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Fortune 500

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The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

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The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

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The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are insurance and managed care, medical products and facilities, pharmacy services, and pharmaceutical companies.

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The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

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WMA 2024-CVS

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

WMA-2023-CVS

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-CVS Health

The health retail, pharmacy, and insurance conglomerate is the largest company ever to be led by a female CEO; Karen Lynch has been chief executive since Feb. 2021. 
<ul> 
 	<li>CVS exceeded Wall Street’s revenue expectations in 2022 with $322 billion, but profits fell nearly 50% compared to 2021.</li> 
 	<li>The company made progress in expanding into the primary care space with two big acquisitions: primary care network Oak Street Health, purchased for approximately $10.6 billion; and health services company Signify Health, for approximately $8 billion. The deals were completed earlier than anticipated, prompting the company to lower its earnings expectations for 2023.</li> 
 	<li>CVS joined other health care companies in settling lawsuits that claimed they should have known they were filling too many opioid prescriptions. Under a settlement announced in December, CVS will pay state and local governments up to $4.9 billion over 10 years. (The company did not admit wrongdoing.)</li> 
</ul>

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F500 2023-CVS Health

The health retail, pharmacy, and insurance conglomerate led by Karen Lynch is one of the nation’s two biggest health care companies. It’s also the biggest company ever to be led by a female CEO. 
<ul> 
 	<li>CVS exceeded Wall Street’s revenue expectations in 2022 with $322 billion, but profits fell nearly 50% compared to 2021.</li> 
 	<li>The company made progress in expanding into the primary care space with two big acquisitions: primary care network Oak Street Health, purchased for approximately $10.6 billion; and health services company Signify Health, for approximately $8 billion. The deals were completed earlier than expected, prompting the company to pull back on earnings expectations for 2023.</li> 
 	<li>CVS joined other health care companies in settling lawsuits that claimed they should have known they were filling too many opioid prescriptions. Under a settlement announced in December, CVS will pay state and local governments up to $4.9 billion over 10 years. (The company did not admit wrongdoing.)</li> 
</ul>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

WMAC-2022-27-CVS

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

G500 2022-10-CVS Health

CVS outpaced analyst expectations for 2021 under the leadership of Karen Lynch, who came aboard as CEO in February. The company reported $292 billion in revenue for the fiscal year ended December 2021—an 8.7% increase year over year. In a quest to revolutionize America’s access to health care, Lynch initiated a plan to transform hundreds of CVS stores into super-clinics that provide primary care—creating what will become the nation’s biggest network of urgent care and primary care outlets. CVS also played a major role in fighting COVID-19, administering over 50 million vaccines and 29 million tests through December 2021. In the fight to retain talent, CVS announced a minimum wage increase to $15 an hour, effective July 2022.

Fortune collaborated with the Diligent Institute to rank the most innovative boards of directors among S&P 500.

Modern Board 2022-CVS Health

CVS, the retail and pharmacy giant that ranks fourth on the <a href="https://fortune.com/fortune500/">Fortune</a> 500, scored high on gender equality, board independence, and ESG. Karen Lynch was named CEO in February 2021 and <a href="https://fortune.com/2021/10/04/cvs-ceo-karen-lynch-stores-health-care-super-clinics/">has said the company</a> is “pivoting to become more central to America’s health care.” The company recently made the decision to <a href="https://fortune.com/2021/08/04/cvs-minimum-wage-t15-an-hour/">raise its minimum wage</a> to $15. 
 
CVS counts the former CEOs of Chiquita Brands; AT&amp;T; Becton, Dickinson; Johnson &amp; Johnson; PCS Health Systems; and Applied Biosystems among its directors. The board also has two members with high-level government experience: Nancy-Ann DeParle is the former deputy chief of staff and director of the White House Office of Health Reform, and Mary Schapiro is a former chairman of the Securities and Exchange Commission. 
 
Editor's note: An earlier version of this post misspelled the name of Nancy-Ann DeParle.

Fortune Modern Board 25

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CTW.1122. CVS Aetna

CVS-owned Aetna last year launched an effort to reduce suicide attempts. Its clinicians began asking mental health screening questions of most members, rather than querying only those who showed risk of self-harm; it also reached out to high-risk youth. Aetna has seen an 18% decrease in suicide attempts since 2019 among its 16.3 million adult members with behavioral health coverage—a promising start.

