Cigna Group — Call Transcript 2026

Is the incoming CEO of the company. We also have Ralph Giacobbe and Jeff Brook in the audience as well. Maybe just jump right into Q&A, if that's okay with you. Sure. I mean, I guess 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, you know, the rebate-based model into this new Signature model, rebate-free model. Can you talk a little bit about, you know, why you did it, what you're gonna 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 those 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. 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, de-linked pricing structure. 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. Again, we see the industry heading there eventually, it's just a matter of who goes first, who goes second, who goes third, we were proud to lead the industry. Importantly, though, this is a fundamentally different model than the current rebate-oriented architecture that exists. 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. 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, all that takes time, energy, investment, technology spend, legal spend in order to bring it to life. 2026 and 2027 will be transitional years where we're making those investments before the Signature model starts to scale in 2028, and we expect at least half of our Evernorth Pharmacy Benefit Services members will be in that model by the end of 2028. That'll be our standard offering in the future. We'll continue to allow the current legacy models to exist to the extent that a client's not ready to go into the new Signature model. 2026 and 2027 will be transitional years with that spending. 2028, 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. That's a bit of the picture that's in front of us. 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 them being in a high-deductible plan and the list price is a barrier. This allows us to step over all those challenges and see the future. Okay, maybe just drill into that comment about the margins because, longer term, does that mean, you know, 2029, or does it mean 2030? Like, how long does it take to get the PBM margin to be, you know, similar to where it is today or historically? Yeah. The way I would encourage you to think about the margin profile for our pharmacy benefit service business is in two categories. One, we have three 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. As a result of that, we have a more predictable set of clients with those three and a more predictable earning stream, but it's at a lower average profit level than the book average. As a result of that, you can think of those as a bit of a separate cohort from all other. 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 2029 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. Yeah. You guys have talked about this rebate-free model. It seems like your competitors have also announced new models that are more the 100% rebate pass-through. What do you believe that the rebate-free model is solving for that maybe the rebate pass-through model isn't? So to your point, we offer rebate passthrough 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 or if they're unable to, if they have collective bargaining agreements, that sort of a thing. We'll have two 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. 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 'cause you know the upfront net cost. It's been negotiated already with the manufacturers. 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 gonna 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. If it is a cash pay option, it'll apply to their deductible. That capability is a really important part underneath the Signature model. I come back to the core of your question, the predictability is even greater in this model versus in a rebate-oriented model. Just to be clear then about how this works. If you're, if you're guaranteeing a price to a customer, that is the price that you have contracted with the pharmaceutical manufacturer. It's not a situation of you're taking risk on the price, that if the manufacturer raises price mid-year, you that's separate from your negotiation, 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. We're going through all the manufacturer recontracting as we speak. Yes. Okay. 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 kinda have transparent unit costs and usually the companies with the lowest unit costs win. 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 three primary ones. One being unit cost, so the ability to procure better unit costs than an employer health plan, government entity could do on their own. 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 2nd area is our clinical programs. 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 EncircleRx program. Those clinical programs are another reason why we are hired by employers and health plans and government entities. 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. Those are the three 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. 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. 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. We are not betting on that. 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. I guess what's the reception to the new model, and then how is the selling season on the old model going for 2027? To your point, the new model will scale in 2028. We'll have our fully insured Cigna Healthcare customers moved into it in 2027 because they essentially don't go through a buying process for the pharmacy benefit business. They just have it as part of their all-in pricing. The real feedback we'll get relative to bidding will happen starting in the fourth quarter of this year for 2028 selling cycle, since the buying process is long, particularly for large employers and health plans. We'll start to get some real feedback in the fourth quarter of this year as it relates to the 2028 competitiveness of the Signature model. Two 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. 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. 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. The clients know the world needs to change, and it's more a matter of how quickly they get there. To your question, the 2027 selling cycle so far in pharmacy benefit services, we're off to a really good start. 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. We're off to a good start as it relates to 2027. To your point, it's our legacy model with evolution, as opposed to the Signature model for 2027. Retention looks to be tracking in line with historical norms too. We're mid-90s or higher retention for the 2027 selling cycle in the pharmacy benefit services business. Okay. 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 three contracts. I think people saw, okay, you recontracted your top three contracts. Why not the next three largest contracts? Is there now a race at the bottom as the market got more competitive? How do you respond to that? The three 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. 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 2027 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 three large clients. Each of the three large clients that have their own unique requirements. When we did the recontracting, we were able to extend the durations. In some instances, we actually de-risked 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 2025-2026 earnings and pharmacy benefits are actually decreasing, which is driven predominantly by those three large contracts being renegotiated. Okay. That's helpful. I guess maybe just last question on the PBM. you know, I think sometimes people think that the PBM needs to grow fast, but your long-term growth algorithm is 2%-4% growth. I guess old model, new model, 2%-4% growth, that's the same outlook as well. At this juncture, we'll have a formal refresh of all of our growth expectations in our Investor Day in September that we're intending to hold. At this juncture, that looks like a very reasonable expectation, 2%-4%. If you kinda break that apart, just natural growth in terms of prescriptions per person tends to be low single digits, maybe 1%-2% per year. 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. 2%-4% long-term expectation feels very achievable. Again, that'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. You know, I guess, how do you think about the underpinning of that, of that business? I mean, we've had some biosimilars recently. There's a lot of drugs coming through. How do we think about the pace and timing of that the growth of that business? The specialty business for us has been a great part of the portfolio the last several years. Over time, this has been the outsized growth component of the company. Right now, it's about 35% of the company's total income. It wasn't that long ago that number was 20%-25%, if you go back just four years. As a percentage of the total, it's grown very quickly. 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. You kinda step back, that's larger than the individual Medicare Advantage market, right? If you just kinda do a I'm comparing apples and oranges here, but in terms of total addressable market size, it's actually quite large and growing. 