot of questions in there, but let me start from the top. Relative to value-based care, we've had a long commitment and positive track record relative to value-based care programs. Today, roughly 75% of our MA lives are in a value-based program, and depending on what you're looking at, 40% or 50% of lives benefiting from the value-based program. We're seeing benefits from that in our continued market-leading lower medical cost trend. Specific to Village, we're pleased to advance our partnering more deeply with them. There are many ways in which we'll collaborate with Village to further accelerate value-based care traction off of their already successful model. Our model with them allows for benefits from not only commercial and Medicare Advantage, but also ASO and guaranteed cost as we bring more Evernorth services and collaborate with them as we curate specialty networks and more going forward.

Thank you Mr. Rice. Our next question comes from Mr. Justin Lake with Wolfe Research. You may ask your question.

Thank you, good morning. I want to express how much we value the comments on PBM transparency. I would like to follow up on a few points regarding the PBM. First, I understand that 20% of your profits derive from spread contracts and rebates. If the government enacts the proposed changes this year, how would you adjust your contracts to adapt, and how quickly could you implement those changes?

Good morning, Justin. I'm going to take your questions. It’s important to frame the conversation correctly. If we take a theoretical and say legislation is passed tomorrow, that creates an immediacy, which we don't believe will transpire so soon. We anticipate legislation to potentially happen in the latter half of 2025. Having said that, we have contractual frameworks that largely take into consideration unanticipated immediate legislative or regulatory movement. We will continue to advocate for our clients and work hard to ensure that choice exists. With our ClearCareRx program, we have the tools and flexibility to deliver client needs regardless of the situation and can maintain sustained attractive margins for the value we create.

Thank you Mr. Lake. Our next question comes from Ms. Erin Wright, Morgan Stanley. You may ask your question.

Hey, thanks. You mentioned some elevated disenrollment in the second half embedded in your guidance. Can you quantify that range or how are you thinking about that and what are you seeing now, and how did that change relative to what you were anticipating previously?

Good morning Erin, it's Brian. I would reiterate, we're really pleased with the strong growth momentum across the Cigna Healthcare portfolio. U.S. commercial, Medicare Advantage, and our U.S. individual business are all showing strong year-to-date results. However, we have assumed some level of elevated disenrollment in the back half of the year to be prudent. We typically see some in-year attrition within the U.S. individual book over the course of a given year. We still see organic growth in net client counts in the U.S. commercial business, particularly as the select segment continues its sales cycle through the balance of the year. We have not incorporated any assumption of potential volume for Medicaid redetermination, which represents pure upside for us. Final comment: In prior economic downturns, we've seen disenrollment levels change significantly based on unemployment rates.

Thank you Ms. Wright. Our next question comes from Mr. Kevin Fischbeck with Bank of America. You may ask your question.

Great, thanks. It seems like cost cuts really weren't a problem for you in the quarter, but still trying to reconcile the strong numbers from the providers and the med tech companies with the managed care industry. Can you help reconcile what seems to be an apparent conflict and any color on cost trend, particularly through the quarter and into this quarter would be helpful?

Good morning Kevin, it's Brian. We're pleased to have delivered another strong quarter here of MCR performance in line or better than expected. This progress is a function of our affordability initiatives, including provider contracting improvements, clinical program evolution, care optimization, along with pricing discipline. The favorability we saw was driven by lighter-than-expected viral or respiratory claims, while normalized utilization levels are what we planned for. Still, we are pleased with what we are observing at this point.

Thank you Mr. Fischbeck. Our next question comes from Mr. Gary Taylor with Cowen. You may ask your question.

Hey, good morning. Quick question. I appreciate the PBM disclosure because if you're talking about 10% to 15% of the company's total earnings that you expect to retain, it seems like the down 26% stock price is quite overdone this year. Are we going to see some of that financial disclosure in the 10-Q when you talk about new disclosures?

Good morning Gary, it's Brian. The incremental disclosures we designed were aimed at providing our investors with further context around the earnings sources within Evernorth, given the misinformation that's out there. Alongside our 10-Q, you'll find a supplemental disclosure that provides qualitative information and metrics that will help various stakeholders understand what the PBM does and doesn't do. We are not necessarily intending to update that every quarter, but we will give context for how the earnings sources evolve over time as our business continues to grow.

Good morning Gary, relative to the state regulation in Florida, we are still working through the details. This is a topic of discussion for clients, and we will have the ability to flex our capabilities, as I've noted in prior conversations. This aspect will be manageable as we work through client impacts relative to their respective footprint as we move forward.