Change the World

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 CVS Health

CVS outpaced analyst expectations for 2021 under the leadership of Karen Lynch, who came aboard as CEO in February. The company reported $292 billion in revenue for the fiscal year that ended in December 2021—an 8.7% increase year over year. In a quest to revolutionize America’s access to health care, Lynch initiated a plan to transform hundreds of CVS stores into super-clinics that provide primary care—creating what will become the nation’s biggest network of urgent care and primary care outlets. CVS also played a major role in fighting COVID-19, administering over 50 million vaccines and 29 million tests through December 2021. In the fight to retain talent, CVS has announced a minimum wage increase to $15 an hour, effective July 2022.

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-007-CVS

CVS embedded itself on the front lines of the COVID pandemic as one of the central hubs for distributing vaccines to local communities. In the first quarter of 2021 alone, the company, now fully integrated with health insurer Aetna following a mammoth $69 billion acquisition, produced more than $69 billion in revenues. In 2020, revenue grew $12 billion compared to the previous year. Karen Lynch, who became CEO in February 2021, believes that “millions of new customers will engage with CVS Health for the first time through testing and vaccine administration.” The company’s upbeat guidance for 2021, meanwhile, relies on pharmacy sales, rather than retail, to carry the revenue growth.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-04-CVS Health

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-013-CVS-Health

The drug store chain-slash-health care juggernaut got a $62 billion revenue boost—due to its $69 billion acquisition of Aetna, the insurance giant, in 2018. Though investors haven’t entirely sweetened on the deal, CEO Larry Merlo pronounced the integration of the two companies “successful” in February. Former Aetna CEO Mark Bertolini, meanwhile, resigned from the CVS board and said the integration was “far from over.” As a pharmacy retailer on the pandemic’s frontlines, CVS’s sales were brisk in the first quarter, but Merlo has warned about the “uncertainties” that surround the long-term performance of the company’s multifaceted business in a time of COVID-19.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-005-CVS-Health

The drug store chain-slash-health care juggernaut leapt three spots on this year's Fortune 500—and got a $62 billion revenue boost—due to its $69 billion acquisition of Aetna, the insurance giant, in 2018. Though investors haven’t entirely sweetened on the deal, CEO Larry Merlo pronounced the integration of the two companies “successful” in February; former Aetna CEO Mark Bertolini, meanwhile, resigned from the CVS board and said the integration was “far from over.” As a pharmacy retailer on the pandemic’s frontlines, CVS’s sales were brisk in the first quarter, but Merlo has warned about the “uncertainties” that surround the long-term performance of the company’s multifaceted business in a time of COVID-19.

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Change The World

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Headquartered in Woonsocket, R.I., CVS Health owns the country’s largest pharmacy chain with more than 9,000 physical locations found mostly in the Northeastern U.S. The publicly traded corporation is comprised of more than 300,000 employees and offers pharmacy services, health and beauty products, convenience foods, and other services like photo printing. CVS Health didn’t start adding pharmacies to new stores until 1967, but since then has acquired large companies in the health space such as Aetna, Signify Health, and Oak Street Health to boost its primary care offerings and develop its own insurance arm. Other subsidiaries of CVS Health include benefit services manager CVS Caremark and MinuteClinic, a walk-in health clinic for vaccinations, health screenings, and other quick appointments.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

David Joyner

President and Chief Executive Officer, CVS Health®

Sree Chaguturu, MD

Executive Vice President and Chief Medical Officer, CVS Health®

Thomas F. Cowhey

Executive Vice President and Chief Financial Officer of CVS Health®

Sam Khichi

Executive Vice President, Chief Policy Officer and General Counsel, CVS Health®

Tilak Mandadi

Executive Vice President, Ventures and Chief Digital, Data, Analytics and Technology Officer, CVS Health®

Larry McGrath

Executive Vice President, Chief Strategy Officer and Chief Strategic Advisor to the CEO of CVS Health®

Michelle Peluso

Executive Vice President and Chief Customer and Experience Officer, CVS Health®

Mike Pykosz

Executive Vice President and President of Health Care Delivery, CVS Health®

Prem Shah

Executive Vice President, Chief Pharmacy Officer, and President of Pharmacy and Consumer Wellness, CVS Health®

CVS Health (CVS): Company Profile, Stock Price, News, Rankings

legacy

CVS Health

cvs health

Good morning, and thank you all for attending the CVS Health Q1 twenty twenty five Earnings Conference Call. My name is Breeka, and I will be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Larry McGrath, Chief Strategy Officer.