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. Increasingly, specialty drugs are being used as a first line of defense by more prescribers. Now 4%-5% of all Americans take a specialty drug. Again, it wasn't that long ago that number was 2% of all Americans. 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. Yeah. We've seen HUMIRA and STELARA coming. Are there any other drugs that you're kind of keeping an eye on as kinda like the next big thing for the biosimilar? Yeah. 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. HUMIRA was the largest, which finally, biosimilars were available in 2024. 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, we were able to make the same or more per prescription with our model. 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 2025, 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. In the past, supply constraints made it much less available. That's gonna be another example of affordability benefits, but also one where we get the benefit within our specialty business. In the future, there's a few smaller ones on the horizon, like Prolia and EYLEA. You've got KEYTRUDA, which is an oncology injectable, which 2028 or 2029, that will have biosimilar competition as well. Each of those are opportunities, and it's a bit of a building, a 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. Yeah, I think that sometimes we kinda think of specialty as, like, a one thing. 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 kinda look at as saying there's an opportunity? Sure, sure. The specialty space, that addressable market I made reference to, that's approaching $500 billion. You can think of it as about 60% patient administered. 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. The other 40% is provider administered. 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. 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 two 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. We've been adding to the portfolio, to your question, in recent years, capabilities that allow us to serve that provider administered market differently. We acquired a company called Carepath, which assists with health system and hospital infusion services. We made an investment, a strategic investment, a sizable one, last year in Shields. 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. We continue to bulk up in that area, but specialty in aggregate, when you put an umbrella across all of this, we see as a 8%-11% annual growth engine for the company, riding those 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. 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 capability's been building over time and investing in give us a great overall platform here. There's not a significant huge gap there. It's more some of the conditions where we can strengthen ourselves. Yeah. 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 it seems like the new model is de-risking the PBM side of things pretty dramatically. The growth is in the specialty business. When we think about the regulatory risk or the political risk on the specialty business, I mean, I guess 340B comes to mind. Can you help us think about your 340B exposure? If there's anything else that you kinda see on the horizon as issues that you might have to manage? Sure, sure. Yeah. The specialty business, in addition to being a great growth engine, is also 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. It's a little bit different than other parts of our company, where sometimes we have people that don't utilize healthcare. You know, in this, every single person we serve utilizes healthcare in an intensive way. As a result of that, by definition, they need companies like us to be there for them. 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 that go to people's homes and help them infuse drugs. For those reasons, a little bit less easy to scrutinize, if you will, or 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 The Cigna Group, but it is a set of services we provide. We do believe the 340B program has an important purpose in American healthcare, 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. 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. 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. We'll continue to fight those misguided bills that are working their way through some states. All right. Great. Then maybe move to Cigna Healthcare then. You know, Q1 seems like utilization looked, you know, 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, initial color on, like, how April has gone? Yeah. Cigna Healthcare off to a good start this year, we were ahead of expectations in the first quarter, driven by the medical care ratio coming in a bit favorable. Really the drivers of that, we had a little bit of weather-related care deferral. We had a little bit of favorability in respiratory, then we had some timing dynamics with our exchange business where we had more bronze in 2026 than we had anticipated we would have. That has more of a steeper slope, if you will, on MCR seasonality, as you well know. All 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. 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, not really a lot to report in terms of variability compared to our outlook. 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. Our pricing, our planning continues to assume that for the balance of 2026 and as we head into 2027. Okay. You guys are the only kind of pure play employer-focused managed care company. Like, why have you chosen that as the place to be? 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-sponsored business. We've proven if you go back over long periods of time, we've been able to grow over and above market rates. By, depending on what timeframe you use, the market's grown 0%-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, 50-500, at rates of growth meaningfully higher than that. Mid-single digit, some cases high single digit rates of growth in that space. Really for us that comes back to focus. We've concluded we can't be all things to all people. We're not gonna 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. 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. We've got great growth opportunities and 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. That's really where we're focused right now. Of course, we'll continue to evaluate those choices, 'cause being out of the government business indefinitely is a big decision for the company to make. 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. In the commercial book, there was the issue around stop loss in 2024. How can you talk about how that repricing has gone and where we are on that? Sure. Sure. For those not familiar with our stop loss business, as 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. 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." It's a great business for us over the long run in terms of the risk-reward trade-off. 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 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, 2024 was a difficult year for us, where claim costs exceeded our expectations, rather meaningfully that year. 2025 was a year where by the time 2024 emerged, we were not able to reprice enough of 2025 was a bit of a cut-over year, transitional year. 2026, we've been able to get sizable price increases, 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 on the stop loss book. 2027 will be the final year of the margin recovery on our stop loss portfolio. 2026, off to a good start. Our guide reflects those dynamics, 2027 we'll complete the stop loss repricing. Yeah, it was like 2/3 this year, 1/3 next year. Roughly. Yeah, that's the right dimensioning generally. All right. You know, everyone seems to be talking about AI. Would love to kinda hear your views about AI, where you think the biggest opportunity is across your three businesses. Is there anything people are getting too excited about with AI or their skis on? Our belief at The Cigna Group is that data, advanced analytics, and AI are a critical unlock for the healthcare system over the long run. We do not believe it's overhyped in terms of the opportunities in healthcare. I can't speak to other industries, but certainly in healthcare, 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. I shared a data point in our earnings release. Calls, inbound calls per customer are down 20% in two years in our Cigna Healthcare book of business, and they're down 25% in our Pharmacy Benefit Services business. That's a function of more and more digital engagement upstream for customers. 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. That's an example in the back office of what we've done. There's a whole category of risk prediction. 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. 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. We found that that saved, for the patients that engaged, $2,000 per year, just as a function of that. That's an example of risk prediction pointed at the affordability challenge. 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. 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. 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.

