The Cigna Group (CI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by for Cigna's segment reporting changes conference call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference, including the Q&A session, is being recorded. We'll begin by turning the call over to Ralph Giacobbe. Please go ahead, Mr. Giacobbe.

Thanks, Shirley. Good morning, everyone, and thank you for joining today's call. It should be a pretty quick one. I'm Ralph Giacobbe, Senior Vice President of Investor Relations at Cigna. The purpose of the call is to discuss Cigna's change in segment reporting, which we announced earlier today through a Form 8-K filing. We believe the changes are straightforward, driven by the pending divestiture of Cigna's International life, accident and supplemental benefits business in 7 Asia Pacific markets. The objective of today's call is to ensure the investment community has an understanding of the specifics of the reporting changes, which are going to be implemented beginning with our fourth quarter earnings release on February 3. I'll make some brief opening remarks, and then we'll open up a few lines for any questions specifically related to the resegmentation. Effective for the fourth quarter of 2021, Cigna results will be reported through the following 3 groups: Evernorth, Cigna Healthcare and Corporate and Other operations. I'll briefly describe the changes in each of our segments. First, in regards to changes. Two sets of business operations that were previously reported in the former International Markets segment have now been reclassified to different segments. First, as announced on October 7, 2021, we reached an agreement with Chubb to divest our International life, accident and supplemental benefits businesses in 7 Asia Pacific markets. These businesses will now be reported in the Other Operations pending the close of that transaction. And second, the International Health business that will be retained by Cigna, which includes our Expatriate Benefits business, will join our U.S. Commercial and U.S. Government operating segments in a new reportable segment called Cigna Healthcare. This segment replaces the prior U.S. Medical segment. With these changes, I'll now briefly describe each of our segments. The Evernorth segment provides a broad range of coordinated endpoint solution, health services capabilities, including pharmacy, benefits management, care solutions and intelligence provided to health plans, employers, government organizations and health care providers. This segment has not changed as a result of today's announcement. The new segment, Cigna Healthcare segment, consists of 3 operating units: our Commercial Employer business in the United States, which provides Integrated Medical and specialty solutions; our Government business, which includes Medicare Advantage, Medicare Part D, Medicare Supplement and individual and family plan offerings; and our International Health business that will be retained, which provides benefits to the globally mobile multinational employers, intergovernmental and non-governmental organizations as well as providing targeted local market health offerings. Corporate and Other Operations contains the remainder of our operations intersegment eliminations, interest expense on debt and various other items and will now include results for the International life, accident and supplemental benefits business in 7 Asia Pacific markets that we announced would be sold to Chubb in 2022. This aligns with the company's organizational structure that has been put in place as a result of the pending sale to Chubb. To provide additional clarity, I'll just briefly reiterate the changes that are reflected in our new segment reporting structure. The Evernorth segment will not change and will continue to consist of all the pharmacy and health services previously reported in the segment. The Cigna Healthcare segment consists of all businesses previously reported within the U.S. Medical segment, which consisted of our Commercial and Government businesses, and now also includes the International Health business to be retained. Corporate and Other Operations will continue to reflect the remainder of our operations, amounts not allocated to operating segments and intersegment eliminations. This will now include the International life, accident and supplemental benefits business that are planned to be divested as previously described. These changes are being applied retrospectively to facilitate comparisons to prior periods. And I want to stress that as a result of these segment changes, there is no change to our historically reported consolidated shareholders' net income, consolidated adjusted income from operations, earnings per share, shareholders' equity or cash flows. To help investors understand these changes in advance of our fourth quarter earnings release we have voluntarily disclosed prior period results on this new reporting basis within the Form 8-K that was filed earlier this morning. Within the 8-K, we have included the results for the first 3 quarters of 2021, the 4 quarters and full year of 2020 and the full year of 2019. As previously communicated, Cigna will provide our fourth quarter and full year 2021 financial results and our 2022 financial guidance on our earnings call on February 3. Cigna's 2021 results and 2022 guidance will be presented on a basis consistent with the new reporting segments. For transparency, Cigna will also provide the full year 2021 adjusted income from operations and medical care ratio for the former U.S. Medical segment in the fourth quarter earnings release. Before opening up for questions, I want to reiterate that the financial reporting updates discussed today enable Cigna continue to provide high-quality transparent financial reporting to the investment community and reflect the company's management and business reporting structure changes that were made in light of the planned divestiture of the International life, accident and supplemental business in 7 countries expected to close in 2022. As a reminder, on today's call, we will not discuss Cigna's fourth quarter or full year 2021 results, current business conditions or our expectations for 2022 performance. Accordingly, questions should be specifically focused on the financial reporting changes that are outlined in this morning's 8-K. With that, let me turn it over to the operator for any questions we may have. Operator?

[Operator Instructions] And our first question comes from Gary Taylor with Cowen.

I just wanted to clarify, given the importance of the medical loss ratio as reported in investor and sell-side monitoring of that ratio. When we look at the new Cigna Healthcare segment, is the only change -- will it just be as simple as the reported medical costs as you show it divided by premium? And the only change will be the impact of bringing that Cigna International Expatriate Healthcare business into that ratio on a go-forward basis? Or is there any other impact or reason we should think about how you'll be reporting MLR out on a 4 basis any differently?

Yes, no, that's exactly right. It will be sort of consistent and the only difference in change is bringing in the retained International business into it and blending into 1 MCR stat that will provide for the Cigna Healthcare segment. And again, you can look back over a sort of time and break out the differences between what that had been previously for that International segment that's being brought into Cigna Healthcare.

[Operator Instructions] Our next question comes from Nathan Rich with Goldman Sachs.

Maybe just following up on Gary's question. So it looks like doing the adjustment to the MLR under the restated results versus what was previously reported in U.S. Medical it's about 80 to 90 basis points difference. I guess is that what you would expect the difference to be going forward? I didn't know if there is anything that you would call out there. And then the other question I had was just are there going to be any changes to the quarterly financial supplement? Obviously, it will be reorganized a bit, but just in terms of the level of detail that you'll be providing going forward?

Thanks, Nate. So no real comment specifically in terms of the MLR. I mean, it's stated there. Obviously, the International segment, I think, historically, it's fair to say, has ran and run at a lower MCR. We'll update guidance for next year related to sort of total segment medical care ratio sort of for a go-forward basis. But nothing more to really sort of comment there. In terms of the QFS, again, consistent with sort of the way we've broken out the segments historically and some of the details. We'll provide the premiums. We'll provide the customer growth -- customer numbers. But from an MCR perspective, the MCR will be disclosed in aggregate for Cigna Healthcare.

At this time, I'm showing no further questions. I'll turn the call back over to Ralph Giacobbe.

Okay. Great. Thanks, everyone, for joining on short notice. Again, we do believe the resegmentation is straightforward but just wanted to provide this advanced communication and transparency around the changes. If there are additional questions specific to the 8-K filed this morning, please reach out to me or the Cigna IR team, and we look forward to speaking with you all on February 3 for our fourth quarter earnings call. Thank you.

Ladies and gentlemen, this concludes Cigna's segment reporting changes conference call. Cigna Investor Relations will be available to respond to additional questions shortly. A recording of this conference will be available for 10 business days following this call. You may access the recorded conference by dialing (800) 934-9450 or (203) 369-3854. There is no passcode required for this replay. Thank you for participating. We will now disconnect.