CVS - Earnings call transcript Q4 2024

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Operator

Good morning, and thank you all for attending the CVS Health Q4 2024 Earnings Conference Call. My name is Brika, and I will be your moderator for today's call. [Operator Instructions]

I would now like to pass the conference over to your host, Larry McGrath, Chief Strategy Officer. Thank you.

Larry. proceed, may You

Larry McGrath

David welcome XXXX CVS I'm Earnings Officer; Chief morning Chief and Officer; Chief and Tom and Larry Fourth Full Strategy Cowhey, by this joined Year Call Officer. I'm President to morning, and Health Executive the Financial Quarter McGrath, Joyner, Good and Webcast.

to we'll team. remarks, prepared session our leadership a question-and-answer that the will Following host include additional members

with our the and be slide Today's website, filed presentation website, to along release posted XX-K our with press also Our this archived is been morning SEC. call on year. being Form our have for broadcast X it where

this During make statements. forward-looking call, we'll certain

We are we Form and could to to risk uncertainties, and from statements SEC results with particular our strongly forward-looking X-K, risks annual and to those results. the risks materially concerning stuck on release. filings review morning's the encourage statement that including cause on forwarding statements file regarding filed cautionary you Form are reports actual this in in earnings in uncertainties that factors our the recent XX-K, these differ Our projected press this and significant described report on currently morning,

Relations when talking in the and reconciliation this we'll non-GAAP find of morning's release and the these website. this portion press Investor use our During condition. non-GAAP company's document financial of call, to performance And reconciliation about measures financial a can you measures the in posted

With that, David. over to David? I'd to call like turn the

J. Joyner

adjusted of billion. everyone. we $X.XX earnings This share reported income morning, fourth you, $X.X and adjusted Thank per and good quarter of morning, Larry, operating

of the to guidance for We also provided $X. full our adjusted $X.XX EPS in XXXX range year

will reflect as Aetna by well of a segment. in guidance recovery components this provide meaningful Advantage, Tom more well in growth business expectations breakdown as as particularly Health overview detailed the our Services. initial of Our as continued Medicare in a

sharing some days with back time my taking you my a CEO. to during and first XXX step observations as like spend I'd

clients. time, elected importantly, and I I deal this and from with shareholders, I met customers of a strength time I've to and, our what of tremendous a have During understanding have spent great and need have heard to inspired connected with to conversations CVS from listening these with consumers and realize officials and and colleagues. Health. clear away the to we promise come do

ensuring that America's and increase its trusted care by outcomes, The be can we company. company deliver improve cost ability value. leading these We A lower be and access most that proud of shareholder can experience greater measures a to consumer will care, while of. the health of ultimately itself measures combination

our managing to that in Health's health What me its in company pharmacy the deliver makes CVS through responsibility stores our or whether a United with of that assets, clinics, a One, plan unlike XXX reach, benefits, other and our promise? million collection opportunity with by Americans, can on in and this the comes any or confident Health difference. States, we CVS connection its make is

removed reduce rising we throughout a when us needed the our to innovate we that did drug we viable the history. today system, health pharmacy shown have ago our name this during in as pandemic. and seriously we the responsibility do this XX as when And country tobacco did take a frictions biosimilar and We fight few. years this we to urgency with market, prices create the as model We We this stores. from

this to deliver responsibility by to what's being bold continue on consumers innovative do customers. and and will right our We for

conversation my health communities could of our all with America day that in In backgrounds we done to making colleagues dedicated for have reflect and can Americans the colleagues I that work Two, better where come say are to our over serve. I'm stories experiences the thousands better. our XXX,XXX and every we proud inspiring everyone to there we of say colleagues, those many for serve. care

that reasons demographic near-term opportunities trends pose to best public to and challenges, and an are external while The positioned Three, lead. the are in aging of are broader where many consumer technology, need excited. also for there be are of we advances create activations population, improved the the to personalized there experience, care factors AI an American

long promise and I the Health a How will developing that the employees spent we our to have ultimately, results and time delivering are set be the this of committed team clear aligning We priorities over of together of and all realize our term? Collectively, specific CVS leadership we X believe can the on enterprise our will short power we of. that My potential experiences and, CVS Health. behind on and the proud deliver priorities.

deliver this each restore and First, turnaround that we target on ensuring to is through Aetna one strong businesses business importantly, at of need best-in-class execution. margins. our Most our to

to accessible. and to develop more integrated where capabilities care more it affordable continuing matters order Second, better, health in our make

as create digital our sheet, investing manage and our continue and businesses our we for better disciplined to delivering ensuring technologies people our finally, experiences value portfolio we balance leading emerging while shareholders. advancing to the are capital in strategy, serve. for that we of efficiency, Third, simplicity strengthen stewards of the that And drive capital

working our have these closely my and I'm team on priorities. structures execute the to deliver right enterprise and to important across with collaboration we talent, ensure

important pay never challenges we as most care in country operates care. Rising rising increasing costs care, health been people on the they areas affordability. see our costs largely put bill with the of more health Health who across the CVS government, and the These for throughout put U.S. pressure challenges on some health care the see system. critical serve of health to connections pressure consumers care of the because and the also has we employers

dramatic increasing branded for the pharmaceuticals. because of labor provider are combination costs price of shortages hikes rising care utilization, health clear, be greater To and costs,

system. delivering focused are teams and the to we Our health in are our hard mission, working on care the directly address challenges on

exceptional tools enterprise our value differentiated to customers deliver to our across using clients. experiences are We and and

most the drug are health chain only to subject helping rhetoric misinformation. like These to the cost, PBMs remain and of care part Caremark. of erroneously powerful offset focused the on costs been One entirely entities supply have courses rising but lowering deceptive

the For more adherence promoting for than consumers, down X and of unequivocal proven, better drugs better and mechanism health. negotiate decades, while PBMs been a have to payers price

as can egregious the secure added drug have drugs as price branded those through items. manufacturers drug weeks first prices of with rebates. where rebates that where tools January price gross spend no increasing drugs drugs X are we billion hikes of In annual we've than for twice seen their fast limited, In PBM $XX alone, more

to a manufacturers is needed counterbalance hard fight are so the and PBMs our work Our monopolistic to tendencies critical why why drug capabilities. is of This limit manufacturers.