Good morning, and welcome to the CVS Health first quarter twenty twenty five earnings call and webcast. I'm Larry McGrath, Chief Strategy Officer. I'm joined this morning by David Joyner, President and Chief Executive Officer and Tom Cowie, Chief Financial Officer. Following our prepared remarks, we'll host a question and answer session that will include additional members of the leadership team. Our press release and slide presentation have been posted to our website along with our Form 10 Q filed this morning with the SEC.

Today's call is also being broadcast on our website where it will be archived for one year. During this call, we'll make certain forward looking statements. Our forward looking statements are subject to significant risks and uncertainties that could cause actual results to differ materially from currently projected results. We strongly encourage you to review the reports we file with the SEC regarding these risks and uncertainties, in particular, those that are described in the cautionary statements concerning forward looking statements and risk factors in our most recent annual report on Form 10 ks, our quarterly report on Form 10 Q filed this morning and our recent filings on Form eight ks, including this morning's earnings press release. During this call, we'll use non GAAP measures when talking about the company's financial performance and financial condition, and you can find a reconciliation of these non GAAP measures in this morning's press release and the reconciliation document posted to the Investor Relations portion of our website.

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

Thank you, Larry, and good morning, everyone. We continue to build momentum across CVS Health and are progressing on our aspiration to be America's most trusted health care company. This morning, we are pleased to report solid results in what continues to be a challenging and volatile environment. We delivered first quarter adjusted earnings per share of $2.25 and adjusted operating income of $4,600,000,000 In addition, we increased our full year 2025 adjusted EPS guidance to a range of $6 to $6.2 up from our previous range of $5.75 to $6 Our strong start to the year and our increased guidance reflects solid performance and execution across each of our businesses as we maintain a prudent outlook with opportunities for outperformance and deliver on our promise to you, our shareholders. One of my top and most urgent priorities coming into this role was ensuring I had a leadership team with diverse experiences that can help me execute against my strategic priorities.

Last month, we announced the appointments of Brian Newman as chief financial officer effective May 12 and Amy Compton Phillips as the chief medical officer effective May 19. I am confident that Brian and Amy will help us continue building upon the momentum we've created over the past several months as we execute on our strategy to deliver better health care to those we are privileged to serve. I believe I now have completed my management team and that Brian and Amy's collective and individual experience and expertise are well suited to position CVS Health for the future. Brian is succeeding Tom Cowie, who will continue to serve as a strategic adviser to me effective May 12 to help ensure a successful transition. I wanna express my personal appreciation for all Tom has done in his eleven years at Aetna and three years at CVS Health.

Tom has been instrumental in advancing our talent, advocating for the finance function, and engaging with our shareholders. Tom has also played a critical role in our efforts to stabilize the Aetna business and position us on the path to improve results. I'm grateful for my time with Tom and wish him all the best in the future. We are driving towards becoming America's most trusted health care company. Every day, we earn the trust of customers we serve by improving outcomes, expanding access, and improving affordability to address one of the largest problems faced by our country, rising and unsustainable health care costs.

We hold a unique position in health care with our scaled assets. Our 9,000 community health destinations, our more than 1,000 walk in and primary care clinics, and the deep connections we have with more than 185,000,000 consumers we serve. It is this combination that differentiates CVS Health and provides us with a competitive advantage, allowing us to drive change and bring solutions to market at scale. Addressing the fragmented and broken health care system of today is not easy, but we are facing this challenge head on. This is personal for me, my leadership team, and the more than 300,000 CVS Health colleagues that work tirelessly every day to earn the trust of the customers we serve.

Our solutions are driven by insights from the millions of consumer touch points we have across CVS Health. We are purposely using these insights through our digital capabilities to improve transparency, empower our members, and drive better outcomes. In our CVS Health app, customers now have greater visibility into their health care journey and how to address potential barriers to care. This core digital asset is helping to drive a more trusted and integrated health care experience for our customers. We are also directly supporting our members with real time AI powered recommendations to help them better manage their health and achieve better outcomes.

Our capabilities allow us to precisely engage with members where we can have the most impact on their health and experience. We have the best run pharmacy businesses in the country. We have been investing in our colleagues, strengthening our technology, and we continue to build on our market leading cost of goods sold. Our focus in these areas has allowed us to deliver superior experiences to our customers while driving significant operational improvements across our nationwide footprint. Between our community, specialty and mail order pharmacies, we process and dispense over 1,700,000,000 scripts each year, generating unique insights that create opportunities to improve processes and health care experiences at scale.