Speaker 2: Is the incoming CEO of the company. We also have Ralph Giacobbe and Jeff Brook in the audience as well. Maybe just jump right into Q&A, if that's okay with you. Is the incoming CEO of the company. is the incoming ceo of the company We also have Ralph Giacobbe and Jeff Brook in the audience as well. we also have ralph giacobbe and jeff brook in the audience as well Maybe just jump right into Q&A, if that's okay with you. maybe just jump right into q&a if that's okay with you

Speaker 1: Sure. Sure. sure

Speaker 2: I mean, I guess 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, you know, the rebate-based model into this new Signature model, rebate-free model. Can you talk a little bit about, you know, why you did it, what you're gonna expect to get from it, and how we should think about the earnings impact as you transition? I mean, I guess one of the major overhangs it seems for the stock right now is just on the PBM business. i mean i guess 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, you know, the rebate-based model into this new Signature model, rebate-free model. there's a big transition going through from your model from you know the rebate-based model into this new signature model rebate-free model Can you talk a little bit about, you know, why you did it, what you're gonna expect to get from it, and how we should think about the earnings impact as you transition? can you talk a little bit about you know why you did it what you're gonna expect to get from it and how we should think about the earnings impact as you transition

Speaker 1: 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 those 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. We stepped into that void and said, you know what? Sure, Kevin, and thanks to you and Bank of America for hosting us this conference. sure kevin and thanks to you and bank of america for hosting us this conference We appreciate that. 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 those specific questions you were asking about. 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 those 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. 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. 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. each of those represent opportunities for the industry to perform better on behalf of patients plan sponsors like employers and all their family members We stepped into that void and said, you know what? 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, de-linked pricing structure. 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. 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, de-linked pricing structure. 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 de-linked pricing structure 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. 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. 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 Again, we see the industry heading there eventually, it's just a matter of who goes first, who goes second, who goes third, we were proud to lead the industry. Importantly, though, this is a fundamentally different model than the current rebate-oriented architecture that exists. 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. 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. Again, we see the industry heading there eventually, it's just a matter of who goes first, who goes second, who goes third, we were proud to lead the industry. again we see the industry heading there eventually it's just a matter of who goes first who goes second who goes third we were proud to lead the industry Importantly, though, this is a fundamentally different model than the current rebate-oriented architecture that exists. importantly though this is a fundamentally different model than the current rebate-oriented architecture that exists This is not 100% rebate pass-through, which we can do today, which we do today. 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 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. this is a no-rebate world that's all predicated on upfront discounts that we negotiate with manufacturers To bring that to life, it's actually a pretty heavy lift. 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 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 our pharmacy network with all the retail pharmacies independent pharmacists et cetera We have to go out and recontract all of our client contracts, all that takes time, energy, investment, technology spend, legal spend in order to bring it to life. 2026 and 2027 will be transitional years where we're making those investments before the Signature model starts to scale in 2028, and we expect at least half of our Evernorth Pharmacy Benefit Services members will be in that model by the end of 2028. That'll be our standard offering in the future. We'll continue to allow the current legacy models to exist to the extent that a client's not ready to go into the new Signature model. 2026 and 2027 will be transitional years with that spending. We have to go out and recontract all of our client contracts, all that takes time, energy, investment, technology spend, legal spend in order to bring it to life. 2026 and 2027 will be transitional years where we're making those investments before the Signature model starts to scale in 2028, and we expect at least half of our Evernorth Pharmacy Benefit Services members will be in that model by the end of 2028. we have to go out and recontract all of our client contracts all that takes time energy investment technology spend legal spend in order to bring it to life 2026 and 2027 will be transitional years where we're making those investments before the signature model starts to scale in 2028 and we expect at least half of our evernorth pharmacy benefit services members will be in that model by the end of 2028 That'll be our standard offering in the future. that'll be our standard offering in the future We'll continue to allow the current legacy models to exist to the extent that a client's not ready to go into the new Signature model. 2026 and 2027 will be transitional years with that spending. we'll continue to allow the current legacy models to exist to the extent that a client's not ready to go into the new signature model 2026 and 2027 will be transitional years with that spending 2028, 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. That's a bit of the picture that's in front of us. 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 them being in a high-deductible plan and the list price is a barrier. This allows us to step over all those challenges and see the future. 2028, 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. 2028 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 That's a bit of the picture that's in front of us. that's a bit of the picture that's in front of us 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 them being in a high-deductible plan and the list price is a barrier. 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 them being in a high-deductible plan and the list price is a barrier This allows us to step over all those challenges and see the future. this allows us to step over all those challenges and see the future

Speaker 2: Okay, maybe just drill into that comment about the margins because, longer term, does that mean, you know, 2029, or does it mean 2030? Like, how long does it take to get the PBM margin to be, you know, similar to where it is today or historically? Okay, maybe just drill into that comment about the margins because, longer term, does that mean, you know, 2029, or does it mean 2030? okay maybe just drill into that comment about the margins because longer term does that mean you know 2029 or does it mean 2030 Like, how long does it take to get the PBM margin to be, you know, similar to where it is today or historically? like how long does it take to get the pbm margin to be you know similar to where it is today or historically

Speaker 1: Yeah. The way I would encourage you to think about the margin profile for our pharmacy benefit service business is in two categories. One, we have three 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. As a result of that, we have a more predictable set of clients with those three and a more predictable earning stream, but it's at a lower average profit level than the book average. As a result of that, you can think of those as a bit of a separate cohort from all other. 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. Yeah. yeah The way I would encourage you to think about the margin profile for our pharmacy benefit service business is in two categories. the way i would encourage you to think about the margin profile for our pharmacy benefit service business is in two categories One, we have three very large clients that we serve, Centene, Prime Therapeutics, and the Department of Defense. one we have three 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. we proactively renewed them and extended the duration of the contracts last year As a result of that, we have a more predictable set of clients with those three and a more predictable earning stream, but it's at a lower average profit level than the book average. as a result of that we have a more predictable set of clients with those three and a more predictable earning stream but it's at a lower average profit level than the book average As a result of that, you can think of those as a bit of a separate cohort from all other. as a result of that you can think of those as a bit of a separate cohort from all other That's about $65 billion of pharmacy benefit revenue. 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. 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 2029 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. The other component of the book, we would expect to run, call it, 4% profit margins, and to your point of when, certainly by 2029 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. the other component of the book we would expect to run call it 4% profit margins and to your point of when certainly by 2029 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

Speaker 2: Yeah. You guys have talked about this rebate-free model. It seems like your competitors have also announced new models that are more the 100% rebate pass-through. What do you believe that the rebate-free model is solving for that maybe the rebate pass-through model isn't? Yeah. yeah You guys have talked about this rebate-free model. you guys have talked about this rebate-free model It seems like your competitors have also announced new models that are more the 100% rebate pass-through. it seems like your competitors have also announced new models that are more the 100% rebate pass-through What do you believe that the rebate-free model is solving for that maybe the rebate pass-through model isn't? what do you believe that the rebate-free model is solving for that maybe the rebate pass-through model isn't

Speaker 1: So to your point, we offer rebate passthrough 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 or if they're unable to, if they have collective bargaining agreements, that sort of a thing. We'll have two 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 to your point, we offer rebate passthrough models today, 100%. so to your point we offer rebate passthrough 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 or if they're unable to, if they have collective bargaining agreements, that sort of a thing. 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 or if they're unable to if they have collective bargaining agreements that sort of a thing We'll have two offerings available in the future, but the standard will be the Signature model. we'll have two 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. one of the big differences is the predictability and the budgeting for the plan sponsor 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 'cause you know the upfront net cost. It's been negotiated already with the manufacturers. 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 gonna 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. If it is a cash pay option, it'll apply to their deductible. 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. 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 'cause you know the upfront net cost. this provides more predictability 'cause you know the upfront net cost It's been negotiated already with the manufacturers. it's been negotiated already with the manufacturers 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 gonna 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. 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 gonna 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 If it is a cash pay option, it'll apply to their deductible. if it is a cash pay option it'll apply to their deductible That capability is a really important part underneath the Signature model. I come back to the core of your question, the predictability is even greater in this model versus in a rebate-oriented model. That capability is a really important part underneath the Signature model. that capability is a really important part underneath the signature model I come back to the core of your question, the predictability is even greater in this model versus in a rebate-oriented model. i come back to the core of your question the predictability is even greater in this model versus in a rebate-oriented model

