Executive Summary

Cigna delivered a solid Q3: revenue $69.7B (+10% y/y) and adjusted EPS $7.83, both above S&P Global consensus; GAAP EPS was $6.98. Strength was led by Evernorth (specialty volume, biosimilars), while Cigna Healthcare saw a higher MCR of 84.8% driven by Individual & Family Plans and stop-loss costs . EPS/revenue beats vs consensus: $7.83 vs $7.64* and $69.7B vs $66.7B* .
Management reaffirmed full‑year 2025 adjusted EPS of at least $29.60 and segment targets (Evernorth ≥$7.2B pre‑tax AOI; Cigna Healthcare ≥$4.125B; MCR 83.2–84.2%), now expecting the full‑year MCR at the high end of the range .
The key strategic catalyst is a rebate‑free, fee‑based PBM model (front‑end discounts, lowest price at counter, pharmacy reimbursement reform) that management says improves transparency and supports independent pharmacies; Cigna Healthcare will adopt it for fully insured lives in 2027 and it becomes Evernorth’s standard in 2028 .
2026 setup: EPS growth expected despite PBM margin compression tied to large client renewals/terms and transition investments in the new model; specialty & care and Cigna Healthcare expected at the high end of long‑term growth, Evernorth PBM down in 2026 with long‑term durability intact .

What Went Well and What Went Wrong

What Went Well
- Evernorth specialty & care grew revenues +10% y/y to $26.3B and pre‑tax AOI +11% to $928M, aided by strong specialty volume and increased biosimilar adoption .
- Consolidated revenue rose 10% y/y to $69.7B; adjusted EPS rose to $7.83, while adjusted SG&A ratio improved to 4.6% (vs 5.5% y/y), reflecting mix .
- Strategic innovation: “new market‑defining rebate‑free pharmacy benefit model” to “lower costs and enhance transparency,” with management emphasizing upfront discounts and lowest‑price technology at the counter . Quote: “Our new … rebate‑free pharmacy benefit model will further lower costs and enhance transparency” — CEO David M. Cordani .
What Went Wrong
- Cigna Healthcare pre‑tax AOI declined 12% y/y and MCR increased to 84.8% (vs 82.8% y/y), driven by Individual & Family Plans and higher stop‑loss medical costs .
- Evernorth PBM pre‑tax AOI fell 6% y/y (to $975M) amid “strategic investments and initiatives to support business growth” .
- Management flagged 2026 PBM margin pressure from large client renewals/extensions and transition investments for the rebate‑free model; Evernorth segment income expected slightly down in 2026 even as enterprise EPS grows, increasing investor focus on transition execution risk .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($B)	$65.50	$67.18	$69.75
GAAP EPS	$4.85	$5.71	$6.98
Adjusted EPS	$6.74	$7.20	$7.83
Adjusted SG&A Ratio	5.8%	4.9%	4.6%
Cigna Healthcare MCR	82.2%	83.2%	84.8%

Q3 actuals vs S&P Global consensus (estimates):

EPS: $7.83 vs $7.64* → beat by ~$0.19 .
Revenue: $69.75B vs $66.74B* → beat by ~$3.0B .
Values marked with * are from S&P Global.

Segment breakdown – Evernorth Health Services

Metric	Q1 2025	Q2 2025	Q3 2025
Pharmacy Benefit Services Adjusted Revenues ($B)	$29.74	$31.95	$34.09
PBS Pre‑tax AOI ($M)	$544	$833	$975
Specialty & Care Services Adjusted Revenues ($B)	$23.94	$25.87	$26.30
SCS Pre‑tax AOI ($M)	$890	$863	$928
Evernorth Pre‑tax AOI ($B)	$1.43	$1.70	$1.90
Evernorth Pre‑tax Margin	2.7%	2.9%	3.2%

Cigna Healthcare

Metric	Q1 2025	Q2 2025	Q3 2025
Adjusted Revenues ($B)	$14.48	$10.75	$10.76
Pre‑tax AOI ($B)	$1.29	$1.09	$1.04
Pre‑tax Margin	8.9%	10.2%	9.7%
MCR	82.2%	83.2%	84.8%

KPIs

KPI	Q1 2025	Q2 2025	Q3 2025
Total Pharmacy Customers (000s)	122,283	121,892	122,486
Total Medical Customers (000s)	18,043	18,046	18,059
Net Medical Costs Payable – CHC ($B)	$4.37	$4.49	$4.53
Operating Cash Flow ($B)	—	—	$3.4 (Q3)

Guidance Changes

Metric	Period	Previous Guidance (Q2’25)	Current Guidance (Q3’25)	Change
Adjusted EPS (per share)	FY 2025	At least $29.60	At least $29.60	Maintained
Evernorth Pre‑tax AOI	FY 2025	≥ $7.2B	≥ $7.2B	Maintained
Cigna Healthcare Pre‑tax AOI	FY 2025	≥ $4.125B	≥ $4.125B	Maintained
Cigna Healthcare MCR	FY 2025	83.2%–84.2%	83.2%–84.2% (now expecting high end)	Range maintained; tilt to high end
Dividend per share	Q4 2025	—	$1.51 payable Dec 18 (record Dec 4)	Declared