We have been focused on simplifying and improving the prior authorization process for many years with the goal of getting patients their critical medications as quickly as possible. We eliminated requirements, accelerated decisions, created transparency, as well as provided proactive support to improve their experience. We took what we know matters most to our customers and applied it to what we do every day across each of our businesses. In the last several months, our team is taking meaningful steps to address points of friction, including simplifying and streamlining the prior authorization process of Aetna. Today, Aetna maintains one of the shortest list of treatments and procedures that require prior authorization.

Of the eligible prior authorization request we receive, over 95% are approved within twenty four hours, with some approved in as little as just a few hours. However, we know patients still feel friction in the system, and we are not satisfied with the status quo. We will continue leading the industry in driving change and improving member and provider experiences. We recently announced a novel approach, which bundles multiple prior authorization requests into one. We have begun to deploy this solution in some common areas of cancer care where we can have a meaningful impact supporting our members.

By bundling the prior authorization for multiple high-tech imaging scans like MRIs that are used for restaging cancer care, we are reducing the administrative load on providers, expediting treatment, and reducing uncertainty for our members. Our goal is to launch additional bundles later this year and to expand the program more broadly to other conditions such as musculoskeletal and select cardiology services. We are excited about rolling out this new approach, particularly after the positive response we've received from plan sponsors. Another critical component of earning the trust of our customers is enhancing access and making the cost of life changing medications more affordable. We have a proven history of leading the market with the use of preferred formularies more than a decade ago.

We led the market in driving the adoption of HUMIRA biosimilars, delivering over $1,000,000,000 of savings for our clients. A year after we revitalized the biosimilar market with our launch of Cordovus, our low cost Humira biosimilar has the largest market share in The U. S. Today, we're leading the way forward on GLP-1s. These innovative drugs, which can have a meaningful impact on people's health, were launched at prices that pressured our clients' budgets.

To address this, we are pleased to announce that we are partnering with Novo Nordisk to significantly increase access to Wegovy for our members at a more affordable price. We can increase the power of GLP-1s by combining them with additional lifestyle clinical support as part of our CVS weight management program offered to our clients through Caremark. This combination allows members to achieve better outcomes and even greater weight loss than the preprogrammed results. Additionally, we are the first retail pharmacy in the NovoCare pharmacy network. This will enable us to provide convenient, safe, and affordable access to Wegovy for eligible patients at our 9,000 community health locations across the country.

Taken together, this demonstrates the value of our integrated model and what CVS Health does day in and day out. Our clients and the patients we serve continue to choose us because we innovate, create competition, increase access, and deliver savings while leveraging our leading clinical capabilities to improve health outcomes. Our industry leading pharmacy capabilities built across our national footprint and powered by our efficient operations and our innovative and transparent pricing models have allowed us greater flexibility to focus on improving health outcomes. Patient experience and trust have a meaningful impact on medication adherence. Our success in this area has enabled us to be the top ranked national retail chain for medication adherence.

In our Aetna business, Medicare Advantage members who utilize CVS Pharmacy are more adherent to the therapy. This results in fewer acute medical events such as emergency room visits, and on average, these members have 3% lower medical costs. Our unrivaled reach to consumer and our integrated business model allow us to establish deeper connections in the community and drive better outcomes. The combination of our capabilities across each of our businesses are what allow us to deliver on these promises. This is why the ongoing rhetoric and misguided actions by some aimed at integrated health care companies like CVS Health are so flawed.

In April, the Arkansas government took unjustified action that will leave hundreds of thousands of patients without their community pharmacy, severely limiting access to critical drugs and increasing costs for employers and consumers. The actions will also affect more than ten thousand people in Arkansas who have complex conditions like cancer and multiple sclerosis. These vulnerable patients require specialized care and close coordination with their specialty pharmacists. Independent pharmacies will not be able to fill the void this legislation creates in Arkansas as they often do not stock specialty medications and lack the capabilities to manage complex conditions. We saw an overwhelming response against this proposal from patients and customers who will now see a rise in the cost of medications and a decrease in their accessibility.

We've also seen several direct letters from trade groups like the American Benefits Council and the ERISA Industry Committee who are also concerned about the negative impact resulting from this bill. Our health plan partners have also raised issues as they will now have trouble satisfying network adequacy requirements, including for the Medicare program. We will continue to serve patients in the state for as long as we can, and we'll work to educate stakeholders on all the ramifications of this flawed legislation. We are already seeing other states rejecting the Arkansas approach. Our position remains that we believe in common sense, meaningful actions to help lower the cost of medications in The US, which is why we were pleased to see that the president's executive order on drug pricing focuses on the entire supply chain.

