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Cigna Group (CI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue rose 28% year over year to $65.65B, but adjusted EPS slipped to $6.64 (–2% YoY) and fell sequentially from $7.51 as higher stop-loss medical costs in Cigna Healthcare offset strong Evernorth performance .
  • Evernorth delivered robust growth (Q4 adjusted revenues +33% YoY to $53.74B; pre‑tax adjusted income +14% YoY to $2.15B), while Cigna Healthcare margins compressed (3.8% vs 7.5% YoY) on elevated high‑cost claimants in stop-loss .
  • 2025 outlook: at least $29.50 adjusted EPS; at least $7.9B adjusted income; at least $252B adjusted revenues; consolidated adj. SG&A ~5.4%; Cigna Healthcare MCR 83.2–84.2%; dividend raised 8% to $1.51/share; buyback authorization lifted to $10.3B .
  • Management plans to recapture ~100 bps of Cigna Healthcare margin over 2 years (most in 2026) via pricing, affordability initiatives, and cost efficiency; near‑term patient cost/ transparency enhancements launched at Express Scripts are intended to support long‑term growth and reduce model friction .

What Went Well and What Went Wrong

  • What Went Well
    • Evernorth momentum: Q4 adjusted revenues up 33% to $53.74B and pre‑tax adjusted income up 14% to $2.15B; specialty and care services adjusted income +27% YoY with increased HUMIRA biosimilar adoption; pharmacy benefit services benefitted from client wins .
    • Biosimilars/clinical programs: HUMIRA biosimilars reached nearly 50% of eligible scripts by year‑end; STELARA biosimilar planned with $0 patient cost; EnCircleRx GLP‑1 program scaled to ~8M lives, supporting outcomes and affordability .
    • Operating leverage and capital returns: Adjusted SG&A ratio fell to 5.7% in Q4 (from 7.4% YoY); dividend raised to $1.51 (+8%); buyback authorization expanded to $10.3B; $7.0B repurchases in 2024 .
  • What Went Wrong
    • Stop‑loss pressure: Cigna Healthcare Q4 pre‑tax adjusted income fell to $511M (–47% YoY) with MCR up to 87.9% (vs 82.2% YoY) due to more high‑cost claimants; full‑year MCR rose to 83.2% from 81.3% .
    • Sequential earnings downtick: Adjusted EPS fell to $6.64 in Q4 from $7.51 in Q3 as stop‑loss variability concentrated late in the year and client settlements/true‑ups hit Q4 .
    • Mix/margin drag: Evernorth pre‑tax margin ticked down to 4.0% (from 4.7% YoY) on planned growth investments despite strong volume; Cigna Healthcare margin compressed to 3.8% (from 7.5% YoY) .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($B)$51.11 $63.69 $65.65
Shareholders’ Net Income ($B)$1.03 $0.74 $1.42
Diluted EPS (GAAP) ($)$3.49 $2.63 $5.13
Adjusted Income from Operations ($B)$2.00 $2.11 $1.85
Adjusted EPS ($)$6.79 $7.51 $6.64
Cigna Healthcare MCR (%)82.2% 82.8% 87.9%
Adjusted SG&A Ratio (%)7.4% 5.5% 5.7%

Segment performance (Adjusted Revenues and Pre‑Tax Adjusted Income):

SegmentMetricQ4 2023Q4 2024
Evernorth Health ServicesAdjusted Revenues ($B)$40.52 $53.74
Pre‑Tax Adjusted Income ($B)$1.89 $2.15
Pre‑Tax Margin (%)4.7% 4.0%
Cigna HealthcareAdjusted Revenues ($B)$13.01 $13.33
Pre‑Tax Adjusted Income ($B)$0.97 $0.51
Pre‑Tax Margin (%)7.5% 3.8%

Key performance indicators (selected):

