The Cigna Group (NYSE:CI) BofA Securities 2024 Health Care Conference Call May 15, 2024 2:40 PM ET Company Participants Brian Evanko - CFO of The Cigna Group, President and CEO of Cigna Healthcare Hasan Riaz - Lead Principal, Investor Relations Ralph Giacobbe - Head of Investor Relations Conference Call Participants Kevin Fischbeck - Bank of America Kevin Fischbeck All right. I want to thank everyone for joining us today. It's my pleasure to be hosting The Cigna Group. Presenting today, we have Brian Evanko ...

Core Insights - Cigna Group's stock is currently trading at $343.11, down 1% from its previous position, but remains close to its record high of $365.71 reached on March 28, reflecting a year-over-year increase of 34.6% [1] - The recent pullback in Cigna's stock has brought it near its 80-day moving average, with historical data indicating that similar instances have led to significant upward movements in the past [2] - Following eight similar signals in the last three years, the stock has typically risen by an average of 6.1% within a month, suggesting potential for the stock to exceed $364 again [3] - The current market conditions also present a favorable opportunity for options trading, as indicated by a relatively low Schaeffer's Volatility Index (SVI) of 29%, which ranks in the 16th percentile of annual readings, suggesting lower volatility expectations [3]

Increasing supplier diversity: Late last year, The Cigna Group surpassed its goal of $1 billion in annual spending with small and diverse businesses in the United States by roughly $400 million, about 2 years ahead of schedule. The Cigna Group has expanded its commitment to spend even more with diverse suppliers: $1.6 billion annually in 2025. Building healthier communities: The Cigna Group remains committed to improving the health and vitality of the communities it serves through charitable giving. The com ...

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The Cigna Group (CI) 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 ...

Confidential, unpublished property of The Cigna Group. Do not duplicate or distribute. Use and distribution limited solely to © 2024 The Cigna Group authorized personnel. © 2024 The Cigna Group This presentation, and oral statements made in connection with this presentation, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on The Cigna Group's current expectations and projections about future trends, event ...

