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G500-2023-Cigna

The insurer and health services company had a relatively slow year for revenue growth, but profits, at $6.7 billion, were up 24.3%. 
<ul> 
 	<li>Cigna has been working to expand “value-based” care models, which are designed to emphasize primary care and preventive medicine. To strengthen such care, Cigna entered into a strategic partnership with Walgreens-owned primary care provider VillageMD.</li> 
 	<li>Evernorth, Cigna’s service-provider arm, which also oversees the new VillageMD investment, has brought the company growth over recent years, and focuses on value-based care.</li> 
 	<li>Cigna Healthcare, the health-insurance benefits arm of the business, also expanded its margins and customer base.</li> 
</ul>

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F500 2023-Cigna Group

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G500 2022-30-Cigna

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F500 2022 Cigna

Global health services company Cigna had an up-and-down year. Despite bringing on an additional 8.4 million customers in its pharmacy division in 2021 and an 8.5% rise in sales, Cigna’s profits plummeted by 36% from 2020, to $5.37 billion. After years of litigation, an appeals court rejected Cigna’s attempt to claim a $1.85 billion breakup fee from Anthem in the wake of a merger agreement that fell apart a few years ago.

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G500-2021-028-Cigna

If there’s one element you need to home in on to understand health insurer Cigna’s 2020 success, Evernorth is a pretty good place to start. The company climbed more than 50 spots on the Fortune 500 after completing its merger with pharmacy benefits manager Express Scripts. That sent its revenues skyrocketing—and then the pandemic hit. How did Cigna manage to deal with that buzz saw? The Evernorth subsidiary, which encompasses Express Scripts, brought in $30.6 billion in the first quarter of 2021 and moved to expand its plan memberships in five more states and 67 new counties. It doesn’t hurt that Evernorth acquired the virtual care platform MDLive at the beginning of 2021—at a time when telehealth demand is soaring.

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F500-2021-013-Cigna

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FGC 2021-Cigna

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G500-2020-032-Cigna

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F500-2020-013-Cigna

Health insurer Cigna ranked 65th on the Fortune 500 last year. This year? A meteoric rise to 13th, the result of its merger with pharmacy benefits giant Express Scripts—and another instance of the trend toward vertical integration among large health care companies. The Express Scripts integration, completed in December 2018, fueled revenue growth that exceeded even Cigna’s own pre-merger expectations: Adjusted revenues for 2019 soared to $140 billion, compared with the $131 to $133 billion originally forecast.

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Fastest-Growing-Companies-2020-59-Cigna

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Fastest-growing Companies

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With roots dating back to 1792, the Cigna Group is an insurance and related services company serving millions of clients in the United States. Its Evernorth Health Services branch offers pharmacy benefits, home delivery, distribution, management solutions for plans, and health care providers. Meanwhile, the company’s Cigna Healthcare segment provides medical, behavioral health, dental, and other products to customers. In 2023, the business underwent a rebrand; Cigna Corp. changed its name to the Cigna Group, and its two segments became the primary business units.

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Cigna Group (CI): Company Profile, Stock Price, News, Rankings

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Cigna Group

cigna group

Ladies and gentlemen, thank you for standing by for The Cigna Group's third quarter 2026 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. If you should require assistance during the call, please press star 0 on your touch-tone phone. As a reminder, ladies and gentlemen, this conference, including the Q&A session, is being recorded. We will begin by turning the conference over to Ralph Giacobbe. Please go ahead.

Great, thanks. Good morning. Thank you for joining today's call. I am Ralph Giacobbe, Senior Vice President of Investor Relations. With me on the line this morning are Brian Evanko, The Cigna Group's President and Chief Executive Officer, and Ann Dennison, Chief Financial Officer. In our remarks today, Brian and Ann will cover a number of topics, including our third quarter 2026 financial results and our financial outlook for 2026. Following their prepared remarks, Brian and Ann will be available for Q&A. As noted in our earnings release, when describing our financial results, we use certain financial measures, including adjusted income from operations and adjusted revenues, which are not determined in accordance with accounting principles generally accepted in the U.S., 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 2026 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 to today's earnings release and in our most recent reports filed with the SEC. Regarding our results in the third quarter, we recorded after-tax special item charges of $146 million, or $0.55 per share.

Details of the special items are included in our quarterly financial supplement. Additionally, please note that when we make prospective comments regarding financial performance, including our full year 2026 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2026 dividends. With that, I will turn the call over to Brian.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call. I am pleased to share that The Cigna Group delivered strong performance in the third quarter as we continue executing on our strategy. Today, I will cover our results for the quarter and key drivers, our profitable growth strategy, and how we are advancing toward our long-term EPS growth algorithm of 10%-14%, which we laid out at our recent investor day, as well as how our strategic growth framework positions us to build momentum in 2027. Then Ann will share additional details about our financial results and outlook for the rest of the year, and we will take your questions. During the quarter, we delivered adjusted revenue of $73.8 billion, adjusted after-tax earnings of $2.1 billion, and adjusted earnings per share of $7.98.