Speaker 2: Just to be clear then about how this works. If you're, if you're guaranteeing a price to a customer, that is the price that you have contracted with the pharmaceutical manufacturer. It's not a situation of you're taking risk on the price, that if the manufacturer raises price mid-year, you that's separate from your negotiation, it's all passed through, but it's set in advance rather than post-fact. Just to be clear then about how this works. just to be clear then about how this works If you're, if you're guaranteeing a price to a customer, that is the price that you have contracted with the pharmaceutical manufacturer. if you're if you're guaranteeing a price to a customer that is the price that you have contracted with the pharmaceutical manufacturer It's not a situation of you're taking risk on the price, that if the manufacturer raises price mid-year, you that's separate from your negotiation, it's all passed through, but it's set in advance rather than post-fact. it's not a situation of you're taking risk on the price that if the manufacturer raises price mid-year you that's separate from your negotiation it's all passed through but it's set in advance rather than post-fact

Speaker 1: Correct. We've negotiated the net price with the manufacturers. We're going through all the manufacturer recontracting as we speak. Yes. Correct. correct We've negotiated the net price with the manufacturers. we've negotiated the net price with the manufacturers We're going through all the manufacturer recontracting as we speak. we're going through all the manufacturer recontracting as we speak Yes. yes

Speaker 2: Okay. 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 kinda have transparent unit costs and usually the companies with the lowest unit costs win. 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? Okay. okay What do you think are the competitive implications of this model? 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 kinda have transparent unit costs and usually the companies with the lowest unit costs win. i mean when i think about this it feels analogous to the aso model where you kinda have transparent unit costs and usually the companies with the lowest unit costs win 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? 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

Speaker 1: 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 three primary ones. One being unit cost, so the ability to procure better unit costs than an employer health plan, government entity could do on their own. 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 2nd area is our clinical programs. 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 EncircleRx program. I appreciate that question. 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 three primary ones. 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 three primary ones One being unit cost, so the ability to procure better unit costs than an employer health plan, government entity could do on their own. one being unit cost so the ability to procure better unit costs than an employer health plan government entity could do on their own 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. 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 2nd area is our clinical programs. the 2nd area is our clinical programs Oftentimes these are overlooked in the pharmacy benefit space, but importantly, making sure patients adhere to their treatment protocols. 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 EncircleRx program. in some cases we take risk or we have value-based arrangements with manufacturers like our safeguardrx program or encirclerx program Those clinical programs are another reason why we are hired by employers and health plans and government entities. 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. Those are the three 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. 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. Those clinical programs are another reason why we are hired by employers and health plans and government entities. those clinical programs are another reason why we are hired by employers and health plans and government entities 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. 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 Those are the three reasons why we create value, why we're hired to provide services in the pharmacy benefit services space. those are the three 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. 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 That should, over time, provide advantages to those who have better unit cost structure. 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. today it's often difficult to do an apples to apples comparison with the different models that are in place 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. We are not betting on that. To the extent that happens, that's upside to our long-term outlook. 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. 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. all that said our longer term eps growth algorithms our longer term expectations for this business are not predicated on taking market share We are not betting on that. we are not betting on that To the extent that happens, that's upside to our long-term outlook. to the extent that happens that's upside to our long-term outlook

Speaker 2: 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. I guess what's the reception to the new model, and then how is the selling season on the old model going for 2027? Great. great Can you talk a little bit about then the 2027 selling season? 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. you've got this other option which isn't available yet but you're talking to people about it I guess what's the reception to the new model, and then how is the selling season on the old model going for 2027? i guess what's the reception to the new model and then how is the selling season on the old model going for 2027

Speaker 1: To your point, the new model will scale in 2028. We'll have our fully insured Cigna Healthcare customers moved into it in 2027 because they essentially don't go through a buying process for the pharmacy benefit business. They just have it as part of their all-in pricing. The real feedback we'll get relative to bidding will happen starting in the fourth quarter of this year for 2028 selling cycle, since the buying process is long, particularly for large employers and health plans. We'll start to get some real feedback in the fourth quarter of this year as it relates to the 2028 competitiveness of the Signature model. To your point, the new model will scale in 2028. to your point the new model will scale in 2028 We'll have our fully insured Cigna Healthcare customers moved into it in 2027 because they essentially don't go through a buying process for the pharmacy benefit business. we'll have our fully insured cigna healthcare customers moved into it in 2027 because they essentially don't go through a buying process for the pharmacy benefit business They just have it as part of their all-in pricing. they just have it as part of their all-in pricing The real feedback we'll get relative to bidding will happen starting in the fourth quarter of this year for 2028 selling cycle, since the buying process is long, particularly for large employers and health plans. the real feedback we'll get relative to bidding will happen starting in the fourth quarter of this year for 2028 selling cycle since the buying process is long particularly for large employers and health plans We'll start to get some real feedback in the fourth quarter of this year as it relates to the 2028 competitiveness of the Signature model. we'll start to get some real feedback in the fourth quarter of this year as it relates to the 2028 competitiveness of the signature model Two 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. 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. 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. The clients know the world needs to change, and it's more a matter of how quickly they get there. Two 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. two 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 It's not yet in the context of a selling cycle. 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. it's more in the context of directionally here's where we're intending to go There's a lot of interest and appetite for this because employers know the market needs to change. 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. 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 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. there's too many instances of that breakage The clients know the world needs to change, and it's more a matter of how quickly they get there. the clients know the world needs to change and it's more a matter of how quickly they get there To your question, the 2027 selling cycle so far in pharmacy benefit services, we're off to a really good start. 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. We're off to a good start as it relates to 2027. To your point, it's our legacy model with evolution, as opposed to the Signature model for 2027. Retention looks to be tracking in line with historical norms too. We're mid-90s or higher retention for the 2027 selling cycle in the pharmacy benefit services business. To your question, the 2027 selling cycle so far in pharmacy benefit services, we're off to a really good start. to your question the 2027 selling cycle so far in pharmacy benefit services we're off to a really good start 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. 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 We're off to a good start as it relates to 2027. we're off to a good start as it relates to 2027 To your point, it's our legacy model with evolution, as opposed to the Signature model for 2027. to your point it's our legacy model with evolution as opposed to the signature model for 2027 Retention looks to be tracking in line with historical norms too. retention looks to be tracking in line with historical norms too We're mid-90s or higher retention for the 2027 selling cycle in the pharmacy benefit services business. we're mid-90s or higher retention for the 2027 selling cycle in the pharmacy benefit services business