The Cigna Group (NYSE:CI) Q1 2024 Earnings Call Transcript May 2, 2024 8:30 AM ET Company Participants Ralph Giacobbe - SVP of IR David Cordani - Chairman and CEO Brian Evanko - CFO, and President and CEO, Cigna Healthcare Eric Palmer - President and CEO, Evernorth Health Services Conference Call Participants Justin Lake - Wolfe Research Lisa Gill - JPMorgan Andrew Mok - Barclays Scott Fidel - Stephens Sarah James - Cantor Kevin Fischbeck - Bank of America A.J. Rice - UBS George Hill - Deutsche Bank Erin Wr ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents The Cigna Group's unaudited consolidated financial statements for Q1 2024, encompassing statements of income, comprehensive income, balance sheets, equity changes, and cash flows, along with detailed accompanying notes [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Total revenues increased to **$57.26 billion** in Q1 2024, but the company reported a **net loss of $277 million** or **($0.97) per diluted share**, primarily due to a **$1.84 billion** net realized investment loss Consolidated Statements of Income (Q1 2024 vs Q1 2023) | Financial Metric | Q1 2024 (In millions) | Q1 2023 (In millions) | | :--- | :--- | :--- | | **Total Revenues** | **$57,255** | **$46,517** | | Pharmacy revenues | $42,036 | $32,144 | | Premiums | $11,603 | $11,025 | | Income from operations | $2,256 | $2,015 | | Net realized investment losses | $(1,836) | $(56) | | Income before income taxes | $79 | $1,601 | | **Shareholders' Net (Loss) Income** | **$(277)** | **$1,267** | | **Diluted (Loss) Earnings Per Share** | **$(0.97)** | **$4.24** | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets reached **$153.1 billion** as of March 31, 2024, while total liabilities increased to **$111.8 billion**, leading to a decrease in total shareholders' equity to **$41.2 billion** Consolidated Balance Sheet Highlights | (In millions) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total Assets** | **$153,119** | **$152,761** | | Cash and cash equivalents | $8,439 | $7,822 | | Goodwill | $44,258 | $44,259 | | **Total Liabilities** | **$111,769** | **$106,410** | | Long-term debt | $31,053 | $28,155 | | **Total Shareholders' Equity** | **$41,181** | **$46,223** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was **$4.84 billion** in Q1 2024, while net cash used in financing activities significantly increased to **$2.53 billion** due to substantial common stock repurchases Cash Flow Summary (Q1 2024 vs Q1 2023) | Cash Flow Activity (In millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $4,840 | $5,028 | | Net Cash Used in Investing Activities | $(495) | $(2,983) | | Net Cash Used in Financing Activities | $(2,529) | $(37) | | **Net increase in cash** | **$1,807** | **$2,013** | [Notes to the Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed disclosures supporting the consolidated financial statements, covering business segments, accounting policies, the pending sale of Medicare businesses, debt and equity activities, investment portfolio details, and segment performance breakdowns - The company is organized into two main reportable segments: Evernorth Health Services (providing pharmacy and care services) and Cigna Healthcare (providing medical plans and international health solutions)[12](index=12&type=chunk)[13](index=13&type=chunk) - In January 2024, the company agreed to sell its Medicare Advantage, Medicare Stand-Alone Prescription Drug Plans, and related businesses to HCSC for approximately **$3.3 billion** in cash, with the deal expected to close in Q1 2025[28](index=28&type=chunk)[58](index=58&type=chunk) - In February 2024, the company entered into accelerated share repurchase (ASR) agreements to buy back **$3.2 billion** of its common stock, receiving an initial **7.6 million** shares[316](index=316&type=chunk)[49](index=49&type=chunk) - The company recognized a **$1.8 billion** impairment loss on its equity investment in VillageMD, which was recorded in Net realized investment losses[364](index=364&type=chunk)[95](index=95&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion provides an overview of the company's performance, highlighting a **23% increase** in total revenues to **$57.3 billion** and a **16% rise** in adjusted income from operations to **$1.9 billion** for Q1 2024, with the GAAP net loss attributed to a significant investment impairment [Executive Overview](index=35&type=section&id=Executive%20Overview) The executive overview highlights strong Q1 2024 performance with a **23% increase** in total revenues and a **16% increase** in adjusted income from operations, driven by growth in both the Evernorth Health Services and Cigna Healthcare segments, despite a GAAP net loss due to a **$1.8 billion** impairment of equity securities Q1 2024 Financial Highlights | Metric (in millions, except per share) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $57,255 | $46,517 | 23% | | Adjusted Revenues | $57,247 | $46,479 | 23% | | Shareholders' Net (Loss) Income | $(277) | $1,267 | N/M | | Adjusted Income from Operations | $1,875 | $1,618 | 16% | | Diluted EPS (GAAP) | $(0.97) | $4.24 | N/M | | Adjusted EPS | $6.47 | $5.41 | 20% | - The Shareholders' net loss was primarily driven by the impairment of equity securities, which was partially offset by strong adjusted income from operations[184](index=184&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$4.8 billion** in operating cash flow in Q1 2024, actively managing capital through **$4.5 billion** in new debt issuance, **$1.8 billion** in existing note repurchases, and **$3.4 billion** in share repurchases - In February 2024, the company issued **$4.5 billion** in new senior notes and used proceeds to repurchase **$1.8 billion** of existing notes and repay maturing debt[226](index=226&type=chunk) - The company repurchased **10.1 million** shares for approximately **$3.4 billion** in Q1 2024, including shares from a **$3.2 billion** Accelerated Share Repurchase (ASR) program[219](index=219&type=chunk)[220](index=220&type=chunk) - In April 2024, the company replaced its existing credit agreements, increasing total revolving credit capacity to **$6.5 billion**[215](index=215&type=chunk) [Segment