Cigna Group Q3 2026 Earnings Call Transcript

Cigna Group (NYSE:CI) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Cigna Group reported strong Q3 2026 performance with adjusted revenue of $73.8 billion and adjusted earnings per share of $7, raising full-year EPS outlook to at least $30.60.

The company is progressing with its ‘Lead to One’ vision aimed at personalizing healthcare through integrated capabilities, focusing especially on complex patient needs.

Evernorth Health Services and Cigna Healthcare both showed robust earnings growth, with Evernorth experiencing a 15% pre-tax adjusted earnings increase year-over-year.

Strategic initiatives include expanding specialty pharmacy capabilities and launching the Signature Model for pharmacy benefits, which is expected to drive future growth.

For 2027, Cigna anticipates at least 10% EPS growth despite facing headwinds such as industry rebate compression and a limited pipeline of biosimilars.

Management emphasized disciplined execution and leveraging data, technology, and clinical expertise to drive long-term growth, targeting $45 EPS by 2030.

Full Transcript

OPERATOR

Ladies and gentlemen, thank you for standing by for the Cigna Group’s third quarter 2026 results review. At this time, all callers are in a listen-only mode. We will conduct a question-and-answer session later during the conference and review procedures on how to enter the queue to ask questions at that time. If you should require assistance during the call, please press star-zero on your touchtone phone. 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 Jacoby. Please go ahead.

Ralph Jacoby (Senior Vice President of Investor Relations)

Great, thanks. Good morning. Thank you for joining today’s call. I’m Ralph Jacoby, Senior Vice President of Investor Relations. With me on the line this morning are Brian Emanco, the Cigna Group’s President and Chief Executive Officer, and Ann Denison, Chief Financial Officer. In our remarks today, Brian and Anne 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 Anne 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 cignagroup.com. We use the terms 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 turn the call over to Brian.

David Cordani (Chief Executive Officer)

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 2027.

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 billion, adjusted after-tax earnings of $2.1 billion, and adjusted earnings per share of $7. 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 nine months of the year gives us confidence to raise our full-year outlook, and we now expect adjusted earnings per share of at least $30.60.

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 three pillars. First, we will deliver core growth. Second, we will leverage distinct capabilities. And third, we will execute with discipline. These three pillars taken together give us a clear path to build on the strength of our business today while creating the next chapter of sustainable growth and greater value for those we serve.

Now let me walk through some of our highlights in the quarter across Evernorth Health Services and Cigna Healthcare. Starting in Evernorth, third quarter earnings were in line with expectations. Our specialty and care services businesses delivered attractive performance, including pre-tax adjusted earnings growth of 15% year over year. This was fueled by secular tailwinds and disciplined execution across our specialty, pharmacy, and distribution capabilities.

We also drove continued strong biosimilar and specialty generic utilization. Today, Revlimid, a widely used oncology drug, is seeing specialty generic adoption rates around 90% across our specialty businesses. We are leveraging our distinct capabilities for patients with complex needs who require a higher level of care, support, and coordination to manage their conditions. For example, in our specialty pharmacy Accredo we have industry-leading access with more than 330 highly complex limited distribution and exclusive products.

This demonstrates the strength of our manufacturer relationships and the trust they place in us to partner in serving some of the most clinically complex patient needs. That access also positions us to capture growth as new specialty therapies come to market. I’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 a build phase. These highly sterile environments take years to build, license, and operationalize to safely mix and compound some of the most complex medicines. These clean rooms are just one example of the durable competitive advantage in our specialty business that we’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 benefits services business. In Evernorth we delivered third quarter pre-tax adjusted earnings of $765 million. We continue to see strong momentum for the 2027 sales season supporting our core growth along with strong retention rates in the high 90s.

Next, I’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 three 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 cost when they fill prescriptions and will save an average of 30% on high-cost branded drugs. Price Assure is already in market and being leveraged by about 10% of our current clients, 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 1/1/27. Early client conversations for the 2028 benefits year have been encouraging and indicate strong interest in the model for a broader Evernorth book of pharmacy benefit services clients, and our very strong 2027 selling season reinforces that clients value innovation and see us as a multi-year partner on their pharmacy benefits journey.

