Cigna Aktie

All right, great. I want to thank everyone for joining us. It's my pleasure to be hosting this conference with The Cigna Group. Today we have Brian Evanko, who is the incoming CEO of the company. And we also have Ralph Giacobbe and Jeff Rook in the audience as well. But -- so maybe just jump right into Q&A, if that's okay.

Sure.

All right. So I mean, I guess, you're one of the major overhangs it seems for the stock right now is just on the PBM business. There's a big transition going through from your model from the rebate-based model into this new signature model, rebate-free model. Can you talk a little bit about why you did it, what you're going to expect to get from it and how we should think about the earnings impact as you transition?

Sure, Kevin, and thanks to you and Bank of America for hosting us this conference. We appreciate that. Maybe I'll give you a little bit of the background for how we got to the new signature model, and then I'll address some of the specific questions you were asking about.

If you think about the challenges with pharmacy benefits in America, there's a few words that bubble to the top, affordability, personalization, transparency, predictability. Each of those represent opportunities for the industry to perform better on behalf of patients, plan sponsors like employers and all their family members.

And so we stepped into that void and said, you know what, where we see the world going is in the future, a simpler, more transparent, more personally relevant, more affordable for patients, a world without rebates, but instead having simple upfront discounts, and the ability for the plan sponsor to have more budget predictability through a simple fee-based delinked pricing structure.

And so that essentially provided the background for where we're driving with the signature model. And we think the whole industry will go there eventually in time. We were proud to lead the industry by announcing this in October. And subsequent to that, as you saw some of the legislative activity, you saw some of the FTC activity, it all very much aligns with that strategic direction.

So again, we see the industry heading there eventually. It's just a matter of who goes first, who goes second, who goes third. So we were proud to lead the industry. Importantly, though, this is a fundamentally different model than the current rebate-oriented architecture that exists. So this is not 100% rebate pass-through, which we can do today, which we do today. This is not point-of-sale rebates, which we can do today, which we do today for some clients. This is a no rebate world that's all predicated on upfront discounts that we negotiate with manufacturers.

But to bring that to life, it's actually a pretty heavy lift. We have to go out and recontract with all the pharma manufacturers. We have to go out and recontract our pharmacy network with all the retail pharmacies, independent pharmacists, et cetera. We have to go out and recontract all of our client contracts. And all that takes time, energy, investment, technology spend, legal spend in order to bring it to life.

So '26 and '27 will be transitional years where we're making those investments before the signature model starts to scale in '28, and we expect at least half of our Evernorth Pharmacy Benefit Services members will be in that model by the end of 2028. That will be our standard offering in the future. We'll continue to allow the current legacy models to exist to the extent that a client is not ready to go into the new signature model. But '26 and '27 will be transitional years with that spending. '28, you'll start to see those costs dissipate.

And then in the longer run, we would expect the profitability of our new model will be very comparable to the legacy model once that's fully scaled. So that's a bit of the picture that's in front of us. But importantly, it starts with those principles of affordability, personalization, transparency, predictability, and we see the world going in this direction because there are too many instances today, where we see individuals not fill their prescription due to than being in a high deductible plan and the lift price is a barrier. And so this allows us to step over all those challenges and see the future.

Okay. So maybe just drill into that comment about the margins because -- so longer term, does that mean 2029? Or does it mean 2030? Like how long does it take to get the PBM margin to be similar to where it is today or historically?

Yes. The way I would encourage you to think about the margin profile for our pharmacy benefit service business is in 2 categories. One, we have 3 very large clients that we serve, Centene, Prime Therapeutics and the Department of Defense. We proactively renewed them and extended the duration of the contracts last year.

And as a result of that, we have a more predictable set of clients with those 3 and a more predictable earnings stream, but it's at a lower average profit level than the book average. And as a result of that, you can think of those as a bit of a separate cohort from all other. So that's about $65 billion of pharmacy benefit revenue. It's about $90 billion in total if you include specialty pharmacy and some of the other components.

The other component of the book, we would expect to run, call it, 4% profit margins. And to your point of when, certainly by '29, we would expect the signature model, the legacy model will be in that 4% profit margin zone for that other portion of the book, which is, if you go back in time, approximately where the industry has run, where the large competitors have run, and we believe is commensurate for the value creation as well as the risk that we absorb in those relationships.

Yes. And you guys have talked about this rebate-free model. It seems like -- your competitors have also announced new models that are more of the 100% rebate pass-through. So like what do you believe that the rebate-free model is solving for that maybe the rebate pass-through model isn't?

Yes. So to your point, we offer rebate pass-through models today, 100%. Some want us to retain portions of that depending on the client relationship. And that will continue to be available for clients in the future, if they're not prepared to go to the signature model, if they're unable to, if they have collective bargaining agreements, that sort of a thing.

So we'll have 2 offerings available in the future, but the standard will be the signature model. One of the big differences is the predictability and the budgeting for the plan sponsor. So in the rebate model, there's still variability in what happens with the flow of funds relative to the settlement of the upfront rebates, if it's a point of sale or the ability to know downstream because rebates are post-utilization true-ups.

Exactly what happens there. This provides more predictability because you know the upfront net cost. It's been negotiated already with the manufacturers. And importantly, for the patients, the Price Assure Capability, which we have embedded in the signature model, we have a version of it available today actually, but in the -- it's going to be a really central part of the signature model, guarantees patients the lowest possible out-of-pocket, whether it's the price we've negotiated from the manufacturer, if it's their co-pay or if it's a cash pay option.

And if it is a cash pay option, it will apply to their deductible. So that capability is a really important part underneath the signature model. But I come back to your core of your question, the predictability is even greater in this model versus in a rebate-oriented model.

Okay. And so just to be clear then about how this works. So if you're guaranteeing a price to a customer, that is the price that you have contracted with the pharmaceutical manufacturers. So it's not a situation of you're taking risk on the price that if the manufacturer raises price midyear, that's separate from your negotiation. And so it's all passed through, but it's set in advance rather than post fact.

Correct. We've negotiated the net price with the manufacturers. So we're going through all the manufacturer recontracting as we speak.

Okay. And so then what do you think are the competitive implications of this model? I mean when I think about this, it feels analogous to the ASO model, where you kind of have transparent unit costs and usually the companies with the lowest unit cost win. So is that what you would expect that the largest players with the best unit costs are just going to win when the model moves in this direction?

I appreciate that question. If you step back and think of what are the value creators for any PBM or for us, our pharmacy benefit service business, there's really 3 primary ones, one being unit cost. So the ability to procure better unit cost than an employer health plan government entity could do on their own. So to your point of where you get some buying power advantages, certainly on the unit cost component in terms of, if we bring more volume to a manufacturer, generally, we can get a better net price.

The second area is our clinical programs. So oftentimes, these are overlooked in the pharmacy benefit space. But importantly, making sure patients adhere to their treatment protocols, in some cases, we take risk or we have value-based arrangements with manufacturers like our SafeGuardRx program or our EnCircleRx program.

Those clinical programs are another reason why we are hired by employers and health plans and government entities. And then the third one is all the benefits administration that we do, the formulary management, the network design, all of that work we're doing on behalf. So those are the 3 reasons why we create value, why we're hired to provide services in the pharmacy benefit services space.

To your point, moving to a rebate-free simpler fee-based model, it makes that first component, the unit cost much more easy to see and compare. And so that should, over time, provide advantages to those who have better unit cost structure. Today, it's often difficult to do an apples-to-apples comparison with the different models that are in place.

So we like that about the model because being the largest pharmacy benefit services player in the industry, we have great unit costs. So we like the competitive opportunity there. All that said, our longer-term EPS growth algorithms, our longer-term expectations for this business are not predicated on taking market share. So we are not betting on that. So to the extent that happens, that's upside to our long-term outlook.

Great. Can you talk a little bit about then the 2027 selling season. You've got this other option, which isn't available yet, but you're talking to people about it. So I guess what's the reception to the new model? And then how is the selling season on the old model going for '27?

Yes. To your point, the new model will scale in '28. We'll have our fully insured Cigna Healthcare customers moved into it in '27 because they essentially don't go through a buying process for the pharmacy benefit business. They just -- they have it as part of their all-in pricing.

So the real feedback we'll get relative to bidding will happen starting in the fourth quarter of this year or '28 selling cycle since the buying process is long, particularly for large employers and health plans. So we'll start to get some real feedback in the fourth quarter of this year as it relates to the '28 competitiveness of the signature model. 2 weeks ago, we had many of our large clients together, and we got some great real-time feedback, which has helped us to make course corrections if needed along the way, but it's not yet in the context of a selling cycle. It's more in the context of directionally, here's where we're intending to go.

But there's a lot of interest and appetite for this because employers know the market needs to change. They know that the pharmacy benefit model of the past isn't the right model for the future. There's just too many examples of patients being exposed to the high list prices, when they're in their high deductible plans and they're in the deductible phase. There's too many instances of that breakage.

So the clients know the world needs to change. It's more a matter of how quickly they get there. Now to your question on the '27 selling cycle, so far in pharmacy benefit services, we're off to a really good start. So we have more new clients, more new business measured by scripts, measured by lives at this juncture than we did last year or the year before at this point in the respective selling cycle. So we're off to a good start as it relates to '27.

To your point, it's our legacy model with evolution as opposed to the signature model for '27. And retention looks to be tracking in line with historical norms to or mid-90s or higher retention for the '27 selling cycle in the pharmacy benefit services business.

Okay. And then I think one of the other questions that we get from people about concern around the PBM involves the recontracting that you mentioned in the largest 3 contracts. I think people saw, okay, you recontract your top 3 contracts. Why not the next 3 largest contracts? Like is there now a race at the bottom as the market got to be more competitive? So how do you respond to that?

Yes. The 3 largest contracts, which each of them are very unique and bespoke and have specific requirements that only a very small number of companies in the world can actually meet those requirements have dynamics that I don't believe are indicative of the broader market.

So to your -- the core of your question, we do not see pricing dynamics that would lead to margins being cut at scale across the pharmacy benefit space. The '27 selling cycle coming back to that question, has underscored that. There appears to be good pricing discipline in the market right now across the pharmacy benefit space, which is why we believe that 4% margin profile is a durable level over the long run for the industry and for our book of business with the exception of those 3 large clients.

Each of the 3 large clients that have their own kind of unique requirements. And when we did the recontracting, we were able to extend the durations. In some instances, we actually derisked the nature of the contracts to make them more fee-based, more service-oriented in exchange for a lower expected return, which is one of the reasons our '25 to '26 earnings in pharmacy benefits are actually decreasing, which is driven predominantly by those 3 large contracts being renegotiated.

Okay. That's helpful. And then I guess maybe just last question on the PBM. I think sometimes people think that the PBM needs to grow fast, but your long-term growth algorithm was 2% to 4% growth. And so I guess, old model, new model, 2% to 4% growth, that's the same outlook as well.

At this juncture, and we'll have a formal refresh of all of our growth expectations in our Investor Day in September that we're intending to hold. But at this juncture, that looks like a very reasonable expectation, 2% to 4%. And if you kind of break that apart, just natural growth in terms of prescriptions per person tends to be low single digits, maybe 1% to 2% per year.

And then on top of that, we'll have an inflationary component in the fee-based compensation that we'll receive from employers in the signature model. So 2% to 4% long-term expectation feels very achievable. And again, it's not predicated on any market share gains. So that would all be icing on the cake to the extent we did gain any share in the future.

Great. Now let's move to a little bit more exciting part of the business, the specialty business. I guess, how do you think about the underpinning of that business? I mean we've had some biosimilars recently. There's a lot of drugs coming through. So how do we think about the pace and timing of the growth of that business?

Yes. The specialty business for us has been a great part of the portfolio the last several years. And over time, this has been the outsized growth component of the company. So right now, it's about 35% of the company's total income. It wasn't that long ago that number was 20% to 25% if you go back just 4 years. So as a percentage of the total, it's grown very quickly. And part of that is the strong secular growth in the space, which you've covered nicely in your research as well, Kevin.

This addressable market in total is now approaching $500 billion, the total addressable for specialty. So you kind of step back, that's larger than the individual Medicare Advantage market, right? If you just kind of do a -- I'm comparing apples and oranges here, but in terms of total addressable market size, it's actually quite large and growing.

So secular growth in this space, 7%, 8% over time, which has been powered by all the drug innovation of biopharma as well as some of the larger manufacturers. And increasingly, specialty drugs are being used as a first line of defense by more prescribers. So now 4% to 5% of all Americans take a specialty drug.

And again, it wasn't that long ago, that number was 2% of all Americans. So more and more people are taking these high-cost clinically intensive specialty drugs. We have a great leadership position in this business with Accredo, which is our specialty pharmacy. And then we've been adding capabilities around that to further expand our presence in the specialty space.

And so we've seen HUMIRA and STELARA come into any other drugs that you're kind of keeping an eye on as kind of like the next big thing for biosimilar?

Yes. HUMIRA and STELARA have been great examples of a win-win here for society, for patients, for companies like ourselves and for the plan sponsors who are funding the benefits, right? Because HUMIRA was the largest, which finally biosimilars were available in '24.

So we had a $0 patient out-of-pocket for that, which again, great affordability proposition for the patient. The net cost came way down for the employer, the plan sponsor relative to the branded HUMIRA. And then we were able to make the same or more per prescription with our model. So that was a great example of affordability for the benefit of patients.

STELARA last year was introduced with a $0 patient out-of-pocket as well in the second quarter of '25, and we've seen good uptake thus far in terms of the percentage of eligible patients who have moved into a biosimilar for STELARA, another one of those examples of a win-win.

This year, although not a biosimilar, generic Revlimid is now available at a much greater scale. So in the past, supply constraints made it much less available. That's going to be another example of affordability benefits, but also one where we get the benefit within our specialty business. And then in the future, there's a few smaller ones on the Horizon like Prolia and Eylea.

And then you've got KEYTRUDA, which is an oncology injectable, which in '28 or '29, that will have biosimilar competition as well. So each of those are opportunities, and it's a bit of a building wave of all the drug innovation and the benefits of generics and biosimilars making their way through, which should improve affordability, but also allow companies like us to thrive as a result of that.

I think that sometimes we kind of think of specialty as like one thing, but you've been investing in specialty the last few years. Can you talk a little bit about where you've been strong historically, what you've been adding to that portfolio, if there's any other white space that you kind of look at as saying there's an opportunity.

Sure, sure. Yes. So the specialty space, that addressable market I made reference to is approaching $500 billion. You can think of it as about 60% patient administered. So it could be orals, it could be injectables, but the patient is essentially administering the drug themselves, right, in their home, that sort of a thing. And then the other 40% is provider administered.

So this could be -- you go into the doctor's office for your drug to be infused or injected or other types of ways in which it's adjudicated. So 60% patient, 40% provider administered. We've historically been very strong in the 60%, the patient administered. So our Accredo capabilities, we're one of the 2 largest specialty pharmacies in the world pointed at that.

The 40% that's provider administered, we've been a little bit less present historically. We have a distribution capability called CuraScript, where we distribute specialty drugs to providers. That's a great business for us, been growing double digits for many years. But we've been adding to the portfolio, to your question, in recent years, capabilities that allow us to serve that provider-administered market differently.

So we acquired a company called Carepath, which assists with health -- our health system and hospital infusion services. And we made an investment, a strategic investment, a sizable one last year in Shields. And Shields provides essentially clinical coordination, inventory management and consulting services, for lack of a better term, to health systems and hospitals who run their own in-house specialty pharmacies to help them manage that profit pool more effectively.

So we continue to bulk up in that area. But specialty in aggregate, when you put an umbrella across all of this, we see as an 8% to 11% annual growth engine for the company, riding the secular growth tailwinds plus our own company-specific capabilities.

Are there other areas that you still don't really operate in that you need to add capabilities?

If there were any that I would call out, they'd be more certain conditions where we have some opportunity to strengthen. So oncology is an example of one where we actually have less of a meaningful presence today in the oncology space than some others.

But the capabilities we've been building over time and investing in give us a great overall platform here. So there's not a significant huge gap there. It's more some of the conditions where we can strengthen ourselves.

Yes. I guess when we think about regulatory risk, the new model, at least to us and the market doesn't 100% agree, it doesn't seem like. But typically the new model is derisking the PBM side of things pretty dramatically. The growth is in the specialty business. When we think about the regulatory risk and political risk on the specialty business, I mean, I guess 340B comes to mind. Is there -- help us think about your 340B exposure? And if there's anything else that you kind of see on the horizon as issues that you might have to manage...

Sure, sure. And the specialty business in addition to being a great growth engine is also -- it's a really important part of American Healthcare because every single person we serve in the specialty business is clinically complicated and taking high-cost prescription drugs. So it's a little bit different than other parts of our company where sometimes we have people that don't utilize health care.

In this, every single person we serve utilizes health care in an intensive way. So as a result of that, by definition, they need companies like us to be there for them. So when you think about regulatory risk, whether that's federal or state, specialty tends to have a little bit less of it just for that reason because you have such a reliance on the services we provide, the clinical support the engagement and many of our nurses are known on a first name basis by the patients that they serve, right?

We have 600 home infusion nurses they go to people's homes and help them infuse drugs. So for those reasons, a little bit less easy to scrutinize, if you will, it's more difficult to scrutinize because of the services we provide. All that said, we do provide services to the 340B participants. We serve as a contract pharmacy in Accredo, not to a great degree, but we do have contract pharmacies in Accredo. And then we provide services to the health systems and hospitals we were talking about earlier to help them manage 340B capabilities.

Overall, it's a relatively small part of the overall earnings for Evernorth and an even smaller part of the total Cigna Group, but it is a set of services we provide. We do believe the 340B program has an important purpose in American health care. And even if there were adjustments to it, we view that as certainly something we would be able to navigate through without a significant point of pressure, for example, to the company.

And the other dynamic, obviously, in this space is some of the state-based legislation working their way through on companies that own PBMs and specialty pharmacies. So we're using data, using facts, engaging constructively as much as we possibly can to show that the value creation is there for integrated care models, and we'll continue to fight those misguided bills that are working their way through some states.

All right. Great. And then maybe we move to Cigna Healthcare then. Q1 seems like utilization looks relatively modest, but skewed by weather, by flu, by all these things. I guess, how do you think about your visibility into how Q1 actually played out? Any additional color on like how April has gone?

Yes, Cigna Healthcare off to a good start this year. So we were ahead of expectations in the first quarter, driven by the medical care ratio coming in a bit favorable. And really, the drivers of that, we had a little bit of weather-related care deferral. We had a little bit of favorability in respiratory. And then we had some timing dynamics with our exchange business where we had more bronze in 2026 than we had anticipated we would have, and that has more of a steeper slope, if you will, on MCR seasonality, as you well know.

So all of that contributed to the outperformance in the first quarter. Some of that was timing, though, which we expect will reverse over the balance of the year. So we did increase the guidance for Cigna Healthcare by $25 million for the year, which contributed to the EPS raise that we had in the first quarter release. So far, so good for April. So not really a lot to report in terms of variability compared to our outlook.

So things are broadly tracking to expectations across both Cigna Healthcare and Evernorth. We continue to expect cost trends to remain elevated. So not accelerating from where they are, but elevated and persistently elevated. So our pricing, our planning continues to assume that for the balance of '26 and as we head into '27.

Okay. And then you guys are the only kind of pure-play employer-focused managed care company. So like why is -- why have you chosen that as the place to be?

So you're right, in Cigna Healthcare and Cigna Healthcare is about 40% of the company's income today. The lion's share of that is U.S. employer -- employer-sponsored business. And we've proven, if you go back over long periods of time, we've been able to grow over and above market rates. So by -- depending on what time frame you use, the market has grown 0% to 1% in terms of lives in the employer-sponsored space over a long period of time.

We've been able to grow particularly at the lower end of the employer market, what we call our Select segment, 50 to 500 at rates of growth meaningfully higher than that. So mid-single digit, in some cases, high single-digit rates of growth in that space. And really for us, that comes back to focus. So we've concluded we can't be all things to all people. We're not going to be able to be effective by spreading our bets across too many different end markets, whether that's in Cigna Healthcare, whether that's across the company in aggregate.

And we feel like we're really good at serving employers in Cigna Healthcare. So one of the reasons we sold our Medicare business last year, one of the reasons we stayed out of Medicaid is we don't believe we have the expertise to run that business as effectively as others, and we don't see a path for it to scale to be a meaningful part of the Cigna Group franchise.

And we've got great growth opportunities in specialties. We just talked about, continued growth opportunities in Cigna Healthcare in the Select segment and this opportunity to transform our pharmacy benefits model, while continuing to deliver for clients today. So that's really where we're focused right now.

Of course, we'll continue to evaluate those choices being out of the government business indefinitely is a big decision for the company to make. But for the current point in time, we're quite pleased with the portfolio composition and don't feel compelled to make any meaningful adjustments.

Okay. And then on the -- in the commercial book, there was the issue around stop-loss in 2024. So can you talk about how that repricing has gone and where we are on that?

Sure, sure. And for those not familiar with our stop-loss business is part of the Cigna Healthcare product suite for those employers who self-fund benefits, many of them will purchase risk protection on top of that. It could be individual stop-loss for an individual claimant that exceeds a certain threshold or it could be aggregate stop-loss where the employer says, I want a cap on my total budget outlay.

And so it's a great business for us over the long run in terms of the risk/reward trade-off. So we have about $8 billion of annual premium in the stop-loss book specifically, we're the largest underwriter in the world of stop-loss. All of the business that we do is integrated. So we don't do carve-out stop-loss, where we quote only the stop-loss. We only do integrated where we have the underlying medical and put the stop-loss around that.

To your point, '24 was a difficult year for us where claim costs exceeded our expectations rather meaningfully that year. '25 was a year where -- by the time '24 emerged, we were not able to reprice enough of '25. So '25 was a bit of a cutover year or transitional year. '26, we've been able to get sizable price increases. And one of the things I've been really pleased with is the retention of our clients despite those higher than historical price increases that have been necessary in the stop-loss book.

And then '27 will be the final year of the margin recovery on our stop-loss portfolio. But '26 off to a good start. Our guide reflects those dynamics. In '27, we'll complete the stop-loss repricing.

Yes. And it was like 2/3 this year, 1/3 next year. That was the...

Roughly, that's the right dimensioning generally.

All right. And then everyone seems to be talking about AI. I would love to kind of hear your views about AI, where you think the biggest opportunity is across your 3 businesses? And then is there anything people are getting too excited about with AI over their skis on?

Our belief at the Cigna Group is that data, advanced analytics and AI are a critical unlock for the health care system over the long run. So we do not believe it's overhyped in terms of the opportunities in health care. I can't speak to other industries, but certainly in health care, we believe that this is a critical part of driving more affordable, more personalized solutions in the future for customers and clients.

There's a few ways I'd just point to that we're using it already, and then there's some other frontiers. We've been able to take meaningful costs out of the back-office functions. So I shared a data point in our earnings release. Calls -- inbound calls per customer are down 20% in 2 years in our Cigna Healthcare book of business, and they're down 25% in our pharmacy benefit services business.

So that's a function of more and more digital engagement upstream for customers. And when customers do call in better first call resolution because we have AI tools available to our customer service representatives as they're engaging with patients. So that's an example in the back office of what we've done. Then there's a whole category of risk prediction.

So using all of the data that we exist that we have under the Cigna Group umbrella, we've been able to take the models historically, which were constructed by data scientists and actuaries and turbocharge those with AI capabilities. So we've gotten much more accurate risk prediction of who will be a high-cost claimant within our Cigna Healthcare book of business, which helps us with our stop-loss business we were just talking about. And it helps us to mobilize our clinical teams to engage earlier with those patients to help with their treatment protocols and their care journeys.

And we found that, that saved for the patients that engage $2,000 per year just as a function of that. So that's an example of risk prediction pointed at the affordability challenge. And then there's a whole set of use cases we're exploring in the customer experience domain to help reduce some of the fragmentation of patient journeys, whether that's the Cigna Healthcare AI virtual assistant that we launched last year, whether that's capabilities that we're putting into our call centers where instead of having an IVR phone tree, now you have a responsive AI agent engagement.

Those are the types of enhancements to the customer experience that we think AI will really help to turbocharge. So this is an area where we seek to lead. We're putting a lot of capital behind this. We're putting a lot of people behind this, and we think it's a critical unlock for the system at large.

All right. Great. I think that's all we have time for. Thank you very much.

Thank you, Kevin. Appreciate the time.

Ladies and gentlemen, thank you for standing by for The Cigna Group's First Quarter 2026 Results Review. [Operator Instructions] 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. Thanks. Good morning, everyone. 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; Brian Evanko, President and Chief Operating Officer; and Ann Dennison, Chief Financial Officer. In our remarks today, David, Brian and Ann will cover a number of topics, including our first quarter 2026 financial results and our financial outlook for 2026. Following their prepared remarks, David, 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 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 the cignagroup.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 first quarter, we recorded after-tax special items charges of $322 million or $1.22 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'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining us today. This call is somewhat bittersweet for me as it is my last quarterly earnings call after many years, Cigna Group. The CEO, I participated in close to 70 of these calls with you, and I'm pleased to be able to share strong results again on this call. Today, I'll focus my remarks on our strong first quarter performance and how we continue to deliver in a dynamic operating environment. And then I'll take a moment to address our leadership transition on July 1 and Brian Evanko will step into the CEO role to drive our company's next chapter of growth, and I'll transition to the role of Executive Chair. Following my remarks, Brian will provide a more detailed update on our business platforms and performance and then Ann will review additional details about our financial results and outlook, and then we'll move to your questions.

So let's get started. I'm pleased to report that The Cigna Group delivered strong performance in the first quarter, including total revenues of $68.5 billion and adjusted earnings per share of $7.79. All while we continue our disciplined track record of reinvesting back in our businesses to fund growth addressable market expansion and innovation. With our performance, we are raising our full year 2026 adjusted EPS outlook to at least $30.35 reflecting our disciplined approach and steady execution in an operating environment that continues to be shaped by many forces. Two of these froces are clearly rising to the top for customers and employers. First, affordability; and second, the need for health care that is more personalized and as a result, easier to navigate. We are addressing these expectations in an environment where health care demand continue to rise and the cost of new services like pharmaceuticals continue to grow to greater than inflation.

Against this backdrop, over the course of my tenure, there are 3 key attributes that our company has demonstrated time and again to fuel a successful track record of performance rooted in purpose and innovation. First and perhaps most importantly, we've been steadfast in our commitment to put the customer at the center to make the health care journey more affordable, personalized and overall easier to navigate. This commitment is what spurred us to improve our prior authorization process as outlined in our first customer transparency report, which was released last month.

Our goal is to make the process faster and more seamless while ensuring that care is to lift the right time and right place appropriately and safely to that end, we have removed hundreds of tests and procedures and services from prior authorization process in the United States, decreasing the volume of medical prior authorizations by about 15%. Our treatment to the customer also drove us to take an active role within the industry, which last week announced further progress towards stabilization of the prior authorization process. This is enabling greater automation and more seamless, efficient access to care while maintaining appropriate safeguards. This announcement reflects continued progress on the voluntary commitments our industry made in June of 2025, in coordination with HHS and CMS.

Second, our company has taken a strategic and disciplined approach to the way we shape our business portfolio, which Brian will address more in a moment. Through our approach, we remain sharply focused on where we can deliver differentiated value, and we feed those businesses with additional capabilities or a -- and where we cannot, we make the decision to exit. This process has honed our focus on the addressable markets where we have a right to win for the benefit of our customers, patients and clients, which has been a critical driver in our success for many years.

Finally, we have a proven ability to innovate and perform even in the most challenging environments, whether that is in periods of accelerated medical costs or during the COVID-19 just to name 2. In moments like these, when customers' needs and behaviors change quickly, we remain relentlessly focused on market centricity, customer centricity and micro segmentation. The introduction of our transformative rebate-free pharmacy service model is the most recent example. This multiyear investment in innovation will deliver the lowest price to the consumers for their brand drugs which will be 30% lower with full transparency each and every time. And this model for deepens partnerships with independent pharmacists, including those critical ones in rural communities. We call this offering signature, a name that reflects a new era in pharmacy services.

Now before concluding my remarks, I also want to speak briefly to our upcoming leadership transition. After my nearly 17 years as CEO of The Cigna Group, we are on track for our carefully planned transition on July 1, when Brian will succeed me as CEO and take on the role, and I will take on the role of Executive Chair. Brian has a strong history of prioritizing customer and client needs and decision-making grounded in our clear mission and enduring such a purpose. Looking ahead, he is committed to further the use of data and AI to drive affordability and personalization, which in turn drives value and sustained growth. With a strong foundation and clear focus I'm excited for Brian to take the helm to guide The Cigna Group to its next chapters of growth. And I look forward to working closely with Brian in my role as Executive Chair.

Now let me wrap up and summarize the quarter and our results. We delivered strong performance, giving us the confidence to raise our full year guidance for 2026. We delivered total revenues of $68.5 billion and earnings per share of $7.79. Looking ahead, our increased adjusted EPS outlook of at least $30.35 reinforces to sustained growth, durability and strength of our company. We are delivering in a highly dynamic environment, and we continue to invest with purpose through a customer-first orientation, driving disciplined portfolio shaping and innovating to personalize and modernize health care for the benefit of our customers and clients. We have a clear strategy and the right leadership team in place to capitalize on those opportunities ahead. And with that, I'll turn the call over to Brian to discuss our results in more detail.

Thanks, David. Good morning, everyone. First, I want to take a moment to thank David and acknowledge his strong leadership, both within our company and throughout the industry. Through his 35 years of service with the company, he has left an enduring legacy defined by an unwavering focus on meeting customer needs, a relentless partnership orientation toward others and a deep commitment to the communities that we serve. It's been a privilege to work with him for so many years. Looking to the future, there's no question that the status quo in health care is unsustainable. Costs continue to rise as does demand for health care services, an untenable equation. .

In this environment, the experience that I have gained over my nearly 3 decades with the company have sharpened my understanding of the needs of those we serve and strengthen my commitment to continue to deliver on our mission. I'm humbled and honored to take on the role of CEO in July with a focus on The Cigna group becoming the clear leader in consumer-focused and AI-enabled health services with an emphasis on clinically complex patients making care more affordable and more personalized for those we serve. In my remarks today, I will cover several topics.

First, I will share a few ways we are shaping our portfolio for the future, aligned to our strategy. Then I will review our first quarter business performance across our growth platforms. And I will go a bit deeper on ways that we are harnessing data, advanced analytics and AI to deliver more affordable and more personalized health care services. Turning to our portfolio. We have a disciplined and consistent approach to ensure that our businesses are aligned to and support our strategic direction and can deliver differentiated value in the market. Over the years, this approach has guided our decisions to either add to or subtract from our portfolio, which in turn has positioned our core health care businesses for sustainable growth. For example, last year, we added key capabilities in the highly attractive specialty pharmacy market. Our acquisition of CarePathRx provides us with further depth in infusion-related services.

And our investment in Shields Health Solutions provides us the opportunity to partner more closely with hospitals and health systems who serve patients with complex care needs and rely on specialty medications. On the other end of the spectrum are the businesses we have divested where the assets no longer support our strategic direction or have reduced management focus from our core growth platforms. Our divestiture of our Group Life and Disability business, which also meaningfully reduced the company's exposure to economic downturns is a prime example as is the more recent sale of our Medicare businesses. Divesting each of these assets enabled greater focus and investment in the remaining businesses within our portfolio, supporting our forward-looking growth path.

In keeping with this portfolio shaping discipline, today, we are announcing 2 additional actions. First, we are planning to exit our individual exchange business at the end of this year. We did not make this decision lightly and appreciate the importance of ensuring patients have continuity through the transition. There are no changes to coverage or networks related to this announcement. And we will support members through their open enrollment transitions into 2027. Second, as our industry continues to make strong progress on standardizing and automating prior authorization services, we have decided to initiate a strategic review of alternatives for EviCore. EviCore is a part of enabling how care is evaluated and delivered across the industry including working with numerous health plans to perform reviews and prior authorizations on their behalf. As David mentioned, prior authorization plays an important role in health care and we will explore options to continue delivering the highest level of service for health plans and the industry at large, while maximizing long-term value.

We see the potential for different approaches to standardize prior authorization across the industry improving transparency for customers and clients, reducing the administrative burden for providers and creating efficiencies for the industry. Both of these actions reflect a deliberate strategy to sharpen our focus on our core platforms where we have the capabilities, positioning and expertise to deliver differentiated value for the benefit of those we serve.

Turning to our performance in the first quarter. We started the year with strong results across both Evernorth Health Services and Cigna Healthcare. Overall, Evernorth earnings were slightly ahead of expectations. This was driven by the strength of our Specialty and Care Services businesses, which delivered adjusted earnings growth of 20% in the quarter, reflecting continued attractive volume growth. As the specialty pharmacy marketplace continues to grow we are well positioned across our suite of solutions, our strong supply chain and our expertise in inventory management and complex drug distribution.