KPIQ4 2023Q3 2024Q4 2024
Total Pharmacy Customers (000s)98,570 119,996 118,304
Total Medical Customers (000s)19,780 19,048 19,147
Cigna Healthcare Net Medical Costs Payable ($B)$4.86 (Dec 31) $4.93 (Sep 30) $4.86 (Dec 31)
Share Repurchases ($B, YTD)—$5.7 (through Oct) $7.0 (FY)
Quarterly Dividend/Share ($)$1.40 (2024) —$1.51 (declared Jan 30, 2025)

Notes: All adjusted figures exclude amortization, investment gains/losses and special items per company definitions .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPSFY 2025Not previously provided≥ $29.50 New
Adjusted Income from Operations ($B)FY 2025Not previously provided≥ $7.9 New
Adjusted Revenues ($B)FY 2025Not previously provided≥ $252 New
Adjusted SG&A RatioFY 2025Not previously provided~5.4% New
Adjusted Effective Tax RateFY 2025Not previously provided~19% New
Cash Flow from Operations ($B)FY 2025Not previously provided~ $10 New
Capital Expenditures ($B)FY 2025Not previously provided~ $1.4 New
Shareholder Dividends ($B)FY 2025Not previously provided~ $1.6 New
Weighted Avg Shares (MM)FY 2025Not previously provided266–270 New
Evernorth Pre‑Tax Adj Income ($B)FY 2025Not previously provided≥ $7.2 New
Cigna Healthcare Pre‑Tax Adj Income ($B)FY 2025Not previously provided≥ $4.1 New
Cigna Healthcare MCR (%)FY 2025Not previously provided83.2%–84.2% New
Total Medical Customers (MM)FY 2025 YENot previously provided~18.1 New
Quarterly Dividend/Share ($)2025$1.40 (2024 run‑rate) $1.51 (declared) Raised 8%
Share Repurchase Authorization ($B)As of 12/31/24Not disclosed$10.3 total; +$6.0 incremental Increased authorization

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
Specialty & BiosimilarsBegan dispensing interchangeable HUMIRA biosimilar late June; ~20% biosimilar share in first 5 weeks; strong specialty growth HUMIRA biosimilars ~33% of eligible by Q3; STELARA biosimilar announced for 2025 HUMIRA biosimilar near 50% eligible by YE; STELARA biosimilar planned, $0 patient cost Accelerating adoption and platform leadership
GLP‑1/EnCircleRxEnCircleRx at >2M covered lives Approaching 8M lives; top client topic; outcomes focus ~8M lives; affordability/wrapper emphasized Rapid uptake and client demand sustained
Stop‑Loss/MCRElevated utilization broadly priced in; MCR within range Raised back‑half MCR expectations; stop‑loss favorable in Q4’23 baseline noted Q4 miss driven by more high‑cost claimants; stop‑loss MCR in low‑90s in 2024; ~100 bps margin recapture by 2026–27 Near‑term pressure, multi‑year recovery plan
PBM Transparency/PolicyDefended PBM value; outlined innovations; discussed IRA/Part D dynamics Cited independent research countering FTC; high client retention New Express Scripts standards: lower counter prices, pass negotiated savings in deductible, patient/plan reporting Proactive transparency/product shifts
Capital DeploymentOngoing buybacks; strong cash flow Reiterated buyback focus; $5.7B YTD through Oct 2024 repurchases $7.0B; dividend +8%; 2025 CF ~$10B; leverage reduction; MA sale proceeds to buybacks Continued return of capital emphasis
Medicare DivestitureOn track for Q1’25 close On track; EPS accretion via buybacks expected On track; most approvals complete; favorable early 2025 MA enrollment mix; expected close Q1’25 Execution progressing

