CNBC Transcript: Cigna CEO David Cordani On SQUAWK ON THE STREET Today

Following is the unofficial transcript of a FIRST ON CNBC interview with Cigna CEO David Cordani on CNBC's "Squawk on the Street" (M-F 9AM-11AM) today, Thursday, February 1st. To watch the interview, click here!

DAVID FABER: CIGNA JOINING OTHER HEALTH INSURERS REPORTING A STRONG QUARTER AND UPBEAT FORECAST FOR 2018. THE COMPANY ALSO BOOSTING INVESTMENT IN RESPONSE TO U.S. TAX CHANGES, INCLUDING RAISING ITS MINIMUM WAGE. JOINING US NOW FIRST ON CNBC, CIGNA CEO DAVID CORDANI. DAVID, NICE TO HAVE YOU. YOU KNOW, I WAS READING THE TRANSCRIPT OF YOUR CONFERENCE CALL, I WASN'T ABLE TO BE ON IT BECAUSE I WAS ON-AIR. YOU GOT A NUMBER OF QUESTIONS, OF COURSE, ABOUT THIS EFFORT, A MORPHOSIS AS THOUGH IT IS, ANNOUNCED EARLIER THIS WEEK BY JPMORGAN, BERKSHIRE, AND PERHAPS MOST IMPORTANTLY AMAZON. AS THE LARGEST, I BELIEVE, PROVIDER OF ADMINISTRATIVE SERVICES ONLY, SORT OF A MIDDLEMAN FOR SO MANY CORPORATIONS, SHOULD YOU BE CONCERNED THAT THEY'RE COMING AFTER YOUR BUSINESS?

DAVID CORDANI: WE ACTUALLY SEE IT THE OTHER WAY AROUND. FIRST, WE'RE DELIGHTED TO REPORT AN OUTSTANDING 2017 RESULT. EARNINGS GROWTH, EPS GROWTH APPROACHING 29%, AND INDUSTRY LEADING MEDICAL COSTS TREND BELOW 3%. AND THEN PUT FORTH AN OUTLOOK FOR ADDITIONAL GROWTH IN 2018 OF 7% TO 8% REVENUE AND 19% TO 23% EARNINGS GROWTH. AS IT RELATES TO THE CHANGING MARKETPLACE, WE EXPECT TO CONTINUE TO SEE EMPLOYERS DEMAND MORE FROM A SERVICE STANDPOINT AS WELL AS DEMAND MORE FROM THEIR CO-WORKERS OR EMPLOYEES TO ENGAGE. AND THAT ACTUALLY FITS EXACTLY WHAT CIGNA DOES AS A SERVICE PROVIDER, SO NOT AN AOS CLAIMS ADMINISTRATOR BUT AS A SERVICE PROVIDER OF CLINICAL PROGRAMS, BEHAVIORAL PROGRAMS, PHARMACY PROGRAMS, ET CETERA, SO WE SEE MORE OPPORTUNITY THAN NOT IN THE CHANGE.

FABER: THE MARKETS SEEM TO THINK OTHERWISE. YOUR STOCK, I THINK, WAS - OF ALL OF THE NAMES OUT THERE, PERHAPS THE LARGEST PERCENTAGE LOSER. WHAT DOES THE MARKET HAVE WRONG HERE IN TERMS OF CONCERNS ABOUT YOUR COMPETITIVE STANCE, IF AND WHEN THIS EFFORT BEGINS TO BEAR FRUIT?

CORDANI: YEAH, I'M NOT SURE. I WOULDN'T SAY WHAT THE MARKET IS RIGHT OR WRONG, BUT I THINK WE HAVE TO PUT IT IN CONTEXT. FOR THE SIX YEARS PRIOR TO 2017, WE DELIVERED AN EXCESS OF 30% TSR ON A COMPOUNDED BASIS. FOR 2017, WE DELIVERED ABOUT 50% TSR AND WE'LL STEP INTO 2018 WITH VERY STRONG RESULTS. CLEARLY A DISRUPTIVE HEADLINE AND CLEARLY A NEED OF CREATING CLARITY IN TERMS OF NEXT STEPS. I THINK THE QUESTION FUNDAMENTALLY FOR EVERYBODY IN THIS SPACE IS, CAN YOU GROW, CAN YOU CONTINUE TO INNOVATE, AND CAN YOU CONTINUE TO DELIVER A STRONG VALUE? AND WE PUT FORTH AN OUTLOOK FOR 2018 THAT INDICATES ALL OF THE ABOVE, SO WE'RE CONFIDENT IN THE FACT THAT WE'LL CONTINUE TO GROW THE BUSINESS AND BE REWARDED BY SHAREHOLDERS OVER TIME.