economists year. generated system success one drug Multiple the are estimated care billion No net down has of driving U.S. $XXX demonstrated that PBMs well-known have prices. the more per that over value for health than PBMs

to kept price, than Caremark annum D better negotiated specifically maximum as Reduction administration's Not first For a had Inflation drug the the per contributed Part $X example, improvement PBMs rates rate MFP. of at XX that Medicare years, part MFP, is the in billion for Act. of inflation the X.X% prior in CVS drugs only fair last negotiated the XX

negotiate we importantly, the beyond More will if go of don't into further savings manufactures. directly discounts continue broad loss to pockets MFP, the

clients. the data in like interim SEC when you conclusion not those the specifically data, referenced PBMs to cherry-pick So their look points the is clear, at savings all reports, deliver

has been to Caremark a be continues for your critical less Americans solution to and help pay drugs.

full our drug supply and for expertise capabilities continue unique our play of to prices in We the bringing customers. breadth the all will to reduce drug market role chain,

how assets through it's costs rising solve our in enterprise our most the and health offset taken we've industry Throughout the for of in biosimilar access important clients customers, using we're to issues recent to experiences. or issues help to to clients transparency, A innovating care market. our history, whether solve and we've our actions is care the led our example cost, important

In a our HUMIRA. HUMIRA individuals than of CVS was out-of-pocket the $X XXXX, list cost that below price Cordavis, of generated XX% Specialty, we a us to through for to XX% consumers This a eligible and enabled branded almost price at the Caremark than for combination patients $X savings biosimilar more and converted of clients. more offer billion

so We a with amongst and of drove do additional are growing the biosimilar meaningfully continue only company pipeline biosimilars. our to will adoption that clients

high our in exceptional business the delivered rates Pharmacy experiences levels PBM high XXs. of in businesses, In with consistently retention retail we our and record NPS

customers' our needs in transparent. to care we However, more improving recognize that to order also experiences, be health continue

We price leadership of and create a across increased took the this addressed simplicity role introduction with models. pharmacy we the in So pathway transparent important for XXXX, marketplace. a transparency to X

model. first The TrueCost is Caremark's

As model continued resonate more with of the through lower of have clients. a X full in reminder, pharmacy of pass-through members, the Caremark's enables in and fully our see XX% at negotiations or today, commercial we rebates to the with the including we to those pharmacy rebates from manufacturers. passed marketplace now elements more TrueCost implemented, cost XX% counter, commercial TrueCost their the to patients [indiscernible]. When the generated our than

CVS are will drive through our The to Under model. CostVantage and relentlessly X, to CostVantage. Pharmacy this to framework, all have is partners we payer CVS transparent of Pharmacy's savings contracted as our we second dispensed Effective tied deliver prices. cost and through acquisition January our commercial reimbursement down our innovative continue scripts new CVS

for deliver our team Our cost-based Medicare to solution markets. now working and is Medicaid

the ensuring continue frequent These and basket durable to models existed care journey. reimbursement, in most that health approach their that and the unintended access in have remove to patients the interaction consequences the market pharmacy

focused some U.S. their provider to the health to in continuing also to see growth. access delivery full with help expanding are We shortages address high-quality of businesses, care facing care on the

accelerated members, Street, Signify by had year. supported an Aetna by at doubled We've year last growth record growth in enterprise also seen Oak which volume connections. a nearly supported patient to

access more opportunities model to market-leading continue the We and expand utilize capabilities across leading to enterprise. broadly ratifying care this to

advancing are care utilize health to to complex system. frictions Americans the that technology have U.S. reduce when and they experience the We navigate benefits it make partner difficult their

copay also by our access more a CVS reduce intuitive details appointments, for it Our and to consumers them to AI frustrations giving and provider health turnaround status. updated for seamless to create perception leveraging faster to App members manage and workflow We're time makes partners. Health their easier

address progress drove While improving within At are and focused we the Aetna, business. our health addressing to the own working we the also are care operations. meaningful on our U.S. system, we across performance strengthening issues challenges

embedded to Advantage most in that earnings opportunities unlock significant is pronounced Medicare business. have We our

creating while members remains Our appropriate viable delivering a commitments to on our Advantage focus our path on to Medicare margins.

In by year-end our will we shrink the commentary, expect Advantage line Medicare XXXX. that percentage from we with single-digit membership high

star combined X% this Our margins to Medicare Advantage commitment margins improved are to deliberate and to to approach of year business, with our improve this will ratings, part restore of XXXX our ongoing target X%. our business

Advantage does proposed Notice. utilization released past X the trend across years. the the over CMS address This month, XXXX industry Last unprecedented not Medicare Advance the update Rate experienced

including Our update, XXXX. for rate team is seen advocating in trends industry-wide for the cost a appropriate more adjustments

help driven We the seniors plan. the to their the new to see benefits dialogue to changes will are significant ensure Advantage to disruption drastic not encouraged continue with that by Medicare American constructive by administration

of are also Medicare, encouraged business. our Beyond Aetna lines progress we in other by

in book We and footprint. are national individual meaningful retention rate seen Medicaid, rightsizing in efficacy progress strong efforts and the made exchange in we've our advancing have accounts our season our welcome of high

the serve. top hard a always we This Health. to improve work CVS is day, priority we health the of people Every at all

some health health the While we better. made industry and of care to simplicity, that increasing the progress including have in frictions transparency leading exist be system we care system, addressing and the the U.S. know

us Our everyone our deep of and and and differentiated unique to deliver members we patients collection with assets consumers, serve. experience our to connections position a better

heading XXXX. momentum into We strong have

We in assets, right and strategy leadership the right place. right have the the

and patients everything consumers Our the we center dedicated of employees at members, our put do.