Speaker 2: Okay. 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 three contracts. I think people saw, okay, you recontracted your top three contracts. Why not the next three largest contracts? Is there now a race at the bottom as the market got more competitive? How do you respond to that? Okay. okay 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 three contracts. 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 three contracts I think people saw, okay, you recontracted your top three contracts. i think people saw okay you recontracted your top three contracts Why not the next three largest contracts? why not the next three largest contracts Is there now a race at the bottom as the market got more competitive? is there now a race at the bottom as the market got more competitive How do you respond to that? how do you respond to that

Speaker 1: The three 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. 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 2027 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 three large clients. The three 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. the three 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 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. 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 2027 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 three large clients. the 2027 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 three large clients Each of the three large clients that have their own unique requirements. When we did the recontracting, we were able to extend the durations. In some instances, we actually de-risked 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 2025-2026 earnings and pharmacy benefits are actually decreasing, which is driven predominantly by those three large contracts being renegotiated. Each of the three large clients that have their own unique requirements. each of the three large clients that have their own unique requirements When we did the recontracting, we were able to extend the durations. when we did the recontracting we were able to extend the durations In some instances, we actually de-risked 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 2025 -2 026 earnings and pharmacy benefits are actually decreasing, which is driven predominantly by those three large contracts being renegotiated. in some instances we actually de-risked 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 2025 -2 026 earnings and pharmacy benefits are actually decreasing which is driven predominantly by those three large contracts being renegotiated

Speaker 2: Okay. That's helpful. I guess maybe just last question on the PBM. you know, I think sometimes people think that the PBM needs to grow fast, but your long-term growth algorithm is 2%-4% growth. I guess old model, new model, 2%-4% growth, that's the same outlook as well. Okay. okay That's helpful. that's helpful I guess maybe just last question on the PBM. you know, I think sometimes people think that the PBM needs to grow fast, but your long-term growth algorithm is 2%-4% growth. i guess maybe just last question on the pbm you know i think sometimes people think that the pbm needs to grow fast but your long-term growth algorithm is 2%-4% growth I guess old model, new model, 2%-4% growth, that's the same outlook as well. i guess old model new model 2%-4% growth that's the same outlook as well

Speaker 1: At this juncture, we'll have a formal refresh of all of our growth expectations in our Investor Day in September that we're intending to hold. At this juncture, that looks like a very reasonable expectation, 2%-4%. If you kinda break that apart, just natural growth in terms of prescriptions per person tends to be low single digits, maybe 1%-2% per year. 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. 2%-4% long-term expectation feels very achievable. Again, that'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. At this juncture, we'll have a formal refresh of all of our growth expectations in our Investor Day in September that we're intending to hold. at this juncture we'll have a formal refresh of all of our growth expectations in our investor day in september that we're intending to hold At this juncture, that looks like a very reasonable expectation, 2%-4%. at this juncture that looks like a very reasonable expectation 2%-4% If you kinda break that apart, just natural growth in terms of prescriptions per person tends to be low single digits, maybe 1%-2% per year. if you kinda break that apart just natural growth in terms of prescriptions per person tends to be low single digits maybe 1%-2% per year 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. 2%-4% long-term expectation feels very achievable. 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 2%-4% long-term expectation feels very achievable Again, that'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. again that'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

Speaker 2: Great. Now let's move to a little bit more exciting part of the business, the specialty business. You know, I guess, how do you think about the underpinning of that, of that business? I mean, we've had some biosimilars recently. There's a lot of drugs coming through. How do we think about the pace and timing of that the growth of that business? Great. great Now let's move to a little bit more exciting part of the business, the specialty business. now let's move to a little bit more exciting part of the business the specialty business You know, I guess, how do you think about the underpinning of that, of that business? you know i guess how do you think about the underpinning of that of that business I mean, we've had some biosimilars recently. i mean we've had some biosimilars recently There's a lot of drugs coming through. there's a lot of drugs coming through How do we think about the pace and timing of that the growth of that business? how do we think about the pace and timing of that the growth of that business

Speaker 1: The specialty business for us has been a great part of the portfolio the last several years. Over time, this has been the outsized growth component of the company. Right now, it's about 35% of the company's total income. It wasn't that long ago that number was 20%-25%, if you go back just four years. As a percentage of the total, it's grown very quickly. 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. You kinda step back, that's larger than the individual Medicare Advantage market, right? The specialty business for us has been a great part of the portfolio the last several years. the specialty business for us has been a great part of the portfolio the last several years Over time, this has been the outsized growth component of the company. over time this has been the outsized growth component of the company Right now, it's about 35% of the company's total income. right now it's about 35% of the company's total income It wasn't that long ago that number was 20%-25%, if you go back just four years. it wasn't that long ago that number was 20%-25% if you go back just four years As a percentage of the total, it's grown very quickly. as a percentage of the total it's grown very quickly Part of that is the strong secular growth in the space, which you've covered nicely in your research as well, Kevin . 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. this addressable market in total is now approaching $500 billion the total addressable for specialty You kinda step back, that's larger than the individual Medicare Advantage market, right? you kinda step back that's larger than the individual medicare advantage market right If you just kinda do a I'm comparing apples and oranges here, but in terms of total addressable market size, it's actually quite large and growing. 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. Increasingly, specialty drugs are being used as a first line of defense by more prescribers. Now 4%-5% of all Americans take a specialty drug. Again, it wasn't that long ago that number was 2% of all Americans. More and more people are taking these high-cost, clinically intensive specialty drugs. If you just kinda do a I'm comparing apples and oranges here, but in terms of total addressable market size, it's actually quite large and growing. if you just kinda do a i'm comparing apples and oranges here but in terms of total addressable market size it's actually quite large and growing 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. 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 Increasingly, specialty drugs are being used as a first line of defense by more prescribers. increasingly specialty drugs are being used as a first line of defense by more prescribers Now 4%-5% of all Americans take a specialty drug. now 4%-5% of all americans take a specialty drug Again, it wasn't that long ago that number was 2% of all Americans. again it wasn't that long ago that number was 2% of all americans More and more people are taking these high-cost, clinically intensive specialty drugs. 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. 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. 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

Speaker 2: Yeah. We've seen HUMIRA and STELARA coming. Are there any other drugs that you're kind of keeping an eye on as kinda like the next big thing for the biosimilar? Yeah. yeah We've seen HUMIRA and STELARA coming. we've seen humira and stelara coming Are there any other drugs that you're kind of keeping an eye on as kinda like the next big thing for the biosimilar? are there any other drugs that you're kind of keeping an eye on as kinda like the next big thing for the biosimilar