We remain focused on building trust with you, our shareholders, by taking the right actions to strengthen our business and deliver on our commitments. As you've seen over the last six months, we actively manage our portfolio of businesses to ensure a pathway to sustainable earnings and competitive viability. We took action at the end of last year with our infusion business at Quorum, and we've announced earlier this year our exit from the ACO REACH program and the sale of our MSSP business. We are disappointed by the continued underperformance from our individual exchange products and have recently determined there is not a near or long term pathway for Aetna to materially improve its position in this product. As a result, we've decided that effective 2026, we will exit the states in which Aetna independently operates ACA plans.

Despite our multiyear efforts, we must recognize what is and what is not working, and we'll focus on the areas where we have a clear right to win. This was not a decision we made lightly as we recognize the importance of this product to millions of members. This action will allow us to focus on areas where we will have the strongest capabilities, including Medicare, commercial, and Medicaid, where we continue to build on our ability to serve members and customers in a differentiated way. We are committed to supporting our individual exchange members for as long as we have the privilege to serve them, and we'll also work closely with our partners to ensure a smooth transition, and that these members continue to have access to quality, affordable care. We are dedicated to transforming the health care experience in this country and believe we have the right set of assets, the right strategy, and the right team to deliver the most affordable and highest quality health care solutions to our customers.

We are focused on executing against the strategic priorities I laid out when I spoke to you last quarter and delivering strong results. We continue to lead the industry in driving innovation and better experiences for our members, patients and consumers and are working hard to ensure we deliver best in class performance from each of our businesses. As we continue to build trust and look to the future, we are setting expectations that are appropriate and achievable and continue to focus on areas where we can drive outperformance. With that, I'd like to hand the call over to Tom. Tom?

Thank you, David, and thanks to everyone for joining us this morning. I'll start with a few highlights on total company performance. First quarter revenues of nearly $95,000,000,000 increased 7% over the prior year quarter driven by revenue growth across all segments. We delivered first quarter adjusted operating income of approximately $4,600,000,000 and adjusted EPS of $2.25 driven by strong performance across all segments including meaningful improvement in our Healthcare Benefits segment. Finally, we generated cash flows from operations of approximately $4,600,000,000 during the quarter, an excellent start to the year that allowed us to increase our full year cash flow guidance this morning.

Turning now to our segments. Healthcare Benefits generated nearly $35,000,000,000 of revenue in the quarter, an increase of 8% over the prior year, driven by increases in our Medicare business, including the impact of improved Medicare Advantage star ratings for payment year 2025. Medical membership of approximately 27,100,000 was flat sequentially as declines in our individual exchange and Medicare businesses were largely offset by growth in our commercial fee based business. Shortly after quarter end, the premium grace period for individual exchange members expire, We obtained additional clarity on our effectuated membership. As a result of this subsequent attrition, our membership declined by approximately 300,000 members, which will be reflected in our second quarter membership.

During the quarter, the segment generated adjusted operating income of approximately $2,000,000,000 an increase of over $1,200,000,000 from the prior year quarter. Our medical benefit ratio of 87.3% decreased three ten basis points from the prior year. These improvements were primarily driven by the favorable year over year impact of prior year reserve development across all lines of business, the majority of which was related to fourth quarter twenty twenty four dates of service. We also benefited from better underlying performance in Medicare, including the impact of improved Medicare Advantage star ratings for the 2025 payment year and seasonally strong performance in our Medicare Part D products. Partially offsetting this strong performance were a number of estimate changes related to prior period revenue.

Altogether, prior year reserve development, net of changes in revenue estimates, contributed approximately $400,000,000 to adjusted operating income in the quarter. As David mentioned earlier, we plan to exit our individual exchange business in 2026. We are currently projecting that variable losses in this business will be between $350,000,000 and $400,000,000 for the full year 2025. As a result of these losses as well as updates to reflect the seasonality of this business, This quarter we established a premium deficiency reserve of approximately $450,000,000 related solely to the 2025 coverage year. This PDR reflects updated seasonality projections based on our current membership mix as well as higher membership than previously anticipated.