The work we have done over several years to deliberately shape our portfolio is delivering results, and we are built for the fastest-growing areas of healthcare with a proven ability to execute through a dynamic environment. Our strong performance through the first nine months of the year gives us confidence to raise our full-year outlook, and we now expect adjusted earnings per share of at least $30.60. Importantly, we are building on that strong foundation as we look beyond 2026. At our recent investor day, we announced our Lead to One vision, which is centered on delivering personalization at scale to improve affordability and the healthcare experience for every customer and patient we serve. Lead to One brings together all of our medical, pharmacy, behavioral health, and specialty care capabilities around the individual.

By responsibly leveraging our data, clinical expertise, and technology, we can identify needs earlier, deliver more personalized support, and improve health outcomes while lowering the total cost of care. Our Lead to One vision will benefit all customers, and we see a particular opportunity with the most clinically complex patient needs, where healthcare costs are increasingly concentrated and represent over 50% of total healthcare spending. Lead to One is underpinned by a clear strategic growth framework comprised of three pillars. First, we will deliver core growth. Second, we will leverage distinct capabilities. Third, we will execute with discipline. These three pillars taken together give us a clear path to build on the strength of our business today while creating the next chapter of sustainable growth and greater value for those we serve.

Now let me walk through some of our highlights in the quarter across Evernorth Health Services and Cigna Healthcare. Starting in Evernorth, third quarter earnings were in line with expectations. Our specialty and care services businesses delivered attractive performance, including pre-tax adjusted earnings growth of 15% year-over-year. This was fueled by secular tailwinds and disciplined execution across our specialty pharmacy and distribution capabilities. We also drove continued strong biosimilar and specialty generic utilization. Today, Revlimid, a widely used oncology drug, is seeing specialty generic adoption rates around 90%. Across our specialty businesses, we are leveraging our distinct capabilities for patients with complex needs who require a higher level of care, support, and coordination to manage their conditions. For example, in our specialty pharmacy, Accredo, we have industry-leading access with more than 330 highly complex, limited distribution, and exclusive products.

This demonstrates the strength of our manufacturer relationships and the trust they place in us to partner in serving some of the most clinically complex patient needs. That access also positions us to capture growth as new specialty therapies come to market. I am also pleased to share that we continue to expand our capacity for these limited distribution products with our network of clean rooms, the fifth of which is now in the build phase. These highly sterile environments take years to build, license, and operationalize to safely mix and compound some of the most complex medicines. These clean rooms are just one example of the durable competitive advantage in our specialty business that we have constructed over the past few decades. Finally, our expanded distribution channels are unlocking new opportunities. CuraScript SD is a leader in specialty distribution with access to 40 exclusive distribution drugs.

Our recently launched Evernorth Wholesale has begun fulfilling orders to our distribution centers to be able to serve customers. In our Pharmacy Benefit Services business in Evernorth, we delivered third quarter pre-tax adjusted earnings of $765 million. We continue to see strong momentum for the 2027 sales season, supporting our core growth, along with strong retention rates in the high 90s. Next, I would like to spend a moment on our Signature model transition. We are pioneering this new approach to pharmacy benefits and want you to have further context around current status and why we are so confident in our path. You can think of our Signature implementation in three broad phases. Phase one, our design phase, is complete. Announced this time last year, phase one included designing Signature, our market-defining innovation, driven by core principles of affordability, simplicity, transparency, and value.

Inherent in the model is our price assure capability, which is designed to ensure patients pay the lowest available out-of-pocket costs when they fill prescriptions, and will save an average of 30% on high-cost branded drugs. price assure is already in market and being leveraged by about 10% of our current clients. The Signature model is consistent with the direction of regulatory changes, including the Consolidated Appropriations Act of 2026 and the Department of Labor's recently finalized PBM fee disclosure rule. Phase two, our build phase, is well underway. Currently, we are working on adoption planning alongside market education. Key stakeholders include brokers, pharmaceutical manufacturers, network pharmacy partners, and clients. The work is largely complete for brokers, and we are actively advancing contracts with pharmaceutical manufacturers and network pharmacies. Phase three, our adoption phase, is on track.

The next milestone is the adoption of Signature for our Cigna Healthcare fully insured book on 1/1/2027. Early client conversations for the 2028 benefits year have been encouraging and indicate strong interest in the model for a broader Evernorth book of Pharmacy Benefit Services clients. Our very strong 2027 selling season reinforces that clients value innovation and see us as a multi-year partner on their pharmacy benefits journey. Clients see value in Signature's focus on patient affordability and transparency, and in how it supports their efforts to meet evolving regulatory requirements and their fiduciary responsibilities. They also see a model that can encourage adherence with improved health outcomes and workforce productivity. In summary, we are proud of the progress we are making on Signature. We have completed phase one and are on track to deliver against phases two and three, with broader client adoption expected to ramp in 2028.

We'll share some further detail on the progress across phases II and III during our fourth quarter earnings call. Finally, we continue to leverage our distinct capabilities in Pharmacy Benefit Services to generate industry-leading affordability outcomes, including our deep supply chain expertise, clinical safety checks, and connectivity in the rapidly evolving pharmaceutical market to meet the needs of clients and customers. We're continuing to enhance our technology platforms, better connecting the different components of the pharmacy benefit to create a simpler, more flexible experience for patients and clients. Turning to Cigna Healthcare, we delivered another quarter of strong growth with results ahead of expectations, with pre-tax adjusted earnings growth of 15% year-over-year. Our disciplined pricing, coupled with advanced analytics and insights, enable our steady medical care ratio performance. While medical cost trends continue to be elevated, they are consistent with our expectations and pricing assumptions.

