CI · Q3 2025 Earnings

David emphasized the new fee-based, delinked, transparent model eliminates rebates entirely and aligns with regulatory priorities. Evernorth long-term algorithm remains intact but 2026 will be an exception due to strategic client renewals and investment spend. Specialty and care will grow at high end of algorithm; PBS will decline. Brian detailed three modeling categories: (1) three large clients (~$90B revenue) with new run-rate margins through end of decade, (2) transitional/investment spend pressure in 2026-2027 then dissipating, (3) fundamental earnings on balance of book comparable to today. Model provides patients lowest out-of-pocket costs, supports independent pharmacists with dynamic dispensing fees, and offers employers budget certainty with fee-based structure.

Brian provided directional guidance without explicit numbers. Starting from ~$7.2B Evernorth 2025 income (~$3.6B each for specialty/care and PBS), specialty/care expected at high end of algorithm, overall Evernorth slightly down, implying PBS decline. More than half of PBS decline attributable to large client renewals creating new run-rate margin profile through end of decade. Less than half driven by 2026 investment/transition costs, which continue into 2027 but with expectation of margin recovery thereafter. Renewal impact becomes permanent baseline; investment costs will largely dissipate post-2027.

David declined to guide EPS explicitly but confirmed CHC 40% of company on algorithm toward high end, specialty/care on algorithm toward high end, PBS downturn offsetting growth. Noted cash flow back-half weighted in 2025, similar pattern expected 2026; capital deployment will balance share repurchase and deleveraging. On go-to-market, confirmed pass-through rebates available historically but new model is step function change eliminating rebates entirely; will be Cigna Healthcare standard Jan 2027, Evernorth standard 2028, with consultative approach for clients preferring different programs or multi-year transition. Positioned as future direction of market; most scripts (95%+) will use negotiated price, low single-digit % may use cash alternative with model ensuring lowest price.

David stated does not comment on individual contract profitability but noted large relationships typically have lower earnings profiles than portfolio average. Declined to provide loss assumption but confirmed lower margin profiles on $90B renewals expected. Emphasized proactive engagement and strategic importance; company would not renew if not strategically important. Brian added company does not consciously write business at loss on sustained basis; relationships often deepen over time via specialty capabilities, home delivery, virtual care which could provide future value creation. No explicit projection of profitability trajectory provided.

Brian outlined CHC expected to grow income toward higher end of long-term algorithm off full-year 2025 guidance baseline of at least $4.125B. Stop-loss business tracking well on two-year margin recovery plan with higher rate actions executed with typical retention; 2026 will step forward toward ultimate margin completion by end of 2027; claims experience in line with expectations. Headwinds include absence of 2025 non-recurring benefits from divested Medicare business and individual exchange true-ups. National accounts expect flat to slightly declining (maintaining share strategy); select segment continues strong growth despite higher rate environment; individual exchange membership expected to decline industry-wide commensurate levels. Anne confirmed stop-loss paid MCR tracking expectations; enhanced analytics using claims and clinical data developed to predict individual claims; range of outcomes reinforce full-year expectations.