CIGNA CORPORATION 37 th Annual J.P. Morgan Healthcare Conference January 7, 2019 David Cordani President and Chief Executive Officer
2 Forward-looking statements and Non-GAAP measures CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on Cigna's current expectations and projections about future trends, events and uncertainties. These statements are not historical facts. Forward-looking statements may include, among others, statements concerning our long-term projected adjusted income (loss) from operations outlook; expectations for growth in 2019, including but not limited to global medical and individual Medicare Advantage customer growth for 2019, growth in international markets and expectations for core business adjusted claims growth for 2019; projected growth beyond 2019; projected medical care and operating expense ratios and medical cost trends; our projected consolidated adjusted tax rate; future financial or operating performance, including our ability to deliver personalized and innovative solutions for our customers and clients; future growth, business strategy, strategic or operational initiatives; economic, regulatory or competitive environments, particularly with respect to the pace and extent of change in these areas; financing or capital deployment plans and amounts available for future deployment; our prospects for growth in the coming years; the merger (the Merger ) with Express Scripts Holding Company ( Express Scripts ) and other statements regarding Cigna's future beliefs, expectations, plans, intentions, financial condition or performance. You may identify forward-looking statements by the use of words such as believe, expect, plan, intend, anticipate, estimate, predict, potential, may, should, will or other words or expressions of similar meaning, although not all forward-looking statements contain such terms. Forward-looking statements are subject to risks and uncertainties, both known and unknown, that could cause actual results to differ materially from those expressed or implied in forward-looking statements. Such risks and uncertainties include, but are not limited to: our ability to achieve our financial, strategic and operational plans or initiatives; our ability to predict and manage medical costs and price effectively and develop and maintain good relationships with physicians, hospitals and other health care providers; the impact of modifications to our operations and processes; our ability to identify potential strategic acquisitions or transactions and realize the expected benefits of such transactions, including with respect to the Merger; the substantial level of government regulation over our business and the potential effects of new laws or regulations or changes in existing laws or regulations; the outcome of litigation, regulatory audits, investigations, actions and/or guaranty fund assessments; uncertainties surrounding participation in government-sponsored programs such as Medicare; the effectiveness and security of our information technology and other business systems; unfavorable industry, economic or political conditions, including foreign currency movements; acts of war, terrorism, natural disasters or pandemics; the possibility that the anticipated benefits (including anticipated synergies) from the Merger cannot be realized in full, or at all or may take longer to realize than expected; problems regarding the successful integration of the businesses of Express Scripts and Cigna; unexpected costs regarding the Merger; the ability to retain key personnel; as well as more specific risks and uncertainties discussed in our most recent report on Form 10-K and subsequent reports on Forms 10-Q and 8-K available on the Investor Relations section of www.cigna.com as well as on Express Scripts most recent report on Form 10-K and subsequent reports on Forms 10-Q and 8-K available on the Investor Relations section of www.express-scripts.com. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance or results, and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Cigna undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by law. NON-GAAP MEASURES AND FINANCIAL INFORMATION The Company uses adjusted income from operations as the principal measure of performance when describing its financial results and outlook. On a consolidated basis, adjusted income from operations is not determined in accordance with accounting principles generally accepted in the United States of America ( GAAP ). Adjusted income from operations is defined as shareholders net income (loss) excluding after-tax realized investment results, net amortization of other acquired intangible assets, special items and, for periods ended on or prior to December 31, 2014, the results of Cigna s Guaranteed Minimum Income Benefits (GMIB) business. Management uses adjusted income from operations to measure financial performance because it presents underlying results of operations and permits analysis of trends in underlying revenue, expenses and shareholders net income. On a consolidated basis, adjusted income from operations should not be viewed as a substitute for the most directly comparable GAAP measure - shareholders net income. Global medical customers include individuals who meet any one of the following criteria: are covered under a medical insurance policy, managed care arrangement, or service agreement issued by Cigna; have access to Cigna's provider network for covered services under their medical plan; or have medical claims and services that are administered by Cigna. Adjusted claims includes an adjustment to reflect non-specialty network claims filled through 90-day programs. These claims are multiplied by three, as these claims, on average, typically cover a time period three times longer than other network claims. Home delivery claims are also multiplied by three as home delivery claims typically cover a time period three times longer than unadjusted network claims. All other network and specialty claims are counted as one claim. Core business excludes the contributions from Anthem and Coventry and their clients, which together are referred to as the transitioning clients. *In this presentation, the term earnings means adjusted income from operations and earnings per share means adjusted income from operations on a fully diluted per share basis. The appendix to this presentation contains a reconciliation of adjusted income from operations on a consolidated basis to shareholders net income, the most directly comparable GAAP measure. Management is unable to provide a forward-looking reconciliation of adjusted income from operations to shareholders net income for full year 2018 because we are unable to predict, without unreasonable effort, certain components thereof, including future net realized investment results and future special items. Peer information is presented on the basis of their respective principal financial performance measure.