The premium deficiency reserve increased our first quarter medical benefit ratio by approximately 130 basis points. Medical cost trends during the quarter remained elevated but appeared to show early signs of stabilization and were broadly in line with our expectations for most of our businesses. While our group commercial business delivered a strong quarter, our individual exchange business did experience higher than expected trends as reflected in our PDR. Trends in Medicare, while elevated, were modestly better than our expectations. In Medicare broadly, we continue to see higher trends in inpatient, outpatient, and medical pharmacy, three categories which were elevated in '24 and which we will continue to monitor closely.

That said, performance in Part D during the quarter was better than our projections but may simply reflect updated seasonality given program changes and our current mix of members. In particular, we are watching specialty utilization in this product. We also saw strong improvements in the performance of our supplemental benefit offerings. We remain cautious on the outlook for these products until we have more experience with the substantial changes we made for 2025. We're also closely watching trends in our group Medicare Advantage business, which remain pressured.

In Medicaid, our overall rate advocacy efforts remain on track as we continue to work with our state partners to align rates with changes in acuity. Days claims payable at the end of the quarter was approximately forty three days, down about one day sequentially and from the prior year quarter, primarily driven by pharmacy costs, partially offset by the impact of the premium deficiency reserves. When we compare sequential premium growth against reserve growth, those metrics were more consistent when normalized for the Part D premium changes. We remain confident in the adequacy of our reserves. Our Health Services segment generated revenues of over $43,000,000,000 during the quarter, an increase of nearly 8% year over year, primarily driven by pharmacy drug mix, growth in specialty and brand inflation, partially offset by continued pharmacy client price improvements.

First quarter adjusted operating income of over $1,600,000,000 increased nearly 18% from the prior year quarter, primarily driven by improved purchasing economics and pharmacy drug mix, partially offset by continued pharmacy client price improvements. Total pharmacy claims processed in the quarter were over $464,000,000 and total pharmacy services membership as of the end of the quarter was approximately $88,000,000 We started the year with another strong quarter of top line growth in our health care delivery business. Total revenues grew 27% compared to the same quarter last year, excluding the impact of our exit from the ACO REACH program and the sale of our MSSP business. This increase was primarily driven by strong patient growth at Oak Street and increased volumes at Sigma. Total at risk members at Oak Street increased approximately thirty seven percent in the same period last year.

While very immature, we have seen some signs of pressure in first quarter medical cost trends at Oak Street Health, which we will continue to monitor closely over the next several months as they continue to develop. Our Pharmacy and Consumer Wellness segment also delivered another strong quarter. We generated revenues of nearly $32,000,000,000 an increase of over 11% versus the prior year quarter and over 14% on a same store basis. Adjusted operating income of over $1,300,000,000 increased over 11% from the prior year quarter, primarily driven by increased prescription volume and improved drug purchases. First quarter results also benefited from stronger seasonal factors, including the impact of increased demand for certain vaccines and the extended flu season.

Partially offsetting these items were continued pharmacy reimbursement pressure and the impact of softening consumer demand in the front store. Same store pharmacy sales in the quarter grew nearly 18% versus the prior year and same store prescription volumes increased nearly 7%. Same store front store sales were roughly flat versus the prior year quarter, but were up nearly one percent after adjusting for the impact of Leap Day in the first quarter of twenty twenty four. Retail pharmacy script share in the quarter grew to approximately 27.6%, an increase of approximately 70 basis points from the same period last year, driven by continued strong execution, our ability to deliver superior customer experiences and our commitment to pharmacy access across the communities we serve. Shifting now to cash flow and the balance sheet.

We generated cash flows from operations of approximately $4,600,000,000 in the first quarter. During the quarter, we returned eight forty million dollars to our shareholders through our quarterly dividend. We ended the quarter with approximately $1,500,000,000 of cash at the parent and unrestricted subsidiaries. Our leverage ratio at the end of the quarter improved meaningfully from year end. While our ratio remains above our long term targets, we are pleased by the progress we made in lowering our leverage this quarter.

We continue to expect our leverage ratio to return to more normalized levels as we maintain our disciplined financial policies and make progress on margin recovery in the Aetna business. Shifting now to our outlook for 2025. As David mentioned, we are increasing our full year 2025 guidance for adjusted EPS to a range of $6 to $6.2 This update incorporates our first quarter performance while maintaining a respectful view on medical cost trend and a prudent outlook on various macro factors for the remainder of the year. We now expect total revenue of $382,600,000,000 down approximately $3,300,000,000 largely due to our exit from the ACO REACH program and the sale of our MSSP business. In our Healthcare Benefits segment, we now expect adjusted operating income of approximately $1,910,000,000 at the low end of our guidance range.