FABER: YOU KNOW, I REPORTED ON, I THINK IT WAS MONDAY OR TUESDAY, WHEN THIS CAME OUT THAT IT'S EARLY DAYS FOR IT. ANY THOUGHTS ON YOUR PART ABOUT REACHING OUT TO THEM, TRYING TO ACTUALLY BE A PART OF THE EFFORT?

CORDANI: OH, WE HAVE ONGOING DIALOGUES. SO WE'RE ONE OF JPMORGAN'S SERVICE PARTNERS TO START WITH, SO WE HAVE ONGOING DIALOGUE WITH JPMORGAN ON A REGULAR BASIS. AND YOU COULD ASSUME THAT THOSE CONVERSATIONS TRANSPIRE ON A REGULAR BASIS, INCLUDING THIS WEEK. SECONDLY, MORE BROADLY, IF YOU WERE TO LOOK AT OUR STRATEGIC POSITION, OUR NUMBER ONE STRATEGIC IMPERATIVE IS TO BE THE UNDISPUTED PARTNER OF CHOICE. SO, NOT ONLY CAN WE, WE WILL. WE PARTNER WITH A VARIETY OF PLAYERS, WHETHER IT'S IN THE PHARMACY SPACE, OUR EMPLOYER CLIENTS, OUR PHYSICIAN PARTNERS, AND OUR HOSPITAL PARTNERS. SO WE DO SEE THIS AS AN OPPORTUNITY, AND WE'RE IN THE MIDDLE OF THAT CONVERSATION AS YOU WOULD EXPECT.

MELISSA LEE: YOU SHARE THAT CONTRACT TO PROVIDE WITH JPMORGAN SERVICES WITH U&H. AND PIPER JAFFRAY ESTIMATES THAT IF JPMORGAN ACTUALLY PULLED THAT CONTRACT, IT COULD BE 0.2% TO 0.4% OF 2018 REVENUES FOR YOU. HAVE YOU ACTUALLY - BECAUSE YOU SAID YOU HAVE ONGOING CONVERSATIONS -- HAVE YOU ASKED JPMORGAN IF THEY INTEND ON PULLING THE CONTRACT? DO YOU HAVE ANY SORT OF COMMITMENT FROM THEM THEY ARE NOT GOING TO DO THAT IN THE NEAR TERM AT LEAST?

CORDANI: YEAH, I ACTUALLY DON'T THINK ABOUT IT THAT WAY. EVERY EMPLOYER AND EVERY CUSTOMER HAS AN INDIVIDUAL CHOICE AT ANY GIVEN POINT IN TIME. WE VIEW IT THE EXACT OPPOSITE. WE HAVE THE RESPONSIBILITY TO CONTINUE TO RE-EARN OUR CLIENTS AND CUSTOMERS EACH AND EVERY DAY. WE SUPPORT ABOUT 20% OF JPMORGAN'S BUSINESS TODAY, AND WE'RE DELIGHTED TO DO SO. AND WE'RE DELIGHTED WITH THE SERVICES WE PROVIDE TO THEM AND WE CONTINUE TO INVEST FROM AN INNOVATION STANDPOINT. I THINK IF YOU LOOK AT IT BIGGER PICTURE, WE'RE A GROWING U.S. HEALTH SERVICE COMPANY, WE'RE A GROWING U.S. SENIORS SERVICE COMPANY, WE'RE A GROWING U.S. PRODUCTIVITY COMPANY AND WE HAVE ONE OF THE MOST - DIVERSIFIED PORTFOLIOS OF HEALTH SERVICES COMPANIES TO BE ABLE TO GROW OUR COMPANY.

