The Cigna Group (CI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by for Cigna Group's Third Quarter 2026 Results Review. [Operator Instructions] As a reminder, ladies and gentlemen, this conference, including the Q&A session, is being recorded. We'll begin by turning the conference over to Ralph Giacobbe. Please go ahead.

Great. Thanks. Good morning. Thank you for joining today's call. I'm Ralph Giacobbe, Senior Vice President of Investor Relations. With me on the line this morning are Brian Evanko, The Cigna Group's President and Chief Executive Officer; and Ann Dennison, Chief Financial Officer. In our remarks today, Brian and Ann will cover a number of topics, including our third quarter 2026 financial results and our financial outlook for 2026. Following their prepared remarks, Brian and Ann will be available for Q&A. As noted in our earnings release, when describing our financial results, we use certain financial measures, including adjusted income from operations and adjusted revenues which are not determined in accordance with accounting principles generally accepted in the United States, otherwise known as GAAP. A reconciliation of these measures to the most directly comparable GAAP measures, shareholders net income and total revenues, respectively, is contained in today's earnings release, which is posted in the Investor Relations section of thecignagroup.com. We use the term labeled adjusted income from operations and adjusted earnings per share on the same basis as our principal measures of financial performance. In our remarks today, we will be making some forward-looking statements, including statements regarding our outlook for 2026 and future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. A description of these risks and uncertainties is contained in the cautionary note to today's earnings release and in our most recent reports filed with the SEC. Regarding our results in the third quarter, we recorded after-tax special item charges of $146 million or $0.55 per share Details of the special items are included in our quarterly financial supplement. Additionally, please note that when we make prospective comments regarding financial performance, including our full year 2026 outlook, we will do so on a basis that includes the potential impact of future share repurchases and anticipated 2026 dividends. With that, I'll call -- turn the call over to Brian.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call. I'm pleased to share that The Cigna Group delivered strong performance in the third quarter as we continue executing on our strategy. Today, I'll cover our results for the quarter and key drivers. Our profitable growth strategy and how we're advancing toward our long-term EPS growth algorithm of 10% to 14%, which we laid out at our recent Investor Day. As well as how our strategic growth framework positions us to build momentum in 2020. Then Ann will share additional details about our financial results and outlook for the rest of the year. And we'll take your questions. During the quarter, we delivered adjusted revenue of $73.8 million. adjusted after-tax earnings of $2.1 million and adjusted earnings per share of $7.98. The work we've done over several years to deliberately shape our portfolio is delivering results and we are built for the fastest-growing areas of health care with a proven ability to execute through a dynamic environment. Our strong performance through the first 9 months of the year gives us confidence to raise our full year outlook. And we now expect adjusted earnings per share of at least $30.60. And importantly, we are building on that strong foundation as we look beyond 2026. At our recent Investor Day, we announced our Lead to One Vision, which is centered on delivering personalization at scale to improve affordability and the health care experience for every customer and patient we serve. Lead to One brings together all of our medical, pharmacy, behavioral health and specialty care capabilities around the individual. By responsibly leveraging our data, clinical expertise and technology, we can identify needs earlier, deliver more personalized support and improve health outcomes while lowering the total cost of care. Our Lead to One Vision will benefit all customers. And we see a particular opportunity with the most clinically complex patient needs where health care costs are increasingly concentrated and represent over 50% of total health care spending. Lead to One is underpinned by a clear strategic growth framework comprised of 3 pillars: First, we will deliver core growth. Second, we will leverage distinct capabilities; and third, we will execute with discipline. These 3 pillars taken together give us a clear path to build on the strength of our business today while creating the next chapter of sustainable growth and greater value for those we serve. Now let me walk through some of our highlights in the quarter across Evernorth Health Services and Cigna Healthcare. Starting with Evernorth, third quarter earnings were in line with expectations. Our Specialty and care services businesses delivered attractive