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Cigna (CI) Q4 Earnings Beat on Robust Cigna Healthcare Unit

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Cigna Corporation (CI - Free Report) reported fourth-quarter 2021 earnings of $4.77 per share, which beat the Zacks Consensus Estimate by 1.9%. The bottom line improved 36% year over year.

Adjusted revenues of $45.7 billion rose 10% year over year in the quarter under review. The top line outpaced the consensus mark by 3.7%.

Cigna’s strong fourth-quarter results were driven by solid contributions from its Evernorth and Cigna Healthcare businesses, and sound medical customer growth. However, the upside was partly offset by escalating benefits and expenses.

Cigna saw an uptick of 431,000 customers on a year-over-year basis to 17.1 million in its medical enrollment in the fourth quarter, courtesy of growth within U.S. Commercial, U.S. Government and International Health markets.

Total benefits and expenses amounted to $44.2 billion, which escalated 9% year over year due to a rise in pharmacy and other service costs.

Cigna Corporation Price, Consensus and EPS Surprise

Cigna Corporation Price, Consensus and EPS Surprise

Cigna Corporation price-consensus-eps-surprise-chart | Cigna Corporation Quote

Segmental Update

From the fourth quarter of 2021, Cigna reports its results through two reporting segments. The first one remains the Evernorth segment.

Previously known as the U.S. Medical segment, the second one has been renamed as the Cigna Healthcare segment. Within the reporting segment, results of businesses (which will be retained by Cigna following the deal for selling its life, accident and supplemental benefits businesses) recorded within the newly formed International Health operating unit are included. Alongside, the U.S. Commercial and U.S. Government results are included within the Cigna Healthcare reporting segment.

Strong Segmental Performances

Evernorth: Adjusted revenues of the segment improved 15% year over year to $35.1 billion in the fourth quarter, attributable to solid organic growth in specialty pharmacy services and higher retail network volumes.

Adjusted operating income of $1.6 billion grew 3% year over year on the back of business growth and consistent affordability improvements aimed at benefiting its clients, customers and patients. However, the upside was partly offset by strategic investments undertaken in partnerships, new businesses and solutions, and technology.

Meanwhile, sound organic growth and COVID-19 vaccine volumes enabled Evernorth to fulfill 424 million adjusted pharmacy scripts in the fourth quarter. The metric climbed 9% year over year.

Cigna Healthcare: The segment reported adjusted revenues of $11.2 billion, which advanced 8% year over year. Customer growth, rise in premiums, higher specialty contributions and favorable net investment income contributed to the segment’s results.

Adjusted operating income surged 65.6% year over year to $472 million in the fourth quarter. The upside can be attributed to improved net investment income, higher specialty contributions, increased International Health unit’s contribution and the repeal of the health insurance industry tax.

Medical care ratio ("MCR") came in at 87% in the quarter under review, which expanded 220 basis points (bps) year over year. The increase was due to elevated medical costs across Cigna’s stop loss and U.S. Commercial insured businesses.

Capital Position (as of Dec 31, 2021)

Cigna’s debt-to-capitalization ratio of 41.7%, which deteriorated 220 bps year over year.

Shareholders’ equity of $47.1 billion declined 6.4% from the 2020-end level.

Dividend Hike Announced

On Feb 3, 2022, Cigna’s board of directors approved a 12% hike in the quarterly dividend. With this, the dividend payout now stands at $1.12 per share compared with the prior payout of $1.00. The increased dividend will be paid on Mar 24, 2022 to shareholders of record as on Mar 9.

Full-Year Update

For 2021, Cigna’s revenues grew 9% year over year to $174.1 billion. Full-year adjusted earnings per share of $20.47 climbed 11% year over year.

The selling, general and administrative (SG&A) expense ratio came in at 7.3%, which improved 120 bps year over year riding on top-line growth, consistent expense efficiency and the repeal of the health insurance industry tax.

During 2021, CI bought back 35.2 million shares worth $7.7 billion.

2022 Guidance

Cigna anticipates adjusted revenues for 2022 at a minimum of $177 billion, which suggests an increase from the 2021 level of $174.1 billion.

EPS is now estimated to be a minimum of $22.40 for 2022, which indicates an improvement from $20.47 reported in 2021.

CI expects total medical customer growth of at least 5,75,000. SG&A expense ratio is estimated to lie within 6.9-7.3%.

Zacks Rank

Cigna currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Medical Sector Releases

Among other players from the Medical space that have reported fourth-quarter results so far, the bottom-line results of UnitedHealth Group Incorporated (UNH - Free Report) , Humana Inc. (HUM - Free Report) and Anthem, Inc. beat the respective Zacks Consensus Estimate.

UnitedHealth Group reported fourth-quarter 2021 earnings of $4.48 per share, which outpaced the Zacks Consensus Estimate by 4.2% and increased 77.8% year over year on revenue growth. UNH’s revenues of $73.7 billion climbed 12.6% year over year and beat the consensus mark by 1%. Medical care ratio of UnitedHealth Group for the fourth quarter was 83.7%.

Humana’s fourth-quarter 2021 adjusted earnings per share of $1.24 surpassed the Zacks Consensus Estimate by a penny and rebounded from the year-ago loss of $2.30 per share. Revenues of $21.1 billion were up from $19.1 billion in the prior-year quarter but missed the consensus mark by 0.6%. Operating cost ratio of Humana declined to 16.1% from 16.3% a year ago.

Anthem delivered fourth-quarter 2021 earnings of $5.14 per share, which beat the Zacks Consensus Estimate by 0.6% owing to better revenues. The bottom line soared 102.4% year over year. Operating revenues of ANTM for the quarter grew 14.2% year over year. Anthem’s benefit expense ratio of 89.5% expanded 60 bps from the prior-year quarter’s figure.

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