Speaker 1: Yeah. 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. HUMIRA was the largest, which finally, biosimilars were available in 2024. 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, we were able to make the same or more per prescription with our model. That was a great example of affordability for the benefit of patients. Yeah. yeah 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. 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 HUMIRA was the largest, which finally, biosimilars were available in 2024. humira was the largest which finally biosimilars were available in 2024 We had a $0 patient out-of-pocket for that, which again, great affordability proposition for the patient. 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, we were able to make the same or more per prescription with our model. the net cost came way down for the employer the plan sponsor relative to the branded humira we were able to make the same or more per prescription with our model That was a great example of affordability for the benefit of patients. 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 2025, 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. In the past, supply constraints made it much less available. That's gonna be another example of affordability benefits, but also one where we get the benefit within our specialty business. In the future, there's a few smaller ones on the horizon, like Prolia and EYLEA. You've got KEYTRUDA, which is an oncology injectable, which 2028 or 2029, that will have biosimilar competition as well. STELARA last year was introduced with a $0 patient out-of-pocket as well in the second quarter of 2025, and we've seen good uptake thus far in terms of the percentage of eligible patients who have moved into a biosimilar for STELARA. stelara last year was introduced with a $0 patient out-of-pocket as well in the second quarter of 2025 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. 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. this year although not a biosimilar generic revlimid is now available at a much greater scale In the past, supply constraints made it much less available. in the past supply constraints made it much less available That's gonna be another example of affordability benefits, but also one where we get the benefit within our specialty business. that's gonna be another example of affordability benefits but also one where we get the benefit within our specialty business In the future, there's a few smaller ones on the horizon, like Prolia and EYLEA. in the future there's a few smaller ones on the horizon like prolia and eylea You've got KEYTRUDA, which is an oncology injectable, which 2028 or 2029, that will have biosimilar competition as well. you've got keytruda which is an oncology injectable which 2028 or 2029 that will have biosimilar competition as well Each of those are opportunities, and it's a bit of a building, a 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. Each of those are opportunities, and it's a bit of a building, a 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. each of those are opportunities and it's a bit of a building a 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

Speaker 2: Yeah, I think that sometimes we kinda think of specialty as, like, a one thing. 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 kinda look at as saying there's an opportunity? Yeah, I think that sometimes we kinda think of specialty as, like, a one thing. yeah i think that sometimes we kinda think of specialty as like a one thing You've been investing in specialty the last few years. 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 kinda look at as saying there's an opportunity? 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 kinda look at as saying there's an opportunity

Speaker 1: Sure, sure. The specialty space, that addressable market I made reference to, that's approaching $500 billion. You can think of it as about 60% patient administered. 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. The other 40% is provider administered. 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. 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 two largest specialty pharmacies in the world pointed at that. Sure, sure. sure sure The specialty space, that addressable market I made reference to, that's approaching $500 billion. the specialty space that addressable market i made reference to that's approaching $500 billion You can think of it as about 60% patient administered. you can think of it as about 60% patient administered 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. 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 The other 40% is provider administered. the other 40% is provider administered 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. 60% patient, 40% provider administered. 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 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 two largest specialty pharmacies in the world pointed at that. we've historically been very strong in the 60% the patient administered so our accredo capabilities we're one of the two 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. We've been adding to the portfolio, to your question, in recent years, capabilities that allow us to serve that provider administered market differently. We acquired a company called Carepath, which assists with health system and hospital infusion services. We made an investment, a strategic investment, a sizable one, last year in Shields. 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. The 40% that's provider administered, we've been a little bit less present historically. 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. 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. that's a great business for us been growing double digits for many years We've been adding to the portfolio, to your question, in recent years, capabilities that allow us to serve that provider administered market differently. we've been adding to the portfolio to your question in recent years capabilities that allow us to serve that provider administered market differently We acquired a company called Carepath, which assists with health system and hospital infusion services. we acquired a company called carepath which assists with health system and hospital infusion services We made an investment, a strategic investment, a sizable one, last year in Shields. 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. we made an investment a strategic investment a sizable one last year in shields. 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 We continue to bulk up in that area, but specialty in aggregate, when you put an umbrella across all of this, we see as a 8%-11% annual growth engine for the company, riding those secular growth tailwinds plus our own company-specific capabilities. We continue to bulk up in that area, but specialty in aggregate, when you put an umbrella across all of this, we see as a 8%-11% annual growth engine for the company, riding those secular growth tailwinds plus our own company-specific capabilities. we continue to bulk up in that area but specialty in aggregate when you put an umbrella across all of this we see as a 8%-11% annual growth engine for the company riding those secular growth tailwinds plus our own company-specific capabilities

Speaker 2: Are there other areas that you still don't really operate in that you need to add capabilities? Are there other areas that you still don't really operate in that you need to add capabilities? are there other areas that you still don't really operate in that you need to add capabilities

Speaker 1: If there were any that I would call out, they'd be more certain conditions where we have some opportunity to strengthen. 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 capability's been building over time and investing in give us a great overall platform here. There's not a significant huge gap there. It's more some of the conditions where we can strengthen ourselves. If there were any that I would call out, they'd be more certain conditions where we have some opportunity to strengthen. if there were any that i would call out they'd be more certain conditions where we have some opportunity to strengthen Oncology is an example of one where we actually have less of a meaningful presence today in the oncology space than some others. 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 capability's been building over time and investing in give us a great overall platform here. but the capability's been building over time and investing in give us a great overall platform here There's not a significant huge gap there. there's not a significant huge gap there It's more some of the conditions where we can strengthen ourselves. it's more some of the conditions where we can strengthen ourselves

Speaker 2: Yeah. 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 it seems like the new model is de-risking the PBM side of things pretty dramatically. The growth is in the specialty business. When we think about the regulatory risk or the political risk on the specialty business, I mean, I guess 340B comes to mind. Can you help us think about your 340B exposure? If there's anything else that you kinda see on the horizon as issues that you might have to manage? Yeah. yeah 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 it seems like the new model is de-risking the PBM side of things pretty dramatically. 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 it seems like the new model is de-risking the pbm side of things pretty dramatically The growth is in the specialty business. the growth is in the specialty business When we think about the regulatory risk or the political risk on the specialty business, I mean, I guess 340B comes to mind. when we think about the regulatory risk or the political risk on the specialty business i mean i guess 340b comes to mind Can you help us think about your 340B exposure? can you help us think about your 340b exposure If there's anything else that you kinda see on the horizon as issues that you might have to manage? if there's anything else that you kinda see on the horizon as issues that you might have to manage