Our ability to deliver a strong clinical support model continues to have a positive impact for patients and clients alike. We see this through higher adoption and adherence rates once patients begin taking biosimilars and specialty generics leading to better overall outcomes. Turning to Evernorth's Pharmacy Benefit Services business. Our results were in line with expectations. Our first quarter results reflect previously discussed impacts of large client renewals and investments as we progress toward our transformative new rebate free model. Named Signature. This week, we met with hundreds of leaders from our largest pharmacy benefit services clients. And there are a few consistent themes we're hearing from clients and prospects alike about the direction of our business.

First, our forward-thinking innovation is resonating for its focus on the consumer offering the lowest out-of-pocket costs at the pharmacy counter and helping clients navigate through a very complex and fluid external environment. As clients continue to face budget uncertainty driven by new drug launches and midyear market disruptions, -- our new simplified model will give clients clear visibility into economic value and greater predictability. Second, they appreciate that we are proactively leading through regulatory and legislative changes. We continue to hear from clients and prospects that they are seeking clarity, predictability and value for consumers. Our signature model directly addresses these priorities and supports plan sponsors as they address their obligations today and in the future.

Finally, our clients value our partnership in meeting their needs today while anticipating future needs. This feedback is reflected in a strong start to our 2027 pharmacy benefit services selling season. Finally, turning to Cigna Health Care. Our earnings exceeded expectations in the quarter and grew 18% year-over-year, powered by solid persistency, continued disciplined execution and MCR favorability. Our strong earnings performance is further enabled by our innovative offerings and focus on consumer experience improvements. Recently, Cigna Healthcare was ranked #1 by J.D. Power and digital experience satisfaction among commercial health plan members for the second consecutive year. We are also seeing Clearity, our new co-pay only medical plan launched late last year, generates strong market interest.

In addition to its simplified product design, Clearity features externally derived clinical quality measures and a single digital front door that gives customers integrated access to care and their historical claims data through our myCigna app. Taken all together, we're pleased with our strong first quarter performance across both Evernorth and Cigna Health care. The positive first quarter results and market momentum are further powered by our embrace of data and modern technology. By leveraging the combined power of data, advanced analytics and AI, we're able to drive greater customer and client satisfaction through improved affordability of care and greater personalization of services.

Let me offer a few examples. Starting in our Specialty Care Services businesses. Today, we are using a genic AI together with our clinical expertise to improve customer and patient experiences. This is enabling us to transform how prescriptions are processed, efficiently schedule prescription orders and proactively identify patients who need additional service. We do not use AI for clinical decision-making, but rather AI capabilities increase the speed and strength in the decision quality of our highly experienced clinical teams. In Pharmacy Benefit services, we are utilizing AI to enable better care and service to our customers. This includes leveraging AI in our signature model to improve member communication and notifications and help patients make decisions on their care journey and enhancing our capabilities to deliver the lowest out-of-pocket cost for consumers, including the GLP-1s, where we continue to evolve as new oral solutions enter the market and prices decrease.

And in Cigna Healthcare, we are using AI-enabled capabilities to improve outcomes through risk prediction models, identifying complex patients earlier in connecting them with our clinical teams. Our predictive high-cost claimants model identifies members with increasing care needs earlier in their clinical journey. This then enables targeted clinical engagements that improve affordability, reduce acute utilization and drive measurable cost savings. To date, for those customers engaged in this model, we see an average of $2,000 per member per year in savings, resulting in the elimination of unnecessary provider and ER visits. This improved high-cost claimant prediction capability has benefits across Cigna Health Care, for example, in the stop loss business.

More broadly, we are proactively helping our customers in highly personalized ways. The combination of our AI tools and contact centers and improved customer digital experiences led to a 20% drop in total inbound calls for digitally eligible customer in our Cigna Healthcare U.S. Employer business. And a 25% reduction for pharmacy benefit services members when compared to just 2 years ago. Ultimately, these capabilities allow us to go beyond administrative enhancements and deliver better health outcomes. As I wrap up, I'd like to reiterate a few points. Some of the notable headlines from our strong first quarter include continued momentum in our specialty businesses, underscoring powerful secular growth our differentiated capabilities and our expanded suite of solutions. Good progress on constructing our new signature pharmacy benefits model and positive market reaction to our innovation and evolution. And Cigna Healthcare results exceeding expectations with performance supported by our innovative offerings and focus on the customer experience.

As a result of this combined strength, we are pleased to increase our earnings guidance for the year to at least $30.35 per share. This is made possible by the great work of our teams and also through our continued deliberate focus on disciplined portfolio shaping which ensures that the appropriate resources and support are pointed toward the growth of our core businesses. This morning, we announced the thoughtful sunsetting of our individual exchange business at the end of this year. as well as evaluating strategic options for Evercore. Our results are also enabled by continued investments into harnessing the power of data, advanced analytics and AI driving new value creation and improved personalization and affordability for our customers.

As we look to the future, I'm excited about the progress we've made to date and how we're leading the way building with NEXT in health care. With the most experienced leadership team in the industry and continued partnership with David as Executive Chair, I am confident we are well positioned for continued growth and success. We look forward to hosting an Investor Day in September. We will share more and discuss advancements in each of our core businesses. Now I'll turn it over to Ann to cover our financial performance.

Thank you, Brian, and good morning, everyone. As Brian mentioned, we started the year with a strong first quarter performance. Key consolidated financial highlights for the first quarter include revenues of $68.5 billion and adjusted earnings per share of $7.79, representing 16% year-over-year EPS growth. With the first quarter results, we are raising our full year 2026 adjusted earnings per share outlook to at least $30.35. This outlook reflects the positive momentum in our businesses while maintaining a prudent view of the current moment. Now turning to our segment results. I will first comment on Evermore. First quarter 2026 revenues grew 9% to $58.4 billion, while pretax adjusted earnings grew 2% to $1.5 billion slightly ahead of expectations. Special team care services showed strong growth with pretax adjusted earnings up 20% to $1.1 billion. This performance reflects continued momentum in our fastest-growing business, including strong demand for specialty and increased biosimilar and specialty generic adoption which are key levers for delivering affordability, value to patients and clients.

Additionally, the income from our investment in Shields Health Solutions contributed to the growth in the quarter Pharmacy Benefit Services pretax adjusted earnings decreased 28% to $394 million, in line with expectations. The year-over-year decline of approximately $150 million in the quarter reflects the previously discussed renewal and extension of large client contracts as well as investments associated with the transition to Signature, our new rebate free pharmacy benefits model. As those assessments ramp through the year, the trajectory remains consistent with our prior commentary and expectations for the business.

Taken together, Evernorth's first quarter results reflect the deliberate evolution towards signature and greater focus on higher value care services and specialty capabilities. Turning to Cigna Healthcare. First quarter 2026 revenues were $11.5 billion, and pretax adjusted earnings were $1.5 billion. The medical care ratio for the first quarter was 79.8%. Cigma Healthcare results were favorable to expectations in the first quarter, driven in part by lower flu volumes and weather-related care deferrals. This year, we also have seen a higher proportion of individual exchange members enrolled in plan, which results in a lower first quarter MCR, which does not change our outlook for the full year.

As Brian mentioned earlier, as part of the strategic shaping of our portfolio, we have made the decision to exit the individual exchange beginning in 2027. This will allow us to focus on areas where we can best offer differentiated value to make a more meaningful difference in the health and experiences of those reserves. Our financial expectations for our ACA exchange business in 2026 remain unchanged. Overall, we are pleased with Cigna Healthcare's strong first quarter results.

Now turning to our outlook for full year 2026. Our first quarter performance was strong and we are raising our full year 2026 consolidated adjusted earnings per share outlook to at least $30.35 maintaining a disciplined and prudent approach to the full year. Regarding the cadence of earnings, we expect second quarter adjusted earnings per share to be approximately 25% of the full year outlook. In Evernorth, we continue to expect full year 2026 adjusted income from operations of at least $6.9 billion, and we expect second quarter pretax adjusted earnings seasonality and to be similar to historical patterns. For Cigna Healthcare, we now expect full tax -- full year pretax adjusted earnings of at least $4.525 billion and we expect pretax adjusted earnings in the first half of the year to be slightly above 60% of the full year outlook. We expect the second quarter medical care ratio to be slightly above the high end of the full year range with the sequential increase reflecting typical seasonality and business mix compared to prior years. Our full year medical care ratio guidance remains unchanged.

Turning to our 2026 capital management position. First quarter operating cash flow was $1.1 billion. We continue to expect the majority of 2026 operating cash flow be realized in the second half of the year, consistent with our prior commentary and last year's pattern. Our debt-to-capitalization ratio was 42.3% as of March 31 and 70 basis point improvement compared to year-end 2025. We expect this ratio to be lower by year-end 2026 as we balance debt repayment with other uses of capital, including share repurchase. .

Now to recap. Our first quarter results reflect strong contributions from both Evernorth and Cigna Healthcare, disciplined execution and the resilience of our diverse portfolio of businesses giving us the confidence to raise our full year 2026 adjusted earnings per share outlook to at least $30.35. And with that, we'll turn it over to the operator for the Q&A portion of the call.

[Operator Instructions] And our first question comes from A.J. Rice with UBS.

David, best wishes to you as you move forward. And Brian, congratulations to you on the new role. I wondered maybe just to drill down a little bit more into what you're seeing as you roll out to the to your clients, the new PBM model. I know it doesn't go live for external clients until 2028, but you're in the -- well into the '27 selling season. And I'm trying to think through, if I'm making the transition to the new model as a client, do I need to give you more than the typical notice? Does it take longer lead time for me to make that transition when do you think you'll get indications from clients as to the uptake there? And maybe just expand a little more on the comments around strong selling season, how much is being driven by this discussion versus just the general market environment?

It's Brian. I'll try to take each of those components of your question. I appreciate the kind words and both David and I appreciate hearing that from you. So thanks. Obviously working with you for many years. As it relates to Signature, our new rebate free pharmacy benefits model, maybe I'll just step back and give you a little bit of context for how we got here and how to think about the next couple of selling cycles to your point. If you think about the challenges we have here with health care in America, the affordability of prescription drugs continues to be 1 of the top challenges facing both patients and therefore, the entire pharmacy benefits industry and this is particularly acute for high-cost branded prescriptions, which today represent just 10% of all the prescriptions in America, but nearly 90% of the total drug spending and all key stakeholders, whether that's employers, whether that's brokers, whether that's drug manufacturers themselves acknowledge that the status quo is unsustainable.

So the market feedback thus far as it relates to our new rebate free signature model has been positive as clients and brokers invest the time to learn more of the details of our new model. As I noted earlier, we had hundreds of our largest clients together just this week and received a variety of helpful input from them. Importantly, this model though was designed with the patient at the center and our price assure capability guarantees patients the lowest possible out-of-pocket costs when they fill their prescriptions, whether that's through our negotiated price, whether that's the patient's co-pay or a cash paid alternative. And if the patient does utilize a direct-to-consumer cash pay alternative will ensure that out-of-pocket applies to their deductible. So after we got through some of these details, clients and brokers are excited about this model and treated to learn more about it.

And our legacy rebate free model, it serves a time to place. We're seeing increasing instances of unintended consequences where patient affordability is suffering. Additionally, we're seeing employers and other clients reviewing their obligations to employees and their family members and see the signature model as a simpler way of ensuring that those needs are met. So our capabilities are multidimensional and bespoke in the sense that they can meet a variety of unique clients. So as it relates to the selling season and how to think about this, the signature model will become our standard model in 2028. And as we have shared before, we expect at least 50% of our Evernorth Pharmacy Benefit Services members to be in the Signature model by the year-end 2028. The PDS selling seasons tend to be long, as you know. So by the end of this year, we'll have a much better picture as to the level of market interest to adopt COM-128. Right now, we are largely in the 2027 selling season, which is largely our existing models with continued evolution.

Some of the things we're seeing so far in 2027, though, we're on track for mid-90s or better retention again, which is consistent with historical norms. We ended 2026 with over 97% retention. Additionally, we've already secured some key new business wins for 2027 in Pharmacy Benefit Services, underscoring that our current solutions are resonating in the market. So we're meeting the needs today, and we're preparing to meet the future needs with our new Signature model, which steps over many of the affordability challenges that are in place today. So hopefully, that helps a little bit with reconciling all the different moving pieces. As it relates to 2027, our Cigna Healthcare book of business, our fully insured customers will fully adopt the new model. That's just the standard part of the renewal cycle with those individuals. We're really excited about the future and the Signature model points the way for the industry. Thanks for the question.

Our next question comes from Kevin Fischbeck with Bank of America.

Maybe just asking on the 2 new data points about reshaping the portfolio. Any way to think about the impact from the exchange side as far as capital you might recapture next year. And then the Evercore transaction, is that something that you were approached by the that you decided to do strategically? And should we be thinking about this as a transaction that would be slightly accretive? Or is this kind of a neutral transaction economically?

Kevin, it's Brian. So both of the portfolio shaping actions that we announced this morning, the sunsetting of our individual exchange business as well as exploring strategic alternatives for Evercore were decisions we took proactively. So you should not think of those as a response to any sort of other market activities as we're a proactive, deliberate portfolio shaping decisions that we took after stepping back, continuing our long tradition of disciplined decision-making with the long-term orientation.

As it relates to the individual exchanges, really, there were 2 primary drivers of our decision to step away from that business. One, we did not see a clear path to scale this business to achieve meaningful impact within the context of The Cigna Group's aggregate size. And the second factor is management focus for the organization. This is a small business for us today, and it's been shrinking in recent years. So the decision will allow us to further intensify focus on our core growth platforms across The Cigna Group, notably our rapidly growing specialty and care services businesses, our industry-leading pharmacy benefit services business and our flagship U.S. employer business within Cigna Healthcare.

To your point on capital, we'll free up some amount of capital, but I wouldn't view that as a particularly material again in the context of The Cigna Group. As it relates to core our announcement to explore strategic alternatives, again, as a result of a disciplined assessment process. And you can think of this 1 really being driven by 2 primary factors as well. Similar to my comments on the individual exchanges, the potential size of this asset within the context of The Cigna Group's portfolio made for a challenge relative to the ability to scale it and consume management attention and time. And secondly, as David discussed in his comments earlier, the continued progress around standardization and automation of prior authorization processes, let us to step back and assess the future of the business within our portfolio. Over the past 18 months, we're proud to have voluntarily announced a series of commitments to improve the methodology and tools around prior authorizations, all of which ultimately are designed to simplify customer and provider experiences.

And some of those commitments were specific to us at The Cigna Group. Others were in partnership with HHS and other industry participants. For example, just last week, we had a joint announcement related to the standardization of information that's required for many of the most commonly requested procedures. So all these prior authorization enhancements through standardization and technological progress opened new doors for eviCore business, which could potentially result in a partnership or a combination with other complementary industry participants. But there is no transaction to discuss. This was a proactive step we took to shape the portfolio. Hopefully, that helps. We look forward to providing more details on all of this in the coming months.

Our next question comes from Lisa Gill with JPMorgan.

I just really had 2 things I wanted to better understand. One was just the cadence of the cost, you talked about $150 million in this quarter for renewal plus the transition to the new model. How do I think about that for the rest of the year? And then secondly, very strong results when I think about specialty. Can you talk about some of the key drivers from a specialty perspective. Is this growth in existing clients? Is profit being driven by some of the comments you made earlier around biosimilars. Just if you can give us any color on how to think about your specialty business?

It's Brian. Maybe I'll start with just a few framing comments and then Ann can pick up on some of the drivers from a financial perspective. But overall, we're really pleased that our Evernorth business in total was slightly ahead of expectations powered by the strength in the Specialty and Care Services portfolio. As you think about the Specialty business, this is a space with really strong secular tailwinds, as we've discussed before, and we see the space growing, call it, mid- to high single digits on a pure secular basis. And then we have strong differentiated company-specific capabilities to deploy against that. And so in the quarter, we saw strong volumes, we also saw strong biosimilar adoption, and we had contribution from the Shield investment that we made late last year. And can unpack that a little bit further. .

In the pharmacy benefit services business, we were pleased with the performance of that as well, being in line with expectations and a solid start to the year. And you'll recall, we had 2 discrete headwinds stepping into the year 1 being our proactive large client renewals and the second being the investments to build out our new rebate-free Signature model. And as I was discussing earlier with A.J., as we continue to deliver on the present, we're simultaneously preparing for tomorrow through the build-out socialization of our new signature model with all key industry stakeholders, and that will be ready to scale in 2028. Ann maybe you can pick up a bit on the 2 components of Evernorth. .

Sure. So I'll start with Specialty Care first. And as Brian said, we're pleased with the results. We expected a strong first quarter in Specialty & Care, and we came in slightly ahead of expectations. We remain excited about the space, as Brian talked about, a strong performance in the quarter. So solid specialty volume growth. I'm going to point to 3 things. That's one. The second is a continued mix towards more cost-efficient therapies, so biosimilars and specialty generics. Those are delivering meaningful savings to patients and clients while also lowering reported revenue and supporting higher margins for Evernorth. And then the third, Brian touched on this, the contribution from Shield. So those are the 3 big drivers for the quarter. Taken as a whole, we're confident in delivering Specialty and Care in the high end of the growth range for this year.

The Specialty Care for PBF, new line double down results were in line with our expectations and consistent with the prior commentary that we've given around proactive renewals and extension of the 3 large clients as well as our planned investments to support our transition to Signature our new free bake remodel. So in the first quarter, -- if you just look at the dollars, PBS earnings were down about $150 million compared to last year first quarter. As you think about the run rate of that and then a ramp-up of some of the spending around Signature is weighted towards the back half. The numbers are in line with our prior commentary and our guide -- our overall guide for Evernorth. So -- with that, again, PBS was in line with expectations, and we remain focused and excited about our transition to Signature and confident in our shaping of Evernorth for the full year.

Our next question comes from Scott Fidel with Goldman Sachs. .

David, it's been quite a 1 over the last 70 earnings quarters out with you. So I appreciate all that dialogue over the years. And Brian, congratulate it to you, I guess, Brian, just in sort of the context of some of the strategic sort of updates that you've been talking about and some of the as you start transitioning into the C-suite. And just on if you can maybe also frame it around the 5 growth pillars that have been sort of at the core of the growth strategy for a number of years, but there's also been some evolution across some of those markets as well. Curious around how you see the continuity around those 5 growth pillars or do you see potentially making -- putting your personal touch on those, that approach to some degree as well.

Scott, I appreciate the question and the kind words. I'm sure David does as well. Maybe I'll just give you a little bit of framing for how I'm thinking about the future of The Cigna Group when I step into the CEO role in July. And I'll share a little bit of the problem statements that face our industry a little bit of where we're focused and hopefully, that merges with your point on where we're going to be focused from a growth standpoint. So First off, I'd just start by reiterating my gratitude to David and our entire Board for such a thoughtful plan transition as I step into this role, I'm simultaneously humbled and excited if you will, to be stepping into such a big job here and also feel a strong sense of accountability to our customers, clients, business partners, shareholders as well as my coworkers and their family. So we're fortunate to be right now performing so well across The Cigna Group as we outlined in our release this morning.

So I'm able to build on that historical success, carry forward the momentum we have and really attack the biggest problems in health care going forward. And the problems that we see really are threefold. The first 1 is affordability. Second 1 is, at times, there are fragmented customer and patient experiences. And the third 1 is we have a reactive Cigna care system. So our strategy at The Cigna Group is focused on addressing each of these opportunities. Now we have 3 strong high-performing growth platforms that we continue to invest in -- and to the point I'm making earlier around portfolio shaping, these 3 will continue to be fed with financial and human capital going forward.

One is our Specialty Care Services platform, which now represents about 35% of the company's income and is growing to 12% per year, as -- and just referenced earlier. Secondly, our pharmacy benefit services platform, also within Evernorth, about 25% of the company's income is going through the transformation that I was alluding to earlier, and we're confident on the long-term durability of that. And then finally, our Cigna Healthcare business, which represents the other 40% of the company's income, which is our high-performing health plan business, underpinned by our flagship U.S. employer business, which has shown a long track record of growing at above market rates. So those are the growth platforms we're going to be very focused on going forward in terms of scaling and delivering against our long-term commitments to our shareholders as well as to our customers.

Now when I take the CEO role in July, there are a few areas of greater intensification that I'd just like to highlight for shareholders. One will be the way we harness data, advanced analytics and AI to drive more personalized affordable customer experiences to a relentless drive to more affordable types of care to think generic drugs, biosimilars, more cost-effective locations for medical procedures. And third, shifting further upstream into care journeys through preventive care, diagnostics and encouraging behaviors that promote health and wellness.

And finally, through an investor lens, there are 3 commitments I'll make to all of you. one, strong organic execution of our strategy; two, disciplined capital deployment and continued portfolio shaping, always with a long-term lens. And finally, I believe that our equity has significant appreciation potential from current levels. Through continued strong execution, thoughtful strategic decisions and providing the right visibility to investors reach meaningful shareholder value creation opportunity. So hopefully, that feels familiar to you. We'll be continuing the momentum we have now and intensifying in a few of those areas you just made reference -- thanks for the question, Scott.

Our next question comes from Charles Rhyee with TD Callen.

And first, let me echo congrats to the bulk of you going forward here. Maybe if I could follow up on Lisa's question and drill down a little bit more on biosimilars and the strength we saw in specialty. Perhaps how much of the results we saw in the quarter were driven by formulary genes really to try to drive biosimilar adoption, which I think could be also positive for Accredo. And I'm thinking in particular around biosimilar STELARA, which I think you're also manufacturing through. Maybe talk a little bit about how the synergies between the different parts of the Evernorth business is helping in this regard and perhaps how much of that was -- is driving this kind of growth? And is that something we should expect, particularly as we see more biosimilars coming to market over the next few years? .

Sure, I'll start on this one. So I appreciate you highlighting the strength of our specialty platform as made reference to earlier, really pleased with the strong momentum there. And we believe biosimilars and specialty generics are critically important to driving affordability for the health care system at large in the future. And if you think about the journey we've been on here, we introduced a HUMIRA 0 out-of-pocket a couple of years ago. And the penetration of those biosimilars have continued to grow. And so it took a further step forward into the first quarter of '26. Similarly, our STELARA 0 patient out-of-pocket was available first in May of last year. So if you're doing the year-over-year, it was not in the first quarter of '25, it is in the first quarter '26.

We've seen nice growth in the penetration of that over the course of the 10 months or so since we introduced it -- and this year, we're excited about generic Revlimid, which is especially generic that will have supply constraints ease and that will add to contributions as the year unfolds. And finally, I would just remind you, we made our investment into Shields in the third quarter of last year. So as you think about the way that the timing will unfold on the financial contribution there. as you model the balance of the year. But those are all areas we're really excited about. In addition to core volumes that continue to grow -- we saw a particular strength in the quarter in a few areas like severe asthma hepatology fertility that saw outsized percentage growth rates in volumes in specialty. So we're really excited about that platform in the future. I think David wants to way in with a few thoughts here as well. .

Thanks, Brian. And Charles, thanks for the question. I just want to amplify 2 pieces that Brian articulated and then drill down for 1 more moment. One, our model still embraces choice, so affording choice with the diversity of who we serve and type on what you heard is the incentive alignment. So whether it was HUMIRA or STELARA. STELARA designing it with the $0 out-of-pocket for the consumer, for the patient, very strong value delivered to stakeholders, the employer financier as well as the consumer.

Click down on and complement the team on, the team was able to harness effective use of AI to identify the conversion strategies in a highly personalized way, which had high NPS, low friction and high continuity for both the patient and the physician. The result of that is the conversion. The result of that is more value delivered, but higher satisfaction and then staying power of the conversion to the biosimilar. So it's an example where Brian talked before about harnessing data those few together in AI a highly personalized basis to deliver the outcome on the biosimilar, but to do it in a very customer patient-friendly way and a physician coordinated way. Thanks for your question. .

Our next question comes from George Hill with Deutsche Bank. .

Brian and David, again, congratulations to both you guys. I was just hoping you might update us on your 340B exposure given where you guys are with CarePass now and Shield. And kind of how should we think about how the -- and I don't know if you're doing to quantify what both of those units are contributing to the business right now from an operating earnings perspective. And just kind of how to think about the exposure to that segment, given what's going in the drug space?

George, it's Brian. I appreciate the comments and the question. So as it relates to 340B, you can think of that as a component of the Specialty Care Services platform within Evernorth that we just made reference to. And actually, if you go way back at the time we acquired Express Scripts, looking at the Accredo asset that realized it did not have very much 340B activity within it relative to others in this space. So over time, we built a suite of capabilities that allow us to partner with hospitals and health systems more effectively to help them manage their 340B related activity.

So we had a small acquisition several years ago, Verity, more recently, or acquisition of CarePath and the investment we made in Shields all allow us to serve hospitals and health systems in a way that allows them to optimize their relative performance around 340B. So you should think of it as indirectly supporting, again, hospital and health systems through our service-based offerings as opposed to being a scaled 340B contract pharmacy as it relates to the portfolio. So overall, it's a component of the Specialty and Care Services portfolio, but the lion's share of that business continues to be our core Accredo specialty pharmacy as well as our CuraScript distribution capability. So per to think about it in that way as opposed to being its own P&L, if you will, within the broader Evernorth portfolio.

Our next question comes from Justin Lake with Wolfe Research. .

I wanted to focus on a and specifically on the reported noncontrolling interest in the quarter of $226 million. NCI increased dramatically over the last years and this quarter more than doubled versus Q1 '25. So just given how significant this item to come, I wanted to dig in here for a minute. My impression is that NCI is driven by your GPO, which is, I believe, both the joint ventures, I wanted to confirm a few things. First, what are the main JVs driving this NCI. On average, what percentage of these JVs are owned by the company versus your partners? And what specifically is driving the 100% plus increase in the quarter, for instance, if the partners get significantly larger piece of the JV? Or is this completely driven by a doubling of earnings from the JVs? Thanks for the details. .

All right, Justin. So I'll start. So just to frame it a bit. We support Health in a variety of variety of ways, including procurement, value-based services, and we work across a broad set of relationships with health plans and related entities. Through these partnerships, clients benefit from our ability to drive value and we're able to deliver flexible competitive solutions. So the NCI line item includes minority earnings from a number of joint ventures and partnerships, which you mentioned. There are multiple different structures and ownership levels. So the growth in NCI doesn't directly correlate to the same levels of growth in our earnings.

If you're looking at the year-over-year increase in the NCI line, that was primarily driven by a new joint venture, 1 of our largest clients and the additional economics are passed back as part of the previously discussed renewals that we did. So JVs can have various structures for this one, the new 1 that drove the increase despite us holding a majority share, most of the economics are passed back and have no impact on our earnings. This was known and fully contemplated in our guidance for the full year, and we are really pleased and happy to continue to be a partner of choice for the largest those sophisticated purchasers. I hope that helps.

Our next question comes from Erin Wright with Morgan Stanley. .

Great. With some of the optimization in the portfolio kind of announced today, I guess, should we really think about this, are we read this as you're really trying to push into specialty? Like how central is specialty to the strategy? How do we think about this in the context of your capital deployment priorities from here? And on the flip side of that, what is the commitment to other parts of the insurance business and remind us of the synergies across the integrated model, how that aligns with this sort of new AI-enabled consumer-driven health care services company?

I think there are a few different topics in there that I'll try to lead together as best I can. But as it relates to the portfolio shaping that we announced this morning as I was responding to a earlier think of the choices here as being proactive decisions based on a deliberate review of management focus, relative size and scale, as well as the degree of standardization and automation, for example, that's transpiring in Evercore, -- so you should think of this as the core drivers. As it relates to specialty, we're already a scaled player there, and we love this space. So there should be no doubt about that. but that's not at the -- it's not trading off growth in our other growth platforms at all.

So you should think of we want to continue scaling our specialty business for sure. We want to continue to scale Cigna Healthcare for sure, and we want to continue to transform the pharmacy benefit services model. So all 3 of those growth platforms will continue to get resources and investments as opposed to being a specialty alone. That said, we do continue to see further upside in our specialty business. If you look at our capital deployment in the last couple of years, it's gone in an outsized way into the specialty space with our acquisition of CarePath, and the investment we made into Shields. And going forward, we'll continue to have a balanced capital deployment framework once I become CEO, you should not expect to change as it relates to the way we think about deploying capital. We'll continue to prioritize internal reinvestment. We'll continue to pay an attractive shareholder dividend. We'll continue to make sure the capital structure is appropriate in terms of leverage ratios and we'll use share repurchase and strategic M&A on a targeted basis.

And our focus from an M&A standpoint, the current time continues to be targeted strategic bolt-ons like your broader umbrella, we're very excited about the specialty space. We'll continue to invest there. We'll look to scale it. But again, it won't be trading off against other parts of the company's growth platforms. And looking forward, we do continue to see attractive opportunities to weave together our multidimensional capabilities across The Cigna Group. So many of our Cigna health care clients value the fact that they have a combined medical, pharmacy, behavioral offering that brings together the best of the company into 1 singular offering for the benefit of patients and their families. So hopefully, that helps to hit on your different pieces in the question there.

Our next question comes from Jason Cassorla with Guggenheim.

Great. Congrats to David and Brian as well. Maybe for the health care MLR, the 79.8% in the quarter versus the slightly below 81%. And you had guided to. Was that delta completely explained the way by flu weather and the exchange seasonality? And then maybe just broadly, can you delve in a bit deeper on what you're seeing in terms of employee cost trend any utilization categories where you're seeing favorability. And you've focused and highlighted site of care. Just not sure if you're seeing or maybe you can update us on some of the mix shifts, maybe perhaps helping out cost trend -- or if you're seeing anything from an absolute service category from utilization trending better or worse? And then maybe lastly, can you just help us bridge a little bit on the second quarter MLR coming in slightly above the higher end of the full year guide would be helpful. .

Okay. Thanks for the question. So I guess just starting as I noted in my prepared remarks, the Cigna Healthcare results were ahead of expectations. And I would characterize that as driven by strong fundamental performance, including retention, rate execution and cost trends, across both U.S. employer and individuals. So if you look at the quarter, during the quarter, we observed lower flu respiratory volumes as well as weather-related care referrals, which benefited results. And then on the Individual business, we saw the higher percentage of plan members, which carry a lower MCR at the beginning of the year and a higher MCR at the end of the year.

In terms of any drivers, I would core categories, I wouldn't call out a single driver as outsized or category as above our expectations. The contribution was fairly balanced. Cost trend remains high, and we planned and price for it. So that's on that for itself. When you think about the sequential increase from first quarter to the second quarter, that reflects both normal seasonality and other seasonal and services that are unique to this year. So with regard to normal seasonality. As a reminder, the Medicare business, which we divested last March, had a flatter MCR seasonality than our other businesses. So this year, normal seasonality will be steeper going from 1Q to 2Q. For other seasonal and timing factors that are unique to this year, I'd point to 2 things. I mentioned the higher proportion of bronze numbers in the individual business that compared to prior years.

So that results in a steeper pattern throughout the year with the steepest jump happening in the second quarter. And then there are also timing factors, including weather-related and care referrals that impact the seasonality and will impact the quarter. But overall, we're pleased with the strong start to the year. The full year guidance range of [ 837 to 847 ] remains unchanged and at this point of the year reflects the prudence. .

Jason, just if I could add 2 quick things to a very comprehensive summary there. We're really pleased with the performance of the overall Cigna Healthcare business. And we said to be able to raise the guide for the year based on what we're seeing so far, which includes an appropriate degree of prudence for the balance of the year. As Ann said, we continue to plan for and price for sustained elevated cost trends. On the positive side, they have not accelerated. They remained elevated. So to the extent we do eventually see some deceleration that offers some upside to our outlook. But we're excited with the performance of this portfolio for sure. So thanks for your question. .

And our last question comes from David Windley with Jefferies. .

I wondered if you could highlight or discuss uptake in the GLP-1 programs that you have that you've highlighted in the past in [indiscernible] and Circle -- and then any other similar programs that you would highlight as particularly attractive or popular among your customers right now? .

David, it's Brian. So maybe I'll just talk about the GLP-1 space more broadly and then hit on some of the programs as we work our way through this. As we discussed on prior calls, GLP-1s are a very visible example of the broader wave of drug innovation that's transpiring in America and around the world, quite frankly. And as it relates to coverage for weight management in particular, we continue to see, on a client level, the percentage of clients covering weight measurement be relatively stable from 2025 into 2026.