Clients see value in Signature’s focus on patient affordability and transparency and in how it supports their efforts to meet evolving regulatory requirements and their fiduciary responsibilities. They also see a model that can encourage adherence with improved health outcomes and workforce productivity. In summary, we’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, 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, and connectivity in the rapidly evolving pharmaceutical market to meet the needs of clients and customers. And we’re continuing to enhance our technology platforms that are connecting the different components of the pharmacy benefit to create a simpler, more flexible experience for patients and clients.

Turning to Cigna Healthcare, we delivered another quarter of strong growth with results ahead of expectations, with pre-tax adjusted earnings growth of 15% year over year. Our disciplined pricing coupled with advanced analytics and insights enable our steady medical care ratio performance. While medical cost trends continue to be elevated, they are consistent with our expectations and pricing assumptions this quarter. We also benefited from stronger net investment income and favorable SG&A performance.

We also introduced new capabilities in Cigna Healthcare in September with the launch of HealthSense, our data- and technology-powered customer engagement solution that will start with oncology but broaden to other conditions over time. By connecting a customer’s health needs, benefits, pharmacy coverage, costs, claims, and prior interactions, our clinical teams have context and a more complete picture, enabling earlier interventions. As a reminder, costs are increasingly concentrated in complex conditions, with 8% of patients generating 55% of total 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 and 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, which you will 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 three 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 benefits 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 HealthSense, 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 one single business, market trend, or innovation to deliver our long-term expectations.

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

Ann Dennison (Executive Vice President)

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 Matthew Perlberg and Adam Kautzner outlined at Investor Day to strengthen our specialty leadership while evolving pharmacy benefit services to deliver greater affordability and transparency. Third quarter 2026 revenues grew 6% year over year to $63.8 billion and 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 billion, in line with expectations.

This growth reflects our distinct specialty capabilities across Accredo and CuraScript, and our clinical expertise and patient support services, which together are driving momentum in our fastest-growing business. Consistent with our Lead to One strategy, we continue to make specialty care more affordable by accelerating access to lower-cost alternatives, which benefit patients and clients while driving growth for the business. We continue to drive strong adoption of biosimilars, led by our $0 patient out-of-pocket offerings for both biosimilar Humira and Stelara. Adoption of new specialty generics continued to ramp during the quarter, including generic Revlimid, where penetration is now approximately 90%, and finally, income from our investment in Shields 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, Evernorth’s third quarter results reflect continued growth in our specialty and care services business, powered by our distinct capabilities across both pharmacy and medical benefits and disciplined execution, as we evolve our pharmacy benefit services business towards Signature, delivering greater affordability and transparency for patients and clients.

Turning to Cigna Healthcare, where we continue to execute on the strategy Bryan Holgerson outlined at Investor Day, deepening client relationships and expanding share in the employer market through our integrated medical, pharmacy, and behavioral model with a particular focus on customers with complex care needs, we see significant opportunity to improve outcomes and affordability for these customers through more personalized care. Third quarter 2026 adjusted revenues grew 9% year over year to $11.7 billion and 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%, in line with expectations as trends remain elevated but stable and costs remain consistent with our pricing assumptions. Total medical customers have grown 2% year to date to 18.5 million customers. We continue to see strong growth in our Select segment, which 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’re 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 two years. During the quarter, we reduced our debt to capitalization ratio by approximately 100 basis points to 41.8% as of September 30th, and we remain on track to achieve our long-term target of approximately 40% by year end.

Additionally, in the third quarter, we repurchased approximately 900,000 shares of common stock for approximately $250 million. 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% off of our reported 2026 results, or above the high end of our long-term target after adjusting for our exit from the ACA exchange market. This reflects strong core growth, continued momentum in Select where our distinct capabilities position us to gain market share, and disciplined execution in our pricing to improve margin, and stop loss, in our specialty and care services business.

Despite more limited biosimilar and specialty generic launches in 2027, we still expect adjusted earnings to grow within the 8% 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 in gross rebates and lower employer coverage of GLP-1s for weight loss, consistent with our prior comments.