This quarter, we also benefited from stronger net investment income and favorable SG&A performance. We also introduced new capabilities in Cigna Healthcare in September with the launch of Health Sense, our data and technology-powered customer engagement solution that will start with oncology, but broaden to other conditions over time. By connecting a customer's health needs, benefits, pharmacy coverage, costs, claims, and prior interactions, our clinical teams have context and a more complete picture, enabling earlier interventions. As a reminder, costs are increasingly concentrated in complex conditions, with 8% of patients generating 55% of total healthcare spend. We're excited about the early positive reception to Health Sense from clients and customers, and are taking an agile approach to launching additional components as they are built. As we look to 2027, we remain confident in the strength of our strategic growth framework and our ability to perform through a dynamic environment.

During our fourth quarter call, we will provide our comprehensive 2027 guidance. We continue to expect adjusted earnings per share growth of at least 10% in 2027 off our run rate earnings for our ongoing businesses, and remain confident in 2030 adjusted earnings per share of at least $45 that we outlined at our Investor Day. Today, I'll briefly cover the primary tailwinds and headwinds for 2027. Starting with the tailwinds. First, in our Cigna Healthcare business, we are driving continued improvement in our stop-loss margins. Second, we're pleased with a strong 2027 selling season in both Evernorth and Cigna Healthcare. High client retention and new business wins reinforce the strength of our value proposition and innovation, and will contribute to attractive enterprise revenue growth in 2027. Third, our Accelerate to One modernization and productivity initiative will drive savings across the enterprise.

Turning to the headwinds we expect in 2027. First, within Evernorth Pharmacy Benefit Services, the compression of industry rebate pools and lower employer coverage of GLP-1s for weight loss, consistent with our commentary from Investor Day. Second, within Evernorth Specialty and Care Services, a more limited pipeline of biosimilar and specialty generic launches in the coming year. Finally, as you'd expect, the known exit from the ACA exchange business will remove that contribution from Cigna Healthcare. To ensure our success, we're focused on disciplined execution across the enterprise. Part of our DNA is our proven ability to evolve. Throughout our 234-year history, we've continuously adapted to lead through change and innovated to drive what comes next. Across our businesses, we're coupling data and insights with our clinical and analytical expertise, resulting in disciplined pricing, timely patient support, and consultative solutions for clients.

We are building a future-ready, efficient, and effective workforce while optimizing accountability and decision-making with our Accelerate to One initiative, all while driving run rate savings of $3 billion by 2030, which you will hear more about from Ann in a few moments. Let me close with a few key takeaways. First, we are generating core growth in each of our three business platforms. We have deliberately shaped our portfolio with capabilities that are focused on the most attractive sub-sectors of healthcare, where needs and spending are concentrated, with multiple growth engines across Specialty and Care Services and Pharmacy Benefit Services in Evernorth, along with Cigna Healthcare. Second, we are leveraging our distinct capabilities that strengthen our position for the future.

Our expertise in complex care, combined with our clinical capabilities, data, advanced analytics, and AI, enables us to deliver greater personalization at scale, improve affordability, and create more value for the people we serve. You see that strategy coming to life through capabilities like Health Sense, our expanding specialty infrastructure, and continued innovation across our pharmacy businesses. Third, disciplined execution continues to differentiate our company. This quarter, that showed up in strong client demand, disciplined pricing, stable medical cost trends, continued specialty growth, and our ability to adapt our solutions as the market evolves. As we look to 2027, we have clear visibility into the puts and takes ahead and have multiple levers across the enterprise to deliver against our commitments. Importantly, we are not dependent on any one single business, market trend, or innovation to deliver our long-term expectations.

Our third quarter performance reinforces our confidence in our Lead to One vision and in our long-term strategy, leading to durable, profitable growth and compelling long-term shareholder value creation. With that, I will turn it over to Ann.

Thanks, Brian, and good morning, everyone. As Brian mentioned, our third quarter results reflect the strength of our enterprise and the consistency of our execution. Through our Lead to One vision, we are delivering core growth across a deliberately shaped portfolio of businesses, leveraging our distinct capabilities to deliver greater personalization at scale, particularly for patients with complex conditions, and executing with discipline. That combination of focused strategy and execution continues to translate into strong results. During the quarter, we delivered adjusted revenues of $73.8 billion, adjusted after-tax earnings of $2.1 billion, and adjusted earnings per share of $7.98. With our strong third quarter performance, we are raising our full year 2026 adjusted earnings per share outlook to at least $30.60. Now turning to our segment results.

I'll start with Evernorth, where we continue to execute on the strategy Matt Perlberg and Adam Kautzner outlined at Investor Day to strengthen our specialty leadership while evolving Pharmacy Benefit Services to deliver greater affordability and transparency. Third quarter 2026 revenues grew 6% year-over-year to $63.8 billion, and pre-tax adjusted earnings were $1.8 billion. Specialty and Care Services delivered strong performance, with pre-tax adjusted earnings growing 15% year-over-year to $1.1 billion, in line with expectations. This growth reflects our distinct specialty capabilities across Accredo and CuraScript and our clinical expertise and patient support services, which together are driving momentum in our fastest-growing business. Consistent with our Lead to One strategy, we continue to make specialty care more affordable by accelerating access to lower-cost alternatives, which benefits patients and clients while driving growth for the business.