Now those clients are increasingly looking for programs such as in circle and reach to provide the clinical and lifestyle support to make sure that the weight management programs are designed are working as they're designed to be, meaning -- we're not seeing micro dosing. We're not seeing people start and stop on the protocols, et cetera. So that's really the intention of those programs. And we continue to see -- we had 12 million plus enrollees in the Circle program numbers continue to grow each month across our overall employer book of business. But as I made reference to the coverage rates are about 50% in our Evernorth book of business, which tends to bias to our larger employers, they're about 20% in our Cigna Healthcare book of business, which tends to bias towards smaller employers.

But when you think about where we are with GLP1 more broadly right now, the ongoing tension here is affordability versus employee and family member satisfaction. So employers know this is a very popular benefit. They also know that it's a net cost right now to their overall health care programs. On the bright side, as oral versions are introduced and you see supply strength ease, this should help with future affordability by driving down the net cost of the GLP-1 drugs. But the tension between employee demand and employer affordability will continue to persist. And 1 of the things we've been very focused on, in addition to our great clinical programs is innovating around financing solutions. So we're seeing some employers and plan sponsors cover the full cost of GLP-1 drugs. Others will cover a portion but ask for co-pays to be paid by the employee or falling numbers.

Others are sponsoring coverage on more of a supplemental benefits chassis, where employee will pay the full amount. However, they'll benefit from our thousands of real-time clinical safety checks and then have the option of selecting additional lifestyle and clinical support programs for their members who utilize GLP-1s. So all these moving pieces are contemplated in our guidance. We continue to lean in to our both platform and take a leadership position in supporting employers and other plan sponsors around their GLP-1 strategies. Hope that helps, Dave.

Thank you. At this time, I'll turn the call back over to David Cordani for closing remarks. .

Thank you. I'll have up briefly here. First, thanks for your time and your questions. Second, we're clearly proud of the results we delivered in the first quarter and confident we will deliver on our increased guidance for 2026. I do want to reinforce after 17 years of leading the organization, how much I appreciate our colleagues around the world and the commitment they bring to work every day in serving our customers and patients in partnering with our clients in the relentless orientation around innovation and active voluntarism to make the communities better. .

On a final note, I've valued my interactions with each 1 of you throughout the investor community during my tenure as CEO, and I look forward to continuing to serve the Cigna Group as the Executive Chair. Thanks for your time, and have a great day.

Ladies and gentlemen, this concludes Cigna Group's First Quarter 2026 Results Review. Cigna Investor Relations will be available to respond to additional questions shortly. A recording of this conference will be available for 10 business days following this call. You may access the recorded conference by dialing (866) 405-7290 or (203) 369-0603. There is no pass code required for this replay. Thank you for participating. We will now disconnect.

Next session and -- for joining us here today. And I'm here with my colleague, Ryan Langston, and we're pleased to have Cigna as our next presentation and to present from the company we have Ann Dennison, Chief Financial Officer; and Adam Kautzner, President of Express Scripts and Evernorth Care Management.

So maybe to kick things off, Ann, I think you wanted to have a couple of comments.

Sure. I'll be very brief. I just want to say a few things. So we reported our fourth quarter full year '25 about a month ago. Really pleased with the results that we achieved in 2025. 2025 with expectations that we shared, and we were able to keep those expectations steady and deliver on them in 2025, which I think is a differentiator for now in this space. We're excited about the FTC settlement and what that means. We've been for over a year now, building a new rebate-free model, which Adam is going to talk a bit about. We're excited for that. We're excited for the fact that PBM reform, when you put all these pieces together, we're positioned very well in the context of the way that we're looking forward. We've been very deliberate in how we've shaped our portfolio of businesses.

And as we think about the long term, we have confidence in 2 things: one, delivering on at least $30.25 a share in 2026 and then delivering on our 10% to 14% EPS long-term growth algorithm over the long term.

Great. so I think maybe we're going to switch over a little bit and maybe let Ryan kind of start talk a little bit about Cigna Healthcare and then we'll move to...

Okay.

Sure. Stop loss, obviously, a huge topic in 2025. I think fourth quarter came in just a little bit above maybe where we thought, but still overall, it seems like the repricing on that product has been successful. It sounds like it'd be a little bit more successful going into '26. So maybe in terms of recapturing margin and getting that business back where you want it, maybe in '26, even into '27. Maybe talk about the steps you've taken and maybe further steps you could take as we move into next year?

Sure. So just as a reminder, at the end of 2024, we had some unforeseen trend in the quarter that we weren't able to price for in the 2025 cycle. And so our commitment was about 1% margin recapture over a 2-year period, most of which will happen in '26 and in '27. And it's all about for us striking the right balance between pricing and persistency and recapturing that margin over time. And so we were successful in the 2026 cycle. We've got some more to do in 2027, but we're on track to achieve our goals of recapturing that margin over the 2-year period.

Great. And then just from the fully insured standpoint, that part of the book performed decent pretty well in 2025. I guess maybe what are trends that you're assuming for the guidance in that range for that book? And maybe just any particular pockets of utilization we should be worried about, plus or minus?

Yes. I mean -- so we've talked about this a bit when you look at sort of trend in that book and more broadly, I'd point to the 3 largest contributors to trend that have held true for at least the last couple of years. One is behavioral health. Two is our specialty injectables, so specialty medicine. And then the third is inpatient surgeries. And that has held true. We plan for that. We continue to see those as the biggest growth in cost -- in both unit cost and in utilization across the book. And so we planned and price for that going into this year.

And we're working -- so our consumer, the patient is at the center of everything we do. So we are very focused on how do we bend that curve? What can we do in order to make those prices -- I mean part of it is a rebate-free model, but we're doing things on the -- across the ecosystem in order to try to bend that cost curve.

Got it. Charles?

Okay. Obviously, rebate-free model you mentioned earlier, obviously, been a big topic here. I guess the first question, since the introduction of that at the third quarter, maybe talk a little bit sort of the reception from plan sponsors in regards to that?

Sure, Charles. Happy to do that. We're thrilled with the introduction of our new rebate-free model that we launched back in October. Receptivity so far has been very strong from a client perspective. They're certainly interested to learn more as our benefit consultants. It's unlike anything else that has ever been entered into in the market in decades. So it is new, it's fresh, it's different.

And yes, we did start with the consumer and addressing the challenges that a consumer has today around access, affordability and ultimately improving overall patient outcomes. We've also been responsive to many of the components that you'll see within PBM reform. So we're delinking our fees. So it's going to be a simple administrative fee that will be charged for our services. We are addressing the unpredictability of rebates today. So if you look at Inflation Reduction Act, if you look at what's happening with most favored nation biosimilars, rebates themselves have become a bit unpredictable in the market. We've had to adjust rebate guarantees because of it.

So from a client perspective, that's resonating. It also addresses with this new model, the fiduciary component. And so there have certainly been concerns around fiduciary from an employer perspective. It addresses those types of challenges. But regardless of the positive feedback so far, we are still going to continue to offer a rebate model, too, because we want to make sure we're responsive to the market. We meet our clients where they are, and many of them might be on a different change curve than others. When you factor in PBM reform, though, we've been one step ahead of the market. We expect that most of the market will have to move in this type of direction to a flat fee administrative type of market for the long term.

And maybe just to help the audience, in a rebate-free model, right, the understand the way I understand it is that you are capturing sort of the discounts at the point of basically purchase between the pharmacy and the manufacturer, right? And so that when they are then billing to Cigna, then that's sort of what they're billing, right, their invoice cost. So you've negotiated that discount for your book of business with manufacturers. Can you talk about how then the formulary still works within this kind of structure?

Sure. Yes, happy to do that. So the new rebate-free model is, you could call it a supplemental discount. So we're going to negotiate that directly with drug manufacturers, no differently than we negotiate other discounts with them today. But this discount isn't going to be retrospective. It's not going to be based off a reconciliation or be opaque. It's going to be cleaned. It's going to be upfront. Members will be able to see it on the app when they go in to price those products and be able to then get that lowest net cost. So that component of it is really exciting as we look forward to the future and the overall member access and member affordability, and it's responsive from a legislative perspective.

From a formulary perspective, it essentially will function the same way as it does today. So we will still be focused on lowest net cost. This new model is going to still have a function for lowest net cost. So I would -- we expect formularies decision-making to be to function in a very similar way as how they function today. We'll still be leveraging competitive classes and the competition in those classes and aggressively negotiating for those discounts. They just manifest as an upfront discount that's going to be benefited by the consumer today versus a rebate that today may only be enjoyed by the employer.

Can I ask kind of a simple question? I understand like what we're doing here allows the member to benefit from their upfront cost. But isn't that really just a benefit design function? Like there's nothing stopping employers today to change their deductibles or their co-insurance and payments to allow them to effectively capture the same value. Isn't that true?

So employers could certainly adjust their benefits. So if we were in a flat co-pay world and know you paid $25 for every brand, right, this wouldn't be needed. But we all know the proliferation of deductibles, high co-insurances, and that's been the trend in the market. This is responsive to that trend. And by us negotiating these discounts upfront, on average, a drug that has a discount today, it's about 30% off. So these members for the 10% of branded drugs and for those that have discounts within that 10%, it's going to dramatically reduce their cost. And it goes right at most of the cost that's in the system today because although only 10% of prescriptions in America are brand drugs, they account for about 88% of the total cost, which is an astonishing figure.

Yes. I think one big question that we always get a lot is sort of what does the margin profile of the PBM look like into the future, particularly as you implement this new model. And one of the things you mentioned is we are delinking fees from the price of drugs and there's an administrative fee. And I can understand maybe at the start, that means you can kind of reprice -- you set that fee of what you were kind of making beforehand. But when we look at drug price inflation versus, let's say, CPI, obviously, that's probably going to be a difference. How do you preserve sort of the economics as we go forward would you say?

So first off, I would say with the Inflation Reduction Act and other changes that are happening in the market, drug price inflation, especially in competitive classes, you're going to continue to see likely higher prices when they come out, but less inflation going forward than what we've seen historically. Noncompetitive classes where effectively a drug has a monopoly, you may start -- you may continue to see that type of inflation.

In terms of our pricing, yes, we are delinking our fees. We are going to have simple administrative fees. Those may be per member per month or they may be a per prescription. So whatever a client wants to do, we'll be able to be responsive to those pieces. We will be able to -- since we know our margin profile today and for the different types of business and what does that mean from an administrative fee. And so that will be converted. So we expect that margin profile to be comparable. We do expect that we can continue to realize efficiencies every year like we hold ourselves accountable to be able to do. But there also may be certainly, yes, an increase in those fees going forward year-over-year.

On top of that, though, we're continuing to build out additional products and services, especially in our clinical services area where we're taking risk on improving patients' adherence, improving formulary compliance and their overall health. We have today medical data on over 40 million Americans, prescription data on over 100 million Americans. And so leveraging all of that data, we're continuing to create new products and solutions, which create additional upside as we sell in those additional products and services. But that fee, you can think of as being comparable where it is today and where it will be tomorrow within the new model.

Got it. One of the big pieces, right, is the amount of investments that you've kind of called out over the next couple of years. I think you've cited at roughly, call it, $300 million per year in this year and into next year. I guess 2 questions. The first is sort of I think that was kind of an estimate that you gave beforehand, maybe talk about sort of what you're deploying so far in terms of that $300 million target this year? Maybe what are you spending it on in the near term? And then second, should we expect these investments to continue past '27? Or does this actually become more of a tailwind as we think about '28?

Maybe I'll start, Adam, if you can add anything that you'd like to add. So as a reminder, coming out of the third quarter, we started to share this information. We didn't give a point estimate on the investments, but roughly in the range. And what it represents for 2027 -- 2026 and 2027 is basically the investments that we are doing to support the launch of the entire new model, and that's transformational, as you can imagine. So investing in technology, that needs to be retooled in order to handle this new model, investing in the people that need to work on the recontracting.

As Adam has talked about, we're recontracting with manufacturers. And so there's a lot that goes into that. So the investment -- and it has already started to some extent. We'll see more of it in the back half of this year than we will in the front part of the year. And again, we'll see roughly an equal amount in '27. And you asked about sort of does it just go away? In 2028, it starts to dissipate, and we would expect it to go away over time, but not all on one shot.

Okay. I want to maybe jump back something that Adam, you kind of mentioned before. If we think about the settlement with the FTC and the requirements there as well as the PBM reform measures passed in the appropriations bill, right? A lot of it is around increasing transparency requirements, more visibility for plan sponsors as well. Maybe talk about sort of what you need to do outside of the rebate-free model to comply with those and sort of -- obviously, the rebate-free model aligns very well with those, but maybe talk about sort of what changes in the traditional model that you need to undertake to be compliant.

Yes. So the -- we're thrilled to have the global settlement with the FTC behind us. We certainly welcome the appropriations bill and PBM reform and what that may mean for patients long term. Both of those pieces, we walk into eyes wide open, yes, with the new model being fully responsive. And you look at the key elements of those pieces, which are the rebate-free, but the additional transparency that we will continue to now be able to offer and expand delinking our fees, the pass-through moving all ERISA plans to pass through once the appropriation bill goes into effect. And so we're already moving in that direction, right? So many of the key elements of the delinking, the full pass-through, those are all components that we are addressing today.

Additionally, we are continuing to work to expand and make sure whether it's within the FTC compliance of we're going to be connecting to TrumpRx. We're also going to be connecting to many other direct-to-consumer and cash solutions across the market. We're expanding the functionality of what's called Price Assure.

So Price Assure will go out and look for the lowest price, whether it's cash, direct-to-consumer or within the benefit. It's going to pull that lowest price into the benefit. The benefit to the patient is we're going to do the 18,000 safety and quality benefit checks in that prescription. We're going to guarantee them the lowest price that exists out in the market. We're going to apply it to their deductible. So it's a big win from that perspective. We keep the script. The employer is able to keep that script in the ecosystem. And for the patient, they get the lowest price plus all the safety and quality.

So those are the types of changes we're making within the traditional benefit today and our ability to ensure that we can continue to offer a sustained benefit that is going to transition to pass-through as well long term post 2028 as regulations are finalized for the appropriations bill. But we welcome those pieces. We're well ahead of the market there. Us having new options and offerings and having spent the last year of thinking about this and putting into action a piece does keep us well ahead of where the market is, and that's resonating with clients and benefit consultants because we're continuing to be innovative and responsive to what needs to get done.

I asked at the beginning sort of the response from plan sponsors, but maybe talk a little about what the response from pharma manufacturers? How has that been?

Yes. So we are actively engaged on a daily basis of talking with drug manufacturers about the new model, the rebate-free component of the model. Again, we're still going to be negotiating rebates. We're still going to have market-leading rebates, and that will be available within the traditional model. We're targeting the largest manufacturers to start with. So we've tiered the manufacturers. We've had very productive conversations. We are going to have to recontract the whole market, same for pharmacies. But conversations are progressing well. They understand the benefit of this because they want what we want, which is lower prices for the consumer.

Today, they offset that with their co-pay discount cards and those types of things. There's less of a need for those things if I'm lowering patient out-of-pocket on average by 30% on these branded drugs. That means we can go and extract more of that discount from drug manufacturers what they're paying today, incorporate it into the base supplemental discount that we'll be negotiating for tomorrow. We also will be increasing the level of adherence for patients. There are about 10% of prescriptions that today go unfilled because of cost usually, and they're left at the pharmacy counter. We're going to reduce that number by putting these types of actions in place, which is going to expand affordability, access. Ultimately, that's good for drug manufacturers as well, and it's good for patients. So there's a win all the way around that's resonating really well so far with manufacturers.

You guys put out a target of 50% of your clients by -- for 2028. Does -- if I'm not mistaken, does that include the likes of Prime and Centene, and sort of your big TRICARE? Or is that exclusive of those 3?

So some of those plans are already on, yes, very transparent models. So as part of -- we expect that many of those will continue to transition into the transparent models that they're already on today as part of what that base is. But we do expect still for a large percentage of our commercial book of business, core employers and labor unions to also transition to the new model in 2028 and beyond. We do want to continue to be responsive, though and offer multiple different options to the market.

But again, where PBM reform is going and where additional transparency requirements are going, this new model fully aligns with all of those pieces. And when you incorporate in concerns around fiduciary and those types of things and the unpredictability of the current rebate model, we expect that there's going to be a lot of uptake of this new model.

Got it. I want to ask a little bit separate question. Senators, Warren and Hawley have reintroduced a bill in this Congress looking to separate not just you guys, right, but just in general, managed care from owning PBMs or pharmacies. It doesn't seem like there's a lot of appetite on Capitol Hill necessarily for this. But maybe talk through a little bit about what that means? How could you respond or how would you think to respond?

Our organization steadfastly continues to stand for ensuring that patients have affordable access to medications in a fully transparent environment. Unfortunately, what Senators Warren and Hawley are calling for is in complete conflict with that. It actually reduces a consumer's ability to -- for choice. It will increase the cost of medications and ultimately reduce overall transparency and could affect the health of those patients.

So unfortunately, for us, we aren't in agreement with those things. We actually challenge a similar type of bill that was in the state of Arkansas last year. And we didn't take that lightly, but we did file a lawsuit. The judge did grant us an injunction there. So limiting choice and increasing cost for patients is not something that we are in agreement with. I'm not going to expand any further on that one, but...

That's fair.

But, yes.

Maybe I want to shift gears and talk a little bit more about Specialty Pharmacy. Obviously, Specialty and Care services, you're kind of guiding to the higher end of your long-term adjusted pretax income growth target of 8% to 12% this year. Maybe help us understand sort of what is underpinning sort of your expectations for that to start.

Sure. So as you said, we're guiding to the top end of the range, and there's 2 components to that. One is the Shields investment. The other is the core, and I probably should have said those in the opposite way, is the core business and the growth that we're seeing there. And so when you think about the core business and what's driving the growth there, biosimilar adoption has been a tailwind for that part of the business. And we've seen -- and as we look forward to 2030, we've got about $100 billion of drugs that are expected to go the biosimilar route. So we continue to play a leading position in that space. The adoption of biosimilars is a net positive to the organization. There's a net detriment to PBM. There's a positive to the consumer, and then there's a positive to the Specialty and Care business, but a net positive to us overall.

And when you think about sort of the biosimilar pipeline, what would you expect? Like what percentage would you expect to go through something like Quallent or your own distributing of CuraScript or versus just bringing those products to market? Is it an expectation that more of it goes through your own channel? Or how do you think about that?

If you look at the performance of the Quallent, HUMIRA biosimilar, it's been very, very strong at Accredo. And I would expect for STELARA that we continue to see very strong offerings in that space too.

And any others that are coming in the near term that you think is a good fit for Quallent?

We're always looking at different opportunities that might fit the bill. But the largest ones are certainly ones that we've talked about thus far. Those are the largest in the [ inflam ] class, which have driven so much of the share so far. There's less of an opportunity in biosimilars as you look out into '27.

If you think about our 2026 guide that we've given, HUMIRA, we've got vast majority is already on the biosimilar and STELARA is a little less than 50%. So as we look out for this year built into our expectations is growth in both of them with more penetration.

From [indiscernible]. Got it. Maybe switch gears a little bit to Shields. You kind of mentioned -- and you mentioned a little bit earlier, it's kind of an interesting investment to get into sort of health system space. And I think part of it, it seems like health systems are really actively building out their Specialty Pharmacies. It's a revenue stream for them. It's a way to keep in touch with patients once they get discharged. Talk about sort of how that fits into your strategy going forward, particularly it would suggest a way to play the channel that's growing outside of what you're traditionally doing in Specialty Pharmacy? Or is there a way to kind of integrate both together?

Yes, Charles, I mean, you said it exactly right. So you think about the specialty space with over $400 billion of total addressable market. And then if you split that down into the direct-to-patient portion of it, that's 60% of it. That's the space that we play in already. The other 40% is the provider-to-patient space, which includes where Shields is and where we are not an industry leader in our current model. And so we're really excited about expansion into -- further into the other 40% of that addressable market. And we think there's a lot of synergy between what Shields does and where we can play.

So if you think about CuraScript and our ability to distribute for Shields, and they're serving over 1,000 hospitals, 80 hospital systems across all 50 states. There's a lot of opportunity there. There are ways for us to help them with inventory management and other things in that same ecosystem, but we think there's a lot of synergies that we'll find working together and expanding our addressable market through the process.

Got it. Maybe in the last couple of minutes, switching gears a little bit to capital deployment. Obviously, investments coming related to rebate-free model. You kind of talked about not to expect any kind of significant levels of share repurchase in '26. Maybe just remind us why that's not necessarily possible given sort of what the cash flow profile looks like? And then maybe how we should -- would you expect that to pick up in '27 as we move past this first year?

Yes, there's a couple of things to point out. So we are expecting cash flow from operations of at least $9 billion in this year. Why we've sort of given the guide on share repurchases and the way that we've done it is less about the investments that we're making. We're always prioritizing and making investments. It's more about the timing of our cash flows. If you look at last year, you'll see our cash flows were back half year weighted. And so we expect that again for 2026.

We also ended 2025 with a 43% debt-to-cap ratio, and we want to get that down closer to 40%. And so the combination of the back half weighting plus some debt repayments pushes our repurchases to the back half. And we get less of [ the bank ] for our buck in terms of share count because of the timing of them.

For 2027, I think it will -- we think repurchases are really attractive. We want to do that as much as possible, especially at the price that we're at right now. And so obviously, we're going to be focused on them for '27. It will be about the timing of the cash flows, and we'd expect it to get back to more normal given where we expect to be on our debt journey.

I see. So the timing of when you expect the cash flows is really more about debt paydown.

It's more about when the net cash flows are coming into the organization. But in addition to that, we've got debt paydown. So...

Is there anything in '27 that makes to kind of change again? Or is it sort of more of an annual thing now that more of your cash flow comes in the back half?

I think we'll see a more back half weight, but we won't have the debt repayments in 2027. We're scheduled to get down to around 40 this year. And so we'll be able to put that capital to work a little earlier.

That makes more sense. Maybe last question here on the guide, just kind of coming back to that, obviously, you've kind of guided to at least $30.25. Maybe help us understand what areas in your business you think potentially presents opportunities for upside as we think through the segments?

Yes. Maybe I'd point to just a couple of things. Obviously, our guide is our best view as we sit here today. On the Cigna Healthcare side, a big component of the picture is the medical cost trend and it's been elevated for multiple years now. And so if there's some -- I don't know if the right term is relief, but if it comes in better than we expected, then there's potential upside.

I'd say within the Evernorth space, both on the PBS side and the specialty side, it could be a story of volumes. We've got expectations. We think our data and the way that we're forecasting is pretty solid, but there's always a chance that there's some outperformance in volumes there. And biosimilar penetration is kind of the same -- along the same range. We've got an estimate, but there could be -- it could go a little faster than we think.

Okay. Great. Well, I think we're pretty much right on time here. So I want to thank Ann, Adam, thank you for joining us today. Thank you, everyone.

Thanks for having us.

Ladies and gentlemen, thank you for standing by for the Cigna Group's Fourth Quarter 2025 results review. [Operator Instructions] 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.

Thanks. Good morning, everyone. 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, Cigna Group's Chairman and Chief Executive Officer; Brian Evanko, President and Chief Operating Officer; and Ann Dennison, Chief Financial Officer.

In our remarks today, David, Brian and Ann will cover a number of topics, including our fourth quarter and full year 2025 financial results and our financial outlook for 2026. Following their prepared remarks, David, 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 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 the cignagroup.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 fourth quarter, we recorded after-tax special item charges of $483 million or $1.82 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'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thanks for joining our call. 2025 was a pivotal year for our company as we delivered new innovations for the benefit of our customers, strengthen meaningful partnerships and extended strategic client relationships. Today, I'll briefly focus my comments on delivering our financial commitments for 2025, and how we are leading through a dynamic environment by evolving and advancing our business for the benefit of our customers, clients and partners. Then Brian will provide an update on our performance and our growth platforms and perspective on the year ahead. Then Ann will review additional details on our results and our 2016 outlook, and we'll take your questions.

So let's get started. In 2025, I'm pleased to report that the Cigna Group delivered full year adjusted revenue of $275 billion or 11% growth. Full year adjusted earnings per share of $29.84, a 9% increase, building on our multiyear track record of sustained earnings growth. We also took steps forward in improving our customer experience as evidenced by the increase in our customer Net Promoter Score year-over-year in each of our largest businesses. At the Cigna Group, we also continue to shape our portfolio in 2025, emphasizing businesses where we see clear opportunities to generate attractive sustainable growth. For example, we further expanded our specialty capabilities to serve hospitals and health systems in part with our new investment in Field Health Solutions. And we completed the sale of Sydney Healthcare's Medicare business earlier last year. We are well positioned to continue leading and growing in a rapidly changing environment.

To that end, I want to briefly comment on our global settlement with the Federal Trade Commission announced yesterday. The settlement is a comprehensive resolution of all matters brought by the FTC regarding pharmacy benefits business. It includes the industry-wide insulin lawsuit and ongoing investigations. To be clear here, the beneficiary of the settlement are our customers and patients. The settlement noted $7 billion in out-of-pocket cost relief over the next 10 years for the 100 million customers and patients we serve. The savings will be delivered through lower insulin prices and reduced cost for branded medications for consumers at the pharmacy counter. The settlement will also increase transparency for our customers and clients and strengthen our relationship further with community pharmacists. We were well positioned to execute on the terms of this settlement because of the new pharmacy benefit model that we began developing in the beginning of 2025 and announced in the third quarter of 2025. Our new model clearly positions us to achieve this comprehensive settlement. It enhances the value we provide to customers and clients, all while we continue to strengthen our position and deliver on our long-term shareholder commitments.

With the FTC matter now resolved and the additional clarity from the federal PBM reform legislation that passed earlier this week, we are squarely focused on driving affordability improvements and value for those we serve. We know health care affordability impacts everyone from individuals and families to employers and governmental organizations. At the Cigna Group, we are steadfast in our focus on leaning in to lower health care costs and expanding access to quality care and medications, but doing so requires confronting the underlying cost drivers, including both the demand and the supply side. Demand for health care in the United States is growing rapidly. Our population is aging and chronic conditions are increasing. Today, chronic disease and mental health conditions account for roughly 90% of total health care spending. Together, these forces drive heightened demand for health care services and as such increased costs.

Now relative to supply, in most industries when additional supply comes online, costs go down. However, in health care, costs are rising even as additional supply becomes available. Consider that since 2000, the cost of a hospital stay has increased more than 220%. And according to 2024 data, the median price of a new drug launch was over $370,000 compared to only $2,000 just 20 years ago. The organizations and professionals that supply and deliver costs, be they hospitals, doctors, pharmaceutical manufacturers and medical device companies are advancing significant innovations, but they are coming at an elevated costs. At the Cigna Group, we're moving forward with purpose and conviction counter these focuses.

Let me share a few ways of how we're doing that. First, our approach to investing in and shaping our portfolio guides us to collaborate rather than own physician practices or pursuing capital intensive care delivery infrastructure. This gives us more agility to offer new solutions and services that expand access, lower cost and focus on prevention and treatment adherence. Our transformative rebate-free pharmacy benefits model is one of those improved innovations for prescription drugs. Another example is our new clarity solution in Cigna Healthcare that Brian will talk about in a few moments.

Secondly, we are addressing affordability is by informing decisions more clearly on the location where care is provided as locations could significantly impact patient affordability, whether in a hospital, freestanding facility or a physician's office.

A third way is through meaningful partnerships and collaboration. For example, in the new Trump Rx site launches, Evernorth is the pharmacy partner to the site and will dispense EMD Serona treatment for fertility. This will make treatments more accessible for all Americans struggling to start or expand their families at the lowest available cash price. And we're helping providers focus on care by minimizing their administrative burden, for example, in prior authorization processes. Over the past year alone, we further reduced the number of prior authorizations by 15%, and going forward, we are partnering with the administration to further streamline the prior authorization process.

In the fourth way, we are driving affordabilities by leveraging competition and incurring the use of the most cost-effective solutions. Generics and biosimilar medications are important opportunities here. Today, for example, in the United States, approximately 90% of all prescriptions filled are generic, and they make up only 10% of the total pharmacy spend. As a result, the U.S. has some of the lowest generic prices in the world and highest uptake levels, reflecting what happens when robust competition is harnessed. We see similar promise with biosimilars and our company is already saving Americans money on the widely used brand-name medications such as HUMIRA and SOLAR, where we offer access to zero-dollar out-of-pocket offerings for our patients, saving them thousands of dollars each year.

Looking ahead in the coming years, there will be more than $100 billion of savings for the U.S. in the biosimilar space alone. At the Cigna Group, we will continue to make advancements in each of these areas in addition to the work we do day in, day out to support our customers, patients and our clients every day.

Now to summarize. Time and again, at the Cigna Group, we have demonstrated the ability to evolve to meet the needs of our stakeholders, something we've done over years and decades. Against the backdrop of a disrupted operating landscape in 2025, we delivered full year adjusted earnings per share of $29.84, and we returned over $5 billion to shareholders through dividends and share repurchase.

Looking ahead to 2026, our adjusted EPS outlook of at least $30.25 reinforced the sustained growth and strength of our company. We will also continue to make strategic investments in strengthening our capabilities and broadening our total addressable market profile, while we remain focused on harnessing the breadth of our capabilities across our organization for the evolving needs of those we serve.

With that, I'll turn the call over to Brian.

Thank you, David. Good morning, everyone. I'll start by outlining some highlights of our business performance in the fourth quarter and the full year. I will then highlight the key innovations we introduced in a dynamic environment and outline our view of the years ahead.

Our performance underscores the value we provide for those we serve through our three business platforms, providing multiple paths for sustainable growth, including our specialty and care services businesses within Evernorth, our pharmacy benefit services business also within Evernorth and Cigna Healthcare, our health benefits business. During the quarter, our Evernorth portfolio demonstrated continued performance. Starting in our Specialty & Care businesses, we delivered strong results with 14% adjusted revenue growth, reflecting the demand for our services, and we saw 13% year-over-year growth in the number of specialty scripts in 2025. This is supported by the shift to biosimilars and our industry-leading patient support in Accredo. Our portfolio shaping efforts have resulted in an expansion of our specialty capabilities to serve hospitals and health systems, in part through our investment in Shields Health Solutions that we announced in late 2025.

Next in Evernorth Pharmacy Benefit Services business, our fourth quarter and full year results reflect continued solid performance. We built on our track record of innovative pharmacy benefit solutions to meet market demands. This includes our suite of GLP-1 solutions. In 2025, we added EnreachRx, a new patient support model designed for pharmacies dispensing GLP-1 drugs committed to providing enhanced clinical services. We also expanded our patient assurance program to include these GLP-1 medicines, which sets caps on member out-of-pocket costs to improve predictability and affordability. And we are proud of our continued focus on service. We delivered a seamless January 1st implementation for new and existing clients, ensuring customers and patients have access to care when they need it. Overall, we're pleased to deliver another year of solid results across our Evernorth portfolio.

Now turning to Cigna Healthcare, our consultative approach and focus on affordability are driving strong overall performance. We delivered financial results that were slightly ahead of expectations. We maintained disciplined pricing while driving affordability and introducing or expanding differentiated clinical offerings. We're doing this in a number of ways, including encouraging customers to utilize lower cost generic and biosimilar medicines; optimizing sites of care between hospital facilities and lower cost alternatives and improving administrative processes for providers. We also continue to maintain a disciplined pricing stance. For sold business in the first quarter of 2026, our price increases are in excess of what we achieved for the comparable period in 2025. We expanded our suite of AI-powered digital tools to improve and personalized customer experiences. These include a provider matching tool to help customers find in-network providers based on their specific needs and preferences, and a real-time cost tracking tool to provide a simple breakdown of costs, both before and after clinician and specialist visits. We also launched new partnerships to expand our offerings. For example, we collaborated with Progeny and Karat to offer new coverage options for employers to support patients through their fertility journeys. And we announced an industry-first collaboration with head space to support the mental health of millions of Cigna Healthcare customers with exclusive digital features and content. We see partnerships like these as critical to building a more sustainable model for health care and further accelerating innovation for our customers.

Our performance across Cigna Healthcare underscores our focus on driving innovation, improving personalization, thoughtfully shaping our product portfolio and our execution orientation. As we look ahead over a multiyear horizon, we are focused on leading the changes needed in health care to better serve our customers and clients, resulting in improved affordability and access. To do this, we are taking bold actions, including investments in defining the future of health care.

Let me outline a few of these. First, we're focused on putting the customer at the center of everything we do through new innovations that are data-driven and tech forward. To do this, we are focused on personalizing the health care experience by leveraging and growing our digital and analytics capabilities. Already this year, we have seen a significant increase in digital registrations for our U.S. employer businesses and decreased call volumes. We are facilitating seamless interactions for customers based on their engagement preferences, whether that be mobile, web, text or fun, including chat options with AI virtual assistance and easy connectivity to our service agents for even more personalized support. Beyond this, we are finding new ways to utilize data and analytics, insights and digital tools to better identify patients who need help earlier, particularly those with complex and high-cost conditions. We continue to lead the way in transforming our models and capabilities for those we serve through meaningful innovations. In October of last year, we announced the transformation of our pharmacy benefits model to meet the demands of the market and improve both affordability and transparency for our customers and patients. As David mentioned, our new rebate free model will help people stay healthy and get the medications they need by lowering costs and supporting local pharmacies, so care is always within reach. We have received positive feedback about our new model from our broker partners clients and other stakeholders.