Aetna worked to led business, have and made have the to stabilize to We in our the issues XXXX. underperformance progress address hard that meaningful

driving change health We are well care in the positioned system. the to leader in be

the our to As delivering call I of shareholders. hand reiterate our I to the to want on Tom, commitments over importance

Tom? establishing as We and deliver financial hard are and trust credibility to beyond. in on focused our we on building performances work XXXX

Tom Cowhey

with Thank you, David, and thanks joining few start to company this us performance. a for highlights I'll everyone on total morning.

& lines in $X.X of strong quarter, of by operating growth reserve delivered Consumer Health our of the and across Wellness as performance period multiple and revenues X% saw quarter in nearly increased business. development Fourth favorable EPS we Care more Benefits $XX billion segments. than Pharmacy Aetna adjusted prior business billion our and prior over primarily driven income year over of adjusted $X.XX, We

cash approximately benefiting billion, was year Full receipt business. Pharmacy from from of operations Services particularly in cash, $X.X flow early our

XX.X segments. of to million revenues Medical our growth membership increase roughly Exchange the that to In to XXXX approximately Health business. Turning Benefits, $XX as quarter, in our approximately of over membership sequentially, over was modestly took of reflecting rate decline lines of started an book. flat Individual advance business year all prior grew billion, increases in in Care we XX% we the in

benefit year medical quarter, reserve prior increased operating ratio, higher million. third offset in income. During driven levels the the net loss result the segment reserve premium development by lower and a prior release than the was partially by generated quarter, favorable of adjusted $XXX higher the of primarily of recorded deficiency we investment This quarter, period the an

Our in payment quarter. already medical was premium as quarter, partially levels lower from by This for and benefit development. offset favorable impact ratings XXXX XX.X% point as XXX increase third utilization, year the ratio well prior of Medicaid, higher a basis XXX driven reserve higher higher in of premium recorded basis of points by reserves the primarily deficiency acuity year from period increased Star impact prior the mentioned the

we assumed observed the than less quarter. date downside we remain elevated, in was severe we scenario While medical trends last trends the discussed experience the to

development quarter, primarily service. of related during prior the all quarter lines third across to we Importantly, reserve experienced of period positive business, and second days

did attributable levels discussed same categories costs our quarter the discussed moderation supplemental quarter, pharmacy. to Relative third the and trends, call, In inpatient, of scenario high. including Medicare remains were we on some downside [indiscernible] while steadily trend see our we continued benefits book, to benefit inpatient outpatient, supplemental last

design are structure. alleviate We help cautiously our benefit supplemental some will optimistic benefit in XXXX of the changes that

with part our remained consistent In of acuity largely business, as the our state quarter. across have footprint. third Medicaid latter redeterminations concluded the

work acuity. to to the changes closely rates in with continue with align We partners our

over increase. additional mid-X progress XX% book made our have rate early in we quarter, line to the a During percentage XXXX, with of point sight January having on we updates, and rate a repriced of

Our track. currently efforts are overall rate on advocacy

book, to we less our experienced elevated. commercial similar industry, others XXXX on premiums. risk pressure in fourth In remained our stop-loss the group quarter which our some trends And business, of represents than X%

We combined cost continue business 'XX. to this cautious on medical block contributions lower take a membership, trends in in lower this with expect from outlook and we

of the of Individual specialist, cost our acceleration and we in inpatient continued Exchange categories. by medical saw Finally, book trends, driven ambulatory business,

at will rationalization membership, we this As shifting we plans. made adjustments our significant product mix XXXX, discussed of calls, meaningful while towards which offerings brand in prior price to a also on for lead

Exchange in Individual results Taken our XXXX. offerings in together, these improve should actions

end primarily the the DCP primarily of days, down sequentially, trends. X.X the reflective quarter was at We the in growth year Days prior Medicare the by days business seasonality. down quarter, of confident X.X pharmacy claims XX days driven reserves. from adequacy remain in our impact of payable was increased our and of

our the continued Pharmacy. Services a drug from a Our improvements. were previously delivery billion in pharmacy decreases and pharmacy mix, growth generated by client primarily of assets approximately quarter, contributions care and large driven $XX of X% partly during segment the price revenues year-over-year health offset Specialty decrease approximately Health These increased loss of by and announced client

billion of we purchasing high and of year our the the assets Medicare, care range income operating the higher from Oak of $X.XX The of Signify. delivery of Care guidance Fourth client by pharmacy quarter. and were price X% continued quarter health previously for CVS of offset last that billion, adjusted year by previous $X.X and shy basis, at care are largely full increased to prior improvements, driven drove costs including increased client large improved a investors loss in a end just impact economics result On primarily Accountable tied quarter, income reiterated nearly announced operating Street year-over-year the volume Health. the a decrease health adjusted

processed of the million services claims $XXX pharmacy end nearly total of the membership quarter were quarter in approximately pharmacy Total the $XX million. and as was

We ended the of year care in delivery with growth another strong our quarter health business.

