David M. Cordani
Chairman, CEO at The Cigna Group
Thanks, Ralph. Good morning, everyone, and thank you for joining today's call. Today, I'll spend a few minutes talking about our strong results in the third quarter and how we're advancing our growth strategy. I'll also provide some initial perspective relative to 2025, including some of the expected tailwinds and headwinds. Then Brian will share more detail about our results and our outlook for the rest of the year and we'll take your questions. So let's get started.
Building on our track record of competitively differentiated performance, I'm pleased to report that in the third quarter, the Cigna Group delivered total revenue of $63.7 billion and adjusted earnings per share of $7.51. Our results are a testament to the collective depth and strength of our people and the commitment, hard work and focus they bring to everything we do. We have deep continuity and the most experienced leadership team in the industry with more than 16 years average tenure across our growth platforms. And we continue to infuse new talent to the Company from across many sectors and industries to round out our enterprise perspective.
Our third quarter performance demonstrates how we harness the complementary capabilities of our two growth platforms, Evernorth Health Services and Cigna Healthcare to drive attractive growth. This quarter, Evernorth anchored our results by delivering strong top and bottom line contributions, generated by market-leading innovation and affordability initiatives, particularly within our Specialty and care services portfolio as well as our pharmacy benefit service business. Evernorth's strong overall growth reflects the continued demand for our services as we continue investing in broadening our offerings and expanding our reach.
Cigna Healthcare was also continuing their momentum in the quarter. The US employer business draws on enterprise capabilities to deliver greater affordability and support healthy outcomes for the benefit of our clients and their employees and families. Of note, we are driving continued solid growth in our select customer segment. Our results demonstrate focused execution and momentum during our peak selling season and continued opportunity for growth in the years ahead.
Touching on our Medicare Advantage business, we remain on-track to close on our sale of our Medicare business to HCSC in the first-quarter of 2025. We continue to expect to use the majority of the proceeds for share repurchase. I would note that our Medicare business is performing in line with expectations and we're pleased with the overall value of our offerings, including our nationwide enrollment weighted-average will again be four stars for 2025. Going forward, our focus will be on further growing our Evernorth chassis to continue to serve Medicare lives. Overall, our quarterly results reflect clear strategy and strong execution, resulting in attractive results.
Now stepping back, I want to take a moment to comment on recent headlines and speculation around our Company. And while we don't comment on media rumors, we believe that it is important to provide additional context during these unprecedented times. First, there is no question that the industry is highly disrupted. For example, the Medicare Advantage market is particularly challenged given a number of factors, including elevated medical cost, a significant change in ratings for many and the reset of the risk-adjusted revenue streams. These and other forces are contributing to operational disruption for some as well.
As I noted, we don't comment on rumors, but what I will do is be very clear on the actions we are pursuing. We continue to deploy our excess free cash flow for share repurchase with repurchases totaling $5.7 billion year-to-date, including over $715 million in October. Looking forward, we expect to continue to actively repurchase our shares in the fourth quarter, further leveraging our remaining repurchase capacity, which stands at $5.6 billion.
Now I want to transition and cover several actions we are driving in the third quarter and throughout 2024 that address the forces of change that are reshaping the face of healthcare, while we continue to position our Company for growth for the benefit of our clients, our customers and our patients. The first is the pace and rate of pharmacological innovation, and it continues to surge. Many of the treatments coming to market are meaningful in extending and improving quality of lives, for example through new gene therapies and breakthrough treatments, but they are pressuring affordability given the high list price for manufacturers.
Evernorth's specialty pharmacy business, Accredo is continuing its strong growth trajectory given both the secular tailwinds and our differentiated strengths, which make us the market-leader in the space. The opportunity in biosimilars is a good example of how we are leading the way and providing more value. At the end of June, we began dispensing our interchangeable biosimilar for Humira. And we're pleased that biosimilar penetration was approximately one third among eligible Accredo patients in the quarter. Building on that success, several weeks ago, we announced that we will begin offering an interchangeable to Stelara biosimilar in 2025. Like Humira biosimilar, it will be available for zero dollar out-of-pocket for eligible Accredo patients, which drive savings for individuals as well as clients.
Another example of our leadership is the GLP-1 drug class, which is on pace to be the number-one drug trend driver for plans this year. Now they're expensive manufacturers list price of approximately $15,000 a year. In Express Scripts, our pharmacy benefit service business, the EnCircleRx solution provides a clinical program wrapper around the medication to help to support sustainable and positive lifestyle changes for patients as well as improve affordability and access for clients. I'm pleased to share that in the quarter, EnCircleRx has already grown to almost 8 million lives now enrolled. The pace of change in pharmacological industry is also why we continue to proactively address misconceptions and misinformation around the pharmacy benefits industry. This is vital to ensure the patients and individuals continue to maintain access to affordable, high-quality prescriptions.
