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Cigna (CI) Q1 Earnings Beat on Client Wins in Evernorth Unit
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The Cigna Group (CI - Free Report) posted better-than-expected first-quarter 2024 earnings, driven by a well-performing Evernorth Health Services segment, which, in turn, received an impetus from strength in Specialty and Care Services businesses and operational efficiencies. Premium rate increases also aided the Cigna Healthcare business. However, the upside was partly offset by escalating pharmacy expenses and a decline in customer base within the Cigna Healthcare unit. Nevertheless, a hiked adjusted earnings per share (EPS) guidance for 2024 may serve as a means to cement investors’ confidence in the stock.
CI reported first-quarter adjusted EPS of $6.47, which outpaced the Zacks Consensus Estimate by 4.9%. The bottom line advanced 19.6% year over year.
Adjusted revenues advanced 23% year over year to $57.2 billion, attributable to numerous large client wins in the Evernorth Health Services segment. The top line beat the consensus mark by 1.1%.
The medical customer base of Cigna was 19.2 million as of Mar 31, 2024, which slid 1.5% year over year and fell short of the Zacks Consensus Estimate of 19.3 million. The metric suffered a setback due to a decline in Individual and Family Plans customers as a result of targeted pricing actions undertaken across certain geographies.
Total benefits and expenses escalated 24% year over year to $55 billion, higher than our estimate of $54.7 billion. The year-over-year increase was due to a significant rise in pharmacy and other service costs. Adjusted selling, general and administrative (SG&A) expense ratio of 6.4% improved 120 basis points (bps) year over year as a result of business mix shift and continued operational efficiencies.
CI reported adjusted income from operations of $1.9 billion, which rose 16% year over year on the back of solid contributions from Cigna Healthcare and Evernorth Health Services businesses.
Evernorth Health Services: Adjusted revenues climbed 28% year over year to $46.2 billion within the segment, which surpassed the Zacks Consensus Estimate of $45.6 billion and our estimate of $44.7 billion. The top line was aided by solid organic growth in Specialty and Care Services businesses, new client wins and continued expansion of existing relationships.
Adjusted operating income on a pretax basis amounted to $1.36 billion in the first quarter, which grew 3% year over year on the back of consistent affordability improvements. The metric came higher than the consensus mark of $1.34 billion and our estimate of $1.28 billion. However, the adjusted pre-tax margin deteriorated 70 bps year over year to 2.9% due to large client wins and business mix.
Cigna Healthcare: The segment recorded adjusted revenues of $13.28 billion, which advanced 4% year over year on the back of premium rate hikes and business mix. Yet, the metric lagged our estimate of $14.92 billion.
Pre-tax adjusted operating income rose 20% year over year to $1.3 billion, which almost touched the consensus mark. The metric was driven by a decline in the medical care ratio (MCR) and continued operational efficiencies.
MCR improved 140 bps year over year to 79.9% at the first-quarter end and compares favorably with the consensus mark of 82% and our estimate of 83.6%.
Financial Position (As of Mar 31, 2024)
Cigna exited the first quarter with cash and cash equivalents of $8.4 billion, which improved 7.9% from the 2023-end level. Total assets of $153.1 billion inched up 0.2% from the figure at 2023 end.
Long-term debt amounted to $31.1 billion, up 10.3% from the figure as of Dec 31, 2023. Short-term debt totaled $1.7 billion.
Total shareholders’ equity of $41.2 billion fell 10.9% from the 2023-end level.
Operating cash flows of $4.8 billion slipped 3.7% year over year.
Debt-to-capitalization ratio was 44.3% at the first-quarter end, which deteriorated 210 bps year over year.
Share Repurchase Update
From Jan 1, 2024, till May 1, 2024, Cigna bought back 10.1 million shares for $3.4 billion.
2024 Guidance
New Update
Management reaffirmed its full-year guidance for most metrics barring a few.
Adjusted revenues continue to be forecasted at a minimum of $235 billion, which indicates an improvement of at least 20.3% from the 2023 reported figure.