X mentioned, to year. growth million This in health to evaluations. Signify David As contributed completing the performance over volume a record as year approximately the in quarter revenue prior achieved XX% of compared home

enterprise Street, top connections. Oak continue supported our experience at We to by growth strong line

approximately the to increased driven increased by quarter, the growth. approximately prior XX% XX% revenue patient During year, Total members Oak last quarter same year. at-risk over the Street compared

model While the a experienced industry. throughout Medicare utilization trend lower Street's Advantage care than broader elevated XXXX, Oak industry the achieved

XX% Consumer Wellness segment of XX% $XX increase same-store X% approximately from approximately income due purchase. a the quarter, an partially generated driven We were pressure primarily also and basis. drug [indiscernible] front year lower versus pharmacy over quarter. of nearly revenues Our on store Results the and offset Adjusted to third of by quarter Pharmacy reimbursement year declined by the quarter & fourth the quarter. improved of delivered into immunizations prior billion, billion strong continued over lower another in prior $X.X volumes, operating

and increased position share of quarter approximately Same-store further were are in we We same Despite optimization pharmacy pharmacy closure versus a to completed store sales count, plan versus nearly same-store XXXX. XX% volumes the in over progressing our in continue prescription reduction script store the footprint our sales X-year retail and Same-store maintain store the XX%. X%. down prior year. increased last the year. quarter front X% successfully

ability deep XX% a strong maintaining XX superior our and application. customer presence, of deliver while miles execution, experiences, highlights community within CVS our capabilities robust of Americans This to omnichannel with a

generated now billion to business of our cash Pharmacy operations Services for payment result was expected approximately flows for $X.X and flow early Shifting to lower the flows balance sheet. higher correspondingly We our from the This than in year. will due expectations cash full cash XXXX.

During returned the approximately total $X.X quarterly our We at our of cash $XXX and with in the bringing billion to shareholder XXXX subsidiaries. through payments million we billion. $X.X ended to quarter dividend unrestricted over dividend, shareholders parent the quarter,

which the Xx, of ratio at remains our was approximately Our long-term end the leverage quarter target. above

During billion the of that liability approximately securities we The of debt these $X ratio. subordinated a the of included our issuance net quarter, billion leverage management executed of debt result modestly reduced of $X.X transaction the principal. and retirement outstanding transactions

maintenance expect We including are to and the our to continue and to policies, our margin our levels committed as normalized return look current we to investment-grade prudent business. we dividend, more to rating as maintain recovery execute of financial improve Aetna in on leverage

XXXX. for outlook to now Shifting

we with not $X.XX initial range XXXX David As the our recurrence year in to approximately GPS results. to $X. for are of our mentioned, which XXXX of past reserve EPS assume the prior establishing this full practice, development, range contributed does $X.XX year adjusted guidance Consistent

represents After EPS with excluding our XX% growth impact represents at low reserve We year this approximately opportunities adjusted outperformance. XXXX range. year-over-year the the guidance favorable the end for baseline prior achievable of appropriately development, of believe an of initial

at our we will date, Incorporated offset cost identifying successful billion over as a down guidance drive to XXXX, actions expenses the we minimum, the the of payment further enterprise on years. on elements our coming $X variable Based across work across work return the certain ever. were in our efficiency multiyear to efficiencies is that, initial in

our segment with Care Benefits some let's Now Health to turn the I'll segment. start of details.

launched. driven by products. lives, XXX,XXX effectuated our We and could in over Individual paved in have we'll block greater by all aggregate Individual estimate Medicare expect Exchange our decline to million primarily reductions Exchange We membership members, X premiums their that have contract by membership by and visibility being when members over

summer choices necessary to to XXXX. membership year membership This in have execution by growth they and said are the since These XXXX. partially Advantage our from Medicare We strong the we last as team end single-digit our the consistent high year-end by business. self-insured improve Medicare investors our guidance Advantage offset to with lead also Commercial down expect is going percentage a profitability be declines difficult in have

Benefits and declines membership Exchange Care approximately Health by in generate program billion as revenue Individual to other changes Advantage expect products. in We offset are of Medicare $XXX growth Med and

ratio over end project points XXX Health will low the of yielding income range, our we guidance an At Care our by benefit operating MBR adjusted XX.X%. Benefits approximately of XXXX, improve medical basis

could this adjusted one largest of us performance Our in guidance higher that our factors drive EPS ratio the on range. potential is

projected The particularly medical driver our an benefit ratio reduction largest in our government is improvement businesses, Medicare in of Advantage. the in

driven group our levels in by also We in and lines from declines of in recovery margin pressures offset project improvement year-over-year membership medical commercial combined Individual Commercial by business, cost. elevated Exchange,

contribution the income investment that expect from will also net We decline.

continued Overall, least to we experienced quarter. $X.X Benefits that operating of deliver the light of medical projection fourth in elevated expect This billion. respectful trends of the income we trends at Care cost Health reflects adjusted in view a

As $XXX is operating of worth of million results. a trend every Benefits Care reminder, point Health adjusted income approximately

Health our Services to now segment. Shifting

We segment clients. $X.XX Adjusted as approximately to expect value for this Caremark our to on growth income primarily by of X% billion, deliver is we operating $XXX driven billion. to grow continue revenue approximately at to expected

reflects Care rate is core our continued Health Pharmacy business. While growth XXXX Services, diluted segment Delivery headwinds our Services by the guidance Health overall in

Care this in our initial and framework, course that growth develop highly Health how our segment Medicare for reflect regulations. our we a be is these stage, we quarter consistent outlook the with This throughout cost will upside business results taken long-term trends Delivery we initial know, have outlook over you of Advantage XXXX. the would year. guidance to but on to last where for the prudently preview below are presented correlated this at medical noted opportunities prudent As And

experienced this XXXX appropriately performance planned are investments continued cost more and as and expect reflected the trends We in delivery improve in health medical across to our the business current bids starting mature. rates industry in care

project of approximately and Consumer Now for approximately our growth We X.X% $XXX Pharmacy billion. segment. & of Wellness script revenue

operating income in to We framework $X.XX to line our decline long-term approximately with expect adjusted guidance X%, billion.