Thank you Mr. Taylor. Our next question comes from Mr. Stephen Baxter with Wells Fargo. You may ask your question.

Hi, Yes, I wanted to ask about ClearCareRx. I guess, first, how quickly do you think this model will be adopted? Is there any kind of target for this that you can share?

Good morning Stephen, the ClearCareRx program has been designed for two years with a select number of sophisticated clients. We expect the addressable market will be the larger clients as they consider the immediate benefits this model brings. It will be another choice offered in the marketplace. However, it's critical to note that innovation is always essential in our industry. We are proud to lead various innovations backward into the pharmacy space, and we think some of these new models could evolve further in the future. But the emphasis will always be on having choices for our clients.

Thank you Mr. Baxter. Our next question comes from Mr. Josh Raskin with Nephron Research. You may ask your question.

Hi, thanks. Good morning. I was wondering if you could give us some more color on the individual book. It looks like it came in about 100,000 more than expected. Where did those lives come from and was that the reason for the increased total membership guidance?

Good morning Josh, it's Brian. Overall, the strong individual customer growth in 2023 is a combination of several factors. The industry had strong growth rates from 2022 into 2023, combined with new market entries and competitors exiting certain geographies. Our growth came from existing geographies and those three new states we entered, Texas, Indiana, and South Carolina. The majority of growth notably came from Texas, Georgia, and Florida, but we're in multiple locations in those states. Fortunately, we have a long history in these geographies that goes beyond our U.S. individual business, which will benefit our clinical programs. For purposes of claims experience and margins for 2023, we expect margins on this book will run below our long-term goal of 4% to 6%. The substantial amount of new customers added leads us to believe this is a prudent assumption going forward. However, it's early in the year, and our claims are largely aligning with expectations.

Thank you Mr. Raskin. Our next question comes from Mr. Scott Fidel with Stephens. You may ask your question.

Hi, thanks. I would be interested if you could just drill in more into your latest thinking on GLP-1 drugs and the emerging Alzheimer's drugs. Could you give us insights from both the Cigna Healthcare and Evernorth business segment perspectives?

Good morning Scott, the GLP-1 drugs have been priced significantly. We think the drugs represent a positive step forward for diabetics. We have coverage within our formulary and have seen positive contributions for clients through value-based arrangements with pharmaceutical manufacturers. However, employers have had a more limited appetite to expand coverage beyond clinical diagnoses such as diabetes for lifestyle treatments. For the Alzheimer's space, there's a lot of interest and demand for drugs to help a growing population. We're still seeing limited adoption but have monitored early data that seems to show promise in ongoing testing and development. It’s important to note we're ready to manage the cost pressures involved and have established a natural hedge relative to client impact through our high-performing services. So we are optimistic about the opportunities within both categories.

Thank you Mr. Fidel. Our last question comes from Mr. Kevin Caliendo with UBS. You may ask your question.

Great. Thanks for getting me in. Getting back to the 20% of Evernorth earnings, does that include the ESI rebates and pass-through and spread? Is that separate, and since you've been so generous, can you provide transparency on that number?

Good morning Kevin, it's Brian. The 20% we referenced includes the PBM retained rebates and the retail spread that comprise the Evernorth segment's contribution specifically. Pharmacy earnings in the Cigna Healthcare segment aren't reflected in that 20% metric, just the Evernorth contribution. Clients can choose how best to apply that value to their operations depending on their needs.

To clarify, the cost of pharmaceuticals is a component in the total cost of care for health plans, which is factored into their pricing strategy, so pharmacy savings are directly impactful in shaping their pricing strategies. Thanks again for joining our call today. Let me just reinforce a couple of quick points. We are confident that we will deliver our increased adjusted EPS, revenue, and customer growth outlook for this year. Our team remains focused on everyone we serve and is executing with good focus and discipline while we continue to innovate. We will also continue our leadership in working to improve health care, including our increased transparency, choice, and clinical programs to drive down further drug costs for our customers, our patients, and our clients. I want to underscore that the progress we make starts with and is fueled by the dedication and commitment of our 70,000 coworkers worldwide, and I want to thank them for their commitment and demonstrating a positive difference in the lives of those we serve. Finally, thank you for joining our call, and as always, we look forward to our continued discussions in the future.

Ladies and gentlemen, this concludes the Cigna Group's First Quarter 2023 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. Thank you for participating. We will now disconnect.