On November 5, 2020 Cigna Corporation (NYSE: CI) reported solid third quarter 2020 performance led by strong execution by its Evernorth segment (Press release, Cigna , NOV 5, 2020, View Source [SID1234570247]).

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"In these dynamic and challenging times, we at Cigna continue to act as champions for our customers, clients, and communities as we deliver on our promises to make health care more affordable, predictable and simple," said David M. Cordani, President and Chief Executive Officer. "We delivered attractive revenue growth and strong earnings, while further improving our capital position, driving strategic flexibility. Additionally, our launch of Evernorth accelerates our strategy, broadens our reach and expands our opportunities for growth, further enhancing the value we deliver to the marketplace each and every day."

Total revenues for third quarter 2020 were $41.0 billion. Adjusted revenues1 were $40.8 billion and reflect strong contributions from each of Cigna’s ongoing businesses.

Shareholders’ net income for third quarter 2020 was $1.4 billion, or $3.78 per share, compared with $1.4 billion, or $3.57 per share, for third quarter 2019.

Cigna’s adjusted income from operations2 for third quarter 2020 was $1.6 billion, or $4.41 per share, compared with $1.7 billion, or $4.54 per share, for third quarter 2019 reflecting strong fundamental performance across our businesses as well as the return of medical utilization to more typical levels and COVID-19 related impacts.

Reconciliations of total revenues to adjusted revenues1 and of shareholders’ net income to adjusted income from operations2 are provided on the following page and on Exhibit 1 of this earnings release.

Cigna’s third quarter results reflect revenue growth driven by strong fundamental performance across our businesses led by our Evernorth segment. Third quarter earnings reflect the return of medical utilization to more typical levels and COVID-19 related impacts, as well as focused execution in our businesses.
Year to date through November 4, 2020, the Company repurchased 16.0 million shares of common stock for approximately $2.9 billion.
The debt to capitalization ratio decreased to 42.8% at September 30, 2020 from 45.2% at December 31, 2019.
The SG&A expense ratio4 was 8.1% for third quarter 2020, a decrease from 9.2% for third quarter 2019, driven by significant revenue growth and continued expense efficiency.
The pharmacy customer base5 at third quarter 2020 grew to 86.6 million, an organic increase of 10.7 million customers year to date, driven by strong new health plan sales.
The total medical customer base5 at third quarter 2020 was 17.0 million, a decrease of 163,000 customers year to date, driven by a decline in National Accounts, partially offset by growth in the Select and International Markets segments and in Medicare Advantage.
HIGHLIGHTS OF SEGMENT RESULTS

See Exhibit 1 for a reconciliation of adjusted income (loss) from operations2 to shareholders’ net income.

Evernorth6

This segment includes a broad range of coordinated and point solution health services, including pharmacy services, benefits management, care solutions and data and analytics, which are provided to health plans, employers, government organizations, and health care providers.

Third quarter 2020 adjusted revenues1 increased 20% relative to third quarter 2019 driven by the insourcing of U.S. Medical pharmacy volumes and strong organic growth, including growth in retail network and specialty pharmacy services.
Third quarter adjusted income from operations, pre-tax2 increased 3% relative to third quarter 2019, reflecting customer growth, higher adjusted pharmacy scripts volumes, benefits from the effective management of the supply chain, and continued strong performance in specialty pharmacy services, partially offset by increased operating expenses to support growth.
Evernorth fulfilled 381 million adjusted pharmacy scripts9 in third quarter 2020, an increase of 22% over third quarter 2019 driven by the insourcing of U.S. Medical pharmacy volumes and strong organic growth.
U.S. Medical6

This segment includes Cigna’s U.S. Commercial and U.S. Government businesses that provide comprehensive medical and coordinated solutions to clients and customers. U.S. Commercial products and services include medical, pharmacy, behavioral health, dental, vision, health advocacy programs and other products and services for insured and self-insured customers. U.S. Government solutions include Medicare Advantage, Medicare Supplement, and Medicare Part D plans for seniors, Medicaid plans, and individual health insurance plans both on and off the public exchanges.