Reporting](index=42&type=section&id=Segment%20Reporting) This section details the performance of the company's main business segments, with Evernorth Health Services seeing a **28% revenue increase** driven by higher pharmacy claims volume, and Cigna Healthcare's pre-tax adjusted income growing **20%** due to a lower medical care ratio and effective expense management Evernorth Health Services Segment Results (Q1 2024 vs Q1 2023) | Metric (in millions) | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Adjusted Revenues | $46,226 | $36,179 | 28% | | Pre-tax Adjusted Income from Operations | $1,360 | $1,320 | 3% | | Pharmacy Claim Volume | 513 | 381 | 35% | Cigna Healthcare Segment Results (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Adjusted Revenues (in millions) | $13,277 | $12,718 | 4% | | Pre-tax Adjusted Income from Operations (in millions) | $1,340 | $1,115 | 20% | | Medical Care Ratio | 79.9% | 81.3% | (140) bps | | Total Medical Customers (in thousands) | 19,184 | 19,473 | (1)% | [Investment Assets](index=46&type=section&id=Investment%20Assets) The company's investment portfolio, excluding separate accounts, totaled **$18.5 billion** as of March 31, 2024, a decrease driven by a **$1.8 billion** impairment in equity securities, while the **$9.5 billion** debt securities portfolio remains **85% investment grade** but is in a net unrealized depreciation position Investment Portfolio Composition (in millions) | Investment Type | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Debt securities | $9,480 | $9,855 | | Equity securities | $1,571 | $3,362 | | Commercial mortgage loans | $1,562 | $1,533 | | Other long-term investments | $4,301 | $4,181 | | **Total** | **$18,474** | **$20,348** | - The debt securities portfolio carrying value decreased due to net sales and rising market interest rates, resulting in a net unrealized depreciation position[274](index=274&type=chunk) - The commercial mortgage loan portfolio of **$1.6 billion** consists of approximately **50 fixed-rate loans** and has no exposure to regional shopping malls and less than **30% exposure** to office properties[275](index=275&type=chunk)[129](index=129&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's primary market risk exposures, which are interest rate risk and equity price risk, noting an increase in interest rate risk due to higher fair value of long-term debt and a decline in equity price risk exposure following the impairment of certain equity securities - Interest rate risk increased; a hypothetical **100 basis point** rate increase would decrease the fair value of long-term debt by approximately **$2.0 billion**, up from **$1.8 billion** at year-end 2023[120](index=120&type=chunk) - Equity price risk exposure decreased; a hypothetical **10% decline** in equity market prices would decrease the fair value of the company's equity securities by approximately **$0.2 billion**, down from **$0.3 billion** at year-end 2023[121](index=121&type=chunk) [Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation conducted by management, including the CEO and CFO, the company concluded that its disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective to ensure timely and accurate reporting as required by the SEC[107](index=107&type=chunk)[109](index=109&type=chunk) - No material changes were made to the company's internal control over financial reporting during the first quarter of 2024[110](index=110&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the disclosures in Note 16 regarding legal matters, with a key ongoing matter being the litigation between Express Scripts and Elevance, where Elevance is appealing a court's summary judgment that dismissed its **$14.8 billion** pricing claims against Express Scripts - The company is involved in various legal and regulatory matters, with the most significant disclosed case being the ongoing litigation with Elevance, where Elevance is appealing the dismissal of its pricing-related claims[157](index=157&type=chunk)[127](index=127&type=chunk) [Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023, and investors are directed to that filing for a comprehensive discussion of potential risks - The report states there are no material changes from the risk factors discussed in the 2023 Form 10-K[290](index=290&type=chunk)[128](index=128&type=chunk) [Issuer Purchases of Equity Securities](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2024, The Cigna Group repurchased a total of **10.4 million** shares, including shares under its publicly announced program and an initial delivery of **7.6 million** shares from its Accelerated Share Repurchase (ASR) agreements, with **$7.3 billion** remaining under the program as of May 1, 2024 Share Repurchase Activity (Q1 2024) | Period | Total Shares Purchased | Average Price Paid/Share | | :--- | :--- | :--- | | Jan 1-31, 2024 | 253,716 | $303.91 | | Feb 1-29, 2024 | 9,832,165 | N/A (ASR) | | Mar 1-31, 2024 | 336,493 | $336.19 | | **Total** | **10,422,374** | **N/A** | - The February repurchase activity includes an initial delivery of **7.6 million** shares as part of a **$3.2 billion** ASR program[317](index=317&type=chunk) [Other Information](index=50&type=section&id=Item%205.%20Other%20Information) This section discloses that several of the company's executives and a director adopted Rule 10b5-1 trading plans during the first quarter of 2024, established during an open trading window to manage pre-planned stock transactions - Rule 10b5-1 trading plans were adopted by: - Noelle Eder (EVP, Global CIO) on Feb 9, 2024 - Brian Evanko (EVP, CFO) on Feb 15, 2024 - Eric Palmer (EVP, Enterprise Strategy) on Feb 16, 2024 - Elder Granger (Director) on Mar 13, 2024[307](index=307&type=chunk)[318](index=318&type=chunk)[291](index=291&type=chunk) [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the quarterly report, including the Restated Certificate of Incorporation, a Supplemental Indenture for debt, officer offer letters, CEO and CFO certifications, and the Inline XBRL financial data files - A list of exhibits filed with the Form 10-Q is provided, including governance documents, debt agreements, certifications, and XBRL data[293](index=293&type=chunk)[309](index=309&type=chunk)