LEE: I UNDERSTAND THAT, AND YOU KNOW, JPMORGAN EMPLOYEES HAVE THE CHOICE, RIGHT, TO CHOOSE CIGNA OR ANOTHER PROVIDER. BUT IF JPMORGAN DECIDES TO NOT MAKE CIGNA A CHOICE FOR THEM, THEN IT'S NOT ABOUT THE INDIVIDUAL CONTRACT. SO GOING BACK TO THE ORIGINAL QUESTION, HAVE YOU ASKED JPMORGAN IF THEY INTEND ON PULLING THE CONTRACT OR WHAT THEIR PLANS ARE FOR THAT CONTRACT WITH YOU?

CORDANI: MELISSA, NOT CONSTRUCTIVE TO COMMENT ON INDIVIDUAL CONTRACTS. WE HAVE TO EARN THE RIGHT TO SERVE OUR EMPLOYERS EACH AND EVERY DAY. AND WITH SUCH A DIVERSIFIED BASE, WE ARE NOT DEPENDENT ON ANY ONE CONTRACT, ON ANY ONE SEGMENT, OR OTHERWISE. IN FACT, IF YOU STEP BACK, MELISSA, IF YOU LOOK AT THE NATIONAL ACCOUNT SPACE, WE RETAIN ABOUT 95% OF OUR EMPLOYER RELATIONSHIPS. IF YOU LOOK AT THE MIDDLE MARKET SPACE, WE RETAIN WELL OVER 90% OF THOSE RELATIONSHIPS. SO WE HAVE A LONG-STANDING TRACK RECORD OF HIGH RETENTION BY EARNING THE RIGHT TO SERVE OUR CLIENTS AND TO CONTINUE TO INVEST IN INNOVATION. SO I DON'T LOSE SLEEP OVER LOSING THAT RELATIONSHIP. I LOSE SLEEP AROUND THE ABILITY TO CONTINUE TO INNOVATE, PARTNER, AND DRIVE THE RIGHT RESULTS FOR THEIR CO-WORKERS, WHICH IS WHY WE INVEST SO MUCH BACK IN INNOVATING OUR BUSINESS. AND WE'RE DELIGHTED WITH THE FACT WE'VE DELIVERED BELOW 3% MEDICAL COST TREND IN 2017, WHICH IS LESS THAN HALF THE INDUSTRY AVERAGE. AND CLIENTS LIKE JPMORGAN BENEFIT FROM THAT.

CARL QUINTANILLA: YEAH. THAT'S A GOOD POINT. I KNOW YOU BROUGHT IT UP ON THE CARL, DAVID. THIS IS CARL. REALLY QUICK, SOME WONDER WHETHER OR NOT -- I MEAN, SOME WONDER WHAT'S DIFFERENT ABOUT THIS PARTICULAR INITIATIVE BETWEEN AMAZON, BERKSHIRE AND JPMORGAN, THAN WE'VE SEEN FROM OTHER MULTICOMPANY INITIATIVES TO HELP LOWER THE CURVE. DO WE THEY HAVE SOMETHING BESIDES THEIR MARKET CAP, THEIR STAR POWER, OR THEIR BUYING SCALE, IN YOUR VIEW?

CORDANI: I THINK THE SINGLE BIGGEST DIFFERENCE IS YOU HAVE THE LEADERSHIP VOICES OF THE TOP OF THE C-SUITE WHICH WE VIEW AS A POSITIVE. SO AS WE GO TO CLIENTS, WE CALL AN EMPLOYER A CLIENT AND AN INDIVIDUAL A CUSTOMER, WE THINK ONE OF THE MOST CRITICAL ATTRIBUTES IS TO HAVE BUY-IN AND LEADERSHIP SUPPORT FROM THE TOP OF THE C-SUITE TO VIEW THE INVESTMENTS AS A STRATEGIC INVESTMENT. JAMIE HAS LONG SINCE BEEN ORIENTED THAT WAY AT JPMORGAN. WE THINK IT'S ACTUALLY A POSITIVE THAT THE CEO AND THE LEADERSHIP SUITE VIEW IT AS A LONG-TERM STRATEGIC INVESTMENT AND WANT TO ACTIVELY MANAGE IT WITH THEIR POPULATION. I WOULD SAY THAT'S THE SINGLE BIGGEST DIFFERENCE HERE.

QUINTANILLA: AND STRIPPING IT FROM PROFIT INCENTIVES, IS THAT UNIQUE OR NOT?