performance, including pretax adjusted earnings growth of 15% year-over-year. This was fueled by secular tailwinds and disciplined execution across our specialty pharmacy and distribution capabilities. We also drove continued strong biosimilar and specialty generic utilization. Today, Revlimid, a widely used oncology drug is seeing specialty generic adoption rates around 90%. Across our specialty businesses, we are leveraging our distinct capabilities for patients with complex needs, who require a higher level of care, support and coordination to manage their conditions. For example, in our specialty pharmacy, Accredo, we have industry-leading access with more than 330 highly complex limited distribution and exclusive products. This demonstrates the strength of our manufacturer relationships and the trust they place in us to partner in serving some of the most clinically complex patient needs. That access also positions us to capture growth as new specialty therapies come to market. I'm also pleased to share that we continue to expand our capacity for these limited distribution products with our network of clean rooms the fifth of which is now in the build phase. These highly sterile environments take years to build, license and operational is to safely mix and compound some of the most complex medicines. These clean rooms are just one example of the durable competitive advantage in our specialty business that we've constructed over the past few decades. Finally, our expanded distribution channels are unlocking new opportunities. CuraScript SD is a leader in specialty distribution with access to 40 exclusive distribution drugs. And our recently launched Evernorth wholesale has begun fulfilling orders to our distribution centers to be able to serve customers. In our pharmacy benefit services business in Evernorth, we delivered third quarter pretax adjusted earnings of $765 million. We continue to see strong momentum for the 2027 sales season supporting our core growth, along with strong retention rates in the high 90s. Next, I'd like to spend a moment on our signature model transition. We are pioneering this new approach to pharmacy benefits and want you to have further context around current status and why we're so confident in our path. You can think of our signature implementation in 3 broad phases. Phase 1, our design phase is complete. Announced this time last year, Phase 1 included designing Signature, our market-defining innovation driven by core principles of affordability, simplicity, transparency and value. Inherent in the model is our price Assure capability, which is designed to ensure patients pay the lowest available out-of-pocket costs when they fill prescriptions and will save an average of 30% on high-cost branded drugs. Price issues already in market and being leveraged by about 10% of our current clients. And the Signature model is consistent with the direction of regulatory changes, including the Consolidated Appropriations Act of 2026 and the Department of Labor's recently finalized PBM fee disclosure rule. Phase 2, our build phase is well underway. Currently, we're working on adoption planning alongside market education. Key stakeholders include brokers, pharmaceutical manufacturers, network pharmacy partners and clients. The work is largely complete for brokers, and we're actively advancing contracts with pharmaceutical manufacturers and network pharmacies. Phase 3, our adoption phase is on track. The next milestone is the adoption of signature for our Cigna Healthcare fully insured book on 1127. Early client conversations for the 2028 benefits year have been encouraging, and indicate strong interest in the model for our broader Evernorth book of Pharmacy Benefit Services clients. In our very strong 2027 selling season reinforces that clients value innovation and see us as a multiyear partner on their pharmacy benefits journey. By any value and signatures focus on patient affordability and transparency and in how it supports their efforts to meet evolving regulatory requirements and their fiduciary responsibilities. They also see a model that can encourage adherence with improved health outcomes and workforce productivity. In summary, we're proud of the progress we're making on Signature. We've completed Phase 1 and are on track to deliver against Phases 2 and 3 and with broader client adoption expected to ramp in 2028. We'll share some further detail on the progress across Phases 2 and 3 during our fourth quarter earnings call. Finally, we continue to leverage our distinct capabilities in pharmacy benefit services to generate industry-leading affordability outcomes, including our deep supply chain expertise, clinical safety checks, in connectivity in the rapidly evolving pharmaceutical market to meet the needs of clients and customers. And we are continuing to enhance our technology platforms, better connecting the different components of the pharmacy benefit to create a simpler, more flexible experience for patients and clients. Turning to Cigna Healthcare. We delivered another quarter of strong growth with results ahead of expectations with