This reflects an increase of approximately $400,000,000 primarily driven by the previously mentioned prior year reserve development net of changes in estimates related to prior period revenue that we experienced in the first quarter. We project our full year 2025 medical benefit ratio at the low end of our health care benefits adjusted operating income guidance range to be approximately 91.3%. Our guidance maintains a respectful view of medical cost trends for the remainder of the year. In particular, we continue to keep a close eye on performance of our group Medicare Advantage business. As we discussed last quarter, contracts in this book are typically multiyear and thus take longer to reprice.

While we are encouraged by the favorable development of our 2024 medical cost estimates, our claims experience for 2025 remains immature, particularly in light of changing membership mix in our Medicare Advantage and individual exchange products. That said, outperformance on the medical benefit ratio remains one of the largest potential factors that could drive us higher in our adjusted EPS guidance range. We expect to end the year with approximately 26,400,000 members, up approximately 600,000 members from our previous guidance, primarily driven by higher membership in our individual exchange and Medicare businesses. We continue to expect our Medicare Advantage membership to end the year consistent with our previously guided range of down 5% to 10% year over year. Adjusted operating income guidance for our Health Services and Pharmacy and Consumer Wellness segments is unchanged from our previous expectations.

We are encouraged by the performance of each of these segments in the first quarter and are maintaining a cautious outlook for the remainder of the year. In PCW, we are closely monitoring the potential for softening consumer environment and the implications of tariffs as well as potential changes in consumer sentiment towards vaccines that may impact market demand. We are also closely watching the persistently elevated trends in Medicare Advantage and the potential impact they could have on our health care delivery business, particularly at Oaktree Health. In aggregate, we expect our consolidated adjusted operating income to be in a range of $13,310,000,000 to $13,650,000,000 We continue to believe these expectations represent an appropriately achievable baseline with opportunities for outperformance. Based on these changes, we are also updating our expectation for full year cash flow from operations to approximately $7,000,000,000 Additionally, we now expect our interest expense to be approximately $3,150,000,000 and our adjusted effective tax rate to be approximately 25.9%.

As you think about the cadence of earnings for the remainder of the year, we now expect approximately 60% of full year consolidated earnings to occur in the first half of the year. This reflects a change from our previous estimates, largely driven by strong first quarter performance. For Health Services, while we were pleased with the strength of the quarter and our reiteration of full year guidance, We will remind you that results in the pharmacy services business can see material fluctuations by quarter. Specifically, as we sit here today, consensus expectations for the second quarter are notably higher than our own expectations. You can find additional details on the components of our 2025 guidance on our Investor Relations website.

We are encouraged by our performance in the first quarter as our results demonstrate execution of initial steps to restore Aetna target margins. While we still have a significant amount of work to do, this quarter was an important first step in our multiyear journey to unlock the embedded earnings power of CVS Health. With that, we'll now open the call to your questions. Operator?

Thank you. We will now begin the question and answer session. We have the first question from Justin Lake with Wolfe Research. Your line is open.

Thanks. Good morning. Wanted to focus on your comments around Medicare Advantage. Specifically, it sounds like you're seeing early trends better in individual and Part D, maybe some pressure incrementally in Group of A. So hoping you can give us some more color there across those three segments.

And also maybe give us your early impression of trend versus that high single digit medical trend you put in guidance for MA?

Justin, this is David. Thanks for the question. We expected there will be questions around the trend. And let me before I hand it off to the team to talk more specifically about the drivers and how we're thinking about the end of or the rest of this year, I want to just take a moment talking about what we've done in the last six months. And we've talked a lot about creating operating stability, improving the way in which we're forecasting and pricing our products, and then we had to have a good open enrollment.

So I think we've executed against all three of those priorities. And I feel really good about the team, the focus and the execution that's in front of us. And so I think that has allowed us, again, to I think drive the kind of performance that we've seen in this first quarter. I will also say that we will continue to hold a respect for trend. And I think that will be the theme you'll hear today as we look at both the performance in Q1 and also the elevated trends as we expect for the rest of this year.

So with that, I'll let Steve Nelson give a broader framework on Medicare and that with the other businesses within Aetna. And I'll let Tom speak to the specific trends.