have for time. and trajectory of the year previously, transition implementation model XXXX this we PCW CVS the discussed we is over believe business the As CostVantage, of a positions

interest We to million approximately May annualize approximately our expense expect increase project expense our be rate 'XX. the $XXX in we December tax and offerings debt of to XX.X%. We with as associated

expect our modestly share We share approximately count to to are increase also XXXX. X.XXX contemplating not billion in shares, we any and repurchases

well The pulled expect operations we from that declined were cash flow impact Health billion. cash cash forward accruals, year revenue to as XXXX improved risk versus be risk-adjusted into primarily on by Finally, driven cost XXXX lower Care $X.X timing business. Benefits flow, partially the payable approximately performance by items operating operating offset reserves health care membership our as in flow of is late and

combined improving we years, leverage expect cash our business 'XX performance, of $XX.X the which, back target put will with calendar us levels. operating generated on path when our to flows XXXX the operating that billion, and Over help

timing compared cadence you the first significantly should progression earnings. with half the XXXX, Benefits think about weighted exception unchanged largely half, to of recorded XX-XX in XXXX of D be to premium segments the notable earnings the Care will to the Health second most our we likely of deficiency segment, change reserves XXXX, split. the Part Reduction our than As in where Act, changes expect of earnings the remain Seasonal patterns inflation the due of more in a to

Relations details on of You XXXX components the can guidance find our additional website. our Investor on

we demonstrate unlock to our embedded CVS excited XXXX encouraged are are Health by see and We to earnings. enormous across potential the that in opportunities

are range. over We represent XXXX which, meaningful to the of target our upside margins, high to end working restore Aetna guidance above tirelessly time, should

will the questions. open call your to Operator? we that, With now

Operator

on [Operator phone lines first Instructions] JPMorgan. We with question the have from Gill Lisa the

Lisa Gill

What some share CEO? first that of want you the I can XXX else And the you you from around think to wanted in days. CVS XXX investor start David, as really of your you'd are some anything David, things with think to an made as the first to perspective, new that bring observations days? the comments you --

And your for understand better can year, Tom better-than outperformance. made if just opportunity is starting also you guidance This comment a potential you being $X.XX the year, gave good around which of $X. is I just talk the Last maybe the maybe the I to the guidance, guidance better than number in outperformance had range number. then a and anticipated, XXXX? about confidence an point. Can the for that

J. Joyner

the Thank you, question. Lisa, and I appreciate

you Let XXX that on a into me on give perspective deliver focusing and believe bit the things we're of I the first days 'XX. and can

spent poking point, also issues I'm the needed as company, at we've quarter of actually material the in Aetna lot to in or happy which, very time call, urgent mentioned first progress on of first stabilizing on Aetna's organization. I this the terms So earnings delivered of the and bringing financial discipline and I to focus we the the a back report, to pressing and operation most

the towards the as enrollment the on business. bullish as as open made, So I'm very progress recovery look I very confident, that of you well think continued

CVS of pricing are are I think in spent than market. the this X and that which features change really more progress of to have important piece, XX% commercial of on Pharmacy's more the kind elements, whether last and XXX% I've where transformation changing we there the PBMs had speaks years, which be continue that These that the second continue around that both adoption on recognize model. the it journey. significant fact important headlines pharmacies the than this made pharmacy of now we that And the role believe, that we've transformation to space, models, our the CostVantage, in We TrueCost it's clients play. X model, in we or Caremark's I drive within or and/or adopting attributes critically

what last leading in to Cordavis we and biosimilar believe I We that launch biosimilar terms say with the the durable led volume cost And is our created opportunity and for the that the customers. conversion was in an change, lower the with market of I'll success both technology We had a market. thing the is unprecedented. this

So big role it's think front. at those on right are as playing, I'm sure I the X leadership. look the that making that the I And business I'm surrounded the with headlines

Steve then this operations new the days Nelson earnings. job right leadership the mentioned quarterly on Aetna, role He's we've group Prem a the both outside. And and Shah that leadership announced in also last been the now from team team leading the in So stabilizing -- president and I organization. during XX financial coming

for us organization. to the and moat allowed that's elevate both talent And within

we CVS So which in Sri Ed which had is of now now running running We business. veteran the Caremark, Dr. veteran which Care Health Shankman business. again our Devani running Delivery here of is Pharmacy, CVS XX-plus-year leader Lynn long-timer a then the another assets, XX-year is have our business. a And

lead continue So the us, which in I and to we've the is I shows bench allow organization, built think team [indiscernible]. going the from it believe, to that strength the to of the leadership

I playing, right specifically about look I'm So we believe at the -- assets. role question as your that have the I

become leading continue listening the to right and business care to right hopefully, the earn the at company. right least be I to for think And trusted established this to we've most America's the and able going at point, priorities we're strategy. health -- in the tour,

days leadership. was XXX transition transition leadership to transition first now will a leadership the be my a say I'd that, a becoming and with focus So

promises commitments about both So in question that It on deliver the able let terms credibility important is, being me spend trust to the to question, talking for establish second me without we've on made. and and of a second guidance.

So community. some make to the to want I'm we're the about while there, of commitments and we're that drivers to promises on that -- position the also in going I that overperformance a talk investment make we're and delivering sure sure we that the making to

that, on with 'XX you thoughts So the' couple if of a can share Tom, year.