We continue to drive strong adoption of biosimilars, led by our $0 patient out-of-pocket offerings for both biosimilar HUMIRA and STELARA. Adoption of new specialty generics continued to ramp during the quarter, including generic Revlimid, where penetration is now approximately 90%. Finally, income from our investment in Shields Health Solutions contributed to the growth in the quarter. Within Pharmacy Benefit Services, pre-tax adjusted earnings were $765 million, in line with expectations. As we outlined at Investor Day, this business is in a period of transition, and our performance continues to reflect the previously discussed renewals and extensions of large client contracts, as well as investments to support the transition to our new Signature model.

Overall, Evernorth's third quarter results reflect continued growth in our Specialty and Care Services business, powered by our distinct capabilities across both pharmacy and medical benefits, and disciplined execution as we evolve our Pharmacy Benefit Services business towards Signature, delivering greater affordability and transparency for patients and clients. Turning to Cigna Healthcare, where we continue to execute on the strategy Bryan Holgerson outlined at Investor Day, deepening client relationships and expanding share in the employer market through our integrated medical, pharmacy, and behavioral model, with a particular focus on customers with complex care needs. We see significant opportunity to improve outcomes and affordability for these customers through more personalized care. Third quarter 2026 adjusted revenues grew 9% year-over-year to $11.7 billion, and pre-tax adjusted earnings were $1.2 billion.

Cigna Healthcare adjusted earnings were ahead of expectations, primarily driven by favorable net investment income and ongoing operating efficiencies. The medical care ratio for the third quarter was 85%, in line with expectations as trends remain elevated but stable, and costs remain consistent with our pricing assumptions. Total medical customers have grown 2% year to date to 18.5 million customers. We continue to see strong growth in our Select segment, which served U.S. employers with fewer than 500 employees, with medical customers up 5% year to date, reflecting market share gains that we highlighted at Investor Day. Overall, Cigna Healthcare continues to deliver strong growth, driven by our distinct capabilities along with disciplined pricing and expense management. Now turning to our updated outlook for 2026.

The strength of our third quarter performance gives us the confidence to increase our full-year adjusted earnings per share outlook to at least $30.60. Within Evernorth, we continue to expect full-year pre-tax adjusted earnings of at least $6.9 billion. Within Cigna Healthcare, we are raising our full-year pre-tax adjusted earnings outlook to at least $4.6 billion, and with greater visibility into full-year performance, we are updating our full-year MCR outlook, maintaining our prior midpoint of 84.2% and tightening our range to ±25 basis points. Turning to our 2026 capital management position. Third quarter operating cash flow was $2.6 billion, and we continue to expect strong cash flow from operations in the fourth quarter, consistent with the pattern we observed in the prior two years.

During the quarter, we reduced our debt-to-capitalization ratio by approximately 100 basis points to 41.8% as of September 30th, and we remain on track to achieve our long-term target of approximately 40% by year-end. Additionally, in the third quarter, we repurchased approximately 900,000 shares of common stock for approximately $250 million. Turning to some early thoughts on 2027. I'll provide some additional directional comments building on the headwinds and tailwinds Brian discussed. First, our 2026 run rate earnings. As you think about the appropriate starting point, it's important to consider our previously announced exit from the ACA exchange market. For 2026, we continue to expect our ACA exchange business to generate positive margins, though below our 4%-6% margin target, and we expect some runoff and stranded overhead costs to remain next year.

Based on our current estimates, this represents an approximately $200 million headwind in Cigna Healthcare, resulting in a 2026 run rate adjusted EPS of approximately $30. Regarding our outlook for our business segments, in Cigna Healthcare, we expect another year of strong growth, with adjusted income from operations growing within our long-term target of 6%-9% of our reported 2026 results, or above the high end of our long-term target after adjusting for our exit from the ACA exchange market. This reflects strong core growth, continued momentum in Select, where our distinct capabilities position us to gain market share, and disciplined execution in our pricing to improve margin and stop-loss. In our Specialty and Care Services business, despite more limited biosimilar and specialty generic launches in 2027, we still expect adjusted earnings to grow within the 8%-12% long-term target range, though towards the low end.

In Pharmacy Benefit Services, as Brian mentioned and as we discussed at our Investor Day, we anticipate near-term headwinds, including industry-wide compression in gross rebates and lower employer coverage of GLP-1s for weight loss, consistent with our prior comments. Taken together, we expect Evernorth earnings to be up low single digits in 2027. Regarding our capital management in 2027, consistent with the deployment framework we outlined at Investor Day, we continue to view share repurchase as an attractive use of capital. As I mentioned earlier, we expect to achieve our debt-to-capital target of approximately 40% by year-end 2026, and we expect greater flexibility in capital deployment next year. In summary, we remain confident in delivering at least 10% adjusted earnings per share growth in 2027 off of our 2026 run rate of approximately $30, which reflects our exit from the ACA Exchange business.

