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Cigna (CI) Q4 Earnings Beat on Membership Growth, Dividend Up
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The Cigna Group (CI - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of $6.79, which beat the Zacks Consensus Estimate by 4.1%. The bottom line improved 36.9% year over year.
Adjusted revenues of $51.2 billion advanced 4.8% year over year in the quarter under review on the back of solid contributions from Evernorth Health Services and Cigna Healthcare businesses. The top line outpaced the consensus mark by 4.8%.
However, the upside was partly offset by an elevated expense level resulting from the higher pharmacy and other service costs, medical costs and other benefit expenses, and selling, general and administrative expenses.
CI’s medical customer base was 19.8 million as of Dec 31, 2023, which witnessed a 9.9% year-over-year increase and came higher than our estimate of 19.6 million. Membership grew as a result of an increase in U.S. Commercial fee-based and Medicare Advantage customers.
Total benefits and expenses of $49.1 billion increased 11% year over year in the fourth quarter, higher than our estimate of $46.3 billion. The adjusted selling, general and administrative (SG&A) expense ratio deteriorated 30 basis points (bps) year over year to 7.9%.
Evernorth Health Services: The segment generated adjusted revenues of $40.5 billion, which advanced 12% year over year and beat our estimate of $38 billion. Solid organic growth in specialty and care delivery and management solutions benefited the unit’s quarterly results.
Adjusted operating income on a pretax basis rose 10% year over year to $1.9 billion in the fourth quarter, attributable to specialty strength and consistent affordability improvements. The metric beat our estimate by 2.1%. Adjusted pre-tax margin of 4.7% deteriorated 10 bps year over year.
Cigna Healthcare: The segment’s adjusted revenues climbed 17% year over year to $13 billion, aided by an expanding medical customer base and premium rate increases. The metric surpassed our estimate of $12.6 billion.
Pre-tax adjusted operating income of $969 million improved 87.4% year over year in the quarter under review and beat our estimate of $918 million. The year-over-year growth resulted from improved net investment income and a lower U.S. Commercial medical care ratio (MCR).
The segment’s MCR improved 160 bps year over year to 82.2% at the fourth-quarter end, which came lower than our estimate of 83.7%.
Financial Position (as of Dec 31, 2023)
Cigna exited the fourth quarter with cash and cash equivalents of $7.8 billion, which increased from $5.9 billion at 2022-end. Total assets of $152.8 billion increased from $143.9 million at 2022-end.
Long-term debt amounted to $28.2 billion, which declined marginally from the figure as of Dec 31, 2022. Short-term debt totaled $2.8 billion.
Shareholders’ equity grew 3.5% from the 2022-end level to $46.2 billion.
CI generated cash flow from operations of $11.8 billion in 2023, which soared 36.5% from the prior-year figure.
Debt-to-capitalization ratio was 40.1% at the fourth-quarter end, which improved 90 bps year over year.
Share Repurchase & Dividend Update
In 2023, Cigna bought back 7.8 million shares for around $2.3 billion. The company increased its quarterly dividend by 14% in the first quarter of 2024 to $1.40. The dividend will be paid on Mar 21, 2024, to shareholders of record on Mar 6, 2024.
2024 Guidance
Adjusted revenues are presently forecasted to be a minimum of $235 billion. This outlook indicates minimum growth of 20.3% from the 2023 reported figure.
Adjusted operating income is expected to be a minimum of $8 billion.
Adjusted EPS for 2024 is anticipated to be a minimum of $28.25. The outlook suggests a minimum improvement of 12.6% from the 2023 figure.
CI presently forecasts total medical customers to be around 19.3 million this year, lower than the prior-year figure of 19.8 million.
MCR is currently estimated to be in the band of 81.7-82.7%, 1.1% higher than the 2023 figure. The adjusted SG&A expense ratio is presently estimated to be roughly 6.1%, lower than the 2023 figure of 7.3%.
Adjusted operating income, on a pretax basis, for the Evernorth Health Services and Cigna Healthcare segments is still expected to be a minimum of $7 billion and $4.8 billion, respectively.
Operating cash flow is presently forecasted to be a minimum of $11 billion. Capital expenditures are expected to be around $1,500 million.
Long-Term Targets Reaffirmed
Cigna expects to achieve average annual adjusted EPS growth in the range of 10-13% in the long term.
Over the 2022-2026 period, management expects CI to generate operating cash flows of roughly $50 billion.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS has witnessed one upward estimate revision over the past 60 days against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
The Zacks Consensus Estimate for Brookdale Senior’s full-year 2023 earnings indicates a 49.6% year-over-year improvement. BKD beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 23.5%.
The Zacks Consensus Estimate for Centene’s 2023 full-year earnings implies a 15.1% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $150.8 billion, up 4.4% year over year. CNC beat earnings estimates in two of the last four quarters and missed twice, with an average surprise of 5.6%.
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Cigna (CI) Q4 Earnings Beat on Membership Growth, Dividend Up
The Cigna Group (CI - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of $6.79, which beat the Zacks Consensus Estimate by 4.1%. The bottom line improved 36.9% year over year.