Tom Cowhey

Absolutely.

opportunities thanks, the upside. be We for out question. this Lisa, So thanks with achievable an to target David. And for set

rightfully are I that, what the swing but that is Benefits. said most think opportunities I is every think million all business. investors I you remarks, think $XXX in there and point Health trend as that hope on on about an that you prepared focused Care And our are about of across one the of businesses, think

cost respectfully And we medical they are into because in trends how outlook persist guidance, developed. of that our very XXXX. preferred what have XXXX And we those have our guidance on assumes our a prudent specifically and taken at trends looked

in whether with our in trends our we those So Medicare year XXXX, as XXXX. that's in block, are exited is the what for guidance our group commercial business,or consistent

the place be the potential And think I Benefits that could you that Care where would be most business. so see inside upside Health would

commercial top to And of be signs negative we this even points you is compared our margin of at The the Individual business, a underlying look our Benefits isn't necessarily improved, term. X.X still our XXXX, over has was margin. current the of was Care IFP, at XXXX, is lose outlook. and to product of profitable a Health a XXXX in end which projected still but [indiscernible]. a Group bit to businesses, range, seeing longer government some Medicare particular, money which Exchange pressure. expected think by it's opportunity, business, little guidance driven in And X%; it's

if each so current of of count and $X.XX you do EPS. adjusted and math revenue improvement And is say, with the the share point you base, margin

could Aetna we over implies needed margins, target so back if we another dollars $X we EPS business that's to what more doing $X, have embedded get time. can to adjusted that its of our and And

Operator

We Research with now Lake on the have Wolfe Justin line.

Justin Lake

follow your want on up there, of Tom. some comments I to

trend. pace. us a of are like Medicare First, And coming you're I of trend for out specifically, did to what it's the more assuming your know terms of there in XXXX? what kind trend it bit you keep you the detail Maybe XXXX? said year for give look little can on Advantage you in assuming that

membership taken So XXXX? out 'XX kind business of the and us your assumption? just detail mix trend seeing on instance, the of you're for for 'XX play out could what and via you bids, costs you've maybe any the of the share And the how kind with

Tom Cowhey

Thanks, Justin.

you Let me I answer what on that. can for

this prepared remarks. So I noted the in

was that business, our positive our service. experienced third severe I'd of and although reserve of all scenario. development assumed what in quarter, medical than lines the fourth note, quarter to primarily what we remained the prior we in and elevated, was So of also trends the downside we less dates experienced period related during second quarter across

was positive So also nice a that tailwind there.

as dual earlier on by But and Medicare some driven of modest group saw our major the and the we And mostly starting specifically, look businesses, maybe specifically was we quarter. you at with relief some lines in I'd our business. saw government, improvement. -- say inpatient It Medicare,

trends, to to talked waiting with people those where be of rush consistent that's elevated continue out as XXXX. in more benefit was to was, a but the looked lines, pressure in to benefits at in and enrollment of actually supplemental care we that see that play we about think their how what benefits I so going some patterns we're the [indiscernible] might as a change that, specialist population lot see for on early changing XXXX. mean

On start book. Medicaid, we that see did favorability in to some

came a the our close primary footprint. was redeterminations. redeterminations year-to-date state of Our trend the that And in was those driver to

as versus we also improvement we stabilize, a rate there to what saw started forecast. modest of bit and improvements some had So little that

the trends of So business generally, good the relative the quarters. a to year X on first end the Medicaid to

aggregate stop-loss. this similar but in points. as and very In It's by attachment points than some detachment the commercial industry stop-loss, the block, remained was modest seen. it's trends look have offset the in And improvement, what specific to the we commercial more saw at that elevated, you others underlying about

commercial lot our the really inpatient IFP, accelerate a and block within to quarter, was into of we on continue that then, see claims. also fourth actually driven And trends

We also that we accruals an what that bit little scenario. risk-adjusted talked enhancement got previously recent revenue after downside our data, although less on had we about bit took weekly little a most in than was a of the

important I'd change be there easily to is year. in book, yield most 'XX in going think going particular, that the how the because to we're half, that mix And that's how we understanding of process could in performance book about took. -- in shrink say, factor the that this you as the significant changes pricing

outlook taken overall. book that to relative we've cautious a so And

baseline, too is to respect our With much a any 'XX, to with help to say, the little now the to how confidence, given outlook should confidence I'd some it's comment me, overall, all our normalize trends. remains our incorporated into early like this rule of are to they with any which particularly changed. things Because too so high, year, little excuse of X respectful of membership early a were with impact respect last midnight the trends -- mix year. almost has

early. could but I say developing really about XX/XX also our good guess feel as reserves stage, at how I it's of this we

And so baseline too we'd of we like get understanding to far of ahead a is 'XX that better to before going perform ourselves. how have in

Operator

Baxter have with now We Fargo. Stephen Wells

Stephen Baxter

kind for also the about area I to you on where appreciated. and of going you investment the would general the ended XXXX year Basically, can of Medicare talk community. this over progression the XXXX assumed for was guidance Any couple focus could of of Advantage the be be full huge next XXXX. MA beyond hoping margins in pacing update is a years us recovery of what's obviously the comments

Tom Cowhey

how not maybe itself I'll business think what year Aetna thinking the as said. consistent to the this been he's and and business. it the along, last been be business breakeven, how with to about it I'll biggest They X.X% of end. of loss-making. ended start, margins you the that then The be back it the the the were to think and negative that good improving that's Steve, hear one business in the from high between because this we performance I low Yes, so with moving X% for We're would Steve, business in to factors I current will outlook. over It's he's turn year him getting about range. And swing

over A membership Medicare changes the lot and that and new and year, of benefits think, going I how some the of the how mix members driven is we of by made those to perform. performs be changing how remainder that, those

get to over the so there we've to opportunity to I And talked of about. there's think time back a target that lot X% still X% margins