Taken together, we expect Evernorth earnings to be up low single digits in 2027. Regarding our capital management in 2027, consistent with the deployment framework we outlined at Investor Day, we continue to view share repurchase as an attractive use of capital. As I mentioned earlier, we expect to achieve our debt-to-capital target of approximately 40% by year-end 2026, and we expect greater flexibility in capital deployment next year. In summary, we remain confident in delivering at least 10% adjusted earnings per share growth in 2027 off of our 2026 run-rate of approximately $30, which reflects our exit from the ACA exchange business.

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

This initiative further reinforces our confidence in our ability to deliver attractive earnings growth in 2027 and over the long term, and we look forward to providing periodic updates on our progress. Now, to recap, our third quarter results reflect strong core growth, our distinct capabilities in both Evernorth and Cigna Healthcare, and disciplined execution across the enterprise. We are pleased with our year-to-date performance and confident in our increased full-year 2026 adjusted 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

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

Lisa Gill (Analyst at JPMorgan)

Thanks very much. Good morning. Thank you for all the details, Brian and Ann. I really just want to dig into a few things. When we think about the progression in the PBS side of the business, I heard you talk about kind of the next phase where you’re building adoption, educating the market, signing manufacturer and pharmacy agreements. Can you help us to understand, one, what that looks like; two, 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 PBS segment specifically.

So if you could just help us to bridge that and talk a little bit about how you make progress in the contracting.

David Cordani (Chief Executive Officer)

Good morning. As I said, I’ll start, and if there’s anyone, feel free to jump in here. Setting a few components to your question there, starting with Signature, and then I believe your reference to the low single digit was the Evernorth aggregate income growth expectation that we outlined there. 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 number one challenge 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. When you look back, one of the great success stories in American health care is the way PBMs have led generic adoption to now reach some 90% of all prescriptions at very affordable price points.

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. As I talked about earlier, there are three phases of our Signature model implementation. Maybe I’ll share a little bit more color on some of those components. Phase one was the design phase, which is now complete, which was the decision we made to move to a simple future fee-based, no-rebate model.

And its 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 two is our build phase. And I think your question was pointing at this specifically in terms of where are we with manufacturer 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 in 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 three, as I alluded to earlier, is our adoption phase, and that’s well on track. The next milestone is our Cigna Healthcare fully insured book, which will adopt Signature 1/1/27, 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 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.

OPERATOR

Thank you. Our next question comes from Kevin Fischbach with Bank of America. You may ask your question.

Kevin Fischbach (Analyst at Bank of America)

Great, thanks. I guess just kind of two follow-up questions on the guidance for 2027. I guess first, the $0.60 drag. It sounds like some of it’s just core earnings and some of it is 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?

David Cordani (Chief Executive Officer)

Good morning, Kevin. I’ll have Ann take the first part of your question in terms of the individual exchange exit and the impact on ’26–’27, how to think about ’28, and then I’ll take the second piece relative to the specialty and care.

Ed

Good morning, Kevin. So, just on the ACA, just to level set, the results for the 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 two things to think about as we look at the impact of the ACA exchange exit on our ’27 outlook. The first is what the business contributes today, and then the second is the stranded overhead and other costs that come along with exiting a business, which is what you’d expect. So when you put those two together, based on our current projections, we expect an all-in headwind of about $200 million from exiting the exchange market. Specifically related to your question on recapture in 2028, of course, as we always do, we’d be looking to get out any of the runoff costs and the stranded overhead that remains once we’ve exited the business.

David Cordani (Chief Executive Officer)

Thanks, Ed. 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 step back and look over a longer period of time, new introduction of biosimilars and specialty generics has been a great success story for American healthcare over the past three years: Humira having biosimilar competition in ’24, Stelara having biosimilar competition in ’25, generic Revlimid having supply constraints ease in ’26.

Each of those provided tailwinds for ’24, ’25, and ’26. And 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, for years, there’ll be some ebb and flow on the timing and magnitude of drugs that will see new biosimilar and specialty and generic competition. So for ’27 specifically, again, the pipeline indicates less material new biosimilars and specialty generics being introduced.

But I would view that as a temporary slowdown. 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 think oncology drugs, MS drugs. And we’re preparing for these introductions now. Stepping back from all of this, we’re actively encouraging the approval and adoption of these low-cost alternatives. It’s a great means to improve affordability. 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 2027 specialty and care earnings growth near the low end of our long-term income growth algorithm, 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 healthcare needs.