Adjusted revenues of $51.2 billion advanced 4.8% year over year in the quarter under review on the back of solid contributions from Evernorth Health Services and Cigna Healthcare businesses. The top line outpaced the consensus mark by 4.8%.
However, the upside was partly offset by an elevated expense level resulting from the higher pharmacy and other service costs, medical costs and other benefit expenses, and selling, general and administrative expenses.
CI’s medical customer base was 19.8 million as of Dec 31, 2023, which witnessed a 9.9% year-over-year increase and came higher than our estimate of 19.6 million. Membership grew as a result of an increase in U.S. Commercial fee-based and Medicare Advantage customers.
Total benefits and expenses of $49.1 billion increased 11% year over year in the fourth quarter, higher than our estimate of $46.3 billion. The adjusted selling, general and administrative (SG&A) expense ratio deteriorated 30 basis points (bps) year over year to 7.9%.
Cigna Group Price, Consensus and EPS Surprise
Cigna Group price-consensus-eps-surprise-chart | Cigna Group Quote
Segmental Update
Evernorth Health Services: The segment generated adjusted revenues of $40.5 billion, which advanced 12% year over year and beat our estimate of $38 billion. Solid organic growth in specialty and care delivery and management solutions benefited the unit’s quarterly results.
Adjusted operating income on a pretax basis rose 10% year over year to $1.9 billion in the fourth quarter, attributable to specialty strength and consistent affordability improvements. The metric beat our estimate by 2.1%. Adjusted pre-tax margin of 4.7% deteriorated 10 bps year over year.
Cigna Healthcare: The segment’s adjusted revenues climbed 17% year over year to $13 billion, aided by an expanding medical customer base and premium rate increases. The metric surpassed our estimate of $12.6 billion.
Pre-tax adjusted operating income of $969 million improved 87.4% year over year in the quarter under review and beat our estimate of $918 million. The year-over-year growth resulted from improved net investment income and a lower U.S. Commercial medical care ratio (MCR).
The segment’s MCR improved 160 bps year over year to 82.2% at the fourth-quarter end, which came lower than our estimate of 83.7%.
Financial Position (as of Dec 31, 2023)
Cigna exited the fourth quarter with cash and cash equivalents of $7.8 billion, which increased from $5.9 billion at 2022-end. Total assets of $152.8 billion increased from $143.9 million at 2022-end.
Long-term debt amounted to $28.2 billion, which declined marginally from the figure as of Dec 31, 2022. Short-term debt totaled $2.8 billion.
Shareholders’ equity grew 3.5% from the 2022-end level to $46.2 billion.
CI generated cash flow from operations of $11.8 billion in 2023, which soared 36.5% from the prior-year figure.
Debt-to-capitalization ratio was 40.1% at the fourth-quarter end, which improved 90 bps year over year.
Share Repurchase & Dividend Update
In 2023, Cigna bought back 7.8 million shares for around $2.3 billion. The company increased its quarterly dividend by 14% in the first quarter of 2024 to $1.40. The dividend will be paid on Mar 21, 2024, to shareholders of record on Mar 6, 2024.
2024 Guidance
Adjusted revenues are presently forecasted to be a minimum of $235 billion. This outlook indicates minimum growth of 20.3% from the 2023 reported figure.
Adjusted operating income is expected to be a minimum of $8 billion.
Adjusted EPS for 2024 is anticipated to be a minimum of $28.25. The outlook suggests a minimum improvement of 12.6% from the 2023 figure.
CI presently forecasts total medical customers to be around 19.3 million this year, lower than the prior-year figure of 19.8 million.
MCR is currently estimated to be in the band of 81.7-82.7%, 1.1% higher than the 2023 figure. The adjusted SG&A expense ratio is presently estimated to be roughly 6.1%, lower than the 2023 figure of 7.3%.
Adjusted operating income, on a pretax basis, for the Evernorth Health Services and Cigna Healthcare segments is still expected to be a minimum of $7 billion and $4.8 billion, respectively.
Operating cash flow is presently forecasted to be a minimum of $11 billion. Capital expenditures are expected to be around $1,500 million.
Long-Term Targets Reaffirmed
Cigna expects to achieve average annual adjusted EPS growth in the range of 10-13% in the long term.
Over the 2022-2026 period, management expects CI to generate operating cash flows of roughly $50 billion.
Zacks Rank & Key Picks
Cigna currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Medical space are Motus GI Holdings, Inc. (MOTS - Free Report) , Brookdale Senior Living Inc. (BKD - Free Report) and Centene Corporation (CNC - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Motus GI’s 2023 bottom line suggests a 67.2% year-over-year improvement. MOTS has witnessed one upward estimate revision over the past 60 days against no movement in the opposite direction. It beat earnings estimates in all the last four quarters, with an average surprise of 40.2%.
The Zacks Consensus Estimate for Brookdale Senior’s full-year 2023 earnings indicates a 49.6% year-over-year improvement. BKD beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 23.5%.
The Zacks Consensus Estimate for Centene’s 2023 full-year earnings implies a 15.1% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $150.8 billion, up 4.4% year over year. CNC beat earnings estimates in two of the last four quarters and missed twice, with an average surprise of 5.6%.