Notes: Management reiterated inability to reconcile forward adjusted metrics to GAAP due to unknown future net investment results and special items .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
PBM model transformation	Investments and affordability focus in PBM; biosimilar adoption highlighted	Launch of rebate‑free, fee‑based model; lowest‑price tech at counter; support for independent pharmacies; adoption roadmap (CHC 2027, standard 2028)	Step‑change transformation, transitional costs in 2026–2027
Specialty growth/biosimilars	Strong specialty volume; Humira biosimilar adoption	Specialty & care AOI +11% y/y; 7M specialty scripts YTD; continued biosimilar shift (Humira, Stelara)	Sustained growth tailwind
Medical cost/MCR (CHC)	Higher MCR from stop‑loss in Q1; Q2 MCR 83.2%	Q3 MCR 84.8% on individual exchange and stop‑loss; FY MCR now expected at high end of range	Cost pressure elevated near term
2026 Outlook	Reaffirmed FY25; no detailed 2026 prior	EPS growth in 2026; Evernorth PBM down (renewals + transition costs); specialty & CHC at high end	Transition year in PBM; enterprise growth intact
Capital/leverage	Buybacks YTD in Q1; steady cash flow profile	Q3 OCF $3.4B; leverage 44.9% (Shields investment), target ~40% LT; back‑half weighted cash flow	De‑leveraging expected; balanced with buybacks
Regulatory/policy	Collaboration and affordability initiatives highlighted	Alignment with administration on drug pricing; push for biosimilars; prior auth/continuity‑of‑care reforms	Active public‑private engagement

Management Commentary

Strategic positioning: “We’re introducing new solutions to create meaningful value… our new rebate‑free model… will enable customers and patients to automatically pay the lowest price at the counter…” — CEO David M. Cordani .
2026 framing: “Over the next two years, we will invest… As a result, we expect margin pressure within our pharmacy benefit services segment… We expect to grow EPS in 2026.” — CEO .
PBM economics clarity: “Category one… ~$90B annual revenue… 2026 margin profile should run through the end of the decade… Category two… transitional investment spend in 2026–2027; Category three… balance of book comparable earnings under rebate‑free model.” — President/COO Brian Evanko .
CHC drivers: “Stop‑Loss repricing executed with typical retention… 2026 will be a step forward toward margin recovery by 2027” — CFO/COO team .
Long‑term PBM margin: “4% margin benchmark… reasonable in the long term” (portfolio mix dependent) — President/COO .

Q&A Highlights

PBM guarantees and model economics: Management emphasized the new fee‑based, delinked design eliminates rebate guarantees and delivers lowest price at counter; long‑term Evernorth algorithm intact, but 2026 Evernorth will be below algorithm due to PBM investments/renewals .
2026 PBM headwinds sizing: Evernorth income slightly down vs ≥$7.2B 2025; >50% of PBM decline from large client terms, <50% from transition investments (2026–2027) .
EPS growth algorithm: Despite PBM pressure, CHC and specialty & care expected at high end, supporting 2026 EPS growth; capital deployment and back‑half cash flow noted .
CHC outlook/membership: CHC income growth at high end off ≥$4.125B guide; 2026 national accounts flat to slightly down, Select segment growth, individual exchange enrollment to decline roughly with market .
Long‑term PBM margin: 4% remains reasonable at portfolio level under rebate‑free model; mix (large vs mid/small clients) will drive variation .

Estimates Context

Q3 2025 results vs S&P Global consensus: Adjusted EPS $7.83 vs $7.64*; Revenue $69.75B vs $66.74B* — both beats, driven by Evernorth specialty growth and pharmacy volumes; EPS outperformance tempered by higher CHC MCR .
Forward estimate implications: Management’s 2026 commentary (PBM margin pressure; CHC and specialty at high end) suggests estimate revisions likely to shift mix (lower Evernorth PBM, higher CHC/specialty) while preserving consolidated EPS growth .
Values marked with * are from S&P Global.

Key Takeaways for Investors

Q3 delivered clean top‑line and adjusted EPS beats with reaffirmed FY25 EPS ≥$29.60; mix shows Evernorth leading, CHC pressured by MCR .
Specialty & care remains a structural growth engine (double‑digit AOI growth, biosimilar adoption), partially offsetting near‑term PBM compression .
The rebate‑free PBM pivot is the central narrative: short‑term investment and contract term impacts in 2026, but improved transparency, client stickiness, and potential simplification of the story longer‑term .
2026 enterprise: EPS growth expected even as Evernorth PBM declines; watch execution on transition spend and client economics, and CHC margin recapture (stop‑loss repricing) .
Cash generation remains strong (Q3 OCF $3.4B); leverage elevated (44.9%) after Shields investment but trending toward ~40% longer term; capital returns balanced with de‑leveraging .
Guidance discipline: All FY25 guideposts maintained; CHC MCR bias to high end indicates continued underwriting and pricing vigilance into 2026 .
Trading setup: Near‑term debate centers on PBM transition costs vs durability; catalysts include further detail on 2026 outlook at Q4 call and early proof points of rebate‑free model adoption/benefit realization .

Footnote: S&P Global consensus values are marked with an asterisk (*) and were retrieved from S&P Global.

Cigna Group (CI)·Q3 2025 Earnings Summary