We believe this is a prudent starting point, and we look forward to providing further guidance on our fourth quarter call. Underpinning our confidence in our ability to deliver in 2027 and through 2030 is Accelerate to One. This modernization and productivity initiative, which we announced at our recent Investor Day, will lower our cost to serve and create operating leverage for the enterprise. We expect this initiative to contribute $3 billion in gross savings by 2030. Notably, we expect to reinvest some of these savings back into the business to fund growth and innovation, while a portion will benefit operating results. This initiative further reinforces our confidence in our ability to deliver attractive earnings growth in 2027 and over the long term, and we look forward to providing periodic updates on our progress. Now to recap.

Our third quarter results reflect strong core growth, our distinct capabilities in both Evernorth and Cigna Healthcare, and disciplined execution across the enterprise. We are pleased with our year-to-date performance and confident in our increased full-year 2026 adjusted EPS outlook of at least $30.60. We remain confident in our long-term framework of 10%-14% average annual adjusted EPS growth and at least $45 of adjusted EPS in 2030, which we discussed at Investor Day. With that, we'll turn it over to the operator for the Q&A portion of the call.

Ladies and gentlemen, at this time, if you do have a question, please press star one on your touchtone phone. If someone asks your question ahead of you can remove yourself from the queue by pressing star two. Also, if you're using a speakerphone, please pick up your handset before pressing the buttons. One moment, please, for the first question. Our first question comes from Lisa Gill with JPMorgan. You may ask your question.

Thanks very much. Good morning. Thank you for all the detail, Brian and Ann. I really just want to dig into a few things when we think about the progression in the PBS side of the business. I heard you talk about kind of the next stage where you're building adoption, educating the market, signing manufacturing and pharmacy agreements. Can you help us to understand, one, what that looks like? Two, what the progression looks like in 2027? You talked about low single digits overall for Evernorth, so it doesn't feel like there's a big progression versus what we're seeing here in 2026 in the PBS segment specifically. So, if you could just help us to bridge that and talk a little bit about how you make progress in the contracting.

Good morning, Lisa. I will start, and Ann, if there is anything you want to add, feel free to jump in here. I think a few components to your question there, starting with Signature, and then I believe your reference to the low single digit was the Evernorth aggregate income growth expectation that we outlined there. Just relative to where we are with Signature, first off, we are proud to lead the industry with our new Signature pharmacy benefits offering. If you step back, affordability continues to be the number one challenge facing patients, with the affordability of prescription drugs being a primary pain point. That is particularly acute for high-cost branded prescriptions, which represent just 10% of all prescriptions in America, but 90% of the total drug spending.

When you look back, one of the great success stories in American healthcare is the way PBMs have led generic adoption to now reach some 90% of all prescriptions at very affordable price points. The next frontier is attacking the remaining 10% of prescriptions that are in very high-cost branded drugs and represent some 90% of drug spending. Our Signature model is designed to attack that 10% of high-cost brand drugs and provide a simple, fee-based, transparent solution for clients and customers. As I talked about earlier, there are three phases of our Signature model implementation. Maybe I will just share a little bit more color on some of those components. Phase one was the design phase, which is now complete, which was the decision we made to move to a simple pure fee-based, no rebate model.

This architecture leverages the same value creators for clients and customers, meaning procuring drugs at the most affordable unit cost, wrapping those with clinical programs that drive adherence and administering complex benefit plan designs. Phase two is our build phase, and I think your question was pointing at this specifically in terms of where are we with manufacturer and network contracts. This is actively underway. Our team is doing quite a bit of heavy lifting here relative to re-contracting, as we speak. We will talk about more details on this on our fourth quarter call, but we are actively negotiating with the largest pharmaceutical manufacturers as we speak to get the Signature contracts fully landed. This phase also includes all the technology enhancements and the implementation readiness work that is required.

Finally, for the upcoming sales season, we have been working hard to educate brokers, the employer community, current clients, and prospects on what the Signature model entails. Then phase three, as I alluded to earlier, is our adoption phase, and that is well on track. The next milestone is our Cigna Healthcare fully insured book, which will adopt Signature 1/1/2027, and then the broader ramp will transpire throughout 2028. Big picture, strong receptivity from each of those different stakeholders. We continue to expect 2028 will be the year where we see significant adoption across the broader Evernorth book of business. To the second part of your question, as Ann indicated in her comments, we expect Evernorth 2027 income to be up low single digits.

We expect our Specialty and Care business to be within our long-term growth algorithm of 8%-12%, albeit the lower end, which implies our Pharmacy Benefit Services income will be down single digits in 2027 from where we are in 2026, due to the industry-wide pressure on gross rebate pools, as well as a downtick in the percentage of employers covering GLP-1s for weight management. As we talked about on prior calls, 2026 and 2027 are transitional years for our Pharmacy Benefit Services business, and we continue to expect at least 4%, up to 4% compounded income growth from 2026 to 2030 in the PBS business, and continue to expect at least $45 per share of 2030 adjusted EPS. A lot in there. Hopefully, you got all the components to your question.

Thank you. This question comes from Kevin Fischbeck with Bank of America. You may ask your question.

Great. Thanks. I guess just two follow-up questions on the guidance for 2027. I guess first, the $0.60 drag, it sounds like some of it's just core earnings and some of it is stranded costs. Can you quantify how much that $0.60 might be recaptured in 2028 and beyond? Then, as far as the headwind to 2027 regarding the fewer launches on the Specialty side, is there any early look on 2028? Is that a more normal year in your view, or is that also a little bit lower? Thanks.