Speaker 1: Sure, sure. Yeah. The specialty business, in addition to being a great growth engine, is also 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. It's a little bit different than other parts of our company, where sometimes we have people that don't utilize healthcare. You know, in this, every single person we serve utilizes healthcare in an intensive way. As a result of that, by definition, they need companies like us to be there for them. Sure, sure. sure sure Yeah. yeah The specialty business, in addition to being a great growth engine, is also 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. the specialty business in addition to being a great growth engine is also 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 It's a little bit different than other parts of our company, where sometimes we have people that don't utilize healthcare. it's a little bit different than other parts of our company where sometimes we have people that don't utilize healthcare You know, in this, every single person we serve utilizes healthcare in an intensive way. you know in this every single person we serve utilizes healthcare in an intensive way As a result of that, by definition, they need companies like us to be there for them. as a result of that by definition they need companies like us to be there for them 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 that go to people's homes and help them infuse drugs. For those reasons, a little bit less easy to scrutinize, if you will, or it's more difficult to scrutinize because of the services we provide. All that said, we do provide services to the 340B participants. 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? 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 that go to people's homes and help them infuse drugs. we have 600 home infusion nurses that go to people's homes and help them infuse drugs For those reasons, a little bit less easy to scrutinize, if you will, or it's more difficult to scrutinize because of the services we provide. for those reasons a little bit less easy to scrutinize if you will or it's more difficult to scrutinize because of the services we provide All that said, we do provide services to the 340B participants. 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 The Cigna Group, but it is a set of services we provide. We do believe the 340B program has an important purpose in American healthcare, 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. 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. 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 The Cigna Group, but it is a set of services we provide. overall it's a relatively small part of the overall earnings for evernorth and an even smaller part of the total the cigna group but it is a set of services we provide We do believe the 340B program has an important purpose in American healthcare, 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. we do believe the 340b program has an important purpose in american healthcare 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 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. 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. We'll continue to fight those misguided bills that are working their way through some states. 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. 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 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. 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 We'll continue to fight those misguided bills that are working their way through some states. we'll continue to fight those misguided bills that are working their way through some states

Speaker 2: All right. Great. Then maybe move to Cigna Healthcare then. You know, Q1 seems like utilization looked, you know, 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, initial color on, like, how April has gone? All right. all right Great. great Then maybe move to Cigna Healthcare then. then maybe move to cigna healthcare then You know, Q1 seems like utilization looked, you know, relatively modest, but skewed by weather, by flu, by all these things. you know q1 seems like utilization looked you know 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? i guess how do you think about your visibility into how q1 actually played out Any additional, initial color on, like, how April has gone? any additional initial color on like how april has gone

Speaker 1: Yeah. Cigna Healthcare off to a good start this year, we were ahead of expectations in the first quarter, driven by the medical care ratio coming in a bit favorable. Really the drivers of that, we had a little bit of weather-related care deferral. We had a little bit of favorability in respiratory, then we had some timing dynamics with our exchange business where we had more bronze in 2026 than we had anticipated we would have. That has more of a steeper slope, if you will, on MCR seasonality, as you well know. All 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. Yeah. yeah Cigna Healthcare off to a good start this year, we were ahead of expectations in the first quarter, driven by the medical care ratio coming in a bit favorable. cigna healthcare off to a good start this year we were ahead of expectations in the first quarter driven by the medical care ratio coming in a bit favorable Really the drivers of that, we had a little bit of weather-related care deferral. really the drivers of that we had a little bit of weather-related care deferral We had a little bit of favorability in respiratory, then we had some timing dynamics with our exchange business where we had more bronze in 2026 than we had anticipated we would have. we had a little bit of favorability in respiratory then we had some timing dynamics with our exchange business where we had more bronze in 2026 than we had anticipated we would have That has more of a steeper slope, if you will, on MCR seasonality, as you well know. that has more of a steeper slope if you will on mcr seasonality as you well know All that contributed to the outperformance in the first quarter. all 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. some of that was timing though which we expect will reverse over the balance of the year 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, not really a lot to report in terms of variability compared to our outlook. 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. Our pricing, our planning continues to assume that for the balance of 2026 and as we head into 2027. 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. 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, not really a lot to report in terms of variability compared to our outlook. so far so good for april not really a lot to report in terms of variability compared to our outlook Things are broadly tracking to expectations across both Cigna Healthcare and Evernorth. 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. we continue to expect cost trends to remain elevated so not accelerating from where they are but elevated and persistently elevated Our pricing, our planning continues to assume that for the balance of 2026 and as we head into 2027. our pricing our planning continues to assume that for the balance of 2026 and as we head into 2027

Speaker 2: Okay. You guys are the only kind of pure play employer-focused managed care company. Like, why have you chosen that as the place to be? Okay. okay You guys are the only kind of pure play employer-focused managed care company. you guys are the only kind of pure play employer-focused managed care company Like, why have you chosen that as the place to be? like why have you chosen that as the place to be

Speaker 1: 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-sponsored business. We've proven if you go back over long periods of time, we've been able to grow over and above market rates. By, depending on what timeframe you use, the market's grown 0%-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, 50-500, at rates of growth meaningfully higher than that. Mid-single digit, some cases high single digit rates of growth in that space. Really for us that comes back to focus. You're right. you're right In Cigna Healthcare, and Cigna Healthcare is about 40% of the company's income today. 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-sponsored business. the lion's share of that is u.s employer-sponsored business We've proven if you go back over long periods of time, we've been able to grow over and above market rates. we've proven if you go back over long periods of time we've been able to grow over and above market rates By, depending on what timeframe you use, the market's grown 0%-1% in terms of lives in the employer-sponsored space, over a long period of time. by depending on what timeframe you use the market's grown 0%-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, 50-500, at rates of growth meaningfully higher than that. we've been able to grow particularly at the lower end of the employer market what we call our select segment 50-500 at rates of growth meaningfully higher than that Mid-single digit, some cases high single digit rates of growth in that space. mid-single digit some cases high single digit rates of growth in that space Really for us that comes back to focus. really for us that comes back to focus We've concluded we can't be all things to all people. We're not gonna 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. 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. We've got great growth opportunities and 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. We've concluded we can't be all things to all people. we've concluded we can't be all things to all people We're not gonna 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. we're not gonna 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 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. 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 We've got great growth opportunities and 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. we've got great growth opportunities and 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 That's really where we're focused right now. Of course, we'll continue to evaluate those choices, 'cause being out of the government business indefinitely is a big decision for the company to make. For the current point in time, we're quite pleased with the portfolio composition and don't feel compelled to make any meaningful adjustments. That's really where we're focused right now. that's really where we're focused right now Of course, we'll continue to evaluate those choices, 'cause being out of the government business indefinitely is a big decision for the company to make. of course we'll continue to evaluate those choices 'cause being out of the government business indefinitely is a big decision for the company to make For the current point in time, we're quite pleased with the portfolio composition and don't feel compelled to make any meaningful adjustments. for the current point in time we're quite pleased with the portfolio composition and don't feel compelled to make any meaningful adjustments

