Sign in
CG

Cigna Group (CI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered strong top-line growth and an EPS beat: total revenues rose 14% year over year to $65.5B, adjusted EPS was $6.74 versus $6.35 consensus, and shareholders’ EPS was $4.85; management raised full-year adjusted EPS outlook to at least $29.60 .
  • Evernorth (health services) grew adjusted revenues 16% YoY to $53.7B with Specialty & Care up 19%; Cigna Healthcare revenues rose 9% YoY, while MCR increased to 82.2% on expected stop-loss costs and a later-than-planned Medicare divestiture closing .
  • Guidance update: consolidated adjusted EPS raised to ≥$29.60 (from ≥$29.50), Cigna Healthcare pre-tax adjusted income raised to ≥$4.125B; Evernorth pre-tax adjusted income maintained at ≥$7.2B; full-year MCR range unchanged at 83.2%–84.2% .
  • Strategic/catalyst narrative: expanding GLP-1 affordability/clinical solutions (EnCircleRx ~9M members; new EnreachRx and ENGUIDE specialized pharmacy), growing biosimilar adoption (HUMIRA, new interchangeable STELARA biosimilar), and Select segment momentum; stop-loss margin recapture plan tracking across 2025–2026 .
  • Capital deployment remains supportive: $2.6B buybacks YTD (8.2M shares) through May 1 and quarterly dividend of $1.51 declared April 23; debt-to-cap 43.1% at March 31 with expectation to end lower by year-end .

What Went Well and What Went Wrong

  • What Went Well

    • Double-digit growth in Evernorth, led by Specialty & Care (+19% revenues) and PBS (+14% revenues), with normalized Specialty earnings up 11% excluding lower investment income; management emphasized unique specialty capabilities and strong biosimilar adoption .
    • Cigna Healthcare revenue execution (+9% YoY) and strong Select segment customer growth (+9% YoY), with earnings exceeding expectations excluding Medicare timing impact; management expects Q2 MCR toward low end of full-year range .
    • Strategic GLP-1 initiatives strengthen access, affordability and clinical outcomes: EnCircleRx (~9M enrolled), EnreachRx curated pharmacy support, ENGUIDE home delivery; management expects GLP-1 market >$100B by 2030 and 1 in 10 Americans on therapy .

  • What Went Wrong

    • Higher medical care ratio (82.2%) in Cigna Healthcare versus 79.9% YoY, driven by expected stop-loss costs and an extra month of Medicare (adds ~100 bps to Q1 MCR), pressuring segment margin (8.9% pre-tax vs 10.1% YoY) .
    • Evernorth pre-tax margin compressed to 2.7% (from 2.9% YoY and 4.0% QoQ), reflecting investment spend and lower net investment income (absence of VillageMD dividend) .
    • Regulatory/legal headwinds: management voiced strong opposition to Arkansas legislation targeting PBM-pharmacy integration, warning of reduced access/choice and higher costs; ongoing scrutiny requires continued transparency and innovation .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Billions)$63.7 $65.6 $65.5
Adjusted Revenues ($USD Billions)$63.7 $65.7 $65.5
Shareholders’ EPS ($)$2.63 $5.13 $4.85
Adjusted EPS ($)$7.51 $6.64 $6.74
Cigna Healthcare MCR (%)82.8% 87.9% 82.2%
SG&A Ratio (GAAP, %)5.6% 5.9% 6.4%
Adjusted SG&A Ratio (%)5.5% 5.7% 5.8%

Segment breakdown (Adjusted revenues, pre-tax adjusted income, margin):

SegmentQ1 2024Q4 2024Q1 2025
Evernorth Adjusted Revenues ($MM)$46,226 $53,744 $53,681
Evernorth Pre-tax Adj. Income ($MM)$1,360 $2,146 $1,434
Evernorth Pre-tax Margin (%)2.9% 4.0% 2.7%
PBS Adjusted Revenues ($MM)$26,107 $30,273 $29,742
PBS Pre-tax Adj. Income ($MM)$525 $1,198 $544
Specialty & Care Adjusted Revenues ($MM)$20,119 $23,471 $23,939
Specialty & Care Pre-tax Adj. Income ($MM)$835 $948 $890
Cigna Healthcare Adjusted Revenues ($MM)$13,277 $13,331 $14,482
Cigna Healthcare Pre-tax Adj. Income ($MM)$1,340 $511 $1,287
Cigna Healthcare Pre-tax Margin (%)10.1% 3.8% 8.9%

KPIs and operational metrics:

KPIQ3 2024Q4 2024Q1 2025
Total Customer Relationships (thousands)183,514 182,212 182,208
Total Pharmacy Customers (thousands)119,996 118,304 122,283
Total Medical Customers (thousands)19,048 19,147 18,043
Net Medical Costs Payable ($B)$4.93 $4.86 $4.37
Share Repurchases YTD (shares, $B)——8.2M; $2.6B (YTD thru May 1)
Debt-to-Capitalization (%)——43.1% (as of Mar 31)

Consensus vs. actual (Q1 2025):

MetricConsensusActualSurprise
Revenue ($USD Billions)$60.53*$65.50 +$4.97B; +8.2% (bold beat)
Adjusted EPS ($)$6.35*$6.74 +$0.39; +6.1% (bold beat)
EPS # of Estimates21*——
Revenue # of Estimates16*——