Adjusted operating income is presently anticipated to be a minimum of $8.065 billion, up from the prior view of a minimum of $8.025 billion.
Adjusted EPS is estimated to be a minimum of $28.40, up from the earlier guidance of a minimum of $28.25. The revised outlook suggests growth of at least 13.2% from the 2023 figure.
CI continues to expect total medical customers of roughly 19.3 million in 2024. MCR is currently projected within 81.7-82.5% compared with the previous outlook of 81.7-82.7%. The adjusted SG&A expense ratio continues to be estimated at around 6.1%.
Adjusted operating income, on a pretax basis, for the Evernorth Health Services segment is still anticipated at a minimum of $7 billion. Meanwhile, the metric for Cigna Healthcare unit is currently forecasted to be a minimum of $4.775 billion, higher than the earlier view of a minimum of $4.750 billion.
Operating cash flow continues to be forecasted at a minimum of $11 billion.
Previous View
Earlier, capital expenditures were expected to be around $1.5 billion.
Long-Term Targets Revised
Cigna expects to achieve average annual adjusted EPS growth in the range of 10-14% in the long term. The earlier view called for the metric to witness long-term growth in the range of 10-13%.
Over the next five years, CI is expected to generate operating cash flows of roughly $60 billion.
Of the Medical sector players that have reported first-quarter 2024 results so far, the bottom-line results of Humana Inc. (HUM - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) beat the Zacks Consensus Estimate.
Humana delivered first-quarter 2024 EPS of $7.23, beating the Zacks Consensus Estimate by 20.1%. However, the figure declined from earnings of $9.38 per share in the year-ago period. Adjusted revenues rose 14.3% from the previous year, reaching $29.3 billion. Also, the top line exceeded the consensus estimate by 2.6%. Total premiums amounted to $28.3 billion, which improved 10.6% year over year. Services revenues increased 6.3% year over year to almost $1.1 billion. Investment income of $288 million increased 49.2% year over year.
The benefits expense ratio was 88.9%, which deteriorated 340 bps year over year. HUM reported an operating income of $1.2 billion in the first quarter, down from the year-ago income of $1.7 billion. The Insurance segment’s adjusted revenues rose 10.8% year over year to $28.7 billion. As of Mar 31, 2024, the total medical membership of the segment was 16.17 million. The figure dipped 5.7% year over year. The CenterWell unit recorded revenues of $4.8 billion.
Centene recorded first-quarter 2024 adjusted EPS of $2.26, which outpaced the Zacks Consensus Estimate by 8.1%. The bottom line improved 7.1% year over year. Revenues advanced 3.9% year over year to $40.4 billion. The top line beat the consensus mark by 11%. Revenues from Medicaid amounted to $21.5 billion, which slipped 3% year over year in the quarter under review, while Medicare revenues inched up 1% year over year to $5.9 billion.
Additionally, commercial revenues of $7.8 billion climbed 48% year over year. Premiums of CNC rose 5% year over year to $35.5 billion. Service revenues of $808 million declined 28.3% year over year. As of Mar 31, 2024, total membership was 28.4 million, which dipped marginally year over year. Adjusted net earnings grew 4.1% year over year to $1.22 billion.
Molina Healthcare reported first-quarter 2024 adjusted EPS of $5.73, which beat the Zacks Consensus Estimate by 5%. However, the bottom line dipped 1.4% year over year. Total revenues amounted to $9.9 billion, which improved 21.9% year over year. Also, the top line outpaced the consensus mark by 4.3%. Premium revenues of $9.5 billion climbed 21% year over year in the quarter under review.
Investment income soared 52.1% year over year to $108 million. Adjusted general and administrative expense ratio deteriorated 10 bps year over year to 7.1%. MOH’s adjusted net income dipped 0.9% year over year to $334 million. The consolidated MCR (medical costs as a percentage of premium revenues), was 88.5% in the quarter under review. The metric deteriorated 140 bps year over year. As of Mar 31, 2024, total membership advanced 9% year over year to around 5.7 million.