3 Identity and mission Who we are We are a global health service company dedicated to providing whole-person services and solutions Our mission To improve the health, well-being and peace of mind of those we serve Our role To be champions for our customers and our communities
4 Track record Revenue 11% CAGR EPS 15% CAGR 2009 2018 2009 2018 8 consecutive years of organic Commercial enrollment growth 6 years of industry-leading medical cost trend 500+ physician collaboratives Continued innovation of specialty solutions 85% of Medicare Advantage customers in value-based arrangements Further depth and differentiation in high-growth international markets Strong margins and free cash flows 2018 outlook as of Cigna s 3 rd quarter earnings release on November 1, 2018. Cigna does not undertake to review or update this information.
5 Global market forces Eroding health status Aging population Changing role of consumers Technological innovation INCREASING SOCIETAL PRESSURES Affordability and accessibility challenges Regulatory and legislative climate
6 Strategy aligned with key needs Customers Personalized, affordable solutions Employer and health plan clients Greater affordability and productivity Health care professionals Value-based partnering and care delivery Communities Improved health, vitality and productivity Government Expanded access and improved affordability Tremendous need for affordability, personalization and predictability Our strategy: Go Deeper Go Local Go Beyond
7 Combination with Express Scripts accelerates our strategy INCREASE AFFORDABILITY, CHOICE AND PREDICTABILITY EXPAND DISTRIBUTION REACH ENHANCE STRATEGIC AND FINANCIAL FLEXIBILITY
8 Four growth businesses innovating to deliver more affordability and personalization GOVERNMENT INTEGRATED MEDICAL: HEALTH SERVICES INTERNATIONAL MARKETS COMMERCIAL
9 Commercial Employer Insights, incentives and care resources to engage and align customers, clients and health care professionals Deeply integrated medical and specialty offerings Unique capabilities in the Select and Middle Market segments substantial runway for continued growth 6 years leading medical cost trend results 8 years of organic commercial medical enrollment growth Aligned, transparent, integrated solutions improved outcomes and costs Consistent, strong growth
10 Government Highly attractive Individual Medicare Advantage plan offerings in targeted geographies Outstanding physician engagement, care coordination and clinical quality 85% of MA customers serviced through value-based care arrangements Strong MA Part D networks and formularies focused on improving total pharmacy costs 4.5 Star MA Corporate Rating for 2020 NPS scores as high as 80 Well positioned for growth in existing and new Medicare Advantage markets
11 Health Services Commercial employer clients Medicare Advantage customers Government agency clients Health plan clients Part D customers Value-based health care partners Broad range of solutions customized to customer and client needs while enabling further alignment with health care professionals Technology-focused solutions, with applied analytics to prevent, detect and help close gaps in care Deep clinical capabilities and specialized care models for chronic and complex conditions Unparalleled expertise in Specialty Pharmacy Innovative value-based solutions 1B+ customer touchpoints annually Highly innovative, customer-centric solutions enabling better care at lower cost
12 International Markets INDIVIDUAL CUSTOMERS EMPLOYER CLIENTS SUPPLEMENTAL HEALTH, LIFE & ACCIDENT PRIVATE MEDICAL INSURANCE USA U.K. Belgium China Turkey South Korea Spain India Taiwan UAE Hong Kong Singapore Thailand Indonesia New Zealand Locally managed and licensed, 30+ years in-country experience Proven global platform for employer solutions Continuous innovation of products, services and distribution strong sustained growth and margins GLOBAL HEALTH BENEFITS DOMESTIC HEALTH CARE
Momentum into 2019 and beyond 2018 EPS growth of 36% to 38% 2X EPS $20 to $21 2017 EPS growth of 29% $14.20 to $14.40 $10.46 xxx $10.46 xxx $10.46 $8.10 2016 2017 2017 2018 All ongoing reporting segments driving significant growth 2017 2021 2018 outlook as of Cigna s 3 rd quarter earnings release on November 1, 2018. Cigna does not undertake to review or update this information. Ongoing reporting segments refers to the Cigna s Global Health Care, Global Supplemental Benefits and Group Disability & Life reporting segments. 2019 Cigna 13