Speaker 2: Okay. In the commercial book, there was the issue around stop loss in 2024. How can you talk about how that repricing has gone and where we are on that? Okay. okay In the commercial book, there was the issue around stop loss in 2024. in the commercial book there was the issue around stop loss in 2024 How can you talk about how that repricing has gone and where we are on that? how can you talk about how that repricing has gone and where we are on that

Speaker 1: Sure. Sure. For those not familiar with our stop loss business, as 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. 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." It's a great business for us over the long run in terms of the risk-reward trade-off. 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 the business that we do is integrated, so we don't do carve-out stop loss, where we quote only the stop loss. Sure. sure Sure. sure For those not familiar with our stop loss business, as 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. for those not familiar with our stop loss business as 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 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." It's a great business for us over the long run in terms of the risk-reward trade-off. 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." it's a great business for us over the long run in terms of the risk-reward trade-off We have about $8 billion of annual premium in the stop loss book. 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. specifically we're the largest underwriter in the world of stop loss All the business that we do is integrated, so we don't do carve-out stop loss, where we quote only the stop loss. all 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, 2024 was a difficult year for us, where claim costs exceeded our expectations, rather meaningfully that year. 2025 was a year where by the time 2024 emerged, we were not able to reprice enough of 2025 was a bit of a cut-over year, transitional year. 2026, we've been able to get sizable price increases, 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 on the stop loss book. 2027 will be the final year of the margin recovery on our stop loss portfolio. 2026, off to a good start. Our guide reflects those dynamics, 2027 we'll complete the stop loss repricing. We only do integrated, where we have the underlying medical and put the stop loss around that. we only do integrated where we have the underlying medical and put the stop loss around that To your point, 2024 was a difficult year for us, where claim costs exceeded our expectations, rather meaningfully that year. 2025 was a year where by the time 2024 emerged, we were not able to reprice enough of 2025 was a bit of a cut-over year, transitional year. 2026, we've been able to get sizable price increases, 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 on the stop loss book. 2027 will be the final year of the margin recovery on our stop loss portfolio. 2026, off to a good start. to your point 2024 was a difficult year for us where claim costs exceeded our expectations rather meaningfully that year 2025 was a year where by the time 2024 emerged we were not able to reprice enough of 2025 was a bit of a cut-over year transitional year 2026 we've been able to get sizable price increases 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 on the stop loss book 2027 will be the final year of the margin recovery on our stop loss portfolio 2026 off to a good start Our guide reflects those dynamics, 2027 we'll complete the stop loss repricing. our guide reflects those dynamics 2027 we'll complete the stop loss repricing

Speaker 2: Yeah, it was like 2/3 this year, 1/3 next year. Yeah, it was like 2/3 this year, 1/3 next year. yeah it was like 2/3 this year 1/3 next year

Speaker 1: Roughly. Yeah, that's the right dimensioning generally. Roughly. roughly Yeah, that's the right dimensioning generally. yeah that's the right dimensioning generally

Speaker 2: All right. You know, everyone seems to be talking about AI. Would love to kinda hear your views about AI, where you think the biggest opportunity is across your three businesses. Is there anything people are getting too excited about with AI or their skis on? All right. all right You know, everyone seems to be talking about AI. you know everyone seems to be talking about ai Would love to kinda hear your views about AI, where you think the biggest opportunity is across your three businesses. would love to kinda hear your views about ai where you think the biggest opportunity is across your three businesses Is there anything people are getting too excited about with AI or their skis on? is there anything people are getting too excited about with ai or their skis on

Speaker 1: Our belief at The Cigna Group is that data, advanced analytics, and AI are a critical unlock for the healthcare system over the long run. We do not believe it's overhyped in terms of the opportunities in healthcare. I can't speak to other industries, but certainly in healthcare, 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. I shared a data point in our earnings release. Calls, inbound calls per customer are down 20% in two years in our Cigna Healthcare book of business, and they're down 25% in our Pharmacy Benefit Services business. Our belief at The Cigna Group is that data, advanced analytics, and AI are a critical unlock for the healthcare system over the long run. our belief at the cigna group is that data advanced analytics and ai are a critical unlock for the healthcare system over the long run We do not believe it's overhyped in terms of the opportunities in healthcare. we do not believe it's overhyped in terms of the opportunities in healthcare I can't speak to other industries, but certainly in healthcare, we believe that this is a critical part of driving more affordable, more personalized solutions in the future for customers and clients. i can't speak to other industries but certainly in healthcare 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. 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. we've been able to take meaningful costs out of the back office functions I shared a data point in our earnings release. i shared a data point in our earnings release Calls, inbound calls per customer are down 20% in two years in our Cigna Healthcare book of business, and they're down 25% in our Pharmacy Benefit Services business. calls inbound calls per customer are down 20% in two years in our cigna healthcare book of business and they're down 25% in our pharmacy benefit services business That's a function of more and more digital engagement upstream for customers. 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. That's an example in the back office of what we've done. There's a whole category of risk prediction. 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. That's a function of more and more digital engagement upstream for customers. that's a function of more and more digital engagement upstream for customers 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. 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 That's an example in the back office of what we've done. that's an example in the back office of what we've done There's a whole category of risk prediction. there's a whole category of risk prediction 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. 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 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. We found that that saved, for the patients that engaged, $2,000 per year, just as a function of that. That's an example of risk prediction pointed at the affordability challenge. 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. 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 We found that that saved, for the patients that engaged, $2,000 per year, just as a function of that. we found that that saved for the patients that engaged $2,000 per year just as a function of that That's an example of risk prediction pointed at the affordability challenge. that's an example of risk prediction pointed at the affordability challenge 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. 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. We think it's a critical unlock for the system at large. 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. 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. those are the types of enhancements to the customer experience that we think ai will really help to turbocharge This is an area where we seek to lead. this is an area where we seek to lead We're putting a lot of capital behind this. we're putting a lot of capital behind this We're putting a lot of people behind this. we're putting a lot of people behind this We think it's a critical unlock for the system at large. we think it's a critical unlock for the system at large

Speaker 2: All right. Great. I think that's all we have time for. Thank you very much. All right. all right Great. great I think that's all we have time for. i think that's all we have time for Thank you very much. thank you very much

Speaker 1: Thank you, Kevin. Appreciate the time. Thank you, Kevin. thank you kevin Appreciate the time. appreciate the time