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPS (per share)FY 2025≥$29.50 ≥$29.60 Raised
Evernorth Pre-tax Adj. IncomeFY 2025≥$7.200B ≥$7.200B Maintained
Cigna Healthcare Pre-tax Adj. IncomeFY 2025≥$4.100B ≥$4.125B Raised
Cigna Healthcare MCRFY 202583.2%–84.2% 83.2%–84.2% Maintained
Dividend (Quarterly)Q2 2025$1.51 declared Q1 cycle $1.51 payable Jun 18 Maintained
EPS Cadence (qualitative)Q2 2025—Q2 EPS slightly below 25% of full-year New color

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
Stop-loss marginHigher MCR; mix and extra day; affordability initiatives Stop-loss elevated; segment earnings down; recapture plan outlined Tracking to plan; margin recoup across 2025–2026; MCR Q2 toward low end Stabilizing with corrective actions
GLP-1 strategy——EnCircleRx (~9M), EnreachRx curated network, ENGUIDE home delivery; employer coverage >50% in PBS book; focus on affordability/clinical safety Expanding solutions; key cost driver
BiosimilarsHUMIRA adoption boosted Specialty growth HUMIRA adoption sustained; Specialty earnings +27% YoY Interchangeable STELARA biosimilar launch; $0 OOP option; broader wave of biosimilars Accelerating adoption
Select segment (U.S. under 500)——Customers +9% YoY; ~3M covered; funding-agnostic model Above-market growth
Medicare portfolioMA strain backdrop Planned divestiture Q1 2025 Sale closed Mar 19; residual month added ~100 bps to Q1 MCR Portfolio streamlined; Evernorth serves MA via services
PBM selling season——PBS retention mid-90s or better; strong demand; transparency investments Solid retention; innovation
Regulatory/legal——Arkansas bill opposed; emphasis on transparency, choice and affordability Active engagement
Macro/tariffs——Management references dynamic environment; prudent assumptions maintained Monitoring; guidance prudent

Management Commentary

  • “We delivered $65.5 billion in total revenue, and we grew adjusted earnings per share to $6.74 this quarter. And we are also raising our full year EPS guidance estimate to at least $29.60.” — David Cordani, CEO .
  • “Specialty and Care Services showed strong growth with revenue up 19% to $23.9 billion... normalizing for lower net investment income due to the absence of the VillageMD dividend, pretax adjusted earnings were up 11% year-over-year.” — Ann Dennison, CFO .
  • “In Express Scripts... we will process over 2 billion prescriptions... around 90% of these being cost-effective generics.” — Brian Evanko, President & COO .
  • “Our EnCircleRx solution... EnreachRx... and ENGUIDE... strengthens our position as a leader and innovator in this space.” — Brian Evanko .
  • “Specific to the Arkansas bill... it will decrease access, reduce choice, erode quality... and ultimately increase costs for citizens.” — David Cordani .

Q&A Highlights

  • GLP-1 pricing/coverage: CI promotes competition and choice; employer coverage of weight management is just north of 50% in Evernorth book and 15%–20% in Cigna Healthcare book; new EnreachRx/ENGUIDE to enhance clinical care and access .
  • Stop-loss margin: Recapture plan on track over 2025–2026; revised cost structure incorporated in later 2025 renewals with retention preserved; Q1 stop-loss MCR reflects elevated full-year expectations .
  • PBM selling season: PBS retention tracking mid-90s or better; affordability and personalized solutions (Pathwell) highlighted; specialty now ~20% of employer spend across benefits .
  • Arkansas legislation: CI opposes bill; advocates transparency, choice, and innovation; potential regulatory/legal steps if needed .
  • Medicare/IRA dynamics: Specialty script volumes up mid-teens; Medicare book showed higher growth; biosimilars wave to impact ~$100B spend by 2030 .

Estimates Context

  • Q1 2025 beat: Adjusted EPS $6.74 vs $6.35 consensus (+$0.39); revenue $65.5B vs $60.5B consensus (+$5.0B), with 21 EPS estimates and 16 revenue estimates contributing to consensus*. Beats driven by double-digit Evernorth growth, favorable underlying Cigna Healthcare earnings excluding Medicare timing, and strong price execution .
  • Near-term estimate recalibration: Management raised FY EPS outlook to ≥$29.60 and guided Q2 EPS slightly below 25% of full-year, with Cigna Healthcare MCR trending toward low end in Q2; implies modest upward revisions to full-year EPS and Cigna Healthcare pre-tax earnings while maintaining Evernorth trajectory .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Strong revenue growth and broad-based EPS beat, coupled with a guidance raise, support near-term sentiment; Evernorth’s Specialty & Care and PBS engines continue to drive secular growth .
  • Stop-loss pressure is being actively addressed; watch margin cadence through 2H 2025 and into 2026 for full recapture, with Q2 MCR expected at the low end of FY range .
  • GLP-1 suite and biosimilar leadership (HUMIRA, STELARA) are durable tailwinds for Evernorth net cost outcomes and patient engagement—key differentiators in PBM selling season .
  • Portfolio optimization post-Medicare divestiture reduces volatility in Cigna Healthcare; Evernorth continues to serve MA members via services agreements with HCSC .
  • Capital returns remain robust (buybacks, dividend), with leverage expected to improve by year-end; supports total shareholder return framework .
  • Regulatory scrutiny persists (e.g., Arkansas); CI’s stance emphasizes transparency and choice—monitor developments for PBM policy risk and operational impacts .
  • Trading lens: The combination of an EPS beat, guidance raise, solid PBS retention, and GLP-1/biosimilar momentum is a positive catalyst; key watch items are stop-loss margin trajectory, Q2 cadence, and regulatory headlines’ impact on PBM economics .