Moving ahead and following our recent settlement with the FTC, we are confident in the transformation of pharmacy benefits we are leading for the industry. In Cigna Healthcare, we are similarly driving step changes in our product offerings to create patient-centered solutions that simplify health care and ensuring we're rewarding outcomes rather than volume. One example is clarity our newest offering that we introduced in November, which puts customers and patients in control so they can focus on getting the care they need, designed with cost transparency available to customers at the time they need it. Clarity helps individuals manage their health with ease and saves clients up to 10% medical costs. And it has a simple co-pay-only structure. Clarity also has a single digital front door for all Cigna Healthcare customers integrating experiences for pharmacy, dental and supplemental health, and patients have access to our trusted national network without referrals, supported by clinically sound externally validated quality measures.

Finally, in our Specialty and Care Services business, our expanded suite of offerings has helped grow these businesses from around 25% of the company three years ago to around 35% this year, driven by high secular growth and our deliberate portfolio shaping to increase exposure in this highly attractive growth sector, and we see significant runway for additional growth in our specialty platforms in the future. This includes leveraging competition and the shift to more biosimilars and specialty generics with expected launches and uptake across other drug classes such as oncology, [indiscernible], autoimmune and inflammatory conditions. Guided by a clear mission and vision that prioritizes improving health care and keeping the customer at the center, paired with a partnership orientation and a portfolio intentionally shaped for sustained growth markets, we are leaning into the disruption necessary to drive industry transformation.

As I wrap up, I'd like to reflect on some bright spots for the quarter and the full year. Throughout 2025, we delivered through a dynamic environment. Revenues for the full year increased 11%, driven by specialty pharmacy growth and client relationships. We had a strong selling season in pharmacy benefit services with the retention rate over 97% for 2026. And we grew customers in our Select segment in Cigna Healthcare by 7%. We are a leading change in our industry from our commitments to better that we announced early last year, to our partnership with the administration on improving prior authorization to our announcements of affordable fertility drugs available through Trump Rx to our transformative new model for pharmacy benefits and our introduction of Clarity in Cigna Healthcare. Our mission, coupled with our capabilities, deep expertise and diverse portfolio of businesses positions us well to continue our track record of delivering for all stakeholders.

Now I'll turn it over to Ann.

Thank you, Brian, and good morning, everyone. Today, I'll review Cigna's fourth quarter and full year 2025 results, and I'll provide an outlook for 2026. We are pleased to deliver another strong year for the Cigna Group, reflecting focused execution across Evernorth and Cigna Healthcare with both segments achieving pretax adjusted earnings at or above the outlook we shared a year ago. For full year 2025, we delivered consolidated adjusted revenues of $275 billion, adjusted after-tax earnings of $8 billion and adjusted earnings per share of $29.84.

Now turning to our segment results. I'll start with Evernorth. 2025 marked another year of growth in Evernorth and the introduction of an industry-leading innovation and pharmacy benefit services as we advance our more simple, predictable and transparent rebate remodel. We also advanced our Specialty and Care Services capabilities through a strategic investment in Shields Health solutions as we build on our market-leading position and enhance our offerings in one of the largest and fastest-growing areas in health care. Fourth quarter revenues grew to $63.1 billion, and pretax adjusted earnings grew to $2.2 billion, in line with expectations. Our Specialty and Care Services business delivered strong growth, generating $26.7 billion in revenue, an increase of 14% year-over-year and $1 billion in adjusted earnings. This performance reflects sustained momentum in our fastest-growing business, driven by robust specialty volumes and rising biosimilar use, which continues to generate meaningful savings for our patients and clients. Our pharmacy benefit services business delivered $36.3 billion in revenue and $1.2 billion in adjusted earnings reflecting the impact of our strategic investments, including initiatives to enhance patient experience. Overall, the fourth quarter capped another year of growth for Evernorth. The underlying strength across our Evernorth businesses reinforces our confidence in making deliberate near-term investments to transform our pharmacy benefit services model, positioning us well for sustained long-term value creation.

Turning to Cigna Healthcare. In 2025, Cigna Healthcare delivered strong results above our original expectations in a dynamic environment. This performance underscores the strength and resilience of our purposely constructed portfolio, including the divestiture of our Medicare businesses, which positions us to navigate volatility and drive durable growth. For fourth quarter 2025, Cigna Healthcare delivered adjusted revenues of $11.2 billion and pretax adjusted earnings of $734 million. Adjusted earnings slightly exceeded expectations as favorable net investment income more than offset modestly higher medical costs. The higher medical costs equated to approximately 60 basis points of MCR or about $50 million without notable impact to any one part of the portfolio. Relative to our stop-loss products, the full year MCR was slightly higher in 2025 compared to 2024, consistent with what we expected and communicated at the beginning of the year, and we remain on track with our margin improvement plan. Overall, we're pleased with Cigna Healthcare's performance in 2025. Looking ahead, we remain focused on driving greater affordability and value for the patients and clients we serve while continuing to execute with discipline against our financial targets.

Now turning to our 2026 outlook. We expect full year 2026 consolidated adjusted revenues of approximately $280 billion, and we expect full year 2026 consolidated adjusted income from operations of at least $30.25 per share. Considering earnings seasonality, we expect first quarter EPS to be slightly above 25% of our full year guidance.

Now turning to our 2026 outlook for each of our segments. In Evernorth, we expect full year 2026 adjusted earnings of at least $6.9 billion. As we discussed previously, we expect investment spending to build the infrastructure required for our transformative rebate remodel to commence in 2026, with this spend more back half weighted. As a result, we expect Evernorth's first half earnings to be higher than the historical pattern with the first quarter representing over 20% of full year earnings. For Cigna Healthcare, we expect full year 2026 adjusted earnings of at least $4.5 billion. Within Cigna Healthcare, we expect earnings seasonality to be consistent with prior years with the first quarter representing over 30% of our full year adjusted earnings expectations for the business. Assumptions underlying our 2026 outlook for Cigna Healthcare include a medical care ratio in the range of 83.7% to 84.7%, incorporating the pricing actions taken across stop loss, and individual exchange businesses as well as the assumption of a cost trend environment that remained elevated. We expect the first quarter 2026 medical care ratio to be below 81%, reflecting typical seasonality. We expect approximately 18.1 million total medical customers at year-end, including growth in our middle select and international markets offset by lower membership in our national accounts and individual exchange business.

For the enterprise, we project an adjusted SG&A ratio of approximately 5% for 2026, consistent with the 2025 level, reflecting both the investments to advance our pharmacy benefit services model and continued improvements in operating efficiency. We expect the consolidated adjusted tax rate to be approximately 19%.

Now moving to our 2025 capital management position and 2026 capital outlook. Our fourth quarter cash flow was strong, and we finished the full year by delivering $9.6 billion of cash flow from operations. In 2025, we repurchased 11.9 million shares of common stock for approximately $3.6 billion and returned $1.6 billion to shareholders via dividends. We also improved our debt to capitalization ratio to 43% during 2025, including an improvement of 190 basis points in the fourth quarter.

Now framing our 2026 capital outlook. We expect to deliver approximately $9 billion of cash flow from operations. As previously noted and consistent with 2025, we expect the majority of operating cash flow to be realized in the second half. Our capital deployment priorities remain consistent with our long-term framework. We expect to deploy approximately $1.3 billion to capital expenditures, and we expect to deploy approximately $1.6 billion to shareholder dividends, reflecting our increased quarterly dividend of $1.56 per share. Our guidance assumes full year weighted average shares outstanding to be in the range of 261 million to 265 million shares. And during 2026, we expect to continue progressing towards our long-term debt to capitalization ratio of approximately 40%.

Now to close. As we move into 2026 and beyond, we remain confident in the strength and the resilience of our enterprise. Our disciplined execution, balance portfolio and strategic investments to drive innovation, affordability and an enhanced customer and patient experience, all position us well to deliver differentiated value for our customers, clients and shareholders over the long term. We are confident in our ability to deliver full year 2026 adjusted earnings of at least $30.25 per share, and our ability to deliver attractive long-term EPS growth.

And with that, we'll turn it over to the operator for the Q&A portion of the call.

[Operator Instructions] Our first question comes from Lisa Neil with JPMorgan -- apologize, Lisa Gill.

David, I fee like we've been waiting for a long time for this PBM legislation to finally pass it's finally passed. You've put behind you the FTC suit. Can we talk about a few things. The first -- the change in economics. You talked about this with the new plan in October. But now that everything is kind of settled in place, we've got legislation, et cetera. Can you spend a few minutes talking about the margin profile of what we would expect in the steady state for the PBM? And then secondly, one of the things that stood out to me in the FTC settlement was the moving of the GPO back to the U.S. from Switzerland. I want to understand what that means to the tax rate. My understanding is that the tax rate over in Switzerland is about 15%. So when I think about [ SN ] coming back, what's the financial implication for that as well.

Good morning, Lisa, thanks for your comments and your question. So first, pulling back up, we've been saying for some time that the pharmacy services space would go through a clearing event, be it driven by market innovation, legislation or regulation. And when you step back, many of those forces converge this week. And the clarity of direction that we established back in 2025 with the work we started in early 2025 and announced in the third quarter of 2025 with our new innovative model from our point of view, is directly aligned. So to the first part of your question, at a macro level, as we said in the third quarter of last year, we believe the margin profile will remain similar. We have significant experience with a variety of programs today with the diverse population we serve, be it fee-based full pass-through, the continued innovation we drive with our clinical programs and services that we are able to offer that from a big picture standpoint, we believe the margin profile will be similar and therefore, we believe the underlying growth algorithm for the pharmacy benefit services portion of our portfolio will remain intact to be similar as we get through this innovation. And importantly, before I come to your tax question, it's important to really underscore the underpinnings of our innovation. First and foremost, it starts with a customer-first orientation in its design. It's therefore built to ensure that we are capable of delivering the lowest out-of-pocket cost for the consumer each and every time they consume a pharmaceutical at the altar most likely through their benefit program in the vast majority of cases, that's the instance and the unique cases where it could be a cash pay program or a direct program, et cetera, we have the ability to be able to support that additionally meaningfully expanding the support programs for independent local world pharmacies. And then lastly, as we've discussed, it's built on a more modern, no rebate, no spread framework that gives all visibility to employers on a fee-based transparent environment, and ultimately provide you shareholders more visibility of the sustainability relative to it. So big picture, no change in overall margin profile, and therefore, no change in the growth algorithm over time for pharmacy benefit services business. As it relates to the second part of your question, the Ascent GPO has been and continues to be an important tool to improving affordability for customers and patients. We will move capabilities to the United States, bringing them closer to our U.S. operations. We remain confident in the -- as I said before, the growth algorithm of the business. At the macro level, you could think about an outside impact to the effective tax rate of our organization of up to 1% over time because there's a phase in here if unmitigated. So if you want to put a box around that, you can think about a maximum impact of 1% in the future if mitigated, therefore, given the strong performance of our portfolio and our diverse enterprise, we see that as totally manageable even at the outside parameters of that against our long-term earnings growth algorithm of 10% to 14%. Thanks for your question.

Our next question comes from Scott Fidel with Goldman Sachs.

Just wanted to follow up on Lisa's and then ask a follow-up around Brian's comments on the new pricing model with the customer. So the first question, just following up on Lisa's question is just, it really does feel like there's been a real sea change in collection and just the amount of activity and developments that actually occurred around sort of moving the premium pricing model forward. And just curious from your perspective is, do you feel like at this point now, you've largely fully aligned your PBM model with how the regulators, with how the policymakers have been really pushing the industry to adapt to, or are there still some sort of regulatory battles, residual battles still ahead? And then I wanted to just ask Brian around the premium clients in terms of moving to the new pricing model, just the traction that you're seeing there in terms of sort of your updated view on the ramp that you're expecting in terms of 26 to 28 the percentage of clients that you expect to move on to the pricing model.

Scott, it's David. Let me take the first part of your question, and I'll transition to Brian for the second part. First, just contextually, it's important to note we are proud of the significant value that has been over a long period of time to the people we have the privilege of serving, our customers across the United States. And by way of context there, fully 80% of the Express Scripts customers have less than $250 out of pocket over the course of a full year. I'm going to come back to that in a moment. And as I noted, through the good work of the pharmacy benefit services industry over a long period of time, 90% of all drugs consumed in America are generic, and they make up just over 10% of the total cost equation but 10% of brand, which make up almost 90% of the cost equation. That's creating undue pressure in force on everybody in the model today, including out-of-pocket dislocation for consumers. So when you come back to our model, we are confident that our model is built. The new innovation is built through customer first, no rebate, no spread, fully transparent fee-based model, where we step into the advocacy role for the consumer at point of consumption of a pharmaceutical each and every time at the counter to dynamically shop and make sure they get the lowest out-of-pocket costs. So when you look at any of the legislation or regulation, it's been oriented around improving affordability and predictability, harnessing, ultimately, transparency and expanding value for ultimately the consumers, along with the clients. Our innovation squarely goes in that direction, and we are excited and confident to lead the way for the industry. I'll transition to Brian for the second part of your question.

Thanks, David. Morning, Scott. As it relates to the adoption rates and the pricing model, et cetera, consistent with what we talked about in the third quarter call, the entire Cigna Healthcare fully insured book will be adopting this new model in 2027, and we expect at least 50% of our Evernorth business will adopt the model by year-end 2028. Early feedback from clients brokers and other external stakeholders have been positive to date. And I think importantly, coming back to link Lisa's question and yours, the core value creators in both our legacy models, and our new rebate free model really remain the same. If you think about securing better unit pricing for prescription drugs, administering benefits for plan sponsors and supporting patients with clinical safety checks and advanced clinical programs. Those three core value creators are the same in the legacy model as they are in the new model that we've introduced. The primary difference is the way in which we're compensated. So there's two primary ways will be paid in the future in this model. The first is a core admin fee that will be per member per script, delinked from the price of the drug. That will grow inflation over time. And then the second category be for clinical programs and other innovations that we bring to market, and we expect to take risk on this portion of the compensation. But in aggregate, as David said earlier, we expect to achieve a comparable level of profitability between the legacy model and the new model, although the sources of profit will evolve that land.

Our next question comes from Charles Rhyee with TD Cowen.

First one, just on clarification is just -- I think, Brian, you kind of mentioned it. With the settlement -- the timing of the settlement requirements, is that aligned with the launch of the new rebate free model is the first just sort of clarification question. But the second -- my second question really is more, obviously, your all these settlement agreements are related to the standard -- to provide standard offering, right, which largely aligns it feels like with the new model that you're launching by 2028. I guess the question is, to the extent that clients don't take this new offering, what is the responsibility for Cigna or Evernorth in this case to push the new standard offers so that these requirements are met. And if clients don't choose to take the new offering. Is there any sort of liability to Cigna down the road? And in particular, I'm kind of looking at, for example, ensuring members out-of-pocket expenses are lowest net cost. But if an employer doesn't choose that new option or if the employer chooses to maybe increase a coinsurance amount or deductible, is there any kind of does any kind of responsibility fall by to Cigna?

Charles, good morning. It's David. Let me take the second part of your question, and I'll tack team with Brian on that as well as the first part of your question to pick up on. So a few important points here. First, macro we have, and we continue to believe in offering choice to the marketplace. And we serve a diverse number of clients from governmental agencies to health plans, to employer clients, et cetera. Two, as Brian noted, we will adopt this innovation January 1, 2027 for the Cigna Healthcare guaranteed cost book of business, where Cigna is the purchaser. So we will leave in the accelerated adoption. And third, we expect to see significant adoption in 2028, as Brian mentioned before. Second, it will be our standard offering. It will be our lead offering in 2028, and that is congruent with the settlement and the direction. Third, there is no liability that we assume if the adoption rate is above or below that, we will lead the market. We will support this with marketing dollars because we are convicted and believe that this is the future of pharmacy benefit services. for the benefit of consumers as well as clients as well as community pharmacists. So our conviction we will lean in and support the aggressive adoption of this. But choice will still be in the marketplace. We will still be able to afford -- enable solutions and forge solutions be the rebate, rebate pass-through or otherwise as the market goes through its transitional process and ultimately this model on a go-forward basis. Brian, anything to add to that or to the first part of...

That's a pretty comprehensive answer, David, but just a few additional comments, Charles. So our launch plan from the standpoint of our new rebate-free model is unchanged based upon the FTC agreement that we reached this week. So we'll continue with the same milestone, the same expectations. And importantly, as David made reference to earlier, inherent in our new model is we call our price Assure technology, which guarantees patients the lowest possible price on the drug when they get it filled. So whether that's the price we've negotiated with drug manufacturers whether it's a cash pay alternative, whether it's their co-pay, whatever the lowest possible prices, we're guaranteeing in the new model of the patient will get that. And so that enables us to meet the spirit of the FTC's goals as well to drive lower patient out-of-pocket and to the point of what else could be a little bit different. Lisa's question earlier, the move of our GPO capabilities from Switzerland or the U.S. unrelated to the new rebate-free model. So there's some elements of the FTC agreement that are unrelated to it, but the launch plan for our rebate-free model is unchanged as a result of the agreement.

Our next question comes from Kevin Fischbeck with Bank of America.

I'm a little bit surprised that the MLR in 2026 isn't expected to make any progress given exchanges should be repriced and smaller and stop loss. It sounds like you're repricing that again, getting generally speaking about pricing this year than last year. Why is that? And then I guess if you could just maybe give us a sense on the current business mix, what the right MLR to think about is when the business is fully repriced in the future?

Kevin, so I'll start by just reminding you what I mentioned in my prepared remarks, our 2026 MCR outlook incorporates the pricing actions we've taken across stock loss and the individual exchange businesses as well as the assumption that the cost trend environment remains elevated. So when thinking about the walk -- the MCR walk from '25 to '26, I'd point to -- two things that reduce the MCR, and two things that increase it. With respect to the reductions within stop loss, pricing is tracking in line with expectations and we've achieved rate increases consistent with our targets for improvement in 2026. And then the second is for our individual business, we've repriced for margin improvement. So those are the two things that will reduce MCR going into '26. Items that increase the MCR on a comparative basis. If you recall that the 2025 MCR benefited from several onetime items in our individual business, both of which impact the jump-off point for the year and tempers the year-over-year MCR improvement. And beyond those items, there are mix dynamics to consider as well. And lastly, I do sort of overall, our assumptions incorporate appropriate prudence given the continued elevated cost environment. So summarize, our MCR outlook incorporates stop-loss and due to individual pricing actions, onetime impact to '25 as well mix considerations impact that year-over-year view. And we continue to assume an elevated cost environment and appropriate imprudent. And for your question around the MCR, I'd point you to to the outlook that we provided in terms of the range of where we expect to end up for 2026.

Our next question comes from Justin Lake with Wolfe Research.

I wanted to ask a couple of more PBM questions. As you look out to 2027, it certainly seems like you don't business transitions associated with the FTC settlement, the legislation would be a headwind to earnings, but wanted to confirm that is the case, and you expect 2027 PBM's earnings growth at this business to be in line with your long-term algorithm. And then just from an accounting perspective, is there any changes to PBM revenue recognition here from all these business model changes effectively the move away from spread pricing, rebate guarantees towards a fee-based model, will in still be able to book the total pharmacy spending as revenue? Or would it move to kind of booking fee revenues similar to ASO on the medical side?

Good morning, Justin, it's Brian. On the first part of your question. At this point in time, the FTC agreement will not impact our 2017 financial outlook. Many of the agreements and commitments are multiyear in nature. As we talked about earlier, and as David said, our long-term growth algorithm for EBS remains intact as we move through the transitional period here. As we talked about on the third quarter call, we do expect 2026 and 2027 to have investment-related costs as we build out technology and infrastructure to support our new rebate-free model. So that's really the only thing I'd have you think about as it relates to 2027 in terms of the PBS outlook. On the revenue recognition question, at this point in time, we do not expect there to be changes in the way that our revenue is being recognized in the PBS segment even with the transition to a fee-based model as opposed to spread or rebate-oriented model that we have today. So we'll refine that over time and certainly can take that offline with you. We did not expect a change in the denominator and the margin profile.

Our next question comes from Erin Wright with Morgan Stanley.

I know there's a lot of focus on the PBM. But can you talk about the specialty business. You mentioned some of the strong organic growth there. Can you unpack a little bit some of the key drivers there, what you're anticipating in 2026. Any other implications from some of the dynamics at the PBM side as well, but also biosimilar pipeline, and as we head into 2026, how you're thinking about that?

Good morning, Erin, it's Brian. So as we mentioned in our prepared comments, really pleased with the momentum of the Specialty business 14% and top line growth and attractive earnings contributions alongside of that. And we've talked about before with you, this is already a $400 billion-plus addressable market growing at a high single-digit secular growth rate, and we're really well positioned to capitalize that on that over the longer run. And we certainly saw the dynamics emerge throughout 2025. So the full year, we had 13% growth in prescriptions. Higher rate of growth in our Medicare book of business, but also strong growth in the commercial employer and the Medicaid portfolio. And our Evernorth business is really well positioned to capitalize on each of those different payer types. We continue to expect long-term average annual income growth of 8% to 12% in this business, benefiting from some of these strong secular tailwinds. A few specific TRCs or cost categories, I'd highlight that were particularly strong growers, include inflammatory asthma and allergy, those were -- those generated a good bit of the year-over-year growth in the specialty space. And as it relates to biosimilars, we're really pleased to see the building momentum across the United States, really HUMIRA, the past two years, becoming mainstream was a great win for the market. And as David said earlier, we expect another $100 billion of Specialty drug spend to be subject to competition from biosimilars and generics by 2030. Each of these biosimilars have a slightly different adoption rate based on factors such as interchangeability, dosage levels, branded alternatives and other dimensions. But we've, as you know, introduced a zero-dollar patient out-of-pocket for both HUMIRA and STELARA. And the HUMIRA penetration in 2025 ended up representing the vast majority of eligible scripts. So that's clearly been a success story for American Healthcare from the standpoint of patients getting significant savings finance years, whether those be employers or health plans getting the benefit of the savings on these biosimilars, and we look forward to continue driving savings for patients in the future in the biosimilar and specialty generics space. So to kind of wrap this up space we're really excited about. It's 35% of the company's income now. That percentage will continue to grow in the future as we execute.

Our next question comes from A.J. Rice with UBS.

First, just a point of clarification to the previous comments. You guys gave the outlook for the new rebate-free model. And with that I mean for growth when you talked about third quarter, you haven't really changed that today, but you've obviously had FTC settlement and other things, where those -- I know those don't happen overnight, were those largely contemplated when you made your comments about the outlook in the third quarter. And then the other thing I was wondering on your deals with manufacturers on the pharmacy side, do those need to be significantly renegotiated? How much of an unknown is that over the next few years? And do you envision formulary changes, significant or any other things we should be thinking about from the cost side of the pharmacy business.

A.J., good morning. It's David. A few parts to your question there. First, on the -- your opening portion of your question. You're correct. Our outlook or the '26 time frame and our outlook for the direction of our new pharmacy benefit innovation remains consistent, both the adoption target for 27, the adoption target for '28, and the overall margin profile. Two, as I noted earlier, we began working on that in early 2025, the architecture of it, the design of it, et cetera, and we announced it in October, as you recall, of $25 million and the architecture of what we've built is quite congruent with where the regulatory environment was heading and was likely to head. So when you step back, you can look at the legislative environment or the regulatory environment, and say, what is the focus? The focus here is on increased transparency. The focus is on an environment customer first and tries to optimize the customers out-of-pocket costs and improve the customers' affordability. It's one that is more performance-oriented in some examples, I'll focus on the critical role of independent pharmacists in rural locations, et cetera, all that was contemplated in our design that we began approximately a year ago. So therefore, no change in the direction as a result of the settlement. No change in our direction as a result of what we saw in the legislation in the past this week. On the second part of your question, there's work that sits in front of us to do, as Brian talked about, in the third quarter call and we referenced briefly here in terms of the build-out of the capabilities. But it is very familiar work to us and for our organization in terms of whether it's the technology work that needs to be enhanced amplifying capabilities that we're already using for the benefit of consumer pricing at point of consumption today or the work directly back with the manufacturers in terms of the restructuring of the economic arrangements that are aligned with this more transparent model on a go-forward basis. And your final question is will there be formulary changes. The formulary is a bit fluid. It's governed by clinical efficacy and comparative effectiveness. So clinical advocacy around the notion of the clinical impact of like-for-like drugs when they're similar, that it moves on to comparative effectiveness, which is the economics to generate that, but always led from a clinical standpoint with independent oversight. And the fluid nature of that will transpire. But my closing comment would be, I would not expect that the transitional model to the future, it will be a direct correlation to a formulary change the formulary who will continue to be guided by the proper governance of clinical efficacy first and then comparative effectiveness, optimizing the total cost structure. So taking it all in, again, we could not be more pleased with the direction that we have set for the industry around the transparent customer-centric, rebate-free fee based model, and the ability to secure a broad closure of issues, both from a regulatory standpoint and clarity from a legislative standpoint. A.J., thanks for the question.

Our next question comes from Stephen Baxter with Wells Fargo.

I was hoping you could maybe expand a little bit more on the health care medical membership outlook that you gave. It seems like we're seeing a bit more of an outsized shift into ASO funding models based on some of the other reports Series, maybe that's the higher cost environment. So I was hoping you could expand a little bit on what you're seeing there, whether you might see more outsized growth in select this year? And then just broadly, how you're thinking about in-group enrollment trends given some of the uncertainty in the macro right now?

Good morning, Stephen, it's Brian. So as it relates to the Cigna Healthcare membership outlook, as you saw in the press release, we expect flat year-over-year at about 18.1 million lives. And really, you can think of that big picture is we expect growth in our U.S. employer and international health businesses, offset by a decline in individual exchange customers. Within the U.S. employer portfolio, we expect to see growth in both our select and middle market subsegments, reflecting the continued strength of the consultative model along with our integrated medical, pharmacy and behavioral offerings, plus our focus on affordability for these employers. I would not expect an outsized year of growth to your question on select necessarily, but we do expect growth in that space in 2026. And that growth in selected middle market is partially offset by some decline in national accounts customers in 2026, similar to what we signaled to you previously. Within the individual exchange business, we expect to end 2026 with fewer than 300,000 customers, reflecting another year where we prioritized margin over growth. So again, the net effect of all of this is membership that's approximately flat, although we anticipate an attractive year of earnings growth within Cigna Healthcare. As it relates to the funding mix, we expect our group risk business to be stable for 2026 compared to 2025. So think of around 2.2 million lives, which, again, reflects our disciplined pricing posture. And as we talked about in prior settings, our select segment mix today is roughly 2/3 self-funded, and our net growth in Select has been coming from ASO and level-funded style solutions in recent years. And as a reminder, we're not active in the under 50 regulated small group markets. So our commercial group risk business here is essentially all large group in nature. In group enrollment trends, we are not seeing anything out of the ordinary. Obviously, we continue to monitor economic data unemployment data. But to date, we have not seen anything out of the ordinary. Our 2026 outlook reflects our current view of what the economy will do.

And this question comes from Jason Cassorla with Guggenheim.

I wanted to ask, especially in care for 2026. I just wanted to confirm, are you still anticipating AOI growth at the higher end of your 8% to 12% target offer '26. And then can you help spike out what the implied AOI growth would be when excluding the income attribution from the Shield investment? Just maybe like more core basis, growth would be helpful.

Sure. Jason. So for Specialty and Care, we expect earnings to grow towards the high end of the long-term growth rate, reflecting both strong fundamentals and the contribution from the shales investment. We're really pleased with what we saw in 2025 overall for Specialty & Care. Our expectations for 2026 remain consistent with what we shared coming out of the third quarter. We haven't shared the details specifically around child is built into our expectations, but that takes us to the high end of the range.

Our last question comes from Andrew Mok with Barclays.

The operating cash flow and CapEx guidance implies less than 80% free cash flow conversion on your pretax income, which is below recent history and lower sequentially. So can you walk us through the drivers of that pressure and comment on the expected impact of the new rebate-free model on working capital?

I'll start with the cash flow expectation. So we were really pleased with $9.6 billion for this year coming out. And as I said in my prepared remarks, we do expect a dynamic of higher cash flow or more cash flow in the back half of the year next year. When stepping back and looking at our 2026 cash flow expectations, that -- the decline to the $9 billion that we're guiding to next year is roughly $600 million less than what we thought in 2025. That primarily reflects the lower contribution from the PBS business from our pharmacy benefit services business. And really, that includes the impact of large client renewals and some of the investments that we're making in 2026.

And Andrew, the rebate-free model will not impact the '26 cash flow outlook. And as we get closer to '27 to '28, we can square that up for you a bit in terms of reconciling how that moves year-over-year.

I will now turn the call over to David Cordani for closing remarks.

First and foremost, thank you for your questions and your time today. I just want to reiterate the items. First, with our momentum, we are confident we will deliver on our adjusted EPS outlook of at least $30.25 for 2026. Important to note in the context of a very dynamic environment in 2025, we delivered competitively attractive results, and I'm proud of how our team works tirelessly each and every day for the benefit of those we serve, where we work to know our customers help them by delivering personalized solutions and support programs for the unique needs and working every day to make it easier to access affordable care. We look forward to our future conversations. Thanks, and have a good day.

Ladies and gentlemen, this concludes the Cigna Group's fourth quarter 2025 results review. Cigna Investor Relations will be available to respond to additional questions shortly. A recording of this conference will be available for 10 business days following this call. You may access the recorded conference by dialing 866-405-7290 or 203-369-0603. There is no pass code required for this replay. Thank you for participating. You will now disconnect.

Hi, everyone. I'm A.J. Rice, the health care service analyst at UBS, and we're very pleased to have next up in this room, Cigna Group. We've got Ann Dennison, Chief Financial Officer of Cigna; and Adam Kautzner, President of Evernorth Care Management and Express Scripts. I think Ann is going to make a few opening comments, and I'll let her do that, and then we'll do some Q&A.

Great. Thanks, A.J. Thanks for having us. And everyone, thanks for joining. I know we're at the -- sort of towards the tail end of the conference. So I appreciate you being here. I'm just going to say a couple of things before we jump in. So one, to start, we've been really pleased with our performance this year, especially coming out of the third quarter with strong performance.

And then also being able to reaffirm our full year EPS guidance of at least $29.60 again coming out of this quarter. We've been operating in a very challenging and dynamic time. Despite that, we've been able to execute and also invest for the future. And so I'd point to 2 things there. One, our investment in Shield, so an investment in a company and in a space, the specialty space that's growing 17% to 19% on a big TAM. So really excited about that.

We're also really excited about a couple of weeks ago, we announced the new transformative rebate-free model, and Adam and I are really excited to be here today to talk to you all about that and get into some more depth there. The last thing I'd say is just given where the stock is, we don't believe that the stock price reflects the true value of our long-term proposition and our ability to grow.

And so as I think about capital deployment coming out of this year and into next year, I'm going to be really focused about being opportunistic on the stock repurchase side of things, while at the same time, using our capital in the appropriate ways, but also following our deleveraging plan. So excited to think about it a little bit differently given the opportunity in front of us. So that was all I wanted to say to start...

That's great. I appreciate that, Ann. So why don't we jump right in to what you just mentioned, the transition to a rebate free PBM model has created quite a stir in the market and the industry. Can you talk about the decision to make this move and why it made sense to do it now versus a more gradual approach?

Sure, A.J. I'll take that. Good morning, everyone. So we're thrilled to be able to bring this new model to the industry. It's unlike anything that has been done in the pharmacy benefit space in decades. We're reimagining the pharmacy benefit. How we're going to do that? One is, yes, it's going to be a rebate-free model, which means for the consumer, an upfront discount where they immediately receive the full value of what we negotiate with the drug manufacturer. It's one big benefit.

Another big benefit is we are going to be enhancing our system to where regardless of where the lowest price may exist. Normally, that's within the ecosystem of what we negotiate at Express Scripts, but it also could be a direct-to-consumer price that a manufacturer may offer or it could be within the cash pay market for a drug that may not be covered under the benefit. We're going to seamlessly be able to pull that lowest price. We're going to be able to have it still go through our ecosystem to apply all the safety and quality checks and we'll be able to immediately apply it to the patient's deductible.