Outlook for 2019 Organic medical customer growth of 300,000 400,000 lives Mid-single digit % Individual MA Customer Growth Strength and growth across each of our businesses Express Scripts core pharmacy claims growth of 2 to 3% Continued strong growth in International Markets Pharmacy claims growth of 2 to 3% pertains to Express Scripts core business adjusted claims, which excludes contributions from transitioning clients. 2019 Cigna 14
15 Longer-term outlook Four well-positioned growth platforms 10-13% average annual EPS growth objective Anticipate exceeding high end of annual 10-13% EPS growth target on path to 2021 Operating model and talent that embrace disruptive change
16 Capital deployment priorities Reinvest in businesses to drive long-term growth Return to normalized leverage (upper 30 s debt to capitalization ratio) within 18-24 months following close of ESRX transaction Strategic M&A in areas of focus Return capital to shareholders Significant capacity to externally deploy capital even during 18-24 month deleveraging period
17 $21 Clear path to 2021 EPS target Expect ~15% EPS average annual growth through 2021 ~ $3 $3 to $4 $20 to $21 ~ $14* 2018 guidance incl. baseline adjustments 2019-2021 earnings growth ex combination** 2019-2021 capital deployment including combination** 2021 EPS target *2018 EPS outlook of $14.20 to $14.40 excluding $0.55/share in net baseline reductions as of Cigna s 3 rd quarter earnings release on November 1, 2018. Cigna does not undertake to review or update this information. Baseline adjustments consist of expected year-over-year reductions from U.S. Individual outperformance of approximately $0.40/share and prior year reserve development of approximately $0.35/share, partially offset by a year-over-year increase from the industry tax suspension of $0.20/share. *Combination refers to Cigna s acquisition of Express Scripts.
Compelling valuation 2009 2018 EPS CAGR 15% Cigna 13% MCO peers S&P 500 average 2009 2018 Revenue CAGR 11% Cigna 2009 2017 Average ROIC 14% Cigna 8% MCO peers 11% MCO peers 11% 5% S&P 500 average 11% S&P 500 average Above-market organic growth Strong margins, FCF and ROIC Thrive amid disruptive change Responsible capital deployment 441% TSR since 2009 2.6x S&P 500 Expect to exceed high end of strategic EPS growth range and deliver ~15% average annual growth through 2021 2018 revenue and earnings for MCO peers ANTM, HUM and UNH are based on the companies most recent guidance and for AET are based on consensus estimates prior the company s acquisition. 2018 revenue and earnings for S&P 500 are based on consensus expectations. 2019 PE ratios are based on consensus expectations and For MCO peers includes ANTM, HUM and UNH. 2018 outlook as of Cigna s 3 rd quarter earnings release on November 1, 2018. Cigna does not undertake to review or update this information. 2019 Cigna 2019 PE Ratio 11.9 Cigna As of 12/31/18 16.1 MCO peers 14.7 S&P 500 average 18
19 Well positioned to continue thriving amid change Track record Consistent strong growth in customers, revenue, earnings, EPS Strong margins and ROIC Industry leading medical cost trend Four growth businesses Commercial Government Health Services International Markets Innovation Strategic flexibility Financial strength Integrated, transparent, personalized solutions Cigna Collaborative Care Safeguard Rx Open architecture to maximize choice Aligned incentives to improve health quality and affordability Optionality in dynamic environment Efficient service-based model Strong free cash flow generation Reinvestment & capital deployment to drive long-term growth Cigna Investor Day May 31, 2019 New York City
Appendix Reconciliation of GAAP to Non-GAAP Financial Measures (Dollars in millions, except per share amounts) YEAR ENDED 12/31/2009 12/31/2016 12/31/2017 EPS (FULLY DILUTED): Shareholders' net income $ 4.69 7.19 8.77 Results of guaranteed minimum income benefits (0.76) - - Net realized investment losses (gains) 0.09 (0.42) (0.61) Amortization of other acquired intangible assets 0.13 0.36 0.26 Special items (0.08) 0.97 2.04 Adjusted income from operations $ 4.07 8.10 10.46
CIGNA CORPORATION 37 th Annual J.P. Morgan Healthcare Conference January 7, 2019 David Cordani President and Chief Executive Officer