Good morning, Kevin. I'll have Ann take the first part of your question in terms of the individual exchange exit and the impact on 2026, 2027, how to think about 2028, and then I'll take the second piece relative to the Specialty and Care. Ann?

Great. Morning, Kevin. On the ACA, just to level set, the results for the quarter, this quarter, were largely in line with expectations. I mentioned this in my prepared remarks, but as a reminder, we expect the business to be profitable this year, but with margins a little below our 4%-6% target range. There's two things to think about as we look at the impact of the ACA exchange exit on our 2027 outlook. The first is what the business contributes today, and then the second is the stranded overhead and other costs that come along with exiting a business, which is what you'd expect. When you put those two together, based on our current projections, we expect an all-in headwind of about $200 million from exiting the exchange market.

Specifically related to your question on recapture in 2028, of course, as we always do, we'd be looking to get out any of the runoff costs and the stranded overhead that remains, once we've exited the business.

Thanks, Ann. On the second component of your question, Kevin, in terms of the headwind that we flagged relative to the Specialty and Care business, it's specifically 2027's a bit of a slower year for new biosimilar and specialty generics. If you kind of step back and look over a longer period of time, new introduction of biosimilars and specialty generics has been a great success story for American healthcare. Over the past three years, HUMIRA having biosimilar competition in 2024, STELARA having biosimilar competition in 2025, generic Revlimid having supply constraints eased in 2026, each of those provided tailwinds for 2024, 2025, and 2026. When you look back at our Specialty and Care business, between 2023 and 2026, we've compounded income growth of 13%, which is above our long-term growth algorithm for Specialty and Care.

Now, from year to year, there'll be some ebb and flow on the timing and magnitude of drugs that will see new biosimilar and specialty generic competition. For 2027 specifically, again, the pipeline indicates less material new biosimilars to specialty generics being introduced, but I would view that as a temporary slowdown. As we look ahead to 2028, 2029, and 2030, there are several biosimilars coming to market for drugs often covered under the medical benefit. So, think oncology drugs, MS drugs, and we're preparing for these introductions. Now, stepping back from all of this, we're actively encouraging the approval and adoption of these low-cost alternatives. It's a great means to improve affordability. Finally, the continued momentum across our broader Specialty and Care portfolio allows us to overcome this headwind to Specialty growth.

As Ann noted, we do expect on 2027 Specialty and Care earnings growth near the low end of our long-term income growth algorithm of 8%-12% per year, which speaks to the strength of our broad suite of specialty capabilities, as well as our expertise in serving patients with the most complex healthcare needs. Hopefully, that helps.

Thank you. Our next question comes from AJ Rice with UBS. You may ask your question.

Thanks. Hi, everybody. Just to make sure I understand, so as you deploy the new Signature model next year to your fully insured book, you didn't mention that as a headwind/tailwind for either side of the business. Is there any short-term pressure either on the insurance side or on the Evernorth side that then abates over time as it gets more mature? Also on the Signature model, you did reference various regulatory things, the PBM reform legislation from January, the Department of Labor announcement. Are you naturally going to comply with all of the provisions there as you move to the Signature model, or is there anything incrementally from an investment perspective you need to do to comply with those as they phase in by 2028 and so forth?

Good morning, AJ. A few different components in there. Relative to the first piece of your question, the Signature model implementation for our fully insured business for 1/1/2027 within Cigna Healthcare, as I mentioned earlier in Lisa's question, fully on track to implement that effective January 1st. To your point, that is not a headwind relative to 2027. The reason for that is, since it's fully insured business, any change in economics is essentially in the price. It's in the price that we've implemented through our standard underwriting process as we go through case by case, client by client, and put the appropriate price in place. So, the 2027 headwinds we talked about specifically for PBMs are limited to the GLP-1 weight management coverage ticking down in our employer book, and secondarily, the compression on industry-wide rebates. So again, 2026, 2027, think of those as transitional years for PBMs.

2028, 2029, 2030, we will see income growth over that time period. On the second piece of your question relative to some of the PBM rules, regulations, and reform changes that have gone through, most recently, the Department of Labor PBM transparency rule was issued just a few weeks ago, and really, this issue or this rule speaks to the primary challenge of our healthcare system, which again, is affordability. We support the underlying spirit implied by this rule, specifically the use of objective, data-driven, transparent information in order to drive more educated purchasing and utilization. That said, we think it is very unlikely that this rule will result in lower prescription drug spending. There is some redundancy in the DOL rule and the Consolidated Appropriations Act, and there is some areas where the two are actually contradictory.

Our team is actively engaging to drive clarity on these issues for the benefit of our clients and customers. As it relates to the DOL rule itself, we will, of course, comply with the requirements. This will add some administrative cost and burden to the system, but you should not think of that as a material amount of new spending, something that I would view as normal course for our PBMs business. Again, coming back to our Signature model, that is our one bold way that we are taking action ourselves to drive change in the system with a focus on affordability and a focus on actionable transparency. This model also provides that patient guarantee of the lowest possible out-of-pocket cost when they fill a prescription.