So for the consumer, there are some big benefits here. In addition, we're going to be able to reimburse pharmacies, the community pharmacies at their acquisition plus a dispense fee. So we're going to be able to help to solve the issue around community pharmacies in rural and urban areas from an access-to-care perspective. And we're going to do all of this with a simplified administrative fee that we are charging to our clients that will be delinked from the price of the drug. So very different from today, that will be delinked from that price.

It will be a flat administrative fee to simplify the pharmacy model. Thus far, feedback, especially from President Trump administration, Secretary Kennedy administrator has been very positive as well as other members on Capitol Hill about us and our forward-thinking model here that's fully transparent and delivering real value to the consumers, but also being able to provide value to our clients. That is very different than a point-of-sale rebate model, which is retrospective, and there's reconciliation that occurs in those types of models and their estimates and the complexity within a point-of-sale model.

This is an upfront direct discount that's going to be available to our -- to consumers while also keeping our clients' costs in check. So this model will be durable, sustainable and it future-proofs us and will be a competitive advantage for us for 2028 and beyond.

I think one of the arguments against moving away from the rebate model was the impact to premiums on the health plan side given employers use the rebates to keep overall premiums down. How are you assessing this dynamic when you speak to clients and keeping that desire to keep the premiums down?

A.J., this model, we believe will be premium neutral for our clients compared to the existing model that exists. And it is important to point out, although we are going to be moving on our new standard will be this new model, we are still going to continue to support a rebate model for the foreseeable future. So we will continue to have those options.

For this specific model, though, we will, one, be able to provide for the consumer dramatic value on these branded drugs. There are a lot of branded drugs today, which are not ever picked up because of the cost. By reducing that barrier, patients are able to access the medications, refill the medications on time, which will lower total cost of care, bringing cost down. Secondly, drug manufacturers today do try to offset many patients that are in the deductible or high coinsurance phase and they buy down the cost of those drugs at the pharmacy counter.

We are now going to be able to effectively reduce the need for those types of programs. That creates another opportunity for us to extract value from pharmaceutical manufacturers and bring that back into the plans to help offset those premiums. Even with all those pieces, we will continue to be able to offer premium-neutral options to our clients to allow them to make those decisions.

On the other side, you just sort of mentioned that pharma manufacturers have suggested they'd love to move to some model like this for some time. sometimes be careful what you wish for. But on that same token, how are they -- how are the pharma manufacturers responding to this announcement and the new model?

The conversations so far have gone really well. They've been productive. Manufacturers have been receptive to this new model. You're right. Many of them have asked for what if the rebate model were to go away. This is the answer to that of this new rebate-free upfront discount type of model. And there is some alignment there of today, they do spend a lot of money in buying down patients that are in those higher cost deductible phases, and this alleviates the need for that and provides us with having a new conversation with them on how we're going to be able to better provide that value back to the consumers that need it most as well as to their clients.

So overall, I'd say it's been very positive and productive. And keep in mind, we are going to be recontracting across the entire pharmaceutical landscape with every manufacturer with this new model and this new type of way that we're going to be doing business with them.

And just to clarify that. So the time frame on those recontracting for the new model, is that in place? Are you doing that now? Is that something as you move toward '28, you'll do more of that? How do we think about the timing on those?

Sure. So the timing is for 2027, we'll be moving to the rebate-free model for Cigna Healthcare's fully insured book. For 2028, this will be available to the rest of the Express Scripts book of business. So that's where we'll be contracting with manufacturers. So we have these next call it, 2 years, where we're going to be transitioning to this new way of contracting. We're going to be making those short-term investments to be able to build all the different pipes that we're going to need for this new type of model to have the good data analytics for the new type of contracting that we'll have.

But remember also, we're going to continue to also have the core type of contracting around the value-based solutions that we have within our SafeGuardRx portfolio today, the other clinical services that we're able to contract with manufacturers on. So we expect this to be a complement to those within that portfolio while still supporting a rebate contracting model, too.

So one of the questions we've gotten asked is if you got this dual track basis, the part of the business being traditional rebate model, the other, the net price model, how should we think about how that affects your negotiations and the interplay with pharmacy given the rebates will be less of a factor in one model versus the other. Does that complicate the negotiations as you try to work through all that with this dual track?

We don't expect for it to complicate it at all. Today, we contract with manufacturers across, as I mentioned, many different ways, value-based being one certain example beyond rebates. So we expect to be able to fully support both types of models, and we'll be able to continue to extract market-leading rates, not only in the existing system, but also with this new model. And actually, I think this will become a competitive advantage for us to have this type of forward-thinking new model that's going to be available in the market from a client perspective.

Okay. And you did talk about absorbing incremental investments to put all of this in place in '26 and '27 as you make that transition to the new model. We understand that there's expenses associated with the dual track aspect, too. Is there a substantial incremental cost burden associated with this? And how do we think about that?

Yes, I can take that one. And maybe to bring it back up to what we said coming out of third quarter earnings. So we expect some pressure on the PBS line next year. Part of that pressure is the recontracting and the new client renewals and extensions that we're doing. And then part of it is the investments that we're going to make around this transformative rebate premodel. More than half of it is the first thing.

So for the piece that's related to the investments we're going to be making, and I think it's really important to sort of come back to -- as Adam has talked about this in terms of transforming the market here, we are not just tweaking an existing model. We are doing something holistically different than what we've done before. And so just for context, right, 2,000 clients, 100 million lives in this space. And so we are building and investing in an infrastructure that's going to support that under a new model than what exists today.

So as I think about what are the things in that category that we are going to be spending on. So probably technology is the largest, the first thing I'd mention. So all of our systems are designed to support a rebate model. We are going to have to invest in those over the next 2 years, so in '26 and '27 to be able to have the dual model in place. So that is one. The next 2 I'd sort of put in the same category is maybe a mix of 3 things.

So process optimization, operations optimization and also all of the recontracting work. Adam talked about the manufacturers, but we also have to recontract with all of our clients throughout this process. So there'll be investments across those categories. And then finally, I'd say a big important step here is having the right data so we can optimize our model.

So investing in data and analytics tools that help us find the right places to expand opportunities with clients, the right places to innovate. And so as we think about '26 and '27, you could think about roughly equal amounts of investment across those 2 years to stand up everything that I just described.

And along the same lines, following up on that, it sounds like in '28, there would be some dissipation of this spending level. Can you talk about -- of that investment, how much is sort of a new run rate of investment? And should we get a little tailwind in '28 from that?

Yes. I mean I'd expect sort of the bulk of the spend is going to be '26 and '27 as we stand up. As we talked about in earnings, our goal is through 2028 to have 50% of our clients on this standard new model. And so we'll look to optimize our processes along the way. We're at a sort of special time, I think, in terms of standing up a new model, the ability for us to use technology and process optimization in a different way. So the goal will be to get back to a place that doesn't include incremental investments, but there may be some spillover. But our -- what we're envisioning right now is bulk of that spend in '26 and '27 and dissipation in 2028.

Okay. How are you thinking about how much of an issue is it a risk that clients decline to move to the new model? And do you think this puts at risk your competitive position vis-a-vis others for some people that choose not to may want to just consider a traditional model?

So we see this more as an opportunity than a risk and a competitive advantage for us of understanding where the puck is going in terms of the pharmacy benefit space, the unpredictability around rebates whether it's the Inflation Reduction Act or it's the most favored nation, like there are a lot of things changing right now in the drug pricing landscape, which is causing some challenges from a client perspective in terms of rebate predictability.

This new model takes that and makes what clients are going to be paying much more predictable for them. It also simplifies it. So that's an opportunity of removing the complexity out of the pharmacy benefit space, how our pricing works, delinking pricing from the cost of the drug. That type of opportunity is going to be very attractive to our clients to where I think if we're sitting here in 2 years and we hadn't built this model, you'd be asking me why didn't we see this coming and why weren't we more prepared to have something new like this.

So I see this as a real opportunity for us to have something very attractive for our clients that will be available to them over the next 2 years. And at the same time, for those clients that want to stay on an existing type of model and want to continue to have their rebates, we're going to continue to make that available to them as well. So I don't see this again as a risk. I see this as a real opportunity for us, not only to continue to have strong retention of our current clients, but also from a new sales perspective of having something new and different that's out in the market and available to clients.

And keep in mind, the core components that we're going to continue to deliver to our clients, those pieces don't change in terms of adjudication of claims, the clinical services that we provide, formulary development, those pieces will continue to be there, and we're going to continue to invest in those as well for both models that we'll continue to support.

That's good. Okay. When you think about the administrative fee aspect of this or the PMPM fees associated with it, should we think that those fees have a risk component to them? Or are they largely just set fees only model?

Yes. So you can think about the PMPM fee. Let's think about fees in 2 categories. The PMPM fee is one category, and then there'll be fees for other services. So let me first talk about the first category. So the PMPM fee will not be a risk fee. That will be the fee that we charge clients for the services we provide. So drug price negotiation, the clinical and safety services, the administration adjudication of the plan. So those fees will not be risk-based, and they'll be based on -- and negotiated with the client and based on volume. The second category of fee will be around innovative programs like Adam mentioned earlier, Safeguard Rx, we have Enreach.

Those programs allow us to take risk positions or risk against our fees. And we're very excited about the prospect of expansion of those types of programs and the opportunity that, that provides us. But in short answer to your question, PMPM fee is not at risk. We will have a risk component to the fee structure, but that will be in the context of innovative products that bring clients to us and enhance the services that they have and also enhance affordability and client experience or patient experience, I should say.

Okay. There's certainly been some focus on how this model impacts the discussion around rebate guarantees. Some of your peers have had issues around specific categories of drugs with rebate guarantees. How much has that been historically part of Evernorth's approach to the market? And does this have an impact as you make this model, how might that evolve?

A.J., our ability to continue to meet our clients' contractual obligations on rebate guarantees has been manageable. We expect to continue to be manageable and to be able to meet those obligations. As I mentioned before, the unpredictability, though, of rebates and what's happening in the market today around changes like the Inflation Reduction Act is causing some friction in the market where we're working through those things with clients.

We do have the ability with the vast majority of our clients to be able to adjust those guarantees when different market factors may occur or government intervention may occur. So we've been able to work through those amicably with our clients to be able to make those adjustments. So we would expect this to continue to be manageable.

But it does speak to the challenges that exist in the market and why a new model makes sense and why moving to something that is rebate-free will make more sense, especially as you continue to see more of this disruption to continue to happen in the market where pricing is changing more today than we've ever seen it in terms of the different list price movement that we've been historically.

Interesting. Okay. You have these major contract renewals that you also announced. Are those -- do those envision those going to the new rebate model?

So the large client renewals whether that -- we've talked about Centene, Prime Therapeutics or the strong relationships that we've had with those clients and now we're -- the ongoing relationship that we're going to have. So we're thrilled to be able to extend those relationships for -- through at least the end of the decade. Those are all unique contracts because they are unique clients to us, and they're already in very transparent models, fee-based per claim type of models today. We will certainly offer to them the option if they would want to move to a rebate-free model.

So they'll have that available to them. But being nontraditional clients already, they already have fully transparent models that we work very closely with them on. And we're proud of the work that we've been able to do to service them, not only through today, but also for quite a few years to come. Right.

Right. And so there has been certainly some questions about why the need to do the proactive extension on these major contracts, I think Centene, Prime, and it sounds like DoD may have been early as well. Any -- I think all these contracts had some time to run. Just give us some perspective on why it made sense to do that.

Sure. Yes. So maybe for context, so the 3 large clients, you hit them all, DoD, Centene, Prime, altogether $90 billion worth of revenues associated with just those 3 clients and substantial volumes. Some of the clients were up for regular renewal and others were accelerated discussions. And so why we thought it was important to do that to accelerate. Obviously, we've got to go through the normal renewal process when it's appropriate. But for the acceleration, we really wanted to lock in through the end of the decade.

And why that's important is we've talked a lot about the new rebate-free model. Having sort of that $90 billion of revenues, those clients and the volumes that come along with those, give us stability heading into the end of the decade and allow us to transition to the new model without fear of disruption in that space or distraction. So we feel really great about the relationships, as Adam described, and very good about the fact that we've got them locked in and we can focus on executing on in the new model in the most powerful way possible.

Okay. Okay. Usually, when you have contracts of that size, you take a step down in margin upfront and then it's sort of over time, builds. It sounds like -- I wonder to what extent was there a degradation in profitability, and that's part of the adjustment and outlook that the company gave on the third quarter. And then it sounds like it's more of the margin is going to be steady from here as opposed to lift over time. Maybe just give some thoughts on those that.

Yes, sure. So correct, A.J. What we've said about next year is we expect some pressure due to these accelerations and renegotiations, and that's a bit more than half of the pressure. And so as we think about the future, those fees are -- those contracts are fee-based. We would -- there are some increases in fees over the period of time, but it's going to look different than it did in the past in terms of low earnings and jumps later on in the contracts. And I think Brian talked about this during the earnings call, sort of stable margins for the future for these 3 big clients.

Where we see the opportunity and Centene is a great example, is in terms of what we are doing for those clients and the opportunity to expand our relationships with them. So there's opportunity, in particular, in the specialty space with some of those clients to do more for them. And the better our relationships, the stronger the relationships, the better opportunities we have on the back end of that. So I'd see more of the opportunity coming from the expansion of the relationships on the margin side. I think you can think about margin holistically across Evernorth, right, our target is in the 3.5% to 4.5% range outside of the large clients getting back to those target margins over time.

I got to ask you about the GLP-1 announcements. I know a lot of people are still trying to figure that out. But what's your assessment of how that might affect? I know Novo and Lilly have made some comments. What impact do you foresee that having on the Evernorth business?

So the more recent announcement that they made with the administration, certainly, we're working -- we're engaged with both manufacturers. It's early as we're working through what those changes potentially could mean in working with Novo and Lilly. I think on its Phase 1, this looks like it's certainly a win for consumers and hopefully for our clients as well in lowering the cost of these medications, improving access to these medications. And as I mentioned earlier, our ability to continue to build out functionality, we'll be able to connect with any type of direct-to-consumer offering.

It also provides us with an ability to continue to negotiate to bring down those net costs overall. So although it's early, I would expect this, one, to be manageable; two, to be neutral to us as we continue to work through and to expand access in these drugs. And as they continue to expand the number of indications that are available and us to continue to work to make sure that we can provide affordable access to the patients that need these drugs most.

Okay. Maybe I'll pivot over to Cigna Healthcare for a second. I know we've been talking about the stop-loss business and the recontracting process. Any updates on how that's going, what you're seeing?

Sure. So not too different from what we said coming out of third quarter earnings. So just as a reminder, last year, we had an MCR in the low 90s in the business, a bit of a surprise in terms of how it evolved over 2024. So coming into this year, we've got a higher estimate than we did last year in terms of the overall MCR. We've been tracking against our expectations pretty much all year long. We are doing additional things this year. The standard things like looking at sort of paid ratios, everything is sort of in line with where we'd expect it to be.

The other things that we're doing outside of what we've done before is really in the analytics space. So we have developed analytics that is able to look at each individual in the book, where they are against their attachment point, and to assess what our best estimate of how things are going to progress through the rest of the year, which is only a couple of months now. All of that is progressing where we would expect it to be. Specific to the pricing question, pricing is going as we expected it to go, meaning we are pricing higher than we priced last year.

Our persistency is about where we'd expect it to be. 2/3 of the book reprices on January 1. So we're in that process right now, but it's going well. And we would still expect to recapture the portion of our margin recapture. And when we talked about it last year, we said over '26 in '27. We still see that as the path. So part of it will be '26 and the rest will be in '27.

Okay. Okay. At this point in the year, how would you characterize how the overall medical cost trend in commercial has developed. We've heard some refer to sort of an 8% to 10% range. Do you think -- when you think about '26, are you thinking about the cost trend, the underlying cost trend being stable? And I assume you would characterize your pricing for next year as being for margin stability. Any thoughts on any of that?

Yes, sure. I mean the cost trend continues to be high. We are pricing 2026 higher than we priced 2025. And so that is in process and happening. As I think about margins, if we look at the commercial book, excluding stop-loss, we expect -- we are in our target margins. We expect to be there next year. Stop loss, we're on the recovery. So we'll partially recover next year, but get closer to target margins. Then for the individual business, -- there's been disruptions this year. We're below target margins. We expect to make some improvement next year given where we've priced the book.

And on that, anything to say? I know individual is tiny, but we're in open enrollment now. Any early read on what you're seeing there in that business?

No early read. I think the timing is they have till December 15, and so no early read, but we do expect a contraction. We had at one point, 1 million lives in this space. Now it's less than 400,000. We expect that to be even less next year in the 20% to 30% range. No early read on what's happening. We kind of got to wait for the process to go through. But we did price for margin improvement. So we expect more...

We expect lower lives. I think you noted on the call and maybe even in the prepared remarks that cash flow is going to be back half weighted next year. But it sounded like the capital deployment from things like share repurchase would be more consistent over the year. When you think about -- is that true? And I think normally, we think about a 4% to 5% contribution from capital deployment. Is there any reason to think if the cash flow is back-end loaded that maybe it will be a little less next year. What's your thoughts on that?

Yes. If I think about the dynamics in terms of our cash flow trajectory, like you referenced being back half weighted. If you look at the past couple of years, it has been back half weighted. We had the benefit of the Medicare sale, which allowed us to do some repurchasing earlier in the year and in the back half of the previous year in anticipation. And so we've got that dynamic plus the other dynamic of -- we did the Shields transaction. Our leverage coming out of the third quarter was at 44.9% debt to cap.

We want to get to a roughly 40% range, not exactly, but approximately. And so we're working on delevering at the same time that we want to execute on other elements of the capital plan, one being repurchasing. So I would expect that we're going to be opportunistic and that there will be maybe some pressure to that additional 4% to 5% as it relates to repurchases only.

Okay. Okay. I think '27, the comment was made as you announced this model on the third quarter call that you'd see a return to closer to the long-term growth rate. We're trying to think about, is that because the comp will be easier because of what's happening in '26. It doesn't sound like there's incremental spending in '27 versus '26 for the new model. So you won't have a headwind on that. I think people are gravitating toward thinking about '27 as the low end of your 10% to 14% growth. Does that seem reasonable? I know there's a number of moving parts. Anything you'd like to elaborate on, on that?

To start with, that seems reasonable. We'd expect -- and we said this coming out of the third quarter call, it's reasonable to expect we get back into the long-term growth range of 10% to 14% in 2027. The headwinds that we have in 2026 around the contract renewals and extensions, that won't be a headwind going into '27. We'll continue to see the spend, but it won't be incremental, the spend on the transformation. It won't be incremental in '27 to '26. And so we'd expect to get back into our long-term growth algorithm.

Okay. With that, I think we're winding down. Any final wrap-up comments that you guys would like to make? I appreciate it. We've covered the waterfront here.

Yes. I would make one, which is typically in a lot of the conversations we've had with investors over the last few years, I get the question of what about government intervention? And we didn't talk about that today. And I haven't talked about that really with many investors since we've launched the new model. And I think the reason why is we've been heavily engaged with the President's administration, heavily engaged with members of Congress. And so as we've rolled out this new rebate-free model, it addresses many of the issues and challenges that exist of what we consider from a regulatory overhang.

We're addressing those things with the new model. And we're not doing it because of those things. We're doing it because it's right for the business. But I think it does speak to a new era for us as we introduce this new model and a new opportunity and why it's good for our clients. It's good for consumers, but it's also going to be good for us as well in addressing those challenges that exist in the market today.

And we did ask you, Adam, about the manufacturers, clients and your discussion with them. It sounds like you've had some discussions with policymakers, too, maybe what's their reaction to it? And can you give us a little flavor with what -- how those discussions have gone?

Overall, it's been positive. And I think you've seen the public tweets from Secretary Kennedy or from administrator Oz and others from the administration's members of Congress. Like what we're doing here is new, it's different. And it does meet many of the issues that they've been asking about and addresses those pieces to simplify the model, provide more predictability and transparency for clients and consumers alike.

Great. All right. Well, I really appreciate Cigna participating this year in our conference, and thanks, everybody. I hope you people have a great afternoon.

Thank you, A.J..

Ladies and gentlemen, thank you for standing by for The Cigna Group's Third Quarter 2025 results review. [Operator Instructions] 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. Thanks. Good morning, everyone. Thank you 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; Brian Evanko, President and Chief Operating Officer; and Ann Dennison, Chief Financial Officer.

In our remarks today, David, Brian and Ann will cover a number of topics, including our third quarter 2025 financial results and our financial outlook for 2025. Following their prepared remarks, David, 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 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 the signagroup.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 2025 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 a net after-tax special item benefit of $61 million or $0.23 per share. Additional 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 2025 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2025 dividends.

With that, I'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call. In a highly disruptive market at The Cigna Group, we continue our track record of sustained growth in 2025, and I'm pleased to report that in the third quarter, The Cigna Group delivered strong results and continue -- in a continued dynamic environment.

Today, I'll briefly walk through how we will sustain our growth by accelerating innovation to meet the needs of our customers, clients and partners. We're also introducing new solutions to create meaningful value and impact, including our announcement earlier this week of a new rebate free model for pharmacy benefits. Then Brian will provide an update on our performance on our growth platforms as well as provide some perspective on 2026. Then Ann will share some more details on our financial results for the quarter. Then we'll open up for your questions.

Now let's get started. Third quarter, we delivered revenue of $69.7 billion and adjusted earnings of $7.83 per share, all while continuing to strategically invest in our business to drive growth and innovation. We've also taken further strategic actions to expand our addressable markets and position the company for future growth. One example is our recent investment in Shields Health Solutions completed earlier in September. Brian will share more details on this shortly.

Our performance this quarter also underscores that we continue to deliver for those we serve, consistently navigating through dynamic and challenging environments. For example, this year alone, we publicly committed in February to a series of actions to further ease access to care in a coordinated way for patients and the physicians. Then we step forward to partner with HHS Secretary Kennedy and CMS Administrator Oz, along with others, on a broad set of initiatives that will create a more seamless access to care environment and care continuity for Americans, for example, when they switch health plans.

Additionally, earlier this month, Evernorth fertility pharmacies work with the Trump administration and EMD Serono to make fertility treatments more accessible for Americans struggling to start or expand the families. And just this week, we announced our transformative new rebate-free delinked model. Our pharmacy benefit services here are designed to improve health care affordability and the experience for tens of millions of Americans.

Our durable business model is designed to evolve, flex and thrive through a variety of changes, whether anomic, regulatory, legislative or evolving technologies. Today, the powerful forces of change across health care are accelerating and converging around long-standing challenges, particularly balancing access and affordability for consumers and patients. Drug pricing continues to create a significant affordability challenge and has become an even more intense part of the public dialogue in 2025.

One area where we've helped address affordability relates to generic drugs with Americas today enjoying the lowest prices in the world for these medications. In fact, generic drugs now account for 90% of all prescriptions. And on average, they are 1/3 cheaper than in the United States than in other countries. And pharmacy benefit managers and the industry as a whole have played a key role in contributing to these lower costs by leveraging a competitive environment for clinically equivalent drugs.

Now on the other hand, prices for brand-name medications continued to skyrocket. With those drugs that do not have a generic equivalent costing 4x as much as the same drug in European markets. And in 2025, it's estimated that the median price set by drug companies for new FDA-approved drugs is projected to be approximately $390,000 per treatment course. As a result of these marketplace dynamics, even though brand name drug medications comprise only 10% of overall pharmaceutical volumes in the United States, they account for 80% of the spend.

In recent weeks, President Trump announced a series of initiatives aimed at lowering the cost of brand name medications, bringing the U.S. prices in line with those paid in other developed countries. We are aligned with these efforts and seek to expand access for all our clients, from employers to health plans and governmental plans so that even more Americans can benefit from fair pricing on the prescriptions.

Additionally, similar to our work to reduce pricing in generics, we continue to advocate for necessary changes to accelerate and broaden access to biosimilars, which boosts competition and lowers prices further. For example, the list price of HUMIRA is approximately $7,000 a month. That approaches $85,000 a year for this single medication. Thanks to our innovative offering, we provide customers with HUMIRA at a biosimilar level at no cost to the individual consumer.

From a consumer point of view, that's real value and that's innovation that matters. Even with these efforts, we continue to advance change for the benefit of our customers, clients and patients. We've deliberately shaped our well-balanced portfolio of businesses across 2 growth platforms at The Cigna Group, Cigna Healthcare and Evernorth Health Services. As a reminder, Cigna Healthcare is approximately 40% of our enterprise earnings. And in Evernorth, Specialty & Care and pharmacy benefit services are approximately 30% each.

So 70% of our portfolio, Cigna Healthcare and Specialty and Care Services remain well positioned for growth in 2026 and beyond. And to future-proof our company within our pharmacy benefit services, we continue to take significant actions. First, we proactively secured a number of long-term large client renewals and extensions including the U.S. Department of Defense, Prime Therapeutics and Centene. We're pleased to be able to serve them and their customers and patients now and through the end of the decade and beyond.

Second, we've stepped forward with our new simple and transparent model for pharmacy benefit services, which will replace the complex post-purchase rebate process with a simple upfront discount, which will enable customers and patients to automatically pay the lowest price at the counter, whether through their benefit or on a cash pay basis and apply the payments or the deductible. And importantly, continue to provide approximately 18,000 clinical safety checks as well as care coordination programs, which are essential for Americans who are taking multiple prescription medications that may have dangerous interactions.

To make the benefits of this model even more evident, consider this, for Americans and health plans where they pay the full cost of medications, including, for example, high deductible plans, our new model will reduce the cost for a brand-name drug prescription on average 30%. This will be real savings for the consumers, and they'll see it right at the counter. Cigna Healthcare will adopt this model 100% for fully insured lives beginning in 2027, and it will become our standard offering broadly for The Cigna group to the marketplace starting in January 2028 and we expect to transition at least 50% of our book of business into this new model by the end of 2028.

Consistent with this direction, we are also creating a more sustainable economic model for independent pharmacists we contract with. We understand the critical role these clinicians play in health care, particularly in rural at-risk communities and commit to continuing to support them with fair competitive pricing reimbursements for dispensing medications as well as clinical services they provide for customers and patients.

Further, the combination of market forces and our capabilities position us to proactively drive these long-term strategic renewals, extensions and program transformations to positively impact the marketplace for years to come.

Now over the next 2 years, we will invest to support these renewals extensions and innovations. These investments will support recontracting efforts cross many clients and supply chain partners, technology improvements, process reengineering as well as building a further enhancing data and analytical capabilities. Additionally, given the significant financial and affordability pressures for partners operating heavily in government programs, we have proactively improved the economic terms of the contracts for the benefit of these long-term strategic clients.

As a result of these factors, we expect margin pressure within our Pharmacy Benefit Services segment over the next 2 years. To be clear, we expect a sustained and durable growth trajectory over the long term for the business. I also want to be clear, even with these significant investments, we expect to grow EPS in 2026. Brian will discuss this further in a few minutes when he addresses our tailwinds and headwinds. All these actions demonstrate the commitment and resolve from The Cigna Group to build a better future and sustain our growth and impact.

Now to wrap up, against the backdrop of a dynamic and challenging environment, our third quarter results and our reaffirmed EPS outlook of at least $29.60 underscores the strength of our diverse portfolio of businesses and sustained disciplined execution and focus.

With that, I'll turn the call over to Brian.

Thank you, David. Good morning, everyone. I'll start by emphasizing our continued performance and delivery through a dynamic operating environment. Our strong fundamentals, disciplined focus on execution and innovative mindset position us to continue demonstrating leadership for the benefit of those we serve and to build a more sustainable model for health care. Our continued success is rooted in the reasons our clients choose to partner with us, our breadth of capabilities, our clinical excellence and our benefit plan administration. Taken together, our expertise in these areas enables us to provide access to quality health services and prescription drugs at lower unit costs than clients could achieve on their own, helping them meet their affordability goals, programs and services that deliver personalized care and prioritize patient safety and efficient and effective management of their complex benefit plans.

Today, I'm going to cover 2 things. First, I will go through our third quarter performance across our businesses, and then I'll touch briefly on the tailwinds and headwinds we see for 2026.

Let's begin with our performance in Evernorth and Cigna Healthcare. Evernorth Health Services delivered earnings in line with expectations in the third quarter. Our Specialty and Care Services businesses had another strong quarter where we delivered 11% adjusted earnings growth, reflecting our ability to deliver meaningful value to those we serve. Already this year, our specialty pharmacies have delivered approximately 7 million prescriptions, growing at a double-digit rate from last year. And we are continuing to see a strong shift to biosimilars for HUMIRA and STELARA, saving patients millions of dollars in out-of-pocket costs. This quarter, we also completed a strategic investment in Shields Health Solutions, further expanding our existing specialty capabilities to serve health systems, hospitals and other providers. We're excited about the multiple future opportunities in the over $400 billion specialty market.

With our investment shields, we are enhancing our ability to serve the provider administered portion of the specialty market, which today represents approximately 40% of the specialty space. This addressable market has strong secular growth and our investment in Shields will enable us to accelerate our strategy in the hospital and health systems segment that Shield serves. We're also pleased to be part of an effort by the Trump administration to make fertility treatments more affordable for Americans.

As David noted, earlier this month, we announced that in conjunction with the launch of TrumpRx, we will expand our successful partnership with EMD Serono to deliver fertility treatments from our Evernorth fertility pharmacies in 2026, providing lower cost and differentiated clinical capabilities for the benefit of patients. All in, we see a number of growth opportunities in our Specialty and Care Services business. With our combined suite of capabilities across Accredo, CuraScript SD and CarepathRx, we have opportunities to enhance and expand the ways we support specialty for all stakeholders.

Now I'll turn to our second major platform within Evernorth, our Pharmacy Benefit Services business. We are proactively transforming our pharmacy benefits model to meet the demands of the market and improve affordability and experiences for our customers and patients. We're also seeing strong client retention and demand for our services. And as the 2026 selling season comes to a close, we expect approximately 97% retention in our Pharmacy Benefit Services business.

During 2025, we proactively executed renewals and extensions with our largest clients, including Prime Therapeutics and Centene, building on our previous extension with the Department of Defense. We recognize there are significant financial and affordability pressures for partners operating heavily in the government programs market. We have proactively improved the economic terms of the contracts for the benefit of these long-term strategic clients. We're pleased to have these partnerships secured through the end of the decade, given their attractive long-term economics. Separately, we're also continuing to see positive impact from our suite of GLP-1 offerings, EncircleRx, EnReachRx and the new and Guide pharmacy. These offerings are anchored around affordability, access, clinical support and patient safety. This includes access to FDA-approved medicines, prioritizing adherence, hopper dosing and a focus on diet and exercise to ensure durable lasting results for our patients.

Across Evernorth, we had a solid quarter as we continue to grow our specialty and care capabilities and invest in our Pharmacy Benefit Services model, strengthening our leadership position and delivering solutions for the future. In Cigna Healthcare, we delivered financial results that were in line with expectations, underscoring the resilience of our portfolio and business mix, even in an environment of persistently elevated medical costs. This performance reflects our ability to navigate dynamic market conditions while delivering on our commitments to those we serve, along with targeted customer growth, including an 8% increase in our under 500 Select segment, and continued strong performance in international health.

As it relates to the medical care ratio, we were pleased with solid performance in the quarter from our U.S. employer business, including stop loss, which performed in line with expectations. Our overall Cigna Healthcare segment-wide medical care ratio was 84.8% for the quarter, driven by an updated view of risk adjustment in our individual exchange business. Across all of our Cigna Healthcare customers and clients, bending the cost curve and delivering affordability is more critical than ever.

As I noted, our clinical expertise and support programs are key reasons why our clients choose to partner with us. We're investing in predictive capabilities that allow us to engage our customers at the right time to support their care needs more effectively. We also enable clients and customers to access high-performing providers through value-based reimbursement models that align incentives and drive better outcomes. In Cigna Healthcare, we're proud to have delivered another solid quarter, fueled by the strength and diversity of our portfolio and our operational focus.

Next, I'll share a view of some of the tailwinds and headwinds we anticipate for 2026. Notable tailwinds include continued strong growth of our Specialty and Care businesses, including our investment in in partnership with Shields Health Solutions. In Cigna Healthcare, consistent with prior commentary, we took corrective action to reprice the stop loss business beginning early this year and expect to benefit from margin expansion within that business in 2026.

Turning to headwinds. In Evernorth, the aforementioned renewals and extensions will generate a modified margin profile going forward for these large clients. And our new rebate-free pharmacy benefits model will incur short-term investment and transition costs, including for technology and operational reconfiguration as we accelerate transformative change. And within Cigna Healthcare, the absence of nonrecurring benefits in 2025, specifically related to our divested Medicare businesses as well as our individual exchange business.