Earlier this month, Dr. Dennis Carlton, Professor of Economics from the University of Chicago and former DoJ economists released a comprehensive review of the PBM industry. Dr. Carlton's research was conducted over 16 months and drew from multiple sources, including analysis of approximately $20 billion 30 -day equivalent prescriptions. The finding of Dr. Carlson's research in direct contradiction with the FTC's report concludes that PBMs lower high drug prices by fostering competition amongst rival drug manufacturers and pharmacies. PBMs facilitate broader access to generic medications in addition to name brand alternatives which lower costs. And importantly, PBM support independent pharmacies with higher reimbursement rates than chains and the number of independent pharmacies is increasing. We will leverage Dr. Carlton's study as we continue to engage in fact based discussions about these critical issues.
Moving to the second rapidly changing trend, the increased need for quality behavioral services, which is in-part driven by geopolitical, economic, social dynamic tensions that are unfolding around the globe. For context, in the past five years, we've seen overhaul behavioral therapy utilization nearly double. Now in the same period, we've worked to increase services and access, for example, adding almost 270,000 providers to our network, assessing the needs of those with lower complexity issues and offering new coaching programs and implementing online scheduling and access with appointments care guaranteed within 72 hours, which millions of Cigna Healthcare customers cannot pursue. This is another example of how our businesses have complementary capabilities as we leverage behavioral health innovations and services from Evernorth and embed them into Cigna Healthcare Solutions.
The final trend I will touch on is technology-enabled innovations. While we beginning to see the start of profound changes as emerging technologies such as AI-powered diagnostics and treatments will drive vast improvements, including more personalized care. Another example is the ongoing adoption of virtual services, which is rapidly rising with about 25% -- 25% of patients accessing care through telehealth services last year in the US. This far exceeds the 5% of viewer who access care this way prior to the pandemic.
We continue to advance in this area with our telehealth platform MDLIVE. We have offered MDLIVE to our customers since its acquisition in 2021. And last month, we took another step forward with patients that have lower health risk issues, enabling them to get fast flexible care without a phone call or video call whenever and wherever they want with MDLIVE physicians via an online portal, and patients typically are able to receive treatment within one-hour. At the Cigna Group, we are built to create and capture value from these forces of change for the benefit of those we serve.
Next, I'll transition to provide some context relative to the tailwinds and headwinds we anticipate for 2025. Now we'll provide detailed guidance as we always do during our fourth quarter call. With the strength of our Evernorth and Cigna Healthcare platforms, we expect to both finish 2024 strong and for 2025 to have another year of competitively attractive performance. Some notable tailwinds include our continued ramp-up of biosimilar offerings, continued advancement of new client relationships and EPS accretion from the divestiture of our Medicare business, specifically the impact of share repurchase from the sales proceeds.
Now turning to headwinds. We expect the lower net investment income as we will no longer recognize the dividend from our VillageMD investment. We anticipate some stranded overhead from the sale of our Medicare Advantage business, which we will mitigate over time. And we will make continued strategic investments across our portfolio to drive sustained innovation and position ourselves for long-term growth. Considering all the puts and takes, we expect another strong year of growth in 2025 with EPS growth at least 10%, which is consistent with our historical approach where we start the year with appropriate prudence.
Now I'll briefly summarize our performance for the quarter. Building on our momentum, our focus and disciplined 3rd-quarter execution positions us to meet our full-year 2024 and long-term growth targets. The Cigna Group has earned a reputation for delivering differentiated value for those we serve and driving new innovation in ways that lead the industry. Our ability to consistently do this year-after year is directly attributable to the strength of our leadership team and the passion and commitment of our 70,000 colleagues worldwide and the deliberate structure of our company, which is designed with growth platforms capable of navigating even the most dynamic environments. As a result in the third quarter, we delivered on our financial commitments with adjusted EPS of $7.51 and we remain on-track to deliver full-year adjusted earnings per share of at least $28.40 in 2024. Our Company has attractive and sustainable growth opportunities over the long-term and we remain confident in delivering our continued average annual EPS growth rate of 10% to 14% on average, building on our track-record of achieving 13% adjusted EPS and a compound growth rate over the past decade.