pretax adjusted earnings growth of 15% year-over-year. Our disciplined pricing, coupled with advanced analytics and insights enable our steady medical care ratio performance. While medical cost trends continue to be elevated, they are consistent with our expectations and pricing assumptions. This quarter, we also benefited from stronger net investment income and favorable SG&A performance. We also introduced new capabilities in Cigna Health care in September with launch of Health Sense our data and technology-powered customer enhagement solution that will start with oncology, but broaden to other conditions over time. by connecting a customer's health needs, benefits, pharmacy coverage, costs, claims and prior interactions, our clinical teams have context and a more complete picture enabling earlier interventions. As a reminder, costs are increasingly concentrated in complex conditions with 8% of patients generating 55% of total health care spend. We're excited about the early positive reception to HealthSense from clients and customers and are taking an agile approach to launching additional components as they are built. As we look to 2027, we remain confident in the strength of our strategic growth framework and our ability to perform through a dynamic environment. During our fourth quarter call, we will provide our comprehensive 2027 guidance. We continue to expect adjusted earnings per share growth of at least 10% in 2027 off our run rate earnings for our ongoing businesses and remain confident in 2030 adjusted earnings per share of at least $45 that we outlined at our Investor Day. Today, I'll briefly cover the primary tailwinds and headwinds for 2027. Starting with the tailwinds. First, in our Cigna Healthcare business, we are driving continued improvement in our stop loss margins. Second, we're pleased with a strong 2027 selling season in both Evernorth and Cigna Healthcare. High client retention and new business wins reinforce the strength of our value proposition and innovation and will contribute to attractive enterprise revenue growth in 2027. And third, our [ Accelerate to One ] modernization and productivity initiative will drive savings across the enterprise. Turning to the headwinds we expect in 2027. First, within Evernorth Pharmacy Benefit Services, the compression of industry rebate pools and lower employer coverage of GLP-1s for weight loss, consistent with our commentary from Investor Day. Second, within Evernorth Specialty care services, a more limited pipeline of biosimilar and specialty generic launches in the coming year. And finally, as you'd expect, the known exit from the ACA exchange business will remove that contribution from Cigna Healthcare. To ensure our success, we're focused on disciplined execution across the enterprise. Part of our DNA is our proven ability to evolve. Throughout our 234-year history, we've continuously adapted to lead through change and innovated to drive what comes next. Across our businesses, we're coupling data and insights with our clinical and analytical expertise, resulting in disciplined pricing, timely patient support and consultative solutions for clients. And we're building a future-ready efficient and effective workforce while optimizing accountability and decision-making with our Accelerate to One initiative, all while driving run rate savings of $3 billion by 2030. And which you'll hear more about from Ann in a few moments. Now let me close with a few key takeaways. First, we are generating core growth in each of our 3 business platforms. We've deliberately shaped our portfolio with capabilities that are focused on the most attractive subsectors of health care where needs and spending are concentrated with multiple growth engines across specialty and care services and pharmacy benefit services in Evernorth, along with Cigna Healthcare. Second, we are leveraging our distinct capabilities that strengthen our position for the future. Our expertise in complex care, combined with our clinical capabilities, data, advanced analytics and AI enables us to deliver greater personalization at scale, improve affordability and create more value for the people we serve. You see that strategy coming to life through capabilities like Health Sense our expanding specialty infrastructure and continued innovation across our pharmacy businesses. Third, disciplined execution continues to differentiate our company. This quarter, that showed up in strong client demand, disciplined pricing, stable medical cost trends, continued specialty growth and our ability to adapt our solutions as the market evolves. And as we look to 2027, we have clear visibility into the puts and takes ahead and have multiple levers across the enterprise to deliver against our commitments. Importantly, we are not dependent on any 1 single business, market trend or innovation to deliver our long-term expectations. Our third quarter performance reinforces our confidence in our Lead to One Vision and in our long-term strategy, leading to durable profitable growth and compelling long-term shareholder value creation. With that, I'll turn it over to Ann.