Taking these factors altogether, overall, we expect EPS growth in 2026. In Evernorth, we expect operating income to be slightly down in 2026. Our Specialty and Care Services business will grow income towards the higher end of its long-term growth target, offset by a decline in Pharmacy Benefit Services. In Cigna Healthcare, we expect operating income to grow towards the higher end of its long-term growth target.

As I wrap up, I'd like to reiterate some bright spots for the quarter. We continue to deliver strong business performance and operational execution even in a dynamic environment. Evernorth continues to see strong growth in specialty, and we delivered 11% adjusted earnings growth within Specialty and Care services, reflecting the strength of our capabilities and clinical expertise. We're proactively bringing market-leading innovations such as our new rebate-free de-linked fee-based pharmacy benefits model that will deliver more value to customers and clients and simplify our economic model.

We've also extended our relationships with our 3 largest Evernorth clients through the end of the decade, providing further multiyear predictability. And Cigna Healthcare is successfully navigating a dynamic environment and delivering on our financial commitments, with notable strong medical customer growth in our select segment. Overall, we remain confident in the growth opportunities ahead, supported by strong fundamentals and secular tailwinds that position us to deliver even greater value for our customers clients and shareholders.

Now I'll turn it over to Ann.

Thank you, Brian, and good morning, everyone. Today, I will review Cigna's third quarter 2025 results and discuss our outlook for the full year, which we reaffirmed this morning. As David and Brian mentioned, our strong third quarter results demonstrate our ability to execute and deliver on our financial commitments in a dynamic environment.

Key consolidated financial highlights for the third quarter include: revenues of $69.7 billion and adjusted earnings per share of $7.83. Our performance through the first 3 quarters gives us the confidence to deliver on our full year 2025 adjusted earnings per share outlook of at least $29.60.

Now turning to our segment results. I will start with Evernorth. Third quarter 2025 revenues grew to $60.4 billion, while pretax adjusted earnings grew to $1.9 billion, in line with expectations. Specialty and Care Services continues to deliver strong growth with revenues up 10% to $26.3 billion and pretax adjusted earnings up 11% to $928 million, consistent with expectations. This performance reflects strong specialty volume growth and increased biosimilar adoption.

We continue to see drugs used to treat inflammatory conditions, advanced pulmonary conditions, rare diseases and infertility as some of the drug classes that have seen the largest increases in utilization. As these trends continue, we remain well positioned to build on this momentum leveraging our expertise in specialty to drive affordability and strong clinical outcomes for our clients and patients.

In our Pharmacy Benefit Services business, revenues were $34.1 billion and pretax adjusted earnings were $1 billion, in line with expectations. Pharmacy Benefit Services results in the third quarter reflect the rate and pace of investments including initiatives to improve the patient experience and accelerated biosimilar adoption, consistent with our prior commentary. Taken together, we are pleased with the performance of Evernorth in the third quarter.

Turning to Cigna Healthcare. Third quarter 2025 revenues were $10.9 billion, and pretax adjusted earnings were $1 billion. Cigna Healthcare pretax adjusted earnings were in line with expectations. Overall, results in our U.S. employer business, including stop loss and our international business were consistent with expectations, while our individual business had an impact on our medical care ratio of 84.8%, reflecting an updated view of risk adjustment revenue. The higher medical care ratio in the quarter was offset by operating cost efficiencies.

Now turning to our outlook for full year 2025. Given the strength of our results through the first 3 quarters, we have the confidence to reaffirm our full year 2025 expectation for consolidated adjusted earnings per share of at least $29.60. Our full year 2025 outlook for pretax adjusted earnings for each of our reporting segments remains unchanged. In Cigna Healthcare, we now expect our full year medical care ratio to be at the high end of our full year guidance range of 83.2% to 84.2%. This is driven by a higher expected MCR in our individual business.

Turning to our 2025 capital management position. Third quarter operating cash flow was $3.4 billion, and we continue to expect strong cash flow from operations in the fourth quarter, similar to the pattern we observed last year. Our debt-to-capitalization ratio was 44.9% as of September 30, 2025. The increase primarily reflects the impact of debt issuance associated with our investment in Shields Health Solutions. We continue to target a long-term debt to capitalization ratio of approximately 40%, and we expect to progress towards this target in the fourth quarter.

Looking ahead to 2026, we expect another year of strong growth in Cigna Healthcare and Specialty & Care services, both at the higher end of our respective long-term growth target. And as David and Brian mentioned, we are proud to lead the industry with the proactive transformation of our new rebate-free pharmacy benefit model, which positions us for durable and sustainable long-term growth.

Due to the deliberate investments we anticipate making to implement this new model and the renewals and extensions of our largest clients, we expect adjusted operating income and pharmacy benefit services to decline in 2026.

Regarding our capital management position, we expect cash flow from operations in 2026 to be back half weighted, consistent with the 2025 pattern. Taken together, we expect EPS to grow in 2026. We look forward to providing further details on our 2026 outlook on our fourth quarter earnings call.

And with that, we'll turn it over to the operator for the Q&A portion of the call.

[Operator Instructions] Our first question comes from Lisa Gill with JPMorgan.

Obviously, a lot to unpack on the pharmacy side of the business. So first, I just want to make sure I understand a few things. One, we've heard from a competitor around rebate guarantees. From my memory, I don't recall Express Scripts ever having specific guarantees around rebates. So I want to clarify that, that's the case.

And then secondly, when we think about the renewal pricing going into next year, the shift over to the new rebate free model, I really want to understand the economics. Is it that as we move into next year, there is an incremental element to the renewal pricing? And then longer term, how do we think about those economics? And then when we put this all together, I think your long-term growth rate for Evernorth was 5% to 8% EBIT growth. Are you saying we're going to take a step back from that in '26, but the plan is to get there in this new model longer term? I know that's a lot, but I'm just trying to unpack all this.

Lisa, it's David. It is a lot. And clearly, there's a lot going on in the space. Let me come to a couple of headlines for you first and foremost. The new model that we just walked through is a model that we're extremely excited about. I'm personally proud of our team's ability to step back and architect the new model of the future that is fee-based, de-linked, transparent and has the mechanism to have the lowest available price for the consumer at the calendar on each transaction. And it's highly aligned with the regulatory priorities of the day. So that's frame one. .

To the core of your question, there's a few pieces in there. Our long-term algorithm for the Evernorth portfolio stays intact, number one. Two, for 2026, Evernorth will not be on that long-term growth algorithm. Specialty and care will be, and it will be at the high end of its growth algorithm. The segment as a whole, Evernorth as a whole will not be specifically focus on the PBS segment of our portfolio for the 2 reasons we talked about, significant investments in building these new sets of capabilities and the proactive actions we've taken around renewals and strategic extension of contracts, acknowledging the significant challenges of those that are serving the government-sponsored marketplace. We believe that the combination of those 2 actions materially future-proof that business for many years to come and are highly responsive to where the market needs to go.

To the last part of your question, and then I'll ask Brian to add any go-to-market comments specifically around value proposition to some of our stakeholders. The initial part of your question was around guarantees. Yes. There are instances where different dimensions of offering sub guarantees. We've not spent time with you all talking about guarantee volatility because, by and large, the aggregate relationships we have with our clients over many years, and the value we've delivered for our clients has performed in a dynamic and volatile environment. So -- but it's never been a headline that we've needed to bring to you on a regular basis. Importantly, ending where I started, the new model that we're building takes all that out of the equation. Rebates no longer exist. Reimbursements are no longer linked. They are transparent fee based, and they are highly aligned to the consumer low cost at the counter, which is why we're so passionate about it. Brian, maybe ask you to just highlight a few more of the benefits for our stakeholders on the new model.

Yes. Sure, David. Lisa, maybe just -- before I get to that, I'll touch on your question about how to model the medium and longer term, because I think it's important as you step back and reflect on what David just went through. So far in 2025, our Pharmacy Benefit Services business is tracking to expectations even in a challenging environment. So we're not seeing variability from expectations due to rebate guarantees or those sorts of drivers importantly. And for 2026, we do expect margin compression within our Pharmacy Benefit Services business driven by the 2 headwinds that we outlined earlier, specifically headwind one being the large client renewals and extensions that we secured through the end of the decade and headwind two being the transitional investment spend associated with this transformative new rebate free model, and that will result in meaningful cost across 2026 and 2027.

So when you think about modeling this business in the future, I would encourage you to think of it in 3 categories. Category 1 is represented by the 3 large clients that we referenced earlier. This represents roughly $90 billion of annual revenue and the 2026 margin profile should run rate through the end of the decade. We're thrilled to have these clients through the end of the decade.

Category 2 is the transitional and investment spend associated with our new rebate free model. This will result in margin pressure across 2026 and 2027, but it will largely dissipate thereafter. Category 3 is the fundamental earnings profile on the balance of the pharmacy benefit services book. You should think of this as not meaningfully changing from today in terms of client level earnings contributions, meaning that we would expect comparable earnings contributions from our rebate free model as we have today in our existing solutions. So you put that all together, all these actions strengthen the long-term durability of our Pharmacy Benefit Services business.

David asked me to touch briefly on what's in it for some of the stakeholders in terms of our new remodel. So let me just do a very brief run through some of the key stakeholders. So for patients, this model will insulate them from the high list prices set by drug manufacturers, even if they're a high deductible health plan. Our price assure technology will ensure that they always pay the lowest possible out-of-pocket price. Even in those rare instances where an alternative cash pay option is less expensive than our negotiated price. And if the patient does pay out a bucket, we will ensure that it applies to their deductible.

Our breakthrough new model also supports independent pharmacists by reimbursing them based upon their drug procurement cost plus a dynamic dispensing fee that varies based upon the clinical intensity of the prescriptions they're filling. Critical access rural pharmacies will receive a higher dispensing fee and acknowledgment of the crucial role these pharmacies play in our communities. And for our clients, I'll just use an employer to illustrate this quickly. It's a simple fee-based, de-linked payment structure that covers all administration and clinical programs. This offers the employer more budget certainty versus today's model, which is a post-utilization reimbursement approach. It also should result in greater employee satisfaction with their benefits. Today, often, their sticker shock when a patient is faced with the out-of-pocket cost for expensive brand drugs. This is a solution to that problem for employers. And we would expect stronger adherence to treatment protocols, resulting in improved employee productivity and presenteeism over time.

And from a shareholder perspective, we expect that this model will simplify the analysis of our company and provide you with more visibility, transparency and predictability of our performance. So long question, long answer. Hopefully, that helps.

Our next question comes from Justin Lake with Wolfe Research.

I'll stay on the PBM here. First, just any color you can share with us in terms of the magnitude of that 2026 decline, is it low single digits, mid-single digits, not a [ $0.01 ] down on the number, but just maybe a range you could help us with, so we could think about the magnitude of the pharmacy benefit pressure there next year?

And then you -- so it sounds like you're saying the renewals will play themselves out next year, and it's really that transition and investment spend that will be the pressure in 2027. So maybe you could give us some color on how much of that -- how big that investment spend bucket is maybe relative to the overall pressure and how much of that we should see in '27, just so we can understand how much of a -- do we get back to typical earnings in '27 growth minus whatever this investment spend is. Is that the right framework? And maybe give us some numbers on that.

Justin, it's Brian. So in terms of the second part of your question, your framework is right in terms of the large client extensions and proactive renewals, that will become a new run rate starting in '26 through the end of the decade plus. And the investment spending is the component that will continue into '27. So you've got the right frame of reference there.

as it relates to sizing the impact on the pharmacy benefit services operating segment for '26, just maybe I'll walk through a few of the components within Evernorth to help give you some color here. I just -- we're not giving explicit guidance today. This is meant to be more of a directional outline to help you understand what we see for '26.

If we start with our 2025 Evernorth income guidance of at least $7.2 billion, you can think of this as round numbers split approximately equally between Specialty and Care Services and Pharmacy Benefit Services. So that would be about $3.6 billion of income in each. And as I noted earlier, we expect the Specialty and Care Services business to grow towards the higher end of its long-term income growth algorithm, inclusive of the contribution from our investment in Shields. And we expect the aggregate 2026 Evernorth segment income to decline slightly from the 2025 level. So the delta between those 2 items represents the expected decline in Pharmacy Benefit Services in 2026.

Now the expected decline in Pharmacy Benefit Services income is attributable to the 2 headwinds that I made reference to earlier, one being the proactive extensions and renewals of our 3 largest clients, including both Prime Therapeutics and Centene during 2025. All of that results in a new margin profile on these clients going forward. You can think of that as that headwind being more than half of the overall Pharmacy Benefit Services decline in income that we expect for '26.

And then the second headwind for the 2026 Pharmacy Benefit Services income is the investment in transitional costs associated with our transformative new rebate free model. So this is less than half of the 2026 headwind for the PBS business. And again, while these are 2026 headwinds, both of them serve to extend the long-term value and the durability of our Pharmacy Benefit Services platform for the future. So hopefully, that helps with some of the components.

Our next question comes from A.J. Rice with UBS.

Just to maybe keep on trying to drill down that point. If you're looking at the Pharmacy Services business sort of at the higher end, the Healthcare business at the higher end of long-term targets. And then the PBM pretty much offsetting the growth in Pharmacy Services to the point where Evernorth is slightly negative, a couple of percentage points. I'm getting back of the envelope that, that probably generates EPS growth of roughly mid-single digits, 5% to 6%. I would just so people get off this call understanding in some framework, what you're describing. Is that generally in the ballpark? And are you making any assumptions about capital deployment, share repurchase, et cetera? And how they may contribute to growth in the next 2 years in this model?

And then I'm finally going to just ask a fundamental question on the new program. A lot of employers have had the opportunity to do pass-through rebates and so forth. You're going a step further in eliminating rebates. But a lot of employers push back and say, "Hey, they like that pool of rebates", have you got any early indications of how likely they are to want to adopt this model as you go out with it?

It's David. Two different questions. Let me give you some color on the first. First as you walk through the big box cars, I would ask you to think about it in terms of the earnings profile, and my comments will separate the EPS profile here in a moment. You have the big box cars CHC, 40% of the company on algorithm toward the higher end of the range, specialty and care on algorithm toward the higher end of the range, offset by the PBS downturn in 2026 driven by the 2 items that we drove ourselves relative to the strategic positioning of the franchise on a go-forward basis. We're not guiding to EPS for 2026. I appreciate the desire relative to that.

So we gave you the components of how to think about the earnings. The last piece I would encourage you to think about enhance prepared comments, sheet profile, our cash flow profile for 2025 is largely being back half weighted. The capital profile for 2026 will follow a similar pattern to be back-end loaded. So you may want to think about that in the context of how you're considering your own buildup and projections. Additionally, we've noted that we will balance share repurchase and deleveraging priorities over the near term. So I just will give you those components.

So the last part of your question, which is a very important part of the question, in terms of framing -- in terms of go-to-market. Yes, pass-through has been available for a long period of time. By the way, as have point-of-service rebates in the marketplace and we offer both. This goes beyond it. And just to reiterate your points, no rebates, delinked economics and importantly, a capability that validates for the consumer, lowest available price at the counter regardless of the mechanism that generates that and 95% of the situation, it's the benefits program that yields it, but in low single-digit percentage, which is meaningful given the number of scripts in America, it could be an alternative mechanism, we have the ability to facilitate it.

We indicated this will be our standard offering as we look to the future. We will carry Cigna Healthcare's guaranteed cost portfolio crossed to it on January 1, 2027. It will be our standard offering out of Evernorth for the 2028 cycle, and employers, let's say, for example, as you infer, maybe a collective bargaining union employer or state employer, if they still want a different program or they want to transition over a multiyear period of time, we have the broad suite of capabilities. We have a broad suite of capabilities.

And lastly and importantly, we have the consultative approach to work 1 employer, 1 buyer at a time to come up with the transitional strategies that work best for them based on how they design the program, ending with, we believe this is the future of where the market is going. We're proud to lead it. And we need to have the capabilities to be able to serve the consumer, the employer and the independent pharmacists with the model.

Our next question comes from Andrew Mok with Barclays.

I wanted to follow up on the Evernorth comments. My understanding was that some of those large contracts were only modestly profitable, and now you're talking about lower profitability on those contracts. So is it fair to think that some of them might be operating at a loss near term? And how should we think about the progression of profitability over a multiyear period?

Andrew, I'll start. We don't comment on individual contract profitability, number one. Two, I think if you take the bigger picture, typically in business of all shapes and sizes, very large relationships have lower earnings profiles than a portfolio as a whole. So a directional comment going with you, I'd ask you to consider, we proactively extended. We proactively work to restructure, and we engaged in energized renewals for these contracts. Said otherwise, we're pleased to have these relationships, and we're proud to be able to support and service the DoD be a differentiated partner for Prime and be a strategic partner for Centene. So we proactively collaborate to generate this. I'm not answering your numbers. I'm coming back to lower margin profile, yes, on $90 billion, as you would expect. You should assume we would not have proactively engaged in these relationships if we didn't deem them be strategically important. And maybe Brian comment a little bit relative to the relationship and the evolve relationship we have with the parties as well.

Andrew, just a couple of comments I'd pile on to David's start there. One, we don't write business at a loss constantly, so you should not expect that these contracts are running at a loss on a sustained basis. But to David's point, they do run at a lower margin profile on balance compared to the overall portfolio.

It's also important to note that across the pharmacy benefit services client relationships that we have, many of them deepen over time. So sometimes that's our strong specialty capabilities or home delivery pharmacies or some of our care services capabilities such as our virtual care platform, MDLIVE. So oftentimes, the relationships deepen and expand over time. We're not banking on that happening with any of our 3 large clients here, but it is an opportunity for further value creation in the future.

Our next question comes from Charles Rhyee with TD Cowen.

Maybe, David, obviously, you're making this choice to strategically move the business model going forward. And I appreciate all the comments that you had here. You're kind of going it alone at the moment. You talked about sort of the examples with prior at earlier this year. Can you maybe give us a sense here on what the dialogue might be like in Washington between yourselves and other some of your peers, it does seem like the work that you're doing with administration IVF and some of the other things seems to suggest that the environment is better in terms of coming to some type of bigger resolution and trying to see -- do you see room to find more common ground either with regulators or the administration to maybe come to some more broader resolution that could perhaps lift this regulatory overhang that's kind of been on the industry for years.

Charles, thank you for the question. I guess I'll come at it through a few frames as you paint the picture. One, we've long as a company believe that sustained public-private partnership collaboration is critical in the United States. If you step back and look at the way in which programs are designed in the United States, having good alignment of public-private partnership is quite important in the interdependencies of the programs, be they employer, Medicaid, Medicare, exchange or otherwise, there are interdependencies between the way the programs function.

Point 2 is, if you paint the last year and you referenced some of the components, you can think about actions we've driven in a few categories. One, further extending public-private partnership. Example of that I cited in my prepared remarks and pleased to see the industry more broadly stepping forward with Secretary Kennedy, CMS Administrator Oz relative to changing and transforming [indiscernible] authorization work. and changing and transforming continuity of care between health plans for an individual that no action of their own results in a preapproved event in December. Their health plan changes over in January. They today have to go through a new event. We took that off the table. That's a good example.

Or as you referenced, the fertility outcome on an expedited basis, taking our capabilities, understanding the need statement and through public-private partnership evolving a capability with EMD Serono, ourselves, the administration going forward. That falls into public private partnership.

Bucket 2 is sustained relentless innovation. And you use the go it alone phraseology, I won't put it uniquely in the go to alone. If you just look back at the GLP-1 space over the recent past, we led the industry with our Encircle program that acknowledge and recognize the need to have broader programs wrapped around GLP-1s for employers around lifestyle management, behavior modification, titration of medication programs on an individual-by-individual basis. We're pleased to have over 10 million individuals benefiting from that program today or an expansion of a program that didn't have 1 drug had both leading drugs with a different program for employers, they can't be out of pocket up to $200. So those are examples of continued innovation like our Pathwell programs or otherwise.

And the third category are step function transformations. This is the step function transformation. We should be very blunt about it. It is a reframing of the marketplace to where the marketplace needs to go, whether you look at it through the consumers' lens, the consumer even on 5% of the pharmaceuticals in America, if there's $6 billion -- 6 billion prescriptions, if 5% or 3% of them have some dislocation at the counter, that's too many. That's too many for Americans.

And while benefit programs have been designed comprehensively and responsibly by employers, by health plans, by governmental agencies, there is increasing friction for the consumer. This takes that out of the equation. There is increasing complexity for the employer. As Brian referenced, this takes that out to the equation, and there is more support for the imminent pharmacist. All of that is to say that we're driving public-private partnership. We're driving innovation, and we're driving step function growth. And there is good collaborative engagement in Washington, relative to the direction, the importance and the need, and we will continue to lean into a nonpartisan fact base patent customer-centric engagement in Washington going forward. So this is an important moment for us, and I appreciate your question. Good progress through all fronts of the 3 categories I referenced. Thanks for your question.

Our next question comes from Scott Fidel with Goldman Sachs.

Well, I guess one of us should probably ask about Cigna Healthcare, so I'll do that, appreciate the framing that you gave around 2026 and the growth in Cigna Healthcare expected to be towards the higher end of the long-term algorithm. Can you walk us through maybe some of the key building blocks that are the inputs into that? And just thinking about some of the most impactful dynamics that have been driving sort of fundamentals there. One, stop loss. It sounds like that was in line with expectations in the quarter. How does that sort of feed into the expectations at next year? And then that the Exchange business as well. And just within the Exchange business, if you have any sort of framing around sort of the pricing and enrollment expectations that you're sort of building to get to that?

It's David. Good to hear for you. It sounds like you may have a little bit of a cold. So hopefully, you're doing okay. I'm going to ask Brian to provide some color relative to the comment you articulated because there are several pieces here in your question. One is building blocks that support the outlook for 2026, and there's a couple of important ones you called out. And as he talks, for example, through the stop loss component, maybe I'll invite Ann to talk a little bit about what we've seen on a year-to-date basis and the results, and Brian will talk a little bit about what we're seeing in terms of the go-to-market component and then I'll punctuate on the back end the individual or the exchange-based programs.

Before I hand it over to Brian in a nutshell, we're on track in 2026 for our growth outlook and algorithm. And by and large, our 2025 performance is in line with our expectations with the exception of, as called out in advance some of the pressure we saw in the individual exchange business. Brian, could I ask you to talk a little bit about the Cigna Healthcare tailwinds and headwinds for 2026?

Sure, David. Scott. So for Cigna Healthcare, which represents again about 40% of the company's earnings, we expect tailwind from the repricing of our stop loss business within the U.S. employer portfolio. Now this is partially offset by the absence of some nonrecurring benefits that we had in 2025, specifically the contributions from our divested Medicare business as well as some prior year true-ups in the individual exchange business. So when you net that all together, we expect that 2026 Cigna Healthcare income will grow toward the higher end of our long-term income growth algorithm.

As it relates to stop loss, we're tracking well as it relates to the 2-year margin recovery plan that we outlined in our fourth quarter call. So we've been able to execute against the higher rate actions that we required with typical levels of retention. So we're quite pleased with the performance of that year-to-date in 2026 will be a step forward toward the ultimate margin recovery that we expect to be completed by the end of 2027. And so far, the claims experience on that business has been running in line with expectations in 2025.

As it relates to the '25 performance, Ann, do you want to talk about what we're seeing in stop loss and individual exchange a bit?

Yes, sure. Thanks, Brian. So as Brian said, our stop loss business continues to track in line with expectations. So just as a reminder, we had assumed a higher MCR for this year compared to last year, which was in the low 90s. So a few things I'd note on what we're seeing sort of as we're sitting here now in the fourth quarter, our rate and execution -- rate execution, excuse me, and persistency, as Brian said, are tracking in line with expectations. I'd also point to the paid MCR, which measures claims as a percentage of premium collected. That is tracking where we would expect it to be at this point in the year.

In addition to those stats, we are analyzing how the results are tracking against expectations. We've developed enhanced analytics. In addition, this year that include those that leverage both claims and clinical data to predict individual claims experience, so using these analytics, we've constructed a range of stop loss outcomes based on where members currently sit against their pulling points and predictions of their future claims, those analytics reinforce our expectations for the full year. So taken together, we feel good about expectations for the stop loss book this year.

Our next question comes from Kevin Fischbeck with Bank of America.

I just want to make sure that I'm clear about what you guys are communicating around the investment spending component of the pressure on the PBM business. When you say that the investment spending will continue into 2027. Are you saying that it's going to be a similar year-over-year drag in '27 or that it's stable in '27 before margin recovery in '28 as you start to overcome those investments and recapture them?

Kevin, it's Brian. So it's more of the latter, if you were to think about the choices that you outlined there. You can think of the investment spending continuing from '26 into '27. So at this juncture, we don't anticipate that being a year-over-year headwind '27 over '26. Maybe let me elaborate a little bit on the nature of it, just to give you a little more texture here.

So as I noted earlier, this is one of the 2 headwinds that were impacting our Pharmacy Benefit Services business as we head into 2026 with the other being the large client renewals and extension. And the investment in transitional spending represents less than half of the Pharmacy Benefit Services headwind. Now importantly, as we've said multiple times here, this is a fundamental business model pivot much more than just simply a new product launch. So as a result of that, there's some substantial technology investments required, both some that are market facing as well as others that are more back office in nature.

So just keep in mind, our existing infrastructure really has been built around a pharmacy rebate oriented ecosystem. Secondly, we do have a series of recontracting work that needs to be completed in order to deliver the model. So think of this as manufacturer contracts, network pharmacy contracts as well as client contracts. So overall, these are fairly substantial changes that represent, again, one of the drivers of 2026 being a transitional year for our PBS business. But you should think of the spend levels as being broadly consistent between the 2 years. David, anything you...

Kevin, just maybe to give you a summary, I think we're going with your question. And I'm going to give you a directional comment as opposed to a financial comment. As you think about the building blocks of the capabilities, our CHC were on algorithm in '26, Specialty and Care on algorithm in '26, PBS of algorithm in '26. As you play that forward another year where you're going in terms of the moving points, Brian indicated the greater than 50% in the PBS part of our capabilities that is large client related will run rate going forward. So you have a different basis but new run rate going forward. And when you wrap it together, while there's investments that will carry into 2027, at this point, it would be reasonable to assume we would expect to be back on at the enterprise level on algorithm for 2027 with the strength of the franchise.

Our next question comes from Jason Cassorla with Guggenheim Securities.

Great. Maybe just for health care first, could you clarify, are you seeing health care AOI growth at the high end of your long-term target next year? Off of the AOI baseline that does not include some of the nonrecurring benefits like Medicare attribution, those true-ups? And then my real question for 2026. Are you expecting further membership growth there? Just any pockets or areas you want to highlight, you're looking for strong growth and any other puts and takes around membership to consider for next year would be helpful.

Jason, it's Brian. So on the first point, the again, directional commentary we're giving you today, we expect Cigna Healthcare income growth at the higher end of our long-term growth algorithm off of our full year guide. So no adjustments to that. So our guide is at least $4.135 billion. We expect to grow at the higher end of our income growth algorithm off of that. So just to clarify that.

As it relates to customer growth going forward within Cigna Healthcare, the portfolio is obviously quite diverse in terms of the different types of buyer groups within that. Our national accounts business, which is largely done for 2026 at this stage as it relates to January 1, we expect a flat to slightly declining customer outlook for '26, which is in line with our expectations over the long run given that our strategy is to maintain share in that part of the portfolio.

Our Select segment continues to grow, as I indicated in my earlier comments, also within the U.S. employer portfolio. And despite the higher rate increases that are in the market across all competitors. We're tracking for another good year of performance in the Select segment.

Our Individual exchange business, we expect to see a decline in membership next year, roughly commensurate with what the overall industry-wide enrollment is expected to look like. So those are the bigger building blocks as you think about the overall customer picture for 2026. So different rates of growth or decline business to business. But overall, we like the way we're positioned in Cigna Healthcare, again, confident in growing the income at the higher end of our long-term growth rate range.

Our last question comes from Erin Wright with MorganSo

Back in September, I think you mentioned that roughly in the range of 4% PBM margin would be durable or sustainable even with some of the potential permutations of outcomes from a PBM reform perspective, at least those that are out there today. And -- and is that still the right way to think about it, particularly also in light of the rebate free model transition over the -- obviously, this is over the longer term, excluding some of those nuances in 2026, '27. If you could comment on that longer-term margin profile?

Erin, it's Brian. So as it relates to the 4% margin benchmark we've provided in the past Pharmacy Benefit Services. We do believe that, that's a reasonable way to look at the business when you think about the long term. So as I made reference to an earlier question, we would expect the earnings contribution for our new rebate-free delinked model to be comparable to what the existing solutions are across the portfolio.

Now when you do the overall calculation at the portfolio level, depending on the mix of large clients, small clients, mid-market clients, the overall portfolio level margin may be higher or lower than that at any given point in time, but we would expect strong levels of contribution from our new rebate remodel comparable to what we see on a similar client level today with the existing solutions.

At this time, I'll turn the call back over to the speakers.

I just want to briefly wrap up our call today. First and foremost, thank you for joining, and thank you for your questions during our call. As I wrap up, I want to say how much I appreciate and how proud I am of our cobalt workers across the globe. It's their continued focus and dedication that support our ability to deliver on our commitments for those we serve, and generate the net benefits for our shareholders. And this is all in an environment that is dynamic as we both deliver on our existing promises and enable ourselves to design and deliver these new solutions and these transformative solutions for the benefit of our customers for years to come. We're proud of what we've achieved. We're jumping off a strong base in 2025 and 2026 will mark another strong year for the organization in our Cigna Healthcare portfolio and in our specialty care portfolio as we invest significantly in our PBS portfolio to future proof it for years to come. Thanks, again, and have a good day. .

Ladies and gentlemen, this concludes the Cigna Group's Third Quarter 2025 Results Review. Cigna Investor Relations will be available to respond to questions shortly. A recording of this conference will be available for 10 business days following this call. You may access the recorded conference by dialing (866) 405-7290 or (203) 369-0603. There is no passcode required for this replay. Thank you for participating. We will now disconnect.

Good morning, everyone. Welcome to day 3 of the Morgan Stanley Healthcare Conference. Before we get started, for more important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. If you do have any questions, please reach out to your relevant Morgan Stanley sales representative.

And with that, yes, happy to -- I'm Erin Wright, health care services analyst at Morgan Stanley. Happy to have with us today Cigna. We have COO, Brian Evanko, with us; as well as Ann Dennison, EVP and CFO of Cigna as well. So thank you so much for joining us. I'm going to first -- before we get into kind of Q&A, I want to hand it off to Brian to talk a little bit about or give a little bit of an intro. Thanks.

Thanks, Erin. Appreciate you and Morgan Stanley hosting us here today. Ann and I look forward to discussing anything that's on your mind. But just maybe a couple of introductory comments before we get going.

We just reported our second quarter results last month and delivered a good performance and reaffirmed our full year outlook. And then last week, we reaffirmed the full year EPS outlook yet again. So the company is performing. It's obviously a very disrupted environment that we're operating in right now, but our company continues to deliver. We've delivered historically. We're delivering now, and we'll continue to deliver into the future.

In fact, if you go back over the past decade, we've had 13% compounded EPS growth and look forward to another strong year here in 2025. And really, that comes back to our 3 strong scaled growth platforms, our health benefits business, Cigna Healthcare; and then in Evernorth, our service company; we have our pharmacy benefit services business, Express Scripts; and our Specialty Pharmacy business and Specialty Care Services business, I should say. All 3 of those are strong scaled platforms that continue to grow, and we're confident in those businesses continue to grow in the future.

The second thing I wanted to highlight that's a net new item is, just last week, we announced a sizable investment in Shields Health services. And so for those of you not familiar with Shields, this is the leading -- by far, a leading company in the specialty space as it relates to serving health systems. So the specialty drug market, if you're not familiar with it, is an over $400 billion addressable market.

Today, we have a very strong position in the prescription drug-oriented part of that market, which is about 60% or so with our Accredo specialty pharmacy, but we were comparatively weaker in the medical benefit component of the specialty drug market, which is the other 40%. And so our investment in Shields immediately gives us a very strong presence in that part of the market. And this is, again, $400 billion-plus addressable market, high single-digit secular growth annually going forward.

We're already strong in the drug-oriented component with Accredo. And now we've, overnight, become much stronger with our presence in the medical benefit component of the specialty drug market with the investment we made in Shields. And along with that, again, we reaffirmed our 2025 EPS outlook, so the company continues to perform in a difficult environment. So just a couple of comments I want to start with Erin before we get to whatsoever.

Okay. Great. So I want to stay on the topic of Shields since it's so recent as well. And can you give a little bit more detail on the financial and strategic merits of the investment, how you see this kind of integrating over time and some of maybe the more specifics in terms of the genesis of this transaction?

Sure. So I'll start with some strategic aspects of it, and then I'll ask Ann to chime in on the financial components of the transaction. And so as we think about any inorganic opportunities for the company, they go through 3 filters for us. One, is it strategically aligned with where the company is headed? Two, is it financially attractive? And three, is there a high probability of completing the transaction.