Hopefully that helps.

OPERATOR

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

AJ Wright (Analyst at UBS)

Thanks. Hi, everybody. Just to make sure I understand: so as you deploy the new Signature model next year to your fully insured book, you didn’t mention that as a headwind/tailwind for either side of the business. Is there any short-term pressure either on the insurance side or on the Evernorth side that then abates over time as it gets more mature? 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?

David Cordani (Chief Executive Officer)

Good morning, A.J. A few different components in there. Relative to the first piece of your question: the Signature model implementation for our fully insured business for 1/1/27 within Cigna Healthcare, as I mentioned earlier in Lisa’s question, fully on track to implement that effective January 1st. To your point, that is not a headwind relative to ’27. The reason for that is, since it’s fully insured business, any change in economics is essentially in the price.

It’s in the price that we’ve implemented through our standard underwriting process as we go through case by case, client by client, and put the appropriate price in place. So the ’27 headwinds we talked about specifically for PBS are limited to the GLP-1 weight management coverage ticking down in our employer book and, secondarily, the compression on industry-wide rebates. So, again, ’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 healthcare system, which again is affordability. And we support the underlying spirit implied by this rule — specifically, the use of objective, data-driven, transparent information in order to drive more educated purchasing and utilization.

That said, we think it’s very unlikely that 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 the two are actually contradictory. Our team is actively engaging to drive clarity on these issues for the benefit of our clients and customers. As it relates to the DOL Rule itself, we will, of course, comply with the requirements. This will add some administrative cost and burden to the system, but you should not think of that as a material amount of new spending — something that I would view as normal course for our PBS business. But again, coming back to our Signature model, that is our one 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 cost when they fill a prescription.

Finally, the Signature model is designed to comply with evolving regulations, including both the CAA and the DOL Transparency Rule, while reducing fiduciary risk for employers who adopt the model. So we’re very excited about the Signature model, looking forward to its scaling across the Evernorth book starting in ’28. Thanks for the question.

OPERATOR

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

Justin Lake (Analyst at Wolfe Research)

Thanks. Good morning. On the three headwinds to Evernorth next year, are all three about similar size? Or maybe you can rank order them for us in terms of impact. 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? Thanks.

David Cordani (Chief Executive Officer)

Good morning, Justin. I’ll start, and if you could pick up on how to think about the quant on the three headwinds, as well as the question Justin asked about the investment income. We’re going to wait until the fourth quarter to get into our detailed guidance relative to sub-segment and segment guides 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 versus ’26 income trajectory for each of our businesses.

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 dollars and cents 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. And can you pick up anything else on the headwinds and then the investment income component?

Ann Dennison (Executive Vice President)

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

OPERATOR

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

Scott Fidel (Analyst at Goldman Sachs)

Hi. Thanks and good morning. 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 Ed, 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 and the potential, you know, sort of key drivers of that.

And then also just any one-time costs that we may anticipate may hit the, you know, the GAAP P&L just in the back half of this year or into next year as you implement workforce rationalization and other elements of the Lead to One strategy. Thanks.

David Cordani (Chief Executive Officer)

Good morning, 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 Accelerate to One initiative as well in his question relative to the $3 billion of run-rate saved 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 data, modern technologies, advanced analytics, AI, allowing us to drive personalization in ways that we couldn’t even three, five 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 healthcare needs, which, as I said in my earlier comments, 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, and vendor rationalization in order to drive that $3 billion of run-rate saved by 2030—$3 billion of gross run-rate savings by 2030. Ann, can you pick up a little bit in terms of how to think about the timing, the emergence, investment spend—address that part of Scott’s question?

Ann Dennison (Executive Vice President)

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

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

OPERATOR

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

Jason Casorda (Analyst at Guggenheim Securities)

Great, thanks. Good morning. I wanted to ask a little bit more on Evernorth for 2027. One of the headwinds for PBS segment this year was lower customer script growth due to declines in client plan membership. I guess I’m just curious how you’re thinking about that paradigm for 2027. If you’re assuming some level of headwind there, that’s perhaps more than offset by the strong 2027 selling season. Just any color around that would be a helpful thing.