Thanks, Brian, and good morning, everyone. As Brian mentioned, our third quarter results reflect the strength of our enterprise and the consistency of our execution. For our Lead to One Vision, we are delivering core growth across a deliberately shaped portfolio of businesses, leveraging our distinct capabilities to deliver greater personalization at scale, particularly for patients with complex conditions, and executing with discipline. That combination of focused strategy and execution continues to translate into strong results. During the quarter, we delivered adjusted revenues of $73.8 billion adjusted after-tax earnings of $2.1 billion and adjusted earnings per share of $7.98. With our strong third quarter performance, we are raising our full year 2026 adjusted earnings per share outlook to at least $30.60. Now turning to our segment results. I'll start with Evernorth, where we continue to execute on the strategy, Matt Perlberg; and Adam Kautzner outlined at Investor Day to strengthen our specialty leadership while evolving pharmacy benefit services to deliver greater affordability and transparency. Third quarter 2026 revenues grew 6% year-over-year to $63.8 million and pretax adjusted earnings were $1.8 billion. Specialty and Care Services delivered strong performance with pretax adjusted earnings growing 15% year-over-year to $1.1 million in line with expectations. This growth reflects our distinct specialty capabilities across Accredo and CuraScript, and our clinical expertise and patient support services which together are driving momentum in our fastest-growing business. Consistent with our Lead to One strategy, we continue to make specialty care more affordable by accelerating access to lower-cost alternatives which benefits patients and clients while driving growth for the business. We continue to drive strong adoption of biosimilars, led by our 0 patient out-of-pocket offerings for both HUMIRA, both biosimilar HUMIRA and STELARA. Adoption of new specialty generics continue to ramp during the quarter, including generic Revlimid, where penetration is now approximately 90%. And finally, income from our investment in Child Health Solutions contributed to the growth in the quarter. Within Pharmacy Benefit Services, pretax adjusted earnings were $765 million in line with expectations. As we outlined at Investor Day, this business is in a period of transition, and our performance continues to reflect the previously discussed renewals and extensions of large client contracts as well as investments to support the transition to our new signature model. Overall, Evernoth's third quarter results reflect continued growth in our Specialty and Care Services business powered by our distinct capabilities across both pharmacy and medical benefits and disciplined execution as we evolve our pharmacy benefit services business towards Signature, delivering greater affordability and transparency for patients and clients. Turning to Cigna Healthcare, where we continue to execute on the strategy Bryan Holgerson outlined at Investor Day. Deepening client relationships and expanding share in the employer market through our integrated medical, pharmacy and behavioral model with a particular focus on customers with complex care needs. We see significant opportunity to improve outcomes and affordability for these customers through more personalized care. Third quarter 2020 adjusted revenues grew 9% year-over-year to $11.7 billion and pretax adjusted earnings were $1.2 billion. Cigna Healthcare adjusted earnings were ahead of expectations primarily driven by favorable net investment income and ongoing operating efficiencies. The medical care ratio for the third quarter was 85% and in line with expectations, this trend remained elevated but stable, and costs remain consistent with our pricing assumptions. Total medical customers have grown 2% year-to-date to 18.5 million customers. We continue to see strong growth in our Select segment, which serves U.S. employers with fewer than 500 employees, with medical customers up 5% year-to-date, reflecting market share gains that we highlighted at Investor Day. Overall, Cigna Healthcare continues to deliver strong growth driven by our distinct capabilities along with disciplined pricing and expense management. Now turning to our updated outlook for 2026. The strength of our third quarter performance gives us the confidence to increase our full year adjusted earnings per share outlook to at least $30.60. Within Evernorth, we continue to expect full year pretax adjusted earnings of at least $6.9 billion. Within Cigna Healthcare, we are raising our full year pretax