This one ticks all those boxes. So strategically, as I mentioned earlier, it's an asset in the category of one in this space, far and away the leader as it relates to serving health systems. Two, financially was attractive, and Ann will reference that in just a minute. And then three, we obviously got the transaction completed.

But on the strategic merits, really importantly, maybe I'll unpack a little bit more of what I was talking about earlier with the 40% of the specialty drug market that serves providers. Today, we have a strong distribution business in that part of the market with CuraScript, which is about a $25 billion business for us. So think of this as distributing high-cost, complex specialty drugs to providers, to hospitals, to health systems, to clinics.

Where we didn't have as strong of a position is in the actual support for those health systems in managing and running their own specialty pharmacies. That's what Shields does at a tremendous level. And so our investment in Shields was designed to get us into that part of the specialty drug market. So think of large health systems, Shields currently serves about 80 of them across the country. And then all the hospitals and clinics that attach to that, there's about 1,000 of those that are in support of the 80 health systems. So they are running their own specialty pharmacies.

But in a lot of cases, they're not optimizing the way they're running it. So we help them with drug procurement. We help them with inventory management. We help them with clinical care coordination across different sites. Those are all the things that Shields does to make the hospitals, specialty pharmacy optimized and run more effectively. And the hospitals and health systems are looking for this because increasingly, their core businesses are under financial pressure. If you think about the challenges of payer mix, the challenges of wage inflation and associated dynamics along those lines.

So for us, the ability to have this position in Shields gives us exposure to a really high-growth part of the market and a part of the market where the health systems really need help. They need help to optimize and manage their specialty drugs more effectively. So that was the strategic rationale why we did this. It made a ton of sense for us. It was quite honestly, a no-brainer strategically, which leads to the financial component of the transaction. Ann?

Great. So on the financial side, so $3.5 billion investment. The investment is in a noncontrolling preferred. There is an income stream associated with it. We're not -- we haven't disclosed the specific details, but I would describe it as not material to our overall results, excuse me. And so as Brian said, we're extremely excited for the strategic element of this.

And when you think about our capital deployment framework and as well as over the long term, sort of the incremental EPS that we get from capital deployment of 4% to 5% is either coming from share repurchase, M&A or debt paydown in those categories. And so Shields fits nicely into this construct with a long-term strategic then to it.

That's great. I want to talk a little bit broader specialty. I just always view that that's an underappreciated part of just the market and part of the Cigna story. And it's a $400 billion market growing high single digits. I mean it's bigger and faster growing than a lot of areas of traditional kind of health care services or the insurance businesses that get a lot more attention.

So I want to shift gears to that and just talk about what your long-term prospects are across that business, how you see you're competitively advantaged or the differentiators for Cigna and what that means in terms of potential for growth above the market.

Sure. Sure. So I'll take this one. So again, coming back to the highest level, $400 billion-plus addressable market, high single-digit secular growth. About 60% of that is in direct-to-patient specialty drugs. So we serve that market through Accredo, which is our specialty pharmacy, both in terms of the drugs going direct to the patient, but also our support for those. So we have over 600 home infusion nurses that go into people's houses and help them to inject or infuse these specialty medications themselves.

So that business is strong, scaled, continues to grow at really attractive rates. And one of the reasons we win is because of the clinical expertise we have in that business. So I tend to describe it, it's more like a care delivery business as opposed to an insurance business or a PBM business, more like a care delivery business because fundamentally, these are all high-cost clinically intensive drugs that require case by case, in some cases, temperature control or very specific handling. So we serve about 1 million patients today through Accredo.

Last year, we filled about 8 million prescriptions on their behalf. And one of the reasons that we've established a differentiated position is the clinical expertise that we have, all the pharmacists, the pharma techs that we employ, the home infusion nurses. And importantly, the manufacturers of specialty drugs, they don't just want to give these drugs to anybody. You have to be someone that they trust as it relates to your specialty pharmacy capabilities in order to get access to some of these specialty drugs.

So the limited distribution drugs, which are some of the rarest and most complex, we have the most access to these of any specialty pharmacy in the world. So we have access to over 70% of all the LDDs that exist. So as a result of that, we're not just in Cigna's network with Accredo, our Accredo specialty pharmacy is in many competitor payer networks or competitor PBM networks. And in fact, about 40% of our patients are unaffiliated with our Cigna Healthcare or Express Scripts businesses.

So those are the reasons why we win in that part of the market, which again is the more pharmacy direct-to-patient part of specialty. And the other 40%, which is a direct through provider -- direct to provider, we've had this position in CuraScript that I was describing earlier, the distribution to the medical professionals, but we were not as strong in the actual -- helping the providers run their specialty pharmacy capabilities, which is what Shields does.

So Shields is a fee-based business. We're getting fees from the health systems and the hospitals to help them assist them in operating their specialty pharmacies, which increasingly are important because many of these systems hadn't historically focused as much on the prescription drug part of their operations, but now they are because prescription drugs continue to be a bigger percentage of the total pie. And it's an opportunity for many of these systems to generate more revenue in a time where they're really constrained financially.

Okay. And I'll switch to biosimilars like biosimilars, STELARA, HUMIRA, like those can be a meaningful opportunity on the specialty pharmacy side. I think $100 billion by 2030 is how you sized it. How is this playing out relative to your expectations given some varying adoption curves across biosimilars?

Yes. We see biosimilars and generic specialty drugs as a great savings opportunity for America broadly. And to your point, there will be $100 billion of drugs today that are subject to biosimilar and generic competition by 2030, and we're right in the midst of that as it relates to the capabilities we have across our Evernorth platform. And so from our point of view, this is a classic case of it's a win-win for the financier, whether it's an employer client, health plan or an individual.

It's a win for the patient because it's a lower out-of-pocket. And it's a win for us because whenever we fill a biosimilar or generic instead of a high-cost specialty drug or brand drug, it ends up financially being equivalent or better for us on a per script basis. So for all those reasons, we believe biosimilars and specialty generics are just a huge opportunity for the American health system. HUMIRA was the first really one at scale, right, which hit the market a year or 2 ago.

As it relates to where we are now, at the end of the second quarter, we had over 70% of eligible HUMIRA scripts that were filled by a biosimilar. So that's been really good progress. We expect that metric will tick up over the balance of the year as well. And then in May, we introduced a $0 patient out-of-pocket for STELARA, which is the next largest biosimilar that's been introduced. And we've seen good uptick in the 3 or 4 months since we put that opportunity into the market. But both HUMIRA and STELARA, we now have $0 patient out-of-pocket offerings available, which again speaks to the win-win opportunity with these biosimilars.

And then on -- Brian, you mentioned CuraScript several times, and I don't want to go over too much more on that, but I do want a little bit of an update on how much you're doing now in terms of CuraScript. I think the goal was to get to 50% in-house distribution across your specialty business. I think you were at 20% roughly. Or where do you stand today? And how is progress on that front? Do you anticipate taking that entire business in terms of distribution?

Yes. Your numbers are broadly right, Erin, in terms of the way to frame the situation. So CuraScript today for us is about a $25 billion business. It's been growing double digits annually for a number of years in a row. Most of the distribution is focused on the provider community. So meaning we don't really distribute to retail pharmacies, et cetera, with CuraScript. So we do have a partnership -- a long-standing partnership with Cencora, which has continued to be constructive and productive. We just extended that over a multiyear period last year.

And so we continue to look drug by drug at what makes sense for us to be able to distribute ourselves through CuraScript versus through a partner who we have a good relationship with in Cencora. Biosimilars, in particular, the ones I just referenced for HUMIRA and STELARA do lend themselves to our CuraScript capabilities. So we've tended to use that capability for the newer biosimilars that come to market. And we expect the CuraScript business will continue to grow attractively in the future.

And before shifting to Pharmacy Benefit Services, I want to ask a little bit about Evernorth just broadly and the seasonality here. This was one area that was a big question for investors after the second quarter call was on sort of the Evernorth earnings progression in the second half. Could you talk a little bit or provide a little bit of an overview on how we should be thinking about that quarterly progression? What are some of the moving pieces, not only, I guess, across Evernorth, but Cigna -- the broader enterprise as well, Cigna Healthcare Evernorth, for you, for the remainder of the year?

Sure. So coming out of the second quarter, we had provided some guidance. I think in some cases, that guidance we were providing was taken as a point estimate. And so I think what's important to note, and if we go straight to Evernorth, there's nothing out of pattern that we would expect in the third or fourth quarter. So when you think about the third quarter and the fourth quarter, the third quarter is going to look and feel distribution-wise in the fourth quarter like it did last year and the levels of growth versus last year for the third and fourth quarter, we expect them to look similar to what we saw last year. So that's on the Evernorth side.

On the Cigna Healthcare side, we expect the third quarter to be about a little bit less than 25% of our full year outlook. And then if you look at the entirety of our EPS for the third quarter, we expect that to be a little bit higher than 25% on the full year outlook. So in that vein. But again, these are meant to be directional guidance, not point estimates as folks are thinking about modeling those out.

Okay. Great. Okay. So I'll switch gears to the PBM, and then we'll get to Cigna Healthcare. So on the PBM side of the business, how would you characterize the current 2026 selling season? You've had a multiyear renewal with Prime and are there any other contracts, I guess, up for renewal?

Yes, the '26 season for us in the pharmacy benefit services space specifically is just about wrapped up now, and there's only a few left to go. So broadly speaking, another year of strong retention. So we're on track for that mid-90s or higher level in the Pharmacy Benefit Services business. As you referenced, Erin, earlier in the year, we announced the multiyear renewal of Prime Therapeutics, which we're thrilled to do. They've been a great partner to us.

And again, that validates from our point of view that some of the largest, most sophisticated purchasers continue to value the services that we provide, even though there is obviously some buzz and some noise in the market about alternative models to some degree. But we continue to have a strong level of retention, continue to have high satisfaction rates from our clients and are pleased with the ongoing growth of that business.

Okay. Great. GLP-1s. So a little bit of over like 50% or so of an employer relationship currently cover GLP-1s for weight loss. It's flattish year-over-year. I guess how would you characterize that remaining 50% bucket in terms of their readiness to cover GLP-1s beyond the diabetic indications?

And then Evernorth has announced several innovative programs around this over the past couple of years, whether it's the $200 out-of-pocket cap, EnCircleRx, EnReachRx, EnGuide Pharmacy, ClearNetwork, and a lot of other initiatives in and around this category. So can you comment on the reception of those, the adoption of those and how you're addressing kind of GLP-1s broadly?

Sure. That was a multi-parter, all of this. But broadly speaking, we're really proud of everything we've been doing in the GLP-1 space across the Cigna Group. Obviously, these are innovative medications. They're making a difference in a lot of people's lives, and we want to make sure that they're accessed in an affordable way that ensures patient safety. So a lot of our programs that we've introduced have been anchored around those themes: access, affordability and patient safety.

You mentioned over 50% of our clients have covered GLP-1s for weight management. That's specifically our Evernorth portfolio, where we tend to have larger employers on average and health plans on average. In the Cigna Healthcare portfolio, which is our health benefits business, we tend to skew a little bit to smaller employers. There, we have 15% to 20% that cover it for weight management. So to just give you a little bit of a sense of the contrast there. But to your point, it's been flattish year-over-year in terms of the percentage of employers covering it.

And we still are seeing utilization growth because even with the same percentage of employers, there's net utilization growth in those that have access to it. As it relates to those that don't cover it, there's a lot of interest, but the affordability hurdle is a big one for many employers to get over. And some of the employers we cover have higher rates of turnover in their employee base. And so they have questions about whether they'll see the return or whether the return will be to the benefit of a different employer in the future.

So those are some of the barriers that still exist. But the programs we've introduced in Circle and REACH and Guide have all been anchored around those themes of affordability, access and patient safety. And importantly, patient safety is one we've been very focused on because there are many non-FDA-approved versions out there, in some cases, compounded versions that more and more you hear stories about the ingredients not being quite right. You also have risk of people micro dosing to try to stretch their finances and things along those lines.

And we're very focused on making sure that the drugs are being used in the right way. And so the programs you made reference to EnCircle, EnReach, EnGuide are all designed around that. In some cases, it means lower prescription volumes for us, which we're okay with because over the long run, we think it's the right thing to do to ensure that there's the access but with the right patient safety wrapped around it. And then in May, I think this was also in your question, we introduced a new program, which involved a reduction in the net price for the FDA-approved versions of the GLP-1s and an out-of-pocket cap of no more than $200 per person per month.

So if you think about that, it made the financial picture a little more attractive for an employer who's covering it because they got a lower net price and they get the cost sharing from the patient. The patient was capped at $200 in many instances, lower than that, which competes very effectively with direct-to-consumer offerings and other ways that they could access the medication. So that was an example of another program that we introduced to try to encourage affordability access and patient safety. But again, we're really proud of what we've done in this space. There will be more innovations to come in the future, I'm sure of it.

Okay. Great. So I do have to ask on PBM reform, similar to years now, I feel like. So earlier this year, Arkansas passed a law calling for the separation of pharmacies and PBMs that since been delayed or deferred, and there's other states that are pursuing rebates, spread pricing reform. I guess what's your view on some of these recent reforms and proposals? And it seems that some of these reforms around kind of price transparency, rebate discount kind of pass-throughs should be manageable. The PBM model has evolved, right? And so I do think what is the biggest risk, I guess, in your view at this point?

Sure. So there's a lot in this topic. And as you can appreciate, ideas tend to move over time in terms of where the focus is in the PBM space. And we don't try to protect the status quo as it relates to our business here. To your point, we view our model as a durable model that can evolve and flex depending on any changes in regulation. And for us, it really comes back to why clients hire us. They hire us for the affordability we deliver, so better unit cost than they can secure themselves.

They hire us for the clinical programs that we introduce to ensure patient safety of the drugs, and they hire us for the administration of their benefits. And those are the 3 value creators that regardless of what government regulation may come, as long as those 3 value creators still exist, we'll be able to earn an appropriate return for that. And we view our margin profile, which is circa 4% as a durable margin profile in any of those potential scenarios.

As it relates to where the government tends to focus, again, it's a little bit of a moving target. Right now, it looks a little bit more focused on the government programs, meaning Medicare and Medicaid and some of the provisions within those, which we were a little bit smaller on a relative basis. We're a little bit larger in the commercial employer space. But again, what we're seeing and we're engaging constructively with lawmakers in D.C. and in the states, we believe that it will be manageable for us ultimately, provided that those 3 value creation levers are not compromised.

Great. And then also part of the new administration, there is a lot more noise around drug pricing, whether it's through IRA, most-favored nation. There's also a lot of push around kind of this direct-to-consumer type of model as well. Can you provide us kind of your latest in terms of what you're hearing on this front, what this looks like kind of for Cigna, if there's any implications? And it seems like some of the direct-to-consumer stuff, whether it's LillyDirect or otherwise, seem to be a little bit more around cash pay, but can you talk a little bit about what that means for the model?

Yes. This topic, whether it's MFN or direct-to-consumer, specific details really do matter in terms of exactly what are the implications for different competitors in the industry and the details still are being ironed out, as you can appreciate. Now the spirit behind most favored nation makes all the sense in the world, right? You would want the U.S. to be on equal footing with other countries as it relates to net pricing. But the implications of that ultimately are still a little bit unclear to us. And again, we're engaging constructively with policymakers and lawmakers on those topics.

Direct-to-consumer models, intuitively makes sense. We have access or we offer access through our Inside Rx program today for individuals that may want to go cash pay or use our discount cards. Where the challenge with those models ultimately is in high-cost specialty drugs or the high-cost branded drugs because someone who has a drug that costs $20,000 per month, direct-to-consumer model is a tough model to imagine or you think about the $4 million gene therapies, direct-to-consumer models.

So the financing of those is where the challenge starts to really come in. You could see maybe the model growing a little bit on the lower cost generic side. But even in that situation, we have enough capability across our platform that we're confident we'll continue to thrive.

Okay. Great. So I want to shift to Cigna Healthcare. I know a lot of you have questions on that. What are your latest thoughts on utilization trends? On your second quarter call, you called out heightened pressure across the stop-loss book. It does seem to be in line though with your expectations, how you characterized it before. I guess could you comment on what you're seeing from a utilization standpoint?

Yes, sure. So I'll talk a little bit about that. So coming into the year, we expected higher utilization. We continue to see it. If you're looking at the commercial book, the biggest pressures that we're seeing there are on the specialty injectables and the behavioral health side. I should say they are the biggest contributors to cost trend. And we continue -- that is what we expected, and we continue to see that as the year goes on.

With respect to stop loss, as a reminder, we -- for the last year, our loss ratio there was in the low 90s. And so coming into this year, we expected that to be higher. And so we're seeing similar sort of drivers, but we are seeing it play out as we expected it to be. So it is higher, and it's in line with our expectations. We've got -- we've added a lot of other data elements in order to support the analysis that we're doing on a day-to-day, month-to-month basis in order to track it.

And so we're keeping a very close eye on it, but it is tracking to what we expected being a higher MCR for this year than last year. And then maybe the last thing I'll mention is on the exchange business. So we did see some higher utilization, maybe about $30 million of pressure in the second quarter. We've built that into what we expect the pressure to be there throughout the back half of the year, and we're pretty much seeing what we expected in our estimates. So it's built into our guide.

So broadly in your reaffirmed guide 8-K, that broadly assume consistent trends are in line with your expectations into the second half. Okay. Pricing environment. I guess you mentioned also on the second quarter call that you see kind of the market taking a more -- or broadly a conservative approach from a pricing perspective. Can you describe kind of the environment right now, what your anticipation is kind of heading into 2026? And are there any sort of deviations from that narrative, I guess, with, I guess, specifics around the commercial product?

Yes, I'll touch on that. So no deviations from what we've said before. Like I said, we saw elevated trends last year. We expect to see them again this year. In our pricing, we expect to price '26 at a higher level than 2025, and that's sort of playing out in the process as we go through this year.

Okay. And then going back to the exchange business, you talked a little bit about the utilization environment that we're seeing. But can you talk a little bit about the long-term margin growth profile that you're thinking about for that business? Do you still see this market as attractive in the long term, just given some of the recent volatility there and the likelihood or potential for -- should enhance subsidies, which it changes every day now, sunset at the end of the year. How are you thinking about that? And how are you thinking about the prospects of the exchange business?

Sure. So I'll start, and Brian, if you want to add anything. We still believe the exchange business is an important part of the ecosystem for those that don't have access to employer or governmental plans. And as we said coming out of the second quarter call and we've been talking about, we've been pricing for margin and not for growth, so to manage -- to ensure that we're managing our margin appropriately, we are doing that again this year.

And so we're -- we've submitted our prices for 2026, and we'll manage to what happens in the market. Of course, if the environment changes and there is a change in the perspective around the subsidies, we'll have to shift and work with the states to see if there's anything that needs to be done there. But everything that we have submitted for 2026 is already in.

Okay. And I want to switch gears back to M&A and capital deployment. And Brian, at the beginning of our discussion, you talked about some of those key parameters that you're thinking about when it comes to M&A. But will Shields help to explain your future M&A strategy here? And how are you currently viewing the M&A environment, your areas of focus? Has anything changed in terms of how you're thinking about M&A versus a year ago and still commitment also to buybacks as well?

Sure. I'll start if you want to comment at all on buybacks or anything else, feel free, Ann. But overall, as I mentioned earlier, the 3 criteria continue to guide us in terms of strategic alignment, financial attractiveness, high probability of close. We're generally interested in things that either expand our reach. So the Shields deal expanded our addressable market. We had a part of the market where we were not as strong, and we felt like we could get an immediate boost through the investment we made in Shield. So things that expand our addressable markets, expand our reach are interesting or things that deepen our capabilities in existing platform.

So for the time being, we're very focused on bolt-on oriented acquisitions. So think of up to high single-digit type billions. That's where we define a bolt-on. So the Shields deal kind of fits squarely within that. We've had some other smaller ones as well in the last year or so. And so we're focused on that as it relates to M&A-oriented priorities. But ultimately, these -- each of these have to compete against buybacks. So we always look at the accretion from buybacks. So whenever we talk about our growth algorithm and 4% to 5% of EPS accretion coming from capital deployment, that is fungible between buybacks and M&A.

So when we do a deal like Shields and we say it's immaterial EPS, that's in comparison to doing buybacks, right? So we hold ourselves to that standard as opposed to something where we allow a less accretive transaction to still be acceptable. So buybacks are ultimately the standard for us. We'll continue to repurchase shares in the future. Obviously, we have to keep the balance sheet in a good position, but...

Yes. I think as far as this year goes, we have said coming out of the second quarter, we had -- even coming into the year, we expect sort of a barbell approach to buybacks. Now with the Shields investment, we expect to push out some of those buybacks a little bit further, at least as it relates to this year, but obviously, I agree with everything Brian just outlined.

Okay. Great. And then lastly, a big theme for us at Morgan Stanley is kind of AI, AI diffusion across kind of health care, how health care systems, how health care providers, how health care services more broadly can leverage AI and technology. I guess, can you talk about some of those technological advancements that you're seeing and that you're utilizing and investing in that could drive some mid- to long-term opportunities?

Yes. So at the Cigna Group, we're very excited about the concept of AI and all the potential use cases in the health care system, and we've both hired talent, but also upskilled existing talent to make sure that we're properly positioned here. Broadly, you can think of it in 3 categories for us, one being the better, faster, cheaper. So how do we take operating expenses out without sacrificing quality of what we're delivering. So it's kind of category 1. Category 2 are things that are more precise and personalized for individual customers or patients.

So an example of that would be earlier this year, we introduced an AI-powered virtual assistant to our Cigna Healthcare customers to make their care experience more personalized. And then the third category is what we'd characterize as net new business models. We don't have a lot of announcements in this category yet, but it's an area that we're actively exploring and looking to innovate. So think of it in those 3 buckets, better, faster, cheaper, more precise and personalized and then net new business models.

And some of those tangible use cases are either things like our contact centers, pricing and underwriting, we're exploring things. And then there are some clinical use cases that we're exploring as well. But obviously, that last category, we're going very carefully to make sure that patient safety is never compromised.

Okay. All right. Thank you so much for the time, Brian, and I really appreciate it. It's a great discussion, and thank you.

Thank you, Erin. Appreciate it.

Ladies and gentlemen, thank you for standing by for The Cigna Group Second Quarter 2025 Results Review. [Operator Instructions]

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.

Thanks. Good morning, everyone. 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; Brian Evanko, President and Chief Operating Officer; and Ann Dennison, Chief Financial Officer.

In our remarks today, David, Brian and Ann will cover a number of topics, including our second quarter 2025 financial results and our financial outlook for 2025. Following their prepared remarks, David, 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 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 2025 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 second quarter, we recorded net after-tax special item charges of $171 million or $0.64 per share. Additional 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 2025 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2025 dividends.

And with that, I'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call.

We entered the second quarter with momentum, and I'm pleased to report that The Cigna Group delivered another quarter of differentiated financial results. And recognizing the meaningful disruption in the industry, we're also pleased to reaffirm our guidance for full year 2025.

At The Cigna Group, we continue to meet our financial commitments by delivering innovative new solutions to improve access and affordability for customers and patients and working to build a better, more sustainable health care model. At the same time, we also remain laser-focused on delivering every day for the benefit of those we serve.

Today, for our discussion, briefly, I'll discuss how the strength and durable nature of our model enables us to continue to grow. Then Brian will discuss the performance of our growth platforms and how we continue to expand our total addressable market. After that, Ann will provide details on our financial performance in the quarter, and we'll take your questions.

So let's get started. In the second quarter, we delivered $67.2 billion in total revenue and grew adjusted earnings per share to $7.20. This builds on our long track record of sustained attractive results, where over the average of each of the last 3, 5 and 10 years, we've achieved our growth algorithm of 10% to 14% compounded adjusted EPS growth.

Our results are a direct reflection of our clear and deliberate strategy to position The Cigna Group with differentiated services and integrated benefit capabilities, coupled with strong execution and led by the most tenured and capable leadership team in the industry.

At a macro level, we continue to operate with the assumption that the environment will remain dynamic. We see eroding health status, affordability and access challenges as key forces of change in the health care system in the U.S. and around the globe. In addition, we have operated in and will continue to operate in this space with elevated regulatory and legislative activity as well as significant technological, clinical and pharmacological advances.

We have a number of differentiators, which enable us to lead through these dynamic markets. The first is our orientation toward anticipating, and in some instances, creating constructive disruption, which better positions us to identify opportunities. This is a foundational part of our strategy. For us, it means listening to our customers, patients and clients and leveraging their feedback to continue to evolve, innovate and deliver even more value.

For example, as we stepped into 2025, the forces of change in health care further accelerated our efforts to help shape a more sustainable health care system, and in part, fueled our customer-focused commitments and actions we announced earlier this year. These commitments, which we refer to as our commitment to better, call on us to deliver easier access to care, better support to help customers and patients navigate the health care system, increase value, greater accountability and greater transparency.

This quarter, we took another step forward with Cigna Healthcare introducing a new AI-powered virtual assistant to improve our customers' experience during common interactions such as checking benefits, estimated costs and finding care.

As it relates to regulatory and legislative activity, we continue to proactively lean in with a partnership orientation. We continue to believe in and embrace public-private partnerships, which are essential for the health care system to continue to be responsive to all stakeholder needs. And we are proactively working to bring forward new solutions with the current administration, Congress and within states.

The recent industry announcement to further streamline and simplify prior authorizations for the benefit of patients and physicians is a good example of this, and we partnered closely with HHS on this advancement. Each of these actions represent a commitment from The Cigna Group to build a better future, and I'm pleased that we continue to make good progress.

Our second differentiator is our diverse portfolio of businesses, which provides us with the strategic flexibility to pursue multiple avenues for delivering and capturing value. This is made possible by our service-based model, which provides us with significant amount of agility and nimbleness.

We've deliberately shaped our services-based model over years, and today, they are configured in 3 strong platforms that together provide us with a diversified position and multiple pathways for growth, serving employers, health plans, governmental agencies and health care delivery systems. In Evernorth, that includes Specialty and Care Services and our Pharmacy Benefit Services business; and in our Cigna Healthcare portfolio, our integrated benefits offerings, both in the United States and globally.

Our proven approach leverages the combined strength and capabilities of these platforms to create even more value for the benefit of those we serve. Over the long term, the way we've architected our company, coupled with our strategic choices, including a capital-light model, has given us both the resilient model and the ability to pivot and evolve as the marketplace changes.

Now a third key differentiator for us is our relentless execution fueled by our tenured and talented team. Ultimately, our results are made possible by our coworkers, including the most experienced enterprise leadership team in the industry. And along with the great depth and continuity of our leadership, we also continue to strategically infuse talent into our company in areas such as technology and clinical.

The strength of our team continues to be a key differentiator in our ability to consistently execute on our strategy and deliver on our core fundamentals. Our team's deep expertise in the health care industry and strong understanding of the competitive landscape enables us to adapt quickly. This strategic agility helps us navigate challenging environments as well as to identify and seize new opportunities for growth.

We have drawn upon each of these differentiators time and time again to continue to grow in times of uncertainty, from the launch of the ACA to leading through the global pandemic. And during each of these events, we have sought to innovate through and deliver sustainable value for our customers, patients, clients and shareholders. As a result, we've delivered 13% compounded adjusted EPS CAGR over the last decade.

Now to wrap up my comments. Against the backdrop of a dynamic environment, we continued to deliver and are well positioned for the remainder of 2025. Our second quarter results underscore the strength of our diverse portfolio of businesses and our disciplined focus on innovation and partnership.

We are confident in our ability to sustainably deliver 10% to 14% compounded adjusted EPS growth over the strategic horizon, along with an attractive dividend.

And with that, I'll turn the call over to Brian.

Thank you, David. Good morning, everyone.

To underscore David's comments, we continued to execute well and delivered against our customer and shareholder commitments through a dynamic operating environment.

Our capabilities across our 3 platforms, Cigna Healthcare, Evernorth Pharmacy Benefit Services and Evernorth Specialty and Care Services, uniquely positions us in the market with strong assets and expertise. Across our portfolio, we are leaders in serving employers, health plans and government entities. And we are increasingly entrusted to service health systems, hospitals and other providers with our Evernorth Specialty and Care Services capabilities.

Now let me go a bit deeper on our second quarter business performance. Beginning with Cigna Healthcare, Cigna Healthcare delivered financial results that were in line with expectations even as we've seen persistently elevated medical costs throughout the year. Importantly, our flagship U.S. employer business continues to grow, particularly in our Select segment through a consultative approach with clients.

Overall, our performance reflects a medical care ratio of 83.2% in the second quarter. This is in line with expectations, driven by our sustained disciplined execution against our commitments.

And we have intentionally positioned our Cigna Healthcare portfolio with a product mix that has proven favorable in the current environment as we have no exposure to Medicaid or Medicare, instead choosing to serve these customers through our Evernorth services portfolio. Our planning assumption within Cigna Healthcare for 2025 is that we will continue to experience elevated medical costs throughout the year.

Within the second quarter, we experienced pressures in our individual exchange business that we were able to overcome due to the strength of our broader Cigna Healthcare portfolio and the relatively small scale of our individual exchange business within that portfolio as a result of strategic choices we've made to reposition this product offering.

Turning to Evernorth. Earnings were slightly ahead of expectations. This reflects our strong momentum within the Specialty and Care Services platform, coupled with continued good execution within Pharmacy Benefit Services.

In our Pharmacy Benefit Services business, we continued to see strong client retention with demand across diverse buyer groups, from employers to health plans and other PBMs. And today, we are proud to serve more than 120 million Americans. This includes long-standing client and partner relationships, many of them being the largest and most sophisticated purchasers in the U.S. who come to us for solutions that help them best serve their needs.

This demand for our services has resulted in a number of multiyear renewals and other ongoing agreements with large clients. For example, we recently finalized a multiyear contract extension with Prime Therapeutics.

Our clients also look to us for partnership around innovation. This quarter, Evernorth launched another first-of-its-kind benefit option that will save patients money on their GLP-1 weight loss prescriptions with greater choice and predictability. Building on our Encircle and EnReach offerings, this new benefit, negotiated directly with 2 drug manufacturers, limits the patient's out-of-pocket cost to no more than $200 per month and applies to their annual deductible. This benefit offers our clients flexibility to cover these medicines in multiple ways to best serve customers. As always, we continuously explore new approaches and models to drive greater access, affordability and transparency.

And in our Evernorth Specialty and Care Services businesses, we delivered another quarter of strong growth, led by Accredo, our industry-leading specialty pharmacy, which provides specialty medications for the treatment of complex and rare diseases.

Across the Specialty and Care Services portfolio, adjusted earnings increased 12% in the quarter when normalizing for the absence of the VillageMD dividend. This was driven by increased specialty prescription volume and ongoing biosimilar adoption, further powered by the strong secular tailwinds that we've discussed on prior calls.

Finally, our specialty distribution business serving health systems, hospitals and other providers delivered significant growth in the quarter. And our ability to serve these buyers with both distribution and our unique set of broader enablement capabilities drives future expansion opportunities.

I'm going to spend a few minutes unpacking this theme further. David talked earlier about our ability to find opportunities in a challenging environment to expand our addressable markets. Previously, we highlighted how our specialty pharmacy business uniquely supports patients through Accredo and our other pharmacies with our clinical expertise and services such as our in-home nurses. Today, I want to share a bit more about the important addressable market expansion opportunity we see serving health systems, hospitals and other providers with our specialty services across The Cigna Group.

As a reminder, the specialty space is more than a $400 billion market today and is growing at high single digits annually. In 2024, approximately 70% of new drugs approved by the U.S. Food and Drug Administration were specialty medications. These medicines flow through both the pharmacy and medical benefit with the medical benefits segment representing about 40% of the specialty space.

Specialty represents one of the highest growth areas in health care and within The Cigna Group, and we continue to expect long-term average annual income growth of 8% to 11% across our specialty portfolio.

Increasingly, health systems and other providers are seeking to manage their in-house pharmacy capabilities and inventory, most specifically within specialty drugs as this provides an important source of revenue that can help to counterbalance pressures in other aspects of their business.

Let me outline a few of the unique capabilities within Evernorth that position us to provide innovative solutions and support health systems, hospitals and other providers as they seek to optimize their specialty pharmacy management.

First, across the supply chain, we can help health systems and providers procure specialty medicines, including highly complex and limited distribution therapies. Our specialty distribution serves more than 12,000 providers today, distributing some of the most complex and critical medications to physician offices, health systems and infusion centers. We do this through CuraScript SD, which has seen double-digit average revenue growth over the past 3 years and is now a $25 billion business.

Second, our technology suite of services can support providers and hospitals as they navigate this complex specialty market.