With that, I'll turn it over to Brian to share additional perspective on our performance for the quarter and our outlook for the rest of the year. Thank you, David. Good morning, everyone. Today, I'll review Cigna's third quarter 2024 results and discuss our outlook for the full-year. During a year where the environment has been highly disrupted and dynamic, we're pleased with another quarter of strong results, highlighting our consistent execution and delivering against our prior commitments. Key consolidated financial highlights for the third quarter include revenue of $63.7 billion and adjusted earnings per share of $7.51. These results combined with our breadth of capabilities and diverse portfolio of businesses reinforce our confidence in our full-year 2024 adjusted earnings per share outlook of at least $28.40, representing more than 13% year-over-year growth. Now turning to our segment results, I'll first comment on Evernorth. Evernorth continues to deliver strong results, driven by consistent execution across our businesses with particularly significant growth within our Specialty and Care Services business in the third quarter. Total Evernorth revenues for third quarter 2024 grew to $52.5 billion and pretax adjusted earnings grew 9% to $1.9 billion, slightly ahead of expectations. This growth came despite a $33 million headwind to net investment income related to the absence of the VillageMD dividend. Our strong Evernorth results reflect our continued execution amidst the ongoing long-term trend of pharmacological innovation. With rising clinical needs, the introduction of new therapies to the market and more availability of biosimilars, Evernorth is well positioned to assist patients and clients in navigating these trends. Moving to our businesses within Evernorth. Specialty and care services revenue of $23.8 billion and adjusted earnings of $825 million, both grew 23% in the quarter, a significant acceleration in year-over-year growth when compared to the first-half of 2024. While we had expected strong contributions in the quarter, this performance was above expectations, reflecting growth across our specialty businesses, driven by more rapid uptake of specialty medications. Additionally, the quarter also benefited from increased adoption of Humira biosimilars. The increased adoption benefits both patients through lower out-of-pocket costs as well as clients through lower net costs. And in the quarter, we saw approximately one third of eligible Humira scripts transition to biosimilars. As we have highlighted, we are the leader in the specialty market and we are confident in delivering long-term profitable growth given the pipeline of new drug innovation and our decades of experience in the space as we've established a differentiated business model with proven superior clinical outcomes for complex high-cost conditions. Pharmacy benefit services also posted robust revenue growth, driven by the addition of new business wins, expansion of existing relationships and continued demand for new drugs through our innovative products and solutions. Pretax adjusted earnings increased to $1 billion as our differentiated capabilities continue to drive affordability and value to our patients, customers and clients. Overall, Evernorth delivered results slightly above expectations, even while absorbing the aforementioned net investment income. And we continue to expect accelerating growth in the 4th-quarter. Regarding Cigna Healthcare, third quarter 2024 revenues were $13.3 billion. Pretax adjusted earnings were $1.2 billion and the medical care ratio was 82.8%. The medical care ratio was in-line with expectations. As we have discussed, we planned and priced for elevated trend coming into the year. During the quarter, we did observe elevated trends in specialty medications in our Cigna Healthcare book. This is consistent with the higher volumes we saw in our Specialty and care business within Evernorth and speaks to the balance of our well-diversified portfolio, which we intentionally created to position our company for some of the highest-growth secular tailwinds in healthcare. Overall, Cigna Healthcare delivered solid results this quarter, demonstrating consistent, steady execution in a dynamic environment. Now turning to our outlook for full-year 2024. Given the strength and diversity of our portfolio, we have the confidence to reaffirm our full year 2024 expectation for consolidated adjusted earnings per share of at least $28.40. Moving to our 2024 outlook for each of our growth platforms. In Evernorth, we continue to expect full-year 2024 pretax adjusted earnings of at least $7 billion. This reflects a continued acceleration of earnings in the fourth quarter, driven by strength in specialty volumes and increasing adoption of Humira biosimilars, as well as the continued advancement of new client relationships. This is partially offset by lower expected net investment income. For Cigna Healthcare, we continue to expect full-year 2024 pretax adjusted earnings of at least $4.775 billion, and we are maintaining our full-year medical care ratio outlook of 81.7% to 82.5%. Although we now expect to be toward the high-end of the range due to the aforementioned increase in specialty medication utilization, which we expect to continue through the fourth quarter. We expect the impact of the higher fourth quarter MCR to be offset by other levers within Cigna Healthcare, such as operating efficiency. Turning to our 2024 capital management position. We remain confident in our strong balance sheet and cash flow generation due to our efficient asset-light strategy that delivers attractive returns on capital. I would note that timing related items impacted 3rd-quarter cash flow from operations. We are anticipating a meaningful step-up in cash flow in the fourth quarter and our capital deployment priorities remain consistent with our long-term framework. Regarding share repurchase, year-to-date through October 30, 2024, we have repurchased approximately 16.9 million shares of our common stock for approximately $5.7 billion, including our repurchase of $715 million in the month of October alone. We continue to expect additional share repurchase in the fourth quarter, demonstrating our confidence in the strength and sustainable growth of our business. Now to recap, strong results through the first three quarters of the year give us confidence to deliver on our full year 2024 adjusted earnings per share outlook of at least $28.40, representing over 13% year-over-year growth towards the higher-end of our long-term average adjusted EPS growth target range. As David mentioned, we look-forward to providing our 2025 outlook on our fourth quarter earnings call. We are confident in delivering another year of competitively differentiated EPS growth of at least 10%, consistent with our historical approach where we start the year with appropriate prudence. The ability to consistently meet our financial commitments is a testament to our team executing to drive value for our clients and customers and our portfolio of complementary businesses that we've strategically positioned for strong, stable and sustainable long-term growth. And with that, we'll turn it over to the operator for the Q&A portion of the call.