Finally, the Signature model is designed to comply with evolving regulations, including both the CAA and the DOL transparency rule, while reducing fiduciary risk for employers who adopt the model. So, we are very excited about the Signature model, looking forward to its scaling across the Evernorth book starting in 2028. Thanks for the question.

Thank you. Our next question comes from Justin Lake with Wolfe Research. You are reminded that you may ask your question.

Thanks. Good morning. On the three headwinds to Evernorth next year, are all three about similar size, or maybe you can rank order them for us in terms of impact? You did not mention investment gains in 2026 as a headwind for the healthcare business next year. By my math, it looks like it could be north of $100 million. How should we think about that? Thanks.

Good morning, Justin. I will start, and Ann, if you could pick up on how to think about the quant on the three headwinds as well as the question Justin asked about the investment income. We are going to wait until the fourth quarter to get into our detailed guidance relative to sub-segment and segment guides for 2027. What we are trying to do today was give you a little bit of texture in terms of how to think about the 2027 versus 2026 income trajectory for each of our businesses. As I said earlier to the question that Kevin asked on specialty, we will still be within our 8%-12% income growth algorithm, albeit the lower end.

That headwind in the big picture is more than offset by the underlying strong secular growth that we see in specialty by the continued expansion of our distribution capabilities, by the improvement in our cost to fill through initiatives like our Pharmacy Forward. Big picture, you should not think of that as a substantial headwind in a dollars and cents standpoint. The PBMs headwind that we made reference to contributes to the total income being down single digits 2027 relative to 2026. That gives you a bit of just ballpark dimensioning of how to think about the magnitude. Ann, can you pick up anything else on the headwinds and then the investment income component?

Sure. Just to Brian's point around pharmacy benefit services and the headwinds there, we look forward to quantifying the specific numbers coming out of the fourth quarter. You can think about the two headwinds referenced as relatively equal. On the investment gains in Cigna Healthcare for this year, I would not characterize that as a headwind going into 2027.

Thank you. This question comes from Scott Fidel with Goldman Sachs. You may ask your question.

Hi. Thanks, and good morning. Wanted to just ask about the new initiative, the Lead to One, that you discussed at the Investor Day. Brian and Ann, maybe just in particular, if you can give us any visibility into a level of run rate savings that you expect to potentially be accrued into the 2027 outlook that you're contemplating and the potential key drivers of that. Then also just any one-time costs that we may anticipate may hit the GAAP P&L just in the back half of this year or into next year as you implement workforce rationalization and other elements of the Lead to One strategy. Thanks.

Good morning, Scott. I'll start, and then Ann, if you could pick up. Scott referenced Lead to One. I think he was bridging over to our Accelerate to One initiative as well in his question relative to the $3 billion of run rate save that we expect to see by 2030. Step back, Lead to One is our vision for the future, which is essentially driving personalization at scale. We see the emergence of data, modern technologies, advanced analytics, AI, allowing us to drive personalization in ways that we couldn't even three, five years ago. We're excited to do that across all the customers and patients we serve, with a particular emphasis on those who have the most clinically complex healthcare needs, which, as I said in my earlier comments, that now represents 55% of total spending, even though it's just 8% of patients.

Our Accelerate to One initiative specifically is using a combination of technology, workforce effectiveness, vendor rationalization in order to drive that $3 billion of run rate save by 2030, $3 billion of gross run rate savings by 2030. Ann, can you pick up a little bit in terms of how to think about the timing, the emergence investment spend of that part in Scott's question?

Sure. As Brian mentioned, $3 billion of gross run rate savings. We are focused on three areas: automation and process modernization, talent effectiveness, and how we manage our suppliers, partners, and vendors. All of this is enabled by technology and AI, continuous improvement, and a lot of execution rigor. The goal is twofold. We are going to fund reinvestment in the business, so not all of it is going to fall to the bottom line. Also, we want to support our 10%-14% long-term adjusted EPS growth commitment. Ultimately, this is going to help us reduce our cost to serve, create operating leverage, be more competitive, and have the capacity to keep investing in the growth.

In terms of where the savings come from, we expect roughly 70%-80% of that $3 billion in gross savings to come from automation, modernization, and talent effectiveness, and the remaining 20%-30% from improvements in the vendor space. We are targeting those savings over the five-year period that began this year. We look forward to providing some more color on the shaping and cadence in the fourth quarter earnings call. I would just point you on your question specifically, Scott, related to the costs. The costs in order to execute this are reflected in the strategic optimization program disclosures that will come as part of the Q. I would describe them as mostly concentrated on the employee side, severance, and other sort of one-time costs in order to execute some of the savings that we are doing this year that will carry into next year.

Thank you. Our next question comes from Jason Cassorla with Guggenheim Securities. You may ask your question.

Great. Thanks. Good morning. I wanted to ask a little bit more on Evernorth for 2027. One of the headwinds for PBS segment this year was lower customer script growth due to declines in client plan membership. I am just curious how you are thinking about that paradigm for 2027, if you are assuming some level of headwind there that is perhaps more than offset by the strong 2027 selling season. Any color around that would be helpful. Thanks.