adjusted earnings outlook to at least $4.6 billion and with greater visibility into full year performance, we are updating our full year MCR outlook, maintaining our prior midpoint of 84.2% and tightening our range to plus or minus 25 basis points. Turning to our 2026 capital management position. Third quarter operating cash flow was $2.6 billion, and we continue to expect strong cash flow from operations in the fourth quarter, consistent with the pattern we observed in the prior 2 years. During the quarter, we reduced our debt to capitalization ratio by approximately 100 basis points to 41.8% as of September 30. The and we remain on track to achieve our long-term target of approximately 40% by year-end. Additionally, in the third quarter, we repurchased approximately 900,000 shares of common stock for approximately $250 million. Now turning to some early thoughts on 2027. I'll provide some additional directional comments building on the headwinds and tailwinds Brian discussed. First, our 2026 run rate earnings. As you think about the appropriate starting point, it's important to consider our previously announced exit from the ACA exchange market. For 2026, we continue to expect our ACA Exchange business to generate positive margins though below our 4% to 6% margin target. And we expect some runoff and stranded overhead costs to remain next year. Based on our current estimates, this represents an approximately $200 million headwind in Cigna Healthcare, resulting in the 2026 run rate adjusted EPS of approximately $30. Regarding our outlook for our business segments. In Cigna Healthcare, we expect another year of strong growth with adjusted income from operations growing within our long-term target of 6% to 9% of our reported 2026 results. or above the high end of our long-term target after adjusting for our exit from the ACA exchange market. This reflects strong core growth, continued momentum in select where our distinct capabilities position us to gain market share and disciplined execution in our pricing to improve margin and stop loss. In our Specialty and Care Services business, despite more limited biosimilar and specialty generic launches in 2027 and we still expect adjusted earnings to grow within the 8% to 12% long-term target range, though towards the low end. In Pharmacy Benefit Services, as Brian mentioned and as we discussed at our Investor Day, we anticipate near-term headwinds, including industry-wide compression and gross rebates and lower employer coverage of GLP-1 for weight loss, consistent with our prior comments. Taken together, we expect Evernorth earnings to be up low single digits in 2027. Regarding our capital management in 2027, consistent with the deployment framework we outlined at Investor Day, we continue to view share repurchase as an attractive use of capital. As I mentioned earlier, we expect to achieve our debt-to-capital target of approximately 40% by year-end 2020 and we expect greater flexibility in capital deployment next year. In summary, we remain confident in delivering at least 10% adjusted earnings per share growth in 2027, off of our 2026 run rate of approximately $30, which reflects our exit from the ACA Exchange business. We believe this is a prudent starting point, and we look forward to providing further guidance on our fourth quarter call. Underpinning our confidence in our ability to deliver in 2027 and through 2030 is Accelerate to One. This modernization and productivity initiative, which we announced at our recent Investor Day, will lower our cost to serve and create operating leverage for the enterprise. We expect this initiative to contribute $3 billion in gross savings by 2030. Notably, we expect to reinvest some of these savings back into the business to fund growth and innovation, while a portion will benefit operating results. This initiative further reinforces our confidence in our ability to deliver attractive earnings growth in 2027 and over the long term. and we look forward to providing periodic updates on our progress. Now to recap. Our third quarter results reflect strong core growth, our distinct capabilities in both Evernorth and Cigna Healthcare and disciplined execution across the enterprise. We are pleased with our year-to-date performance and confident in our increased full year 2026 adjusted earnings per share outlook of at least $30.60. And we remain confident in our long-term framework of 10% to 14% average annual adjusted earnings per share growth and at least $45 of adjusted earnings per share in 2030, which we discussed at Investor Day. With that, we'll turn it over to the operator for the Q&A portion of the call.