Third quarter 2020 adjusted revenues1 grew 5% over third quarter 2019, reflecting customer growth in the Select segment and Medicare Advantage, as well as premium increases.
Third quarter 2020 adjusted income from operations, pre-tax² and adjusted margin, pre-tax8 reflect unfavorable prior period development primarily related to second quarter 2020, COVID-19 related impacts, and the return of the health insurance tax. COVID-19 related impacts include the net impact of the return of medical utilization to more typical levels and direct COVID-19 costs as well as the costs of actions we have taken to support customers and providers, decreased specialty contributions, and lower net investment income.
The medical care ratio4 ("MCR") of 82.6% for third quarter 2020 reflects continued effective execution in our U.S. Commercial and U.S. Government segments. The third quarter 2020 MCR increased relative to third quarter 2019 due to unfavorable prior period development primarily related to second quarter 2020 and COVID-19 related impacts, partially offset by the pricing effect of the health insurance tax.
U.S. Medical net medical costs payable10 was $2.97 billion at September 30, 2020, $2.73 billion at September 30, 2019, and $2.59 billion at December 31, 2019. Favorable prior year reserve development on a gross pre-tax basis was $126 million and $159 million through third quarter 2020 and 2019, respectively.
International Markets

This segment includes supplemental health, life and accident insurance products and health care coverage in Cigna’s international markets, as well as health care benefits for globally mobile individuals and employees of multinational organizations.

Third quarter 2020 adjusted revenues1,7 grew 3% over third quarter 2019, reflecting continued business growth.
Third quarter 2020 adjusted income from operations, pre-tax2 and adjusted margin, pre-tax8 reflect continued operational efficiency, lower claim levels driven by the effects of the COVID-19 pandemic, and business growth.
Group Disability and Other Operations

This segment includes Cigna’s Group Disability and Life business which offers group long-term and short-term disability, and group life, accident, voluntary and specialty insurance products and services. Additionally, this segment includes Corporate Owned Life Insurance ("COLI") and the Company’s run-off operations.

Third quarter 2020 adjusted income from operations, pre-tax2 and adjusted margin, pre-tax8 reflect elevated claims in Cigna’s Life business primarily related to the COVID-19 pandemic.
On December 18, 2019, Cigna announced a definitive agreement whereby New York Life will acquire Cigna’s Group Disability and Life business for $6.3 billion. Cigna continues to expect the transaction to close in the fourth quarter of 2020, subject to applicable regulatory approvals and other customary closing conditions.
Corporate

Corporate reflects interest expense, as well as amounts not allocated to operating segments and includes intersegment eliminations.

2020 OUTLOOK

Cigna’s outlook for full year 2020 adjusted revenues1,3 is approximately $158 billion. Cigna’s outlook for full year 2020 consolidated adjusted income from operations2,3 on a per share basis is in the range of $18.30 to $18.60 per share. Cigna’s outlook excludes potential effects of any future share repurchase3. Also, while Cigna continues to expect to close the sale of Cigna’s Group Disability and Life business in the fourth quarter of 2020, Cigna’s outlook assumes a full year of contributions from the Group Disability and Life business.

The foregoing statements represent the Company’s current estimates of Cigna’s 2020 consolidated adjusted revenues1,3 and adjusted income from operations2,3 on a per share basis as of the date of this release. Actual results may differ materially depending on a number of factors. Investors are urged to read the Cautionary Note Regarding Forward-Looking Statements included in this release. Management does not assume any obligation to update these estimates.

This quarterly earnings release and the Quarterly Financial Supplement are available on Cigna’s website in the Investor Relations section (View Source). Management will be hosting a conference call to review third quarter 2020 results and discuss full year 2020 outlook beginning today at 8:30 a.m. ET. A link to the conference call is available in the Investor Relations section of Cigna’s website located at View Source/events/index.page.