CORDANI: AGAIN, THE PROFIT INCENTIVES, IF YOU LOOK AT IT - LET'S FLIP IT AROUND THE OTHER WAY. EACH ONE OF THOSE EMPLOYERS TODAY ARGUABLY FUNCTIONS AS A NOT-FOR-PROFIT HEALTH SERVICE COMPANY THEMSELVES, BECAUSE THEY'RE AN ASO SERVICER. AND THEY'RE COORDINATING BILLIONS OF DOLLARS OF HEALTH SERVICES FOR THEIR EMPLOYEES AND TRYING TO IDENTIFY THE RIGHT SERVICERS TO COORDINATE THAT. I WOULD EXPECT THAT TO CONTINUE, AND IT WILL EVOLVE THROUGH APPLICATIONS OF NEW TECHNOLOGIES. SO THE STRIPPING THE PROFIT INCENTIVE, I THINK IS A HEADLINE TO TRY TO MAKE SURE THE BEST VALUE IS BEING DELIVERED AND THERE'S FAIR RETURNS BEING SHARED. BACK TO CIGNA, WE'RE LARGELY A SERVICE-BASED, FEE-BASED, TRANSPARENT SERVICER OF EMPLOYER CLIENTS AND WE BELIEVE IN ALIGNMENT AND TRANSPARENCY AS A POSITIVE FORCE GOING FORWARD. SO THE STRIPPING OF THE PROFIT MOTIVE I THINK SPEAKS MORE TO THE BROAD INDUSTRY VERSUS AN ASO CONTRACT.

FABER: DAVID, YOU SPENT A LOT OF TIME, OF COURSE, PURSUING CONSOLIDATION. IT DIDN'T HAPPEN. I THINK YOU MAY STILL BE IN A DISPUTE WITH YOUR ONE-TIME PARTNER, ANTHEM, ABOUT A BREAKUP FEE. BUT WHEN YOU LOOK AT AETNA'S DECISION TO SELL TO CVS, DOES THAT CHANGE YOUR VIEW IN TERMS OF RE-ENGAGING IN SOME SORT OF TALK TO GAIN MORE SIZE AND SCALE?

CORDANI: YEAH, WE VIEW THAT THE INDUSTRY AS A WHOLE WILL CONTINUE TO GO THROUGH SOME REFORMATTING. AND STEPPING BACK, IF YOU LOOK AT THE INDUSTRY AS A WHOLE, THE ACA REVENUE INFLUX HAS LARGELY SUBSIDED AND ESTABLISHED A NEW NORMAL. AND MANY COMPANIES HAVE BEEN CONFRONTING GROWTH CHALLENGES. MANY COMPANIES HAVE CONFRONTED THE INABILITY TO FURTHER CONSOLIDATE HORIZONTALLY. AND LOOKING AT DIFFERENT CONFIGURATIONS, CIGNA'S KIND OF UNIQUELY POSITIONED. WE HAVE A GLOBAL PLATFORM. WE HAVE ADDITIONAL HORIZONTAL OPPORTUNITIES IN THE UNITED STATES, AS WELL AS VERTICAL OPPORTUNITIES MORE BROADLY. BEYOND THAT, WE SEEK THE PARTNER TO DRIVE ONGOING GROWTH. SO WE'VE HAD A COUPLE TARGETED ACQUISITIONS IN 2017. ONE IN THE TECHNOLOGY SPACE, ONE OUTSIDE THE UNITED STATES IN THE MIDDLE EAST. AND WE SEE FUTURE M&A AS AN IMPORTANT OPPORTUNITY GOING FORWARD, AIDED BY OUR TREMENDOUS CURRENT CAPITAL POSITION. WE SIT ON BILLIONS OF DOLLARS OF DEPLOYABLE CAPITAL, AS WELL AS BALANCE SHEET LEVERAGE, WHICH IS FURTHER OPPORTUNITY TO CREATE VALUE FOR OUR SHAREHOLDERS.

FABER: RIGHT, SO MORE TIMES IN THE MARKET AS A BUYER AS OPPOSED TO ANYTHING ELSE. DAVID, THANK YOU AS ALWAYS FOR YOUR TIME. WE APPRECIATE IT.

CORDANI: GOOD TO BE WITH YOU TODAY. THANK YOU.

FABER: YOURE WELCOME. DAVID CORDANI IS THE CEO OF CIGNA.

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