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

I really just want to dig into a few things when we think about the progression in the PDF side of the business. I heard you talk about kind of the next stage where you're building adoption, educating the market, signing manufacturing and pharmacy agreements, can you help us to understand when, what that looks like to what the progression looks like in '27. And you talked about low single digits overall for Evernorth. So it doesn't feel like there's a big progression versus what we're seeing here in '26 and the segment specifically. So if you could just help us to bridge that and talk a little bit about how you make progress in the contracting.

Lisa, I'll start and Ann, if there's anything you want to add, feel free to jump in here. So I think a few components to your question, they're starting with Signature. And then I believe your reference to the low single digit was the Evernorth aggregate income growth expectation that we outlined there. But just relative to where we are with Signature, first off, we're proud to lead the industry with our new signature pharmacy benefits offering. If you step back, affordability continues to be the #1 launch facing patients with the affordability of prescription drugs being a primary pain point, and that's particularly acute for high-cost branded prescriptions, which represent just 10% of all prescriptions in America, but 90% of the total drug spending. And when you look back 1 of the great success stories in American Healthcare is the way PBMs have led generic adoption to now reach some 90% of all prescriptions at a very affordable price point. So the next frontier is attacking the remaining 10% of prescriptions that are in very high-cost branded drugs and represent some 90% of drug spending. So our signature model is designed to attack that 10% of high-cost brand drugs and provide a simple fee-based transparent solution for clients and customers. So as I talked about earlier, there are 3 phases of our signature model implementation. Maybe I'll just share a little bit more color on some of those components. Phase 1 was the design phase, which is now complete, which was the decision we made to move to a simple future fee-based no rebate model. And this architecture leverages the same value creators for clients and customers, meaning procuring drugs at the most affordable unit costs, wrapping those with clinical programs that drive adherence and administering complex benefit plan designs. And Phase 2 is our build phase. And I think your question was pointing at this specifically in terms of where are we with manufacturer or network contracts. This is actively underway. Our team is doing quite a bit of heavy lifting here relative to recontracting as we speak. We'll talk about more details on this on our fourth quarter call but we're actively negotiating with the largest pharmaceutical manufacturers as we speak to get the signature contracts fully landed. This phase also includes all the technology enhancements and the implementation readiness work that's required. And finally, for the upcoming sales season, we've been working hard to educate brokers, the employer community, current clients and prospects on what the signature model entails. And then Phase III, as I alluded to earlier, is our adoption phase, and that's all on track. The next milestone is our Cigna Health care fully insured book, which will adopt Signature 1127 and then the broader ramp will transpire throughout 2028. So big picture, strong receptivity from each of those different stakeholders. We continue to expect 28 will be the year where we see significant adoption across the broader Evernorth book of business. The second part of your question, as Ann indicated in her comments, we expect Evernorth 27 income to be up low single digits. We expect our Specialty and Care business to be within our long-term growth algorithm of 8% to 12%, albeit at the lower end which implies our pharmacy benefit services income will be down single digits in '27 from where we are in '26 due to the industry-wide pressure on gross rebate pools as well as a downtick in the percentage of employers covering GLP-1s for weight management. As we've talked about on prior calls, 26 and 27 are transitional years for our pharmacy benefit services business, and we continue to expect at least 4% up to 4% compounded income growth from 26% to 30% in the PBS business and continue to expect at least $45 per share of 2030 adjusted EPS. So a lot in there, hopefully, you got all the components to your question.

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

I guess just kind of 2 follow-up questions on the guidance. for 2027. I guess, first, the $0.60 drag. It sounds like some of it is just core earnings and some of it is kind of stranded costs. Can you quantify how much that $0.60 might be recaptured in '28 and beyond? And then as far as the headwind to 2027 regarding the fewer launches on the specialty side. Is there any early look on '28? Is that a more normal year in your view? Or is that also a little bit lower?

Kevin, I'll have Ann take the first part of your question in terms of the individual exchange exit and the impact on '26 '27, how to think about '28 and then I'll take the second piece relative to the Specialty and Care. Ann?