Great. Well, thanks, David. Good morning, Justin. David used the word this morning momentum. I think that's the right word as you think about Aetna specifically.

The objectives that we've laid out are clear. We have a multiyear path to return Aetna to its target margins. And while it's very early in that journey, the progress is very encouraging. So maybe I'll just highlight four or five points that I think point to some of the drivers of that progress. I'll start with Medicare Advantage in the individual business.

Through the AEP process, we, I think, did a really good job of rationalizing both geographies and product mix combined with really strong execution around the total cost of care and just the overall operational rigor and management process focus discipline. It's really producing results. And as Dave and Tomball said, early innings here, the elevated trends that we've seen, we are starting to see early signs of stabilization. So really producing results and very pleased with the progress in that business overall. I'll just touch on the other businesses quickly to kind of round out just the overall perspective on Aetna.

Our Medicaid business continuing to perform well and we really like the progress we're making around rate advocacy, very much tracking in line with our full year expectations. And we're very competitive in this space. We had a couple of really good wins with Texas and Georgia. They're obviously pending protests. We're confident that we'll prevail there and hopeful.

But really strong performance in the early innings at Medicaid as well. And then our commercial business has been performing slightly ahead of our expectations, mainly driven by a return to more competitiveness in our fully insured book. That's due to really nice disciplined pricing and great work on our trend as well as better than expected retention. And then when you think about our self insured, our Meritain business, our national public and labor accounts business, we've seen some really nice wins there in incredibly competitive markets. The Pennsylvania Employee Benefits Trust Fund, the Advocate Health System, these are examples of full replacement opportunities that we were able to achieve.

Incredibly proud to be able to serve those customers. David mentioned in his prepared remarks that we'll be exiting the IFP business, our exchange business. And we've now met with all of our independent market and states, including CMS, and they are appreciative of the transparency and the thoughtful approach that we're taking here. And we are committed to serving these members through the rest of the year, that's our focus. So we will continue to update you on that process.

And then last point, we're continuing to make progress in our culture and the way that folks think, our colleagues and moving to an advocacy mindset focusing on innovation around member experience and our provider experience. David made an announcement about how we're going to be streamlining the prior authorization process for certain conditions, and we're just going to build on this. This is going to be a focus of our company. A watch item, just to finish up here, is the Medicare Group, Medicare Advantage Group business. Justin, asked about that specifically.

And that business, while we have a strong market position there and we've had success, It has not been immune from the elevated trends. So we've seen that definitely in the group business. Due to the multiyear contract nature of the business, there's not as many levers to pull there, but we are getting after the clinical opportunities aggressively. And we're also going to be introducing some rate actions as well. So we think that will mitigate some of the pressure.

But overall, again, multiyear journey. It's early, but incredibly encouraged about the progress and proud of the team for what they've done. So Tom, I'll turn it over to you for more detail on the trend part.

Good morning, Justin. So as you look at the quarter, if you strip out the premium deficiency reserve, the underlying Aetna business beat by about $1,000,000,000 So we had strong prior period reserve development off the twelvethirty '1 reserves, which as I noted in the prepared remarks was partially offset by some out of period revenue changes. And so net those two are worth about $400,000,000 which was the driver of the increased guidance this morning. As you look at the current period, the upside is almost entirely driven by Medicare. So the other businesses are largely going to offset.

And inside Medicare, there's a few things going on. First, there was about $100,000,000 of expense favorability, which is primarily timing and will come back over the remainder of the year. As you look at the core Medicare trends, they're running consistent with to slightly better than our outlook. And as Steve said, they're showing early signs of stabilization. First quarter inpatient trends are generally consistent with the full year 2024.

We've also seen some modest favorability in outpatient, but medical pharmacy trends remain stubbornly high. Outside of the core trends, as I noted, we saw strong seasonal performance out of Part D, and we also saw strong year over year improvement in our supplemental benefit trends, but we haven't pulled through this favorability until we've seen more data. And then turning last, just to close out your specific question on group. That is a place where we continue to watch. Specifically, inpatient trends on that block have remained quite high, And we've also seen a little bit of acceleration in outpatient.

And so we're watching that very closely. But net net, very pleased with the performance in the quarter. Obviously, pleased enough that we were able to raise the guidance this morning. And we think that the outlook that we've taken here is quite prudent and respectful of how trends may emerge over

We now have Lisa Gill with JPMorgan. Hi. Thanks very much,

CVS Health (CVS) Q1 2025 Earnings Call Transcript

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