Steve Nelson

both Good real I've to all, to it its few generally and one. Advantage in first about Actually go and brand, really be put competed it, then just to CVS a Aetna honored strong many product known of a Tom. comments, the happy Thanks, into But of business. kind clinical. and lead. I'll thrilled Health leadership for against Medicare make team years and a and be found to innovation for perspective

return a team there's Tom's David's, personal to And so is period. lot can multiyear and that margins days its do early commitment, Mark's Health target the Aetna to we add And my on. Encouraged and I read build that. in confident early entire leadership the commitment and team, the my CVS to over to my a and

lot quick few. areas. I just some in would made progress highlight we've think of really a a I

care, of pricing you around about total really capabilities really around all discipline. and as a to our by progress encouraged cost Advantage, think progress honestly, here, and there. our Exchange business business we've meaningful capabilities there about the and managing Our Also, levers what topic and well. and forecasting as encouraged done early very and Medicare relates a that been lot our That's Individual I'm specifically Commercial the

And cutting-edge evidenced then a gone in has state our really into implementation of our strengthened We've with really we've Aetna North the And welcomed well. stabilized sold really, welcome of some which led been and and member technology season largest progress well-executed happy leaning by operations the them, a ever and experience and with there. to has Carolina, that we've in really January. one accounts the also of in

we all Specifically the really discipline in the really then well-executed the best-in-industry and Stars, future we benefit I XXXX performance points we tailwind, plan a Medicare for together the to think that our of put And specifically, talked Advantage, strong there, AEP, when combination we've use execution, about. of looked the momentum this product day-to-day, Medicare was by well, Advantage hour, decisions this a where mix. at our we made, business. almost kind positioned that hour It's

those exited and a we did into several products transition to and that And gone new see the that's our and path better there margin, were expected. products, than target members products we

a evidence about being leader in so about thinking an we're and one how kind of committed Medicare and how to that's Super And Advantage. we're the performer of just excellent piece executing business.

So confident and I'll very months, forward. encouraged early my first very our on, but days path I could go in say, just X my here,

J. Joyner

Thanks, comment. Steve. other just Maybe one

that I last Steve's As in pressure XX days lot think obviously There's the and at Aetna against improved resilient. and has And really the of lot a theme incredibly I the around the making lead allowed of perform to and the culture organization ability team of deliver and is been I we've us, turnaround us look a efforts. which day, on sure Steve's with made. been deliver execute has the manage commitments is Which we onboarding, and better that execute. think, to a that

our done for team state of just on the service with exceptional and the sight of started focused we was the mix. -- the and that with staying the lot And a we we was did we which open delivering fine-tuning so largest levels making right onboarded of which couldn't lose the And had enrollment, customers. Carolina, North and job sure of then account an

Operator

We the have line. Andrew Barclays Mok on with

Andrew Mok

We aggressive lot margins, you Medicare talking on but spent business. of time actions took about the individual also ACA a

to changes So on any provider including in could embedded guidance. elaborate I actions, was hoping impact and margins you expected on networks those

Tom Cowhey

take to shot Sure, a at Happy Andrew. that.

about just to million and and it think not lost with about year business, that that's that that premiums actions year billion. X.XX billion $X million is took. -- ended be nearly the performance. $XX the consistent And business this members. members going last about As a you that's it's had year, and probably acceptable so We sub-X this of we

risk-adjusted as at the there, a back is is about on associated that understand with what year that So the accrue, weekly I us that the with had about how in true-up that XXXX. part bite the we end potential with was, that where lot hopefully performance should good team, us thinking of of a new I to of think CFO to what we talked data not how we've want telling and we've of to feel is are And are. out want booked that, it a be that the risk that -- last we that data XXXX. comes spent year problem about, it what this time we

question into we the an bit need end took becomes we some members margin we So those particularly is will levels get a of book not really that to and retroactive. who we levels until that with be the to think continue feel given of are, we that understand in we good It high that will improvement But the that because of substantially, the end That's breakeven that value even the and trend we that what But the then very make in will back membership progress. mix make -- has year. that of tail something of experienced closely, first it's actions experienced in a little they to churned we more embedded business. guidance. month have to about pay March of their trend so this And premium XXXX. we the watch accelerating

to want you anything add on that? know, don't I Steve,

Steve Nelson

pricing addition made Medicare business geographic product changes we Yes. and to execution in add the to to just points. where Similarly a Sure. I'll execution, point of the really OEP positive discipline. the AEP couple for would Advantage, this mix I the in

that think takes into business XXXX I momentum. So with improved us

business taking you look and this total risk cost of care other design, capabilities but about definitely I we but contracts, components in a in be and our how think it successful what not around is network network are at just populations. to all we and adjustment, referenced than -- -- takes of different this -- the And managing population network

really say, just XXXX. like has and position so overall, we sort in now going business capacity that capability priority our just, the have And improving into this and a I and been confidence would of

it margin, our at a business it that. and and important to but at in perform role target margin. It back plays the for perform But individual needs getting role really it to target consumers look, committed portfolio, to needs the a we're to does play

more start. do, to think getting we're taking I margins. good a steps, to -- target So committed to but Off returning good we're work to

Operator

next Your Erin from comes question Stanley. Morgan Wright with

Erin Wilson Wright

about to front think Great. utilization detail we the overall how year, that on the think any that model How MLR? should as should through gave you quarterly? for particularly we on of from a but your us about about instance, nuances assumptions surprises And progression or flow for IRA XXXX, some for we And year? out the any perspective quarterly for the think as throughout elements