And finally, bringing our exceptional range of clinical services to these buyers provides them with peace of mind and the assurance that best practices are being drawn from across our client base. We offer specialty pharmacy and infusion services on behalf of more than 700 hospitals, health systems and physician groups across the country, helping them expand their ability to offer coordinated access and continuity of care. Whether at home at the pharmacy or in a physician office or hospital, we are built to serve the needs of patients in any setting, delivering greater affordability and better clinical care. Overall, we see the opportunity to serve health systems and other providers holistically as a meaningful growth opportunity.

As I wrap up, I want to reiterate some notable bright spots for the quarter that underscore our strong business performance and operational execution. Cigna Healthcare earnings were solid and reflect the strength of our diverse portfolio and intentional choices around product offerings.

We continued our strong track record of client retention with large strategic client renewals in our Evernorth Pharmacy Benefit Services segment.

We delivered 12% growth in normalized earnings within our Evernorth Specialty and Care Services operating segment, which has attractive growth exposure over the long term, particularly with health systems, hospitals and other providers.

We continue to drive net growth in the U.S. employer select segment within Cigna Healthcare.

And our ongoing innovation for clients includes new enhancements in the quarter associated with GLP-1s in Evernorth and an AI-powered virtual assistant within Cigna Healthcare.

Across our businesses, I'm excited about the ongoing growth opportunities we have. Now I'll turn it over to Ann.

Thank you, Brian, and good morning, everyone. Today, I will review Cigna's second quarter 2025 results and discuss our outlook for the full year, which we reaffirmed this morning.

As David and Brian mentioned, our second quarter results underscore the strength of our diversified portfolio of businesses in a dynamic environment and demonstrate continued execution against our operating and financial commitments.

Key consolidated financial highlights for the second quarter include revenue of $67.2 billion and adjusted earnings per share of $7.20.

Our solid performance and disciplined execution in the first half of the year reinforce our confidence in delivering our full year 2025 adjusted earnings per share outlook of at least $29.60.

Now turning to our segment results. I will start by commenting on Evernorth, our services chassis, which now contributes over 60% of our enterprise earnings. Evernorth's results reflect sustained strength across our Pharmacy Benefit Services business and Specialty and Care Services business.

Second quarter 2025 revenues grew to $57.8 billion, while pretax adjusted earnings grew to $1.7 billion, slightly ahead of expectations. Specialty and Care Services demonstrated strong growth with revenue up 13% to $25.9 billion. Normalizing for the impact of lower net investment income due to the absence of the VillageMD dividend, pretax adjusted earnings increased 12% year-over-year.

This performance showcases the power of our robust and unique specialty capabilities as we delivered broad-based growth across both Accredo and CuraScript.

Pharmacy Benefit Services delivered another quarter of solid growth. Pretax adjusted earnings increased to $833 million as we continued to drive affordability for our patients, customers and clients through innovative product offerings while continuing to invest to drive long-term growth.

Turning to Cigna Healthcare. Second quarter 2025 revenues were $10.8 billion. Pretax adjusted earnings were $1.1 billion. And the medical care ratio was 83.2%.

These results were broadly in line with expectations and reinforced the strength and stability of our portfolio of businesses, which, as David mentioned, was strategically constructed for sustainable long-term growth in a dynamic environment.

Cost trends for our commercial business, including stop-loss, remained elevated in the quarter, consistent with expectations.

For our individual business, utilization was higher than expected, reflecting an increase in medical costs across the ACA marketplace. However, this pressure was manageable due to the smaller relative size of our ACA book, aided by our disciplined pricing actions over the past 2 years.

Overall, Cigna Healthcare delivered consistent results, underscoring the strength of our execution in an environment that continues to present challenges across the industry.

Now turning to our outlook for the full year 2025. Recognizing the overall disruption in the industry, we are pleased to reaffirm our full year 2025 expectation for consolidated adjusted income from operations of at least $29.60 per share.

Regarding the cadence of earnings, we expect the third quarter adjusted earnings per share to be slightly above 25% of the full year outlook.

Now turning to our 2025 outlook for each of our growth platforms. In Evernorth, we continue to expect full year 2025 pretax adjusted earnings of at least $7.2 billion, and we expect the third quarter adjusted earnings for Evernorth to be slightly above 25% of the full year outlook.

For Cigna Healthcare, our outlook continues to assume elevated cost trends to persist throughout the year. We continue to expect full year 2025 pretax adjusted earnings of at least $4.125 billion, and we expect the third quarter adjusted earnings for Cigna Healthcare to be slightly below 25% of the full year outlook.

We continue to expect the full year medical care ratio within the range of 83.2% to 84.2%. Additionally, we expect the third quarter medical care ratio to be toward the upper end of the full year range, reflecting typical seasonality.

Turning to our 2025 capital management position. It's important to note that our operating cash flow can vary from quarter-to-quarter, influenced by timing-specific factors such as the payment of supply chain receivables and payables as well as changes in inventory levels, particularly within Accredo and CuraScript.

Second quarter operating cash flow was impacted by working capital timing within Evernorth. We expect the timing-related impact to reverse and continue to anticipate strong cash flow generation in the second half.

Now to recap. Our first half 2025 results reflect disciplined execution across both Evernorth and Cigna Healthcare. Our 2025 outlook reflects the sustained momentum and strong fundamentals of our growth platforms, which gives us the confidence to reaffirm our full year 2025 adjusted earnings per share outlook of at least $29.60.

And with that, we'll turn it over to the operator for the Q&A portion of the call.

[Operator Instructions] Our first question comes from A.J. Rice with UBS.

I appreciate the comments about the innovative products that Evernorth brought to the market, particularly around GLP-1s. It makes me think even a little more broadly about your positioning in the commercial market, ASO insurance and how you use potentially Evernorth's PBM and pharmacy services business. You have insight on what's happening into those markets, and that's probably the biggest pressure point for commercial trends these days. And that insight is not something that, for example, your big Blue Cross competitors have.

Just maybe try to flesh out a little bit more how you're using that? How much of an advantage do you think that is? Any thoughts on any of that?

A.J., it's David. Maybe just a couple of macro comments and I'll hand it over to Brian. First, I appreciate your broad framing.

Two, contextually, as we step back, you go back a decade or so ago, aggregate pharmacy services was low double-digit percentage of the total medical cost equation. Fast-forward to today, the pie is both larger and aggregate pharmacy services, including specialty, is mid-20s growing, starting at potentially a 30% slice of the pie in short order.

So one, to reinforce your point, it's a more significant part of the overall care equation. Two is the interdependency between medical pharmacy, both traditional pharmacy and specialty pharmacy. And I would simply add mental health further consolidates in terms of a lot of our capabilities to be able to look at the whole person, both the predictive nature of more complex medical issues based on pharmaceutical consumption as well as the interdependency between the mental health aspect, which includes pharmacy as well as medical.

So I'll turn it across to Brian, but I just wanted to amplify the interdependencies of those 3 areas, not just the 2. Secondly, the size of the overall health care equation of what pharmacy is today, 25-plus percent of the overall pie, on its way to 30% on a larger pie versus 10%, 12% just a decade ago or so. Brian?

So I certainly agree with the thesis underneath your question here that our 3 growth platforms, Cigna Healthcare, Pharmacy Benefit Services in Evernorth and our Specialty and Care Services platform in Evernorth, are mutually reinforcing and create value for one another. So that's indisputable.

And to your point, specialty pharmacy continues to be one of the highest trend categories across the health care system. That and mental health services, in particular, were large contributors to the overall cost trend environment that we've seen year-to-date.

As Ann mentioned in her comments, overall, though, cost trends have been elevated, but in line with our expectations. So having the Evernorth insight certainly has been helpful for our Cigna Healthcare team, and it's the way we're able to manage the health plan MCR to the levels that we've committed.

As David was just making reference to, 20% of an average employer's total cost of care is specialty drugs today. Now that's not all in the drug benefit. A portion of that's in the medical benefit. So one of the things we really like about the way we've constructed the company is we can see a specific patient have their care journey start in the medical benefit and transition over into the pharmacy benefit.

So a patient may have a specialty injectable that starts the medical benefit that moves to a self-injectable under the drug benefit. We're able to manage that longitudinally given our suite of services across The Cigna Group.

So all things considered, to the core of your question, we're really pleased with the way we've constructed the company and it's helped us to manage the Cigna Healthcare financial performance.

Our next question comes from Lisa Gill with JPMorgan.

Can you maybe comment on the 2026 selling season? I heard you talk about specifically the renewal of Prime Therapeutic, but really a couple of components to this. One, what do you have up for renewal on the pharmacy benefit side? Two, what do you see as opportunities and what are people looking for?

And then if I could just also add on to that, we saw the Arkansas ruling and the injunction. Can you maybe just comment as to how you're thinking about that and as to how you're thinking about legislation, generally speaking, on the PBM side?

It's Brian. I'll start with some of the selling season themes and then I'll turn it over to David, he could talk a little bit about what's happening with the legislative and regulatory dynamics.

So maybe to kind of round out the first picture, I'll give you a sense for each of our growth platforms, some of the dynamics that we're seeing and then I'll get into some of the themes. So within our Express Scripts Pharmacy Benefit Services business, we're currently tracking toward mid-90s or better retention for 2026, which overall is a strong retention level consistent with prior years. And as I noted earlier, the largest and most sophisticated buyers of pharmacy benefit services continue to trust us and appreciate our value creation with an example of that being the multiyear renewal of Prime Therapeutics that was recently completed.

Within the Cigna Healthcare portfolio, it's still pretty early in the season for small employers, but we do have some good insights on the larger end of the market. And we continue to view the National Accounts space as one that will be a flat to shrinking market over time. And our strategy in the National Accounts space is to maintain our share in Cigna Healthcare. And at this point, we're not seeing anything unique for '26 that would cause us to deviate from that multiyear expectation.

Within Cigna Healthcare, we do continue to be a net share winner in the under 500 Select segment, which is a function of our affordability improvements that we've driven, coupled with our consultative employer engagement model.

And finally, in the Evernorth Specialty and Care Services platform, we do continue to benefit from secular tailwinds there, which leads to more patients utilizing specialty drugs, along with our Accredo specialty pharmacy being included as a network option and more unaffiliated PBM offerings.

In terms of some of the market dynamics or themes that apply more holistically across our businesses, first, I'd characterize this as a pretty active sales season, both as we compete for 2026 new business, both amongst our existing client base, but also new business opportunities for us.

Affordability continues to be the #1 area of focus for employers, particularly with the persistently high cost trend environment that the industry has been experiencing. And part of that's driven by the question that A.J. asked around specialty injectables as well as GLP-1s and the continued growth we're seeing in mental health spending.

And amongst larger employers, we're seeing some elongated decision-making time frames, particularly as employers are seeking reassurance that their benefit decisions are appropriate given the continued pressures on affordability.

The second theme is personalization. This we're seeing across our buyer groups, which can take the form of network solutions, product offerings, clinical programs and service experiences. And during the quarter, we announced our new AI-powered virtual assistant for our Cigna Healthcare customers to help them navigate the complexity of the health care system with the most modern digital capabilities, and the feedback there has been very positive.

And finally, we're hearing more of our larger employers seeking to reduce the number of point solutions, in some cases, finding that the ROI isn't there, or in other cases, finding that there are gaps in integrating these point solutions, which drives a level of fragmentation in the individual's health care journey.

So a lot that I just covered there in a few minutes. But taken all together, we're well positioned to meet all these market needs and we expect 2026 to be a year of attractive results.

David, maybe you can comment on Arkansas and the associated PBM dynamics.

So yes, macro and specific to Arkansas. So at a more macro level, as I noted even in my prepared remarks, we believe that the industry will continue to operate in an active legislative and regulatory environment. And we believe the sustained environment requires a very strong and collaborative public-private partnership and relationship.

And highlighting back to the industry leaning in on evolving prior authorization more broadly with the health plans coordinating a direction in the solution and collaborating with HHS, that's not a declaration of success. That's a positive indication of public-private partnership and collaborating to drive sustained improvement.

And I would say just broadly underlying mostly all the legislative and regulatory activity, there's an orientation around the affordability challenge that everybody is confronting, federal government, state government, employers and individuals, so desiring improvements in affordability while balancing access and quality. They have to actually get squared together. When you over-architect on one, you potentially push too hard on the other.

Specific to Arkansas, to be very clear, we're quite pleased with the expeditious and clear decision of the courts thus far to put a TRO in place because the legislation, while potentially well intended, is contrary to what we believe society needs. And if you look at the legislation, the legislation essentially arbitrarily constrains access. The legislation would, as it's configured, break continuity of care. The legislation would restrict choice. And the legislation would have an undoubtable positive impact or upward impact in a negative way on affordability.

So we are pleased with the outcome and the temporary restraining order to look at the facts relative to that. We will continue to stay engaged both at the state level and federal level, and I come back to the imperative. The imperative is sustainable improvements to overall affordability that harness choice and innovation, that don't architect it away arbitrarily. They have to harness choice and innovation and then balance appropriate access and drive sustained quality.

And we're confident, as Brian noted, our capabilities are well positioned to be able to drive that. Thanks for your questions.

Our next question comes from Josh Raskin with Nephron Research.

Could you provide an update related to the exchange business on your risk adjustment accruals? It just looked like revenue jumped in 2Q on a PMPM basis by a decent amount. And so I'm just curious if there was any specific adjustment for 2024 final settlement or as you're thinking about mortality for this year?

And then could you provide maybe broader commentary on expectations for that book in 2026 and how you're pricing -- how you're approaching the pricing environment?

It's Brian. I'll start with maybe a little bit of context for the individual exchange market and then ask Ann to take the question you asked more specifically about risk adjustment accruals and such.

I think it's important to step back and rewind the clock a couple of years to 2023. At that point in time, we served nearly 1 million customers in the individual exchanges, albeit with mixed financial performance.

Based upon our performance as well as our forward view of the market, we made the strategic choice to prioritize margin over growth, which included adjustments to product and network strategies, refinements to our geographic footprint and increased prices where necessary.

And this decision to prioritize margin over growth in the individual exchanges has helped us to navigate some of the industry-wide pressures that have emerged here in 2025. And we now serve fewer than 400,000 customers in this business, down materially from the nearly 1 million we served in 2023.

Additionally, across both the 2024 and 2025 pricing cycles, our nationwide price increases were roughly double the industry average in each of those years. So as a result of those actions, some of our competitors showed meaningful growth in their individual exchange businesses while we chose to reposition our portfolio, which resulted in fewer individual exchange customers for Cigna Healthcare.

So again, just to summarize what's transpired over the past 2 years in the individual exchanges. We made the choice to prioritize margin over growth, which resulted in a reduction of our customer base from nearly 1 million customers in 2023 to fewer than 400,000 customers today. Meanwhile, across the industry, individual exchange enrollment is up nearly 50% over that same time period.

As it relates to 2026, we expect to take further price increases. We're in the process of working through the refiling of that as we speak. And again, we'll prioritize margin over growth for the 2026 year in the individual exchanges.

Ann, maybe you can pick up on the risk adjustment component of this question?

Sure. So specifically on your question related to risk adjustments, there's a couple of things to note. Reflected in our results this quarter is a 2023 RADV adjustment, which we had visibility into coming into building our expectations for the year. So that was built -- already built into our expectations.

Beyond that, we had a very modest positive adjustment to the 2024 risk adjustment that helped offset some of the pressure we saw related to utilization that I mentioned in my prepared remarks.

Our next question comes from Justin Lake with Wolfe Research.

I wanted to ask about your views on the impact of more sophisticated hospital billing and coding to commercial trend, right? We're hearing about this all over. Curious what you're seeing here?

And do you think this might have an above-average impact on stop-loss?

And then lastly, just with rate increases running double digits for employers. David, I'd love to hear what you're hearing from employers on their ability to absorb it and what they're thinking here.

Let me take a portion of the question and ask Brian to give you some insights in terms of what we're experiencing specifically in terms of our stop-loss actions from a marketplace standpoint.

So we have several questions here. First, are we seeing elevated billing sophistication harnessing AI or other capabilities? Broadly speaking, we think the answer to that is yes.

I'm going to part on the side, there's a significant number of AI-related activities that we are driving as an organization in terms of driving efficiency and effectiveness and productivity, driving accelerated speed, precision and personalization and working to design new capabilities and there's a series of bright spots within that. Some of those capabilities help us to counteract, address and proactively engage very differently in terms of some of the forces we're seeing.

But to your first part of your question, we believe the answer to that is indisputably yes. We engage in that in terms of hospital contracting and provider contracting engagement modifications, our own AI and technology capabilities and seeking to get a balanced net outcome.

On the back side of your question, before I hand it back to Brian to talk more specifically about the marketplace and stop-loss, there's no doubt that affordability is pressuring everybody. And before we come to the employers, it's important to articulate it's impacting the federal government as a payer. It's impacting state government as a payer. It's impacting employers as payers and it's impacting individuals, which is why we always come back and articulate the impact of affordability as the #1 issue to be able to drive forward.

The precision, the personalization, new program designs, and in many cases, integration of point solutions are opportunities to mitigate some of that. And what I would say from an employer standpoint, what this is doing is it's raising the decision criteria in the C-suite even higher.

It's potentially increasing openness to what may have been deemed to be more disruptive solutions, so more precise network solutions or more aggressive adoption of some of our new innovations like our Path more programs -- or Pathwell specialty program, which is an example to A.J.'s question of significantly more precision of network configuration around specialty infusions that deliver exponentially more volume and affordability.

So there is pressure there, no doubt. We see it as actually opening the door for more innovative conversations and bringing more precision to the solution.

Brian, can I ask you to talk about the stop-loss traction we're seeing in the marketplace and some of the progress there?

Sure, David. I know you asked a very specific question on stop-loss, I'm just going to zoom out for a bit and kind of remind of the big picture in terms of where we are with that product line. Our stop-loss offerings are a very important part of our U.S. employer portfolio within Cigna Healthcare that we can complement with our other products and solutions for employers who choose to self-fund their health benefits.

And importantly, they provide employers with budgetary protection against unexpected large claimant activity or aggregate cost levels being higher than projected.

And for us, all of the stop-loss business that we write is through an integrated offering with the employer where we also administer their overall medical benefits. And we continue to see very strong market demand for these solutions as evidenced by the 13% growth in stop-loss premiums in the second quarter.

As we've talked about on prior calls, we're working to improve the margin profile on this business over the course of the next 2 renewal cycles and we're confident in our ability to deliver against this. And over the past few months, we have been able to make progress on this plan with the revised cost structure being reflected in our later 2025 client renewals, and we've been able to execute this while preserving typical client retention levels. And in fact, our sold rate increases for 2025 coverage effective dates after January are higher than our January 2025 sold increases, underscoring that our recovery plan is in motion.

And it's important to keep in mind that about 2/3 of our stop-loss portfolio renews on January 1. So the pricing work for that cohort will be completed in the fall, and that will inform our 2026 outlook.

But thus far, through the first 6 months of the year, the stop-loss portfolio is performing broadly in line with expectations and the more sophisticated or intensive billing that you made reference to, while it is impacting our U.S. employer book, does not have an outsized impact on the stop-loss portfolio. So thanks for the question.

The next question comes from Charles Rhyee with TD Cowen.

Maybe I'd like to ask, Brian, if you could expand a little bit more. You talked about a lot on CuraScript and just curious sort of what does this market look like when you're selling into health systems, in particular? Do you have to go through the GPOs like Novation? Now what does the contracting cycle there look like?

And who are the incumbents? Are we talking about maybe some of the more traditional drug distributors like a McKesson or Cencora in this market?

And then added to that, you talked about biosimilars in the press release. Just curious sort of what the experience you've had so far with maybe something like biosimilar STELARA through Quallent? And is this something you're also selling to health systems through Quallent?

Charles, there's a lot in there, so I'll try to hit each of the components as best as I can. So I appreciate you asking about CuraScript and that part of our company because many people are not familiar with that. And we decided to spend a few minutes in my prepared comments on this opportunity that we see in further expanding the addressable market to serve more health systems, hospitals and provider groups with their specialty pharmacy capabilities. And this is one of the most exciting growth opportunities that we have across The Cigna Group going forward.

And if you think about one of the core problem statements here for these providers is margin compression in their core business, it's often driven by some combination of payer mix, wage inflation, clinician burnout and other factors. So as a result, providers are increasingly looking to their in-house pharmacy capabilities, most notably specialty medication management as an alternative revenue source.

And we're able to support these providers both through distributing specialty medications to them, along with offering clinical coordination, inventory management and other enablement services to help providers manage their specialty pharmacy capabilities.

The specialty capability is fulfilled by our CuraScript business, which is already a $25 billion business and has been growing at a double-digit annualized rate in recent years. And the CuraScript business is primarily focused on the provider-oriented or medical benefit-oriented component of the specialty market, which represents about 40% of the over $400 billion specialty pharmacy addressable market.

And going forward, CuraScript has got multiple avenues for growth, both through serving these unaffiliated health systems and other providers, along with increasing its distribution reach through our Accredo specialty pharmacy.

Now the wholesalers that you made reference to, we don't compete with these directly in this space. They tend to be more focused on the prescription drug or the pharmacy benefits side of the specialty market, which is where our CuraScript business has very little volume today. So we're almost exclusively focused on serving providers through CuraScript. And so our value prop is a bit more holistic because we're able to offer those other enablement services that I made reference to as well to the health systems and other providers.

As it relates to biosimilars, obviously, we're really pleased to see the building momentum of biosimilars across the U.S., particularly in the last 18 months as HUMIRA biosimilars have become more mainstream, and we see this as part of a multiyear wave for biosimilars more broadly. And beyond HUMIRA, we expect another $100 billion of specialty drug spend to be subject to competition from biosimilars and generics by 2030, representing a tremendous opportunity to reduce net cost for patients and clients.

Importantly, each biosimilar will have different rates of adoption based upon factors such as interchangeability, dosage levels, branded alternatives and other dimensions. And so far, we launched our $0 patient out-of-pocket biosimilar for STELARA in May, leveraging the learnings we had from HUMIRA biosimilars. The returns are very early, but we're seeing encouraging signs already of biosimilar adoption here. And we do expect to see gradual growth in STELARA biosimilars over the balance of the year, all of which is contemplated in the Evernorth outlook.

And to your point, importantly, CuraScript is a distribution vehicle for a Quallent biosimilars to many of the health systems and other providers that I made reference to.

So appreciate the question. Hopefully, that captures the essence of what you were hoping to hear.

Our next question comes from Kevin Fischbeck with Bank of America.

Great. I guess one of your larger competitors talked about how at least they're under-earning on the commercial side of the business and need to reprice over the next couple of years. I was wondering if you could just give us a little bit of color on what you're seeing within the competitive pricing environment within commercial broadly? And then if you can give any color what's the difference between the subsegments that you focus on versus maybe the segments that you deemphasized a little bit.

Kevin, it's Brian. I'll start and then Ann can pick up some of the questions around margin and such. So overall, I'd characterize the market as pretty firm right now from a pricing standpoint, meaning there doesn't appear to be a lot of appetite for competitors to go out and underprice business to try to pick up volume.

And as we talked about earlier, our planning assumptions for the balance of 2025, they do assume a continued elevated cost trend environment. And for 2026, our pricing assumptions assume another year of elevated cost trends. And at the current point in time, our expectation is that we will secure price increases for 2026 that exceed what we achieved in 2025, which were already at high levels compared to historical norms.

Now of course, this is prior to clients making adjustments to their benefit designs or network strategies, which could serve to mitigate some of the price increase without impacting our margins.

As a reminder, the vast majority of our U.S. employer business is self-funded or it's priced using client-specific experience as opposed to being block rated, which is one of the differences potentially from some competitive comments that you made reference to.

But again, the market overall is firm and rational at the current point in time as it relates to the pricing environment.

Do you want to talk, Ann, a little bit about the margin dynamics?

Sure. Thanks, Brian. So as Brian mentioned earlier, we continue to see elevated cost trends, but those are in line with our expectations. Most notably, we see it in specialty injectables and behavioral health services trends that have remained high and continue to be the primary contributors to the trend.

Last quarter, we saw some favorability on surgery trends. This quarter, we saw a more normalized trend in line with our expectations. So when you think about the impact across the Cigna Healthcare portfolio, the businesses are generally performing as expected and in the target margin range.

I'd note 2 exceptions to that. So the exchange business, given some of the pressure we're seeing there around utilization, we would expect to run below target margins for 2025.

And then Brian talked earlier about the business and our journey to recover to run rate margins through 2026 and into 2027. But overall, performance across the health care businesses was in line with our expectations, and we are really pleased to reaffirm our full year guidance.

Our next question comes from Jason Cassorla with Guggenheim.

Great. I wanted to ask about Evernorth margins in the quarter. You talked about the investment income headwind. But if we completely back out the investment income across both of your subsegments within Evernorth, it looks like Specialty and Care margins were relatively consistent year-over-year, but the PBM margins were down a little bit.

I know you've discussed investment spend across Evernorth, but maybe can you just walk us through the margin paradigm and the drivers in the quarter, just given the revenue strength?

And then you spent some time talking about the medical side of the specialty business in your prepared remarks. Can you give us a sense on how to think about margins as you go after that TAM opportunity? That would be very helpful.

So I'll start on the margin question as it relates to Evernorth Pharmacy Benefit Services and I'll pass it over to Brian for the second part of the question. So just to set the stage, so our performance in Evernorth continues to reflect strength across both Pharmacy Benefit Services and Specialty and Care. Considering the breadth of the business, there are a few dynamics to consider with respect to margin and I'd point to 2 things that are contributing to some of those dynamics that you see.

So one is client mix. So we've had some -- bringing on some large clients, some large client renewals and our largest clients are growing the fastest and they generally come with lower margin profiles. So that is a contributor to what you're seeing.

The second thing that I'd point to is drug mix. So we're seeing higher-priced drug sales, and higher-priced drug sales create a larger impact on revenues than on margins. So you put those 2 things together and that's really what's creating the dynamic that is coming through the numbers.

Taking into account those 2 things, we feel really good about the strength of the business and the ability to drive sustained growth across both of those businesses. But I'll turn it over to Brian for the second part of the question on health care.

Yes. Thanks, Ann. So as it relates to the medical side of specialty and the Evernorth services that we provide there, I'd encourage you to think of it in 2 buckets. So category one is our distribution business, CuraScript. So I made reference to that's a $25 billion business today, been growing at double digits in recent years, has a lot of runway ahead of it.

You can think of that as a low-margin business, call it, low single-digit type margins. Not that different than what the wholesaler margin profile is, although we provide a little bit more complexity alongside the distribution that we do, so we're able to earn a slightly higher margin. But think of that as a relatively low-margin business.

The second category of enablement services, you can think of that as a fee-based oriented business. So relatively low revenue contributions, but high margins on those fees. So you can think of that as not yet as noticeable in the P&L from a revenue standpoint, but we have quite a bit of long-term opportunity there as that addressable market continues to grow and we continue to build out our capabilities in that space.

Our next question comes from Erin Wright with Morgan Stanley.

Could you give us an update on some of the changes that you're seeing in the retail reimbursement model and landscape with more of the cost-plus models?

Do you expect a large portion of the government business to start moving in that direction as well on top of the commercial that started kind of to move in that direction in 2025? And if so, kind of how do you embrace that on the PBM side? And just talk about how you're navigating that now.

It's Brian. So as it relates to retail reimbursement and more of the cost-plus and other alternative style models that are being advanced, there's certainly market curiosity around these topics. I would note, though, these types of solutions really aren't for everyone.

And as David mentioned earlier, we continue to prioritize choice as it relates to how clients choose to pay us. We've got a variety of formularies that clients can choose from, some of which are customized to a client. And we have a variety of network configurations available.

Specifically on cost-plus style offerings, as we hear from our Pharmacy Benefit Services clients, there's been relatively limited appetite for this thus far because many of them see this as paying more for the same thing in comparison to the more aligned incentive models that we've been able to drive historically and concerns around will I still have incentive for generic replacement continue to come up. So these are challenges with some of the cost-plus style models that have been advanced.

That said, we do have certain network arrangements that are contracted on that basis.

To your point on government business, we have not seen a wholesale shift from one line to another as we think about commercial versus government versus other payer types within the Evernorth platform.

David, do you want to get on this question?

Sure. Just to amplify a point here, and Erin, I appreciate your question. I think when you think about the cost-plus terminology, sometimes it's used as a broader moniker for the industry. But to Brian's point, there is pressure on paying more for the same.

Conversely, evolution to more fee-based models, evolution to more enhanced performance-based models, evolution to enhanced transparency that are in support of fee-based models, those are all part of the bigger ecosystem. And our team continues to lean into that heavily and offer increased choice and opportunities for clients.

So I'd ask you to maybe step back and think about the theme. The theme is another push toward increased affordability while managing choice, and cost-plus is may be used as a broader moniker of heading down that path of fees, but they need to be performance-based. There needs to be a performance-based dimension here to drive additional efficiency, effectiveness and value on a go-forward basis. And our team continues to be putting up some significant innovations in the marketplace that are responsive to this. Appreciate your question.

Our last question comes from Andrew Mok with Barclays.

There's been a lot of developments in the GLP-1 market, including your announced partnerships with Lilly and Novo this quarter. And one of your peers called out a headwind from GLP-1 pharmacy services this year. So can you give us an update on your GLP-1 products and how we should be thinking about the dispensing economics for those drugs given the recent deals?

It's Brian. So maybe I'll talk for a minute about the most recent innovations that we've introduced and then get to the core of your question on dispensing economics and such.

The headline I'd ask you to take away, though, is, broadly speaking, the GLP-1 contributions to Evernorth in 2025 are in the range of what we expected coming into the year, and our guidance does contemplate that, which reflects some decelerating growth in overall scripts, but still strong growth year-over-year compared to what the 2024 volumes would have been.

But when you step back from the GLP-1 space broadly, at The Cigna Group, we're proud to introduce new solutions for some of health care's biggest challenges and GLP-1s are clearly an example of that. And during our first quarter call, you heard us talk about a series of programs that we introduced earlier to create new value in the GLP-1 space, namely, EnCircle, EnReach and EnGuide. These combine access, affordability, clinical safety as well as longer-term lifestyle changes all for the benefit of our clients and patients.

And to your point on economics, we earn fees for those programs as part of our client relationships in helping them manage GLP-1 clinical safety and cost levels.

Subsequent to introducing these programs, we noted that many employers remain reluctant to provide access to GLP-1 drugs for weight management due to the price. So the net cost of a GLP-1 weight management prescription after reflecting the discounts we had negotiated from drug manufacturers and the patient cost sharing was still high and would incrementally pressure employer budgets.

So we challenged ourselves to develop a solution that would further reduce net cost for employers while ensuring that patient out-of-pocket costs will be lower than if they purchased the GLP-1 drugs directly. So in May, we announced a new program that targeted employers who are not yet offering GLP-1 coverage for weight management. And the new solution is coupled with a maximum out-of-pocket cost of no more than $200 per month for the patient while allowing for patient and physician choice.

And that generated some win-win dynamics. The net cost to the employer is reduced by our negotiated rates and by the cost share from the patient. The patient's cost sharing being capped at $200 per month offered a more affordable option than other pathways for FDA-approved treatments. And the drug manufacturers would benefit from higher volumes.

So we introduced this program in late May, again the most recent in our series of innovations. We only have a couple of months of market feedback. The feedback has been very positive thus far, although I would note changes to benefit offerings associated with this new program are more likely to be incorporated at client renewals as opposed to us seeing midyear benefit changes. But again, this is another example of the innovation we brought to the GLP-1 space.

Again, we continue to see growth in this market. The client adoption rates continue to be flattish in our book of business between 2024 and 2025, but the economic contribution is broadly in line with what we had anticipated coming into the year for Evernorth.

Thank you. I'll now turn the call back over to David Cordani for closing remarks.

Thanks. Just briefly wrap this up. First, we want to thank you again for joining our call.

To highlight a couple of headlines. We continue to build on our momentum, and we have confidence in our ability to deliver on our commitments, which include our attractive adjusted EPS outlook of at least $29.60 for full year 2025.

I also want to say how proud I am of our coworkers across the globe and their dedication and commitment to making sure we serve all our diverse stakeholders who we have the privilege to support.

As an enterprise, we remain focused on executing on our growth strategy by leveraging the strength of our diverse businesses, continue to foster partnerships and drive innovation and systematically work to expand our addressable markets. Thank you again, and have a good day.

Ladies and gentlemen, this concludes The Cigna Group's Second Quarter 2025 Results Review.

Cigna Investor Relations will be available to respond to additional questions shortly. A recording of this conference will be available for 10 business days following this call. You may access the recorded conference by dialing (800) 835-8067 or (203) 369-3354. There is no passcode required for this replay.

Thank you for participating. We will now disconnect.