So just on the ACA, just to level set, the results for the quarter -- this quarter were largely in line with expectations. And so I mentioned this in my prepared remarks, but as a reminder, we expect the business to be profitable this year, but with margins a little below our 4% to 6% target range. So there's 2 things to think about as we look at the impact of the ACA exchange exit on our 2017 outlook. The first is what the business contributes today. And then the second is the strange overhead and other costs that come along with exiting a business, which is what you'd expect. So when you put those 2 together, based on our current projections, we expect an all-in headwind of about $200 million from exiting the exchange market. As we -- specifically related to your question on recapture and '28, of course, as we always do, we'd be looking to get out any of the runoff costs and the stranded overhead that remains once we've exited the business.

Thanks, Ann. And on the second component of your question, Kevin, in terms of the headwind that we flagged relative to the Specialty and Care business, specifically 2027 is a bit of a slower year for new biosimilar and specialty generics. If you got to step back and look over a longer period of time, new introduction of biosimilars and specialty generics has been a great success story for American Healthcare. And over the past 3 years, HUMIRA having biosimilar competition in '24, STELARA having biosimilar competition '25 generic Revlimid, having supply constraints ease in '26. Each of those provided tailwinds for '24, '25 and '26. So when you look back at our Specialty and Care business, between 2023 and '26, we've compounded income growth of 13%, which is above our long-term growth algorithm for specialty and care. Now from year-to-year, there will be some head flow on the timing and magnitude of drugs that will see new biosimilar and specialty generic competition. So for '27 specifically, again, the pipeline indicates less material new biosimilars specialty generics being introduced. But I would view that as a temporary as we look ahead to '28, '29 and '30, there are several biosimilars coming to market for drugs often covered under the medical benefit. So I think oncology drugs, as drugs, and we're preparing for these introductions. Now stepping back from all of this, we're actively encouraging the approval and adoption of these low-cost alternatives. It's a great means to improve affordability. And finally, the continued momentum across our broader Specialty and Care portfolio allows us to overcome this headwind to specialty growth. And as Ann noted, we do expect on 2027, Specialty and Care earnings growth near the low end of our long-term income growth [indiscernible] 8% to 12% per year, which speaks to the strength of our broad suite of specialty capabilities, as well as our expertise in serving patients with the most complex health care needs. Hopefully, that helps.

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

Just to make sure I understand, so as you deploy the new signature model next year to your fully insured book -- you didn't mention that as a headwind tailwind for either side of the business. Is there any short-term pressure either on the churn side or on the Evernorth side that then abates over time as it gets more mature? And just also on the signature model, you did reference various regulatory things, the PBM reform legislation from January, the Department of Labor announcement. Are you naturally going to comply with all of the provisions there as you move to the signature model? Or is there anything incrementally -- from an investment perspective, you need to do to comply with those as they phase in by '28 and so forth.

A few different components in there. Relative to the first piece of your question, the signature implementation for our fully insured business for 1127 within Cigna Healthcare, as I mentioned earlier in Lisa's question, fully on track to implement that effective January 1. To your point, that is not a headwind relative to '27. The reason for that is, since it's fully insured business, any change in economics is essentially in the it's in the price that we've implemented through our standard underwriting process as we go through case by case, client by client and put the appropriate price in place. So the' 27 points we talked about specifically for PBS are limited to the GLP-1 weight has been coverage ticking down in our employer book and secondarily, the compression on industry-wide rebates. So again, '26, '27, think of those as transitional years for PBS '28, '29, '30, we'll see income growth over that time period. On the second piece of your question relative to some of the PBM rules, regulations and reform changes that have gone through most recently, the Department of Labor PBM transparency rule was issued just a few weeks ago. And really this issue -- or this rule speaks to the primary challenge of our health care system, which again is affordability. And we support the underlying spirit implied by this rule. Specifically use of objective, data-driven, transparent information in order to drive more educated purchasing and utilization. That said, we think it's very unlikely this rule will result in lower prescription drug spending. There's some redundancy in the DOL rule and the Consolidated Appropriations Act, and there's some areas where we were actually contradictory. Our team is actively engaging to drive clarity on these issues for the benefit of our clients and customers. As it relates to the DOL rule itself, we will, of course, comply with the requirements. This will add some administrative costs and burden to the system. We should not think of that as a material amount of new spending something that I would view as normal course for our PBS business. But again, coming back to our signature model, that is [indiscernible] bold way that we're taking action ourselves to drive change in the system with a focus on affordability and a focus on actionable transparency. This model also provides that patient guarantee of the lowest possible out-of-pocket costs when they fill a prescription. Finally, the signature model is designed to comply with evolving regulations including both the CAA and the DOL transparency rule while reducing fiduciary risk for employers who adopt model. So we're very excited about the signature model, looking forward to scaling across the Evernorth book starting in '28. Thanks for the question.