Tom Cowhey

Erin. Thanks,

I to driver XX-XX this more did some prepared yes, And the is think of about of split it's the second in a comments the going year. We So remarks. first be primary have seasonality half, change seasonality half impact, IRI deal but to a of in forget Health little also Hopefully earnings PDR Care really don't XXXX. with kind bit with the cadence the Benefits have and it's the again. of something we messes won't

back reduction have But Part longer the same as D and upfront at year. think impacts that you the about now no level premium part the the premium, inflation of particularly of get to the and monthly reinsurance we we protection,

MBRs they're you And So of progression quarter lowest and to going could the earnings think be points the fourth. quarter the there. your Aetna the see in and be fourth fourth as in business, they're the higher about first the and going the of progression between to you for of swing MBRs first

of -- so total Aetna. on the And and that's

and earnings, I to in be good particular. that second just second. of the impacts would changing the you pressure bit a a third quarter about cadence on to about But will little the think And than close the there'll more given how as highlight book probably PDP third proxy for think in the our just other, it, that's quarters sloping more be but

Operator

with Mizuho We Ann Securities. an now have Hynes

Ann Hynes

contracts? you on what you? only know growth right when implementation? is so, to that? is the will Do for would contracts headwind positive of focused And first impact eventually with timing what's to Can the turn the And CostVantage, And that you it CostVantage expect believe commercial if you year remind I us the Medicare also, on now.

J. Joyner

just I'll speak couple I make comments Prem how cost, and thinking let vantage product about other a I'll and -- it true Can we're about through make lines. of specifically cost right. flowing All for to

market 'XX. initiative in important felt take enterprise. like We We this a was of really terms late a initiative simplicity changing to this individual-priced major transparency we marketplace a is this thought and the is adding a push This organization. We basket something for we needed -- to important in an from been the and leadership position has announced within for products.

as to enterprise, an proud within I'm we've this both well because done that we Pharmacy we've CVS the say as work in the as able portfolio that TrueCost Caremark. product done move the have market, that we've been to leveraging collectively

I So manage maybe how we're speak to have margin Prem, you a cost standpoint. can about thinking -- from the

Prem Shah

for the Ann, And Yes. Thanks, David. thanks question.

last through X you things the think if of really there's we cost management So addressing. about we end reiterated management, at was cost 'XX, and walked this year, that

pharmacy we reimbursement a pharmacy that closely of serve. our a more of as millions community shift the underlying cost of the really was we and to it foremost, aligned tens that value patients and model our business the local of create or First for to

we of every this patients script for process about durable Secondly, subsidization margins margin more what to generics, pharmacy at cross more essentially predictable inside supply the chain, a about we and when pharmacy brands us there which was as you is that a stable reimbursement, the think pharmacy lot a and of of across for do serving you more dispense. kind and think the counter, ensure allows

that the their the payers, finish we it with to market. creates pricing path provide our say to lastly, XXX% conversations across line, in of for And in commercial this And got transparency for PBMs I'm as our that well. excited drug transparency

XXXX rest into question book it we're our the as Your actively relates a working and model. for Medicaid, to CostVantage-like to Medicare move of

million results is payers of CostVantage purchasing benefit and of delivering toward than this. initial And annualized -- we're and we customers. Our of cost industry-leading customers we our that pass will from more trending through CostVantage $XXX PBMs to improvement payer goods our CVS as we the PBM cost improve that from have, continue generics contracts. the to And under CostVantage across all goods, to of and

we day counter, we're can And and to we with excited forward, calls we out. building to as about XX,XXX-plus clinical day the this payers pharmacists create our in leverage where solutions the move services have continue more and at

Operator

have line We question final the Anderson with Evercore. our on from Elizabeth

Elizabeth Anderson

that color caught pricing. Medicaid the particular, Can over you XX% for sort X kind Can Based there how you was course you Should at you looking up improvement -- in of talk of ratable? like as were you of catches that XXXX of in any think outlook on of the you up. on the Or we XXXX? about that other terms of said it of the know about considerations I had are think points and said that? to year-over-year broadly

J. Joyner

Steve. ahead, Go Yes.

Steve Nelson

a affairs year-over-year worked teams, are Yes, and I'll government combination about and with our team. the states, so Tom, have hard partners as team in through local Medicaid closely start to state yes, the great different it. redeterminations worked we hard, all XXXX. X.X% sure the increase you'll we thoughts start has worked Sure. I'm then, with really some the And anticipating

the our is the state more to position the But as do on like done. with just sure we soundness really funded. we the course the work been work it's to that's we go play partners to out going through continue adequately make to work beginning I have and think program year. as And actuarial But of

So any do. But work other Tom, to comments?

Tom Cowhey

great on next the I'd be January bolus. X.X% But same start. doesn't see the might the outlook say, there No. optimistic renewals of get our opportunity current when in level rate XX% a of that we backside. is We're that cautiously increase there the assume on that Elizabeth,

I that third got around quarter. XX% were another think we've about renews the

of we like rate to. forward is advocacy presumption as working, states, that said, them timing is our rate problem. there our as of with not always when the rates the our so be they will sound at the pace understand are would Steve not robust. we that And increases outlook But they all the But and the actuarially on recognize

J. Joyner

and you, All Thank Elizabeth. thank you, right. Tom,

for call we wraps your the this tireless you, to just especially in health before the want your America grateful I'm communities by to So And dedication our I to improving dedicated over up serve for XXX,XXX and I commitment close, person. person thank today. colleagues. for

year. So throughout our thank our you to updates for look forward today providing the and on we joining progress call

Operator

concluded. CVS now your with call disconnect the Today's enjoy today's for you call. you Please joining Thank call Health. day, rest from has of all and now the may

CVS Health (CVS) 12 Feb 252024 Q4 Earnings call transcript