Good morning, Jason. So appreciate the question there. You are right, relative to 2026, we have seen some decline in the Pharmacy Benefit Services business, both in terms of scripts and overall customer counts. I just would remind everyone, script counts are not really a great indicator of the financial health or success of this business anymore, particularly as specialty drugs have proliferated, representing a small percentage of prescriptions, but over half of total drug spending. Another reminder is we serve many health plan clients, and our customer and script volumes are partially dependent upon their own membership growth or decline. So year to date, we did see some reduction in volumes from our Evernorth health plan clients specifically, partially driven by how some approached their Medicare and Medicaid product and pricing strategies. All that was broadly in line with expectations.

As we indicated, our overall Evernorth business delivered solid financial performance through third quarter of 2026, and we are pleased to reaffirm the full year outlook for Evernorth, incorporating all of those dynamics. As it relates to 2027 and how to think about this dynamic relative to the selling season, we are tracking toward retention in the high 90s, as I indicated earlier, similar to what we saw in 2026, consistent with historical norms. Additionally, our 2027 new business performance is very strong. We are tracking to at least 2 million new PBS customers in 2027, with that new business written at targeted profit levels. That has been generated from a combination of traditional PBM competitors as well as some smaller alternate PBMs.

As I indicated earlier, our new Signature model is generating considerable interest, both from existing clients as well as prospects as we look to scale it in 2028 and beyond. All this is evidence that our clients see us as a multi-year thought partner as they prepare for future changes in their pharmacy benefit programs. So, taken all together, these factors have been incorporated into the outlook that Ann introduced this morning. As I mentioned in one of my earlier comments, enterprise revenue for the entire Cigna Group is on track for an attractive rate of growth here in 2027. Thanks for the question.

Thank you. Our next question comes from Charles Rhyee with TD Cowen. You may ask your question.

Yeah. Thanks for taking the question. As you've kind of talked about 340B here, it's not including the headwinds for specialty care and services. Can you help us understand a little bit why this might be a little bit impact for you guys here versus maybe some of your peers?

Morning, Charles. Appreciate the question. Maybe I'll start with a little bit of background on the program and how we participate, and the core of your question on the 2027 implications. The 340B program has been in place since the early 90s, as you know, designed to support access to care for vulnerable patients by allowing those hospitals who serve them to purchase drugs essentially at a lower cost. This remains a critical lifeline for many rural and safety net hospitals. Over the years, we've seen the program experience changes around eligibility, contract pharmacy access, manufacturer participation, but it has endured given the criticality of the program's underlying purpose to support those rural and safety net hospitals. The way we participate in the 340B program is multifaceted. The most direct way is through Accredo, where we serve as a contract pharmacy in the 340B program.

Now, importantly, our total number of 340B contract pharmacies is far below that of the large retail pharmacy chains. So our exposure as a result is a small fraction of what those competitors would have or what those pharmacy chains would have. Overall, you should think of Accredo's participation as a 340B contract pharmacy as being a relatively small contributor to overall Evernorth earnings. I'd also note that the contribution of 340B is reflected within the specialty and care portion of Evernorth specifically. Now, as it relates to 2027, there will be some modest downward pressure on our 2027 results from the evolved 340B program requirements, but it's just not significant enough for us to call it out as a substantial headwind.

The continued momentum across our broader specialty and care portfolio, as I described earlier, strong secular growth, distribution expansion, cost to fill improvements, allows us to generate income growth that'll be near the low end of our long-term growth algorithm for specialty and care of 8%-12% per year. So it'll be toward the lower end of that. Again, all that speaks to the strength of the broad suite of capabilities we have across specialty and our expertise in serving those individuals with the most complex healthcare needs. So, modest headwind, but more than overcome by those other factors.

Can I follow up with the OPPS cuts for Part B infusion services? Does that have any impact? I know it doesn't really get consolidated into your results, but just thinking about Shields and the work they do, would that have an impact for Shields at all, or is that maybe an opportunity for Shields in helping hospitals?

Yeah, appreciate that question as well. So to your point, we have an investment position in Shields, so the underlying performance of the Shields business does not consolidate into our income. We have essentially a preferred investment, so there's some income from that, but the underlying performance of the asset does not consolidate into our results. To the core of your question, though, when the 340B rules and regulations change and the program gets more complicated, the demand for Shields services actually increases. So we've seen a lot of interest over the course of the last 12 to 24 months from hospitals and health systems who are seeking to optimize their own in-house pharmacies, their own in-house specialty capabilities for the services that Shields provides.

The Shields performance has been really outstanding the last couple of years when you look at the underlying performance in both the top and bottom line. A lot of that is many of these hospitals and health systems don't have the expertise in terms of inventory management, clinical coordination, accreditation services, so we're able to essentially support them via Shields, and there's some synergy relative to client opportunities and cross-sells between our Evernorth portfolio and the Shields client base. Broadly speaking, that's how I would encourage you to think about the Shields component.

Great. That was really helpful. Thanks. Appreciate the comments.

Thank you. Our next question comes from Elizabeth Anderson with Evercore ISI. You may ask your question.

Hi, guys. Good morning, and thanks so much for the question. I had a question about stop-loss. Obviously, seeing some nice growth in middle market and the premiums growing nicely there. Can you tell us a little bit more about how stop-loss is performing relative to the rural segment and how your current expectations for January 1 pricing versus trend you are seeing there? Thank you.

Cigna Group (CI) Q3 2026 Earnings Call Transcript

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