David Cordani (Chief Executive Officer)

Good morning, Jason. Appreciate the question. You’re right. Relative to ’26, we’ve seen some decline in the pharmacy benefit services business both in terms of scripts and overall customer counts. I just would remind everyone script counts are not really a great indicator of the financial health or success of this business anymore, particularly as specialty drugs have proliferated, representing a small percentage of prescriptions but over half of total drug spending.

Another reminder is we serve many health plan clients, and our customer and script volumes are partially dependent upon their own membership growth or decline. So year to date we did see some reduction in volumes from our Evernorth health plan clients specifically, partially driven by how some approach their Medicare and Medicaid product and pricing strategies. All that was broadly in line with expectations. And as we indicated, our overall Evernorth business delivered solid financial performance through 3Q26, and we’re pleased to reaffirm the full-year outlook for Evernorth incorporating all of those dynamics.

As it relates to ’27 and how to think about this dynamic relative to the selling season, we’re tracking toward retention in the high 90s, as I indicated earlier, similar to what we saw in ’26, consistent with historical norms. Additionally, our ’27 new business performance is very strong. We’re tracking to at least 2 million new PBS customers in 2027, with that new business written at targeted profit levels, and that’s been generated from a combination of traditional PBM competitors as well as some smaller alternate PBMs.

And as I indicated earlier, our new signature model is generating considerable interest both from existing clients as well as prospects as we look to scale it in ’28 and beyond. All this is evidence that our clients see us as a multi-year thought partner as they prepare for future changes in their pharmacy benefit programs. So taken all together, these factors have been incorporated into the outlook that Ann introduced this morning. And as I mentioned in one of my earlier comments, enterprise revenue for the entire Cigna Group is on track for an attractive rate of growth here in ’27. Thanks for the question.

OPERATOR

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

Charles Rhee (Analyst at TD Cowen)

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

David Cordani (Chief Executive Officer)

Morning, Charles. Appreciate the question. Maybe I’ll start with a little bit of background on the program and how we participate, and the core of your question on the ’27 implications. The 340B program has been in place since the early ’90s, as you know, designed to support access to care for vulnerable patients by allowing those hospitals who serve them to purchase drugs essentially at a lower cost. And this remains a critical lifeline for many rural and safety-net hospitals.

Over the years we’ve seen the program experience changes around eligibility, contract pharmacy access, manufacturer participation, but it has endured, given the criticality of the program’s underlying purpose to support those rural and safety-net hospitals. The way we participate in the 340B program is multifaceted. The most direct way is through Accredo, where we serve as a contract pharmacy in the 340B program. Now, importantly, our total number of 340B contract pharmacies is far below that of the large retail pharmacy chains, so our exposure as a result is a small fraction of what those competitors would have or what those pharmacy chains would have overall. You should think of Accredo’s participation as a 340B contract pharmacy as being a relatively small contributor to overall Evernorth earnings.

I’d also note that the contribution of 340B is reflected within the Specialty and Care portion of Evernorth specifically. Now, as it relates to ’27, there will be some modest downward pressure on our ’27 results from the evolved 340B program requirements, but it’s just not significant enough for us to call it out as a substantial headwind. And the continued momentum across our broader Specialty and Care portfolio—as I described earlier, strong secular growth, distribution expansion, cost-to-fill improvements—allows us to generate income growth that’ll be near the low end of our long-term growth algorithm for Specialty and Care of 8% to 12% per year, so be toward the lower end of that.

Again, all that speaks to the strength of the broad suite of capabilities we have across specialty and our expertise in serving those individuals with the most complex healthcare needs. So modest headwind but more than overcome by those other factors.

Charles Rhee (Analyst at TD Cowen)

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

OPERATOR

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

Elizabeth Anderson (Analyst at Evercore ISI)

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

Brian Evanko (See Remarks)

Good morning, Elizabeth. I’ll start and then hand it over to Ann to get into more of the specifics in terms of current performance and 27 implications. Big picture, our stop loss book is performing well and in line with what we talked about before in terms of 26 and 27 being the years where we are increasing the margin profile in that book of business back to target levels. Most of that has been accomplished here in 26 with the price actions we were able to secure.