Management Commentary

  • “While higher medical costs in our stop loss product impacted fourth quarter earnings, we are taking corrective actions… and we are simultaneously taking steps to further advance our long‑term growth strategy.” — CEO David Cordani .
  • “We expect to recapture approximately 100 basis points of margin in the overall Cigna Healthcare segment over the next 2 years with the majority in 2026 and the remaining in 2027.” — CFO Brian Evanko .
  • “We began dispensing our HUMIRA interchangeable biosimilar… we are pleased that biosimilar use for eligible HUMIRA scripts reached nearly 50% by year‑end 2024… we will be offering an interchangeable STELARA biosimilar… for a $0 cost to our patients.” — CEO David Cordani .
  • “Going forward, our standard products will provide patients lower prices at the pharmacy counter… and [they] will fully benefit from our lower net negotiated prices.” — CEO David Cordani on Express Scripts changes ; see also Evernorth press release .

Q&A Highlights

  • Stop‑loss impact and recovery: 2024 stop‑loss premiums ~$6.7B with MCR in low‑90s, mid‑single‑digit % worse than expected; elevated high‑cost claimants tied to specialty injectables (e.g., KEYTRUDA, OCREVUS) and high‑acuity inpatient (oncology/cardiac). GLP‑1s were not the driver. Pricing and attachment point adjustments plus affordability and cost actions underpin margin recapture into 2026–27 .
  • 2025 cadence and MCR: Expect 2025 seasonality to resemble 2023 (lower MCR 1H, higher 2H); Cigna Healthcare MCR guide 83.2–84.2%; stop‑loss MCR expected “slightly higher” in 2025 before recovery as renewals catch up .
  • Evernorth outlook and drivers: Reported +9% 2024 pre‑tax income growth; 2025 growth within 5–8% LT target after considering absence of VillageMD dividend, stranded Medicare overhead, and up to $150M patient/provider initiatives .
  • Capital and MA sale: Majority of Medicare sale proceeds earmarked for buybacks; antitrust approvals done, one state pending at the time of call; HMO growth in targeted mature markets noted .
  • PBM model/ rebates: Management emphasized most rebates already pass through; new default offerings lower counter prices and expand transparency without changing enterprise profit model structure .

Estimates Context

  • S&P Global/Capital IQ consensus estimates for Q4 2024 EPS and revenue were not retrievable due to a temporary data access limit. As a result, we cannot formally classify beat/miss vs consensus this quarter. Values retrieved from S&P Global were unavailable at time of analysis.

Key Takeaways for Investors

  • Evernorth strength offset stop‑loss spike: The diversified portfolio worked as intended, but outsized Q4 stop‑loss severity compressed Healthcare margins and adjusted EPS sequentially .
  • Near‑term headwinds, multi‑year fix: Management’s explicit plan to recapture ~100 bps of Cigna Healthcare margin by 2026–27, with limited pricing capture in early‑2025 given renewal timing, sets expectations for a “trough‑then‑recover” trajectory .
  • Proactive transparency/product resets: Express Scripts’ new standard to apply negotiated prices at point‑of‑sale and enhanced disclosures addresses policy scrutiny and could strengthen client/patient value proposition without altering low single‑digit PBM margin structure .
  • 2025 frame: At least $29.50 adjusted EPS on ≥$252B adjusted revenues, adj. SG&A ~5.4%, tax ~19%; Evernorth ≥$7.2B and Cigna Healthcare ≥$4.1B pre‑tax adjusted income; MCR 83.2–84.2% implies continued stop‑loss pressure before recovery in 2026 .
  • Capital deployment intact: 8% dividend raise to $1.51/share and buyback authorization to $10.3B, plus expected Medicare proceeds, reinforce commitment to shareholder returns alongside modest deleveraging .
  • Trading setup: Potential catalysts include Medicare sale close, progress on margin recapture, specialty biosimilar penetration, and client adoption of new transparency offerings; monitor quarterly stop‑loss trends and Evernorth growth to gauge recovery pace .

Citations: All figures and statements are sourced from the company’s Q4 2024 8‑K and press release and the Q4 2024 earnings call transcript , plus the Evernorth Jan 29, 2025 press release on pharmacy cost/transparency changes .