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Cigna (CI) Q1 Earnings Beat on Client Wins in Evernorth Unit
The Cigna Group (CI - Free Report) posted better-than-expected first-quarter 2024 earnings, driven by a well-performing Evernorth Health Services segment, which, in turn, received an impetus from strength in Specialty and Care Services businesses and operational efficiencies. Premium rate increases also aided the Cigna Healthcare business. However, the upside was partly offset by escalating pharmacy expenses and a decline in customer base within the Cigna Healthcare unit. Nevertheless, a hiked adjusted earnings per share (EPS) guidance for 2024 may serve as a means to cement investors’ confidence in the stock.
CI reported first-quarter adjusted EPS of $6.47, which outpaced the Zacks Consensus Estimate by 4.9%. The bottom line advanced 19.6% year over year.
Adjusted revenues advanced 23% year over year to $57.2 billion, attributable to numerous large client wins in the Evernorth Health Services segment. The top line beat the consensus mark by 1.1%.
The medical customer base of Cigna was 19.2 million as of Mar 31, 2024, which slid 1.5% year over year and fell short of the Zacks Consensus Estimate of 19.3 million. The metric suffered a setback due to a decline in Individual and Family Plans customers as a result of targeted pricing actions undertaken across certain geographies.
Total benefits and expenses escalated 24% year over year to $55 billion, higher than our estimate of $54.7 billion. The year-over-year increase was due to a significant rise in pharmacy and other service costs. Adjusted selling, general and administrative (SG&A) expense ratio of 6.4% improved 120 basis points (bps) year over year as a result of business mix shift and continued operational efficiencies.
CI reported adjusted income from operations of $1.9 billion, which rose 16% year over year on the back of solid contributions from Cigna Healthcare and Evernorth Health Services businesses.
The Cigna Group Price, Consensus and EPS Surprise
The Cigna Group price-consensus-eps-surprise-chart | The Cigna Group Quote
Segmental Update
Evernorth Health Services: Adjusted revenues climbed 28% year over year to $46.2 billion within the segment, which surpassed the Zacks Consensus Estimate of $45.6 billion and our estimate of $44.7 billion. The top line was aided by solid organic growth in Specialty and Care Services businesses, new client wins and continued expansion of existing relationships.
Adjusted operating income on a pretax basis amounted to $1.36 billion in the first quarter, which grew 3% year over year on the back of consistent affordability improvements. The metric came higher than the consensus mark of $1.34 billion and our estimate of $1.28 billion. However, the adjusted pre-tax margin deteriorated 70 bps year over year to 2.9% due to large client wins and business mix.
Cigna Healthcare: The segment recorded adjusted revenues of $13.28 billion, which advanced 4% year over year on the back of premium rate hikes and business mix. Yet, the metric lagged our estimate of $14.92 billion.
Pre-tax adjusted operating income rose 20% year over year to $1.3 billion, which almost touched the consensus mark. The metric was driven by a decline in the medical care ratio (MCR) and continued operational efficiencies.
MCR improved 140 bps year over year to 79.9% at the first-quarter end and compares favorably with the consensus mark of 82% and our estimate of 83.6%.
Financial Position (As of Mar 31, 2024)
Cigna exited the first quarter with cash and cash equivalents of $8.4 billion, which improved 7.9% from the 2023-end level. Total assets of $153.1 billion inched up 0.2% from the figure at 2023 end.
Long-term debt amounted to $31.1 billion, up 10.3% from the figure as of Dec 31, 2023. Short-term debt totaled $1.7 billion.
Total shareholders’ equity of $41.2 billion fell 10.9% from the 2023-end level.
Operating cash flows of $4.8 billion slipped 3.7% year over year.
Debt-to-capitalization ratio was 44.3% at the first-quarter end, which deteriorated 210 bps year over year.
Share Repurchase Update
From Jan 1, 2024, till May 1, 2024, Cigna bought back 10.1 million shares for $3.4 billion.
2024 Guidance
New Update
Management reaffirmed its full-year guidance for most metrics barring a few.
Adjusted revenues continue to be forecasted at a minimum of $235 billion, which indicates an improvement of at least 20.3% from the 2023 reported figure.