And I’ve been really pleased with the strong retention on that book of business which speaks to the strong consultation, the sales and client management teams within Cigna Healthcare doing great work to ensure that we continue with those long‑term relationships. But the overall stop loss book continues to perform well and as we indicated earlier, that’s one of the three enterprise tailwinds for 27. As we step into the new year, Ann, can you pick up a bit in terms of current year performance and the 27 price increases?

Ann Dennison (Executive Vice President)

Sure. So as Brian said, tracking in line with what we expected. As we talked about before, we built out our analytics and clinical data so we can price at the right levels and also see early performance, and so those indicators are tracking well. I’ll give you an example. Year‑to‑date we’ve seen relatively stable frequency trends in high‑cost claimants across multiple attachment point levels and that’s played out consistent with our expectations but also consistent with what we observed last year.

So when we put it all together along with the other indicators we watch, we’re feeling good about stop loss book and where we expect to finish this year. Performance is in line with our pricing and planning and our margin recapture targets. And as Brian just mentioned, our plan is to recapture a portion of the margin over this year and a portion next year. So with our visibility into the performance this year, expectations from next year, our pricing captures this objective and we’re executing well against the plan.

So we remain confident in our NCR range for this year, including stop loss, and also executing on the remainder of our margin recapture plan as we go through 27.

OPERATOR

Great. Thank you very much. Thank you. Our next question comes from Whit Mayo with Leerink Partners. You may ask your question.

Dean Radalis (Analyst at Leerink Partners)

Hi, good morning. This is Dean Radalis on for Whit. After some noise surrounding Arkansas last year, you re‑emphasized the value of integrating PBM and pharmacy capabilities, with Tennessee moving in a similar direction being a bit of a different story considering Accredo’s Memphis footprint. Has that at all changed how you think about Evernorth’s operating model and the general flexibility you might need going forward? Thank you.

David Cordani (Chief Executive Officer)

I’ll take that one. So stepping back, I think your question is about some of the state‑level activity relative to, I’ll call it, vertical integration for lack of a better term, just to put an umbrella term over it. As we talked about in some of the prior questions here this morning, it’s clear that our current healthcare system is on an unsustainable trajectory, with affordability, fragmented patient experiences being common pain points. We’re seeing some policymakers, legislators focusing on vertical integration as a potential root cause of these challenges in the healthcare system.

For us, we do not pursue integration for its own sake. Rather, we see tremendous benefits to patients through connecting data with individual context along with coordinating care across providers, plan designs, et cetera. And our Lead to One vision is designed to drive personalization at scale and, as I said earlier, a particular emphasis on those with the most clinically complex healthcare needs, and our integrated capabilities allows us to do this even better and more effectively.

And we have strong evidence of improved affordability results and greater patient satisfaction when care is integrated and coordinated. For example, in our Health Center Oncology Patient Solution, we provided a few examples of this during the Investor Day. For example, the evidence showing that cancer patients’ integrated journey saves $20,000 per person per year or $2,000 per person per year of savings for an integrated customer who has cardio‑diabesity. It’s not just affordability, it’s also better health outcomes. For Cigna Healthcare, integrated customers show 12% lower A1C for people with diabetes.

So these are all examples of our integrated model playing itself out in the form of improved affordability, better patient experiences, and improved health outcomes. So we believe the current composition of the Cigna Group and our three growth platforms, Cigna Healthcare Specialty and Care, Pharmacy Benefit Services, is optimal. And we believe we’re creating real value for customers in the market and value for shareholders with the current composition of the Cigna Group.

OPERATOR

Thank you. Our last question comes from Erin Wright with Morgan Stanley. You may ask your question.

Erin Wright (Analyst at Morgan Stanley)

Great. Thanks. At Investor Day you talked about the next leg of growth in specialty, including greater opportunity across medical benefit side as well as on the distribution side too. Are these drivers we think about for 27, or are these drivers that we’re thinking about more longer term, or anything you can quantify on that front? Thanks.

David Cordani (Chief Executive Officer)

Good morning, Erin. Appreciate the question. You’re right. Tho