Our next question comes from Justin Lake with Wolfe Research.

On the 3 headwins to Evernorth next year, are all 3 about similar size or maybe you can rank order them for us in terms of impact. And then you didn't mention investment gains in 2026 as a headwind for the Healthcare business next year. By my math, it looks like it could be north of $100 million. How should we think about that?

Justin, I'll start, and Ann, if you could pick up on the -- how to think about the quant 3 headwinds as well as the question Justin asked about the investment income. We're going to wait until the fourth quarter to get into our detailed guidance relative to subsegment and segment guidance for '27. What we're trying to do today was give you a little bit of texture in terms of how to think about the $27 million versus $26 million income trajectory for each of our business. But as I said earlier to the question, that Kevin asked on specialty, we will still be within our 8% to 12% income growth algorithm, albeit at the lower end. So that headwind in the big picture is more than offset by the underlying strong secular growth that we see in specialty by the continued expansion of our distribution capabilities by the improvement in our cost to fill through initiatives like our pharmacy forward. So big picture, you should not think of that as a substantial headwind in a dollar incent standpoint. And then the PBS headwind that we made reference to contributes to the total income being down single digits 27% relative to 26%. So that gives you a bit of just ballpark dimensioning of how to think about the magnitude. Ann, can you pick up anything else on the headwinds in the investment income component?

Sure. Just to Brian's point around pharmacy benefit services and the headwinds there, we look forward to quantifying the specific numbers coming out of the fourth quarter. You can think about both the 2 headwinds referenced as relatively equal. On the investment gains in Cigna Healthcare for this year, I would not characterize that as a headwind going into 2027.

Our next question comes from Scott Fidel with Goldman Sachs.

I wanted to just ask about the new initiative, the Lead to One that you discussed at the Investor Day, and I know it sounds like already, there's sort of execution on that that's going on within the company. And Brian and Ann, maybe just in particular, if you can give us any visibility into a level of run rate savings that you expect to potentially be accrued into the '27 outlook that you're contemplating in and the potential sort of key drivers of that? And then also just any onetime costs that we may anticipate may hit the GAAP P&L just in the back half of this year or into next year as you implement workforce rationalization and other elements of the Lead to One strategy.

Scott, I'll start and then, Ann, if you could pick up. So Scott, referenced Lead to One. I think he was bridging over to our Accelerator initiative as well in his question. relative to the $3 billion of run rate savings that we expect to see by 2030. So step back, Lead to One is our vision for the future, which is essentially driving personalization at scale. We see the emergence of beta, modern technologies, advanced analytics, AI, allowing us to drive personalization in ways that we couldn't even 3, 5 years ago. And we're excited to do that across all the customers and patients we serve with a particular emphasis on those who have the most clinically complex health care needs, which as I said in my earlier comments, that now represents 55% of total spending, even though it's just 8% of patients our Accelerate to One initiative, specifically is using a combination of technology, workforce effectiveness, vendor rationalization in order to drive that $3 billion of run rate save by 2030, $3 billion of gross run rate savings by 2030. Ann, can you pick up a little bit in terms of how to think about the timing of the emergence investment spend to that part, Scott's question?