Adjusted operating income is presently anticipated to be a minimum of $8.065 billion, up from the prior view of a minimum of $8.025 billion.
Adjusted EPS is estimated to be a minimum of $28.40, up from the earlier guidance of a minimum of $28.25. The revised outlook suggests growth of at least 13.2% from the 2023 figure.
CI continues to expect total medical customers of roughly 19.3 million in 2024.
MCR is currently projected within 81.7-82.5% compared with the previous outlook of 81.7-82.7%. The adjusted SG&A expense ratio continues to be estimated at around 6.1%.
Adjusted operating income, on a pretax basis, for the Evernorth Health Services segment is still anticipated at a minimum of $7 billion. Meanwhile, the metric for Cigna Healthcare unit is currently forecasted to be a minimum of $4.775 billion, higher than the earlier view of a minimum of $4.750 billion.
Operating cash flow continues to be forecasted at a minimum of $11 billion.
Previous View
Earlier, capital expenditures were expected to be around $1.5 billion.
Long-Term Targets Revised
Cigna expects to achieve average annual adjusted EPS growth in the range of 10-14% in the long term. The earlier view called for the metric to witness long-term growth in the range of 10-13%.
Over the next five years, CI is expected to generate operating cash flows of roughly $60 billion.
Zacks Rank
Cigna currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Medical Sector Releases
Of the Medical sector players that have reported first-quarter 2024 results so far, the bottom-line results of Humana Inc. (HUM - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) beat the Zacks Consensus Estimate.
Humana delivered first-quarter 2024 EPS of $7.23, beating the Zacks Consensus Estimate by 20.1%. However, the figure declined from earnings of $9.38 per share in the year-ago period. Adjusted revenues rose 14.3% from the previous year, reaching $29.3 billion. Also, the top line exceeded the consensus estimate by 2.6%. Total premiums amounted to $28.3 billion, which improved 10.6% year over year. Services revenues increased 6.3% year over year to almost $1.1 billion. Investment income of $288 million increased 49.2% year over year.
The benefits expense ratio was 88.9%, which deteriorated 340 bps year over year. HUM reported an operating income of $1.2 billion in the first quarter, down from the year-ago income of $1.7 billion. The Insurance segment’s adjusted revenues rose 10.8% year over year to $28.7 billion. As of Mar 31, 2024, the total medical membership of the segment was 16.17 million. The figure dipped 5.7% year over year. The CenterWell unit recorded revenues of $4.8 billion.
Centene recorded first-quarter 2024 adjusted EPS of $2.26, which outpaced the Zacks Consensus Estimate by 8.1%. The bottom line improved 7.1% year over year. Revenues advanced 3.9% year over year to $40.4 billion. The top line beat the consensus mark by 11%. Revenues from Medicaid amounted to $21.5 billion, which slipped 3% year over year in the quarter under review, while Medicare revenues inched up 1% year over year to $5.9 billion.
Additionally, commercial revenues of $7.8 billion climbed 48% year over year. Premiums of CNC rose 5% year over year to $35.5 billion. Service revenues of $808 million declined 28.3% year over year. As of Mar 31, 2024, total membership was 28.4 million, which dipped marginally year over year. Adjusted net earnings grew 4.1% year over year to $1.22 billion.
Molina Healthcare reported first-quarter 2024 adjusted EPS of $5.73, which beat the Zacks Consensus Estimate by 5%. However, the bottom line dipped 1.4% year over year. Total revenues amounted to $9.9 billion, which improved 21.9% year over year. Also, the top line outpaced the consensus mark by 4.3%. Premium revenues of $9.5 billion climbed 21% year over year in the quarter under review.
Investment income soared 52.1% year over year to $108 million. Adjusted general and administrative expense ratio deteriorated 10 bps year over year to 7.1%. MOH’s adjusted net income dipped 0.9% year over year to $334 million. The consolidated MCR (medical costs as a percentage of premium revenues), was 88.5% in the quarter under review. The metric deteriorated 140 bps year over year. As of Mar 31, 2024, total membership advanced 9% year over year to around 5.7 million.