Cigna (CI) came out with quarterly earnings of $6.47 per share, beating the Zacks Consensus Estimate of $6.17 per share. This compares to earnings of $5.41 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 4.86%. A quarter ago, it was expected that this health insurer would post earnings of $6.52 per share when it actually produced earnings of $6.79, delivering a surprise of 4.14%.Over the last four quarters, the company has sur ...

[The Cigna Group Q1 2024 Earnings Release](index=1&type=section&id=The%20Cigna%20Group%20Q1%202024%20Earnings%20Release) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) The company reported strong Q1 2024 revenue and adjusted income, though a significant impairment loss on VillageMD equity securities led to a net loss Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenues | $57.3 billion | $46.5 billion | | Shareholders' Net (Loss) Income | ($0.3 billion) | $1.3 billion | | Shareholders' Net (Loss) Income per Share | ($0.97) | $4.24 | | Adjusted Income from Operations | $1.9 billion | $1.6 billion | | Adjusted Income from Operations per Share | $6.47 | $5.41 | - The reported shareholders' net loss was driven by a **non-cash after-tax investment loss of $1.8 billion** ($6.31 per share) from the impairment of VillageMD equity securities[1](index=1&type=chunk) - The company raised its full-year 2024 outlook for adjusted income from operations to **at least $28.40 per share**[1](index=1&type=chunk)[22](index=22&type=chunk) [Consolidated Performance](index=2&type=section&id=Consolidated%20Performance) Consolidated revenues grew 23% year-over-year driven by the Evernorth segment, alongside improved operating efficiency and a higher debt-to-capitalization ratio - **Total revenues increased by 23%** compared to Q1 2023, mainly due to substantial growth in the Evernorth Health Services segment from new large client acquisitions[43](index=43&type=chunk) SG&A Expense Ratio Comparison | Ratio | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | SG&A Expense Ratio | 6.5% | 7.6% | | Adjusted SG&A Expense Ratio | 6.4% | 7.6% | - The **debt-to-capitalization ratio rose to 44.3%** at the end of Q1 2024, up from 40.1% at year-end 2023, largely due to the timing of debt issuance for Accelerated Share Repurchase (ASR) agreements[44](index=44&type=chunk) [Customer Relationships](index=3&type=section&id=Customer%20Relationships) Total pharmacy customers surged by 25% to 122.8 million fueled by new sales, while total medical customers saw a slight decrease to 19.2 million Customer Relationships (in thousands) | Category | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Pharmacy Customers | 122,767 | 98,570 | | Total Medical Customers | 19,184 | 19,780 | - The **25% increase in pharmacy customers** since December 31, 2023, was a result of new sales and the continued expansion of existing relationships[25](index=25&type=chunk) - The decrease in total medical customers was primarily driven by a reduction in Individual and Family Plans customers due to targeted pricing actions[6](index=6&type=chunk) [Segment Performance](index=4&type=section&id=Segment%20Performance) Both Evernorth Health Services and Cigna Healthcare segments delivered strong results, with significant revenue growth in Evernorth and improved profitability in Cigna Healthcare - Evernorth Health Services' **adjusted revenues grew 28%** in Q1 2024 vs Q1 2023, reflecting large client wins and strong organic growth[49](index=49&type=chunk) - Cigna Healthcare's **adjusted income from operations (pre-tax) increased 20%** relative to Q1 2023, primarily driven by a lower MCR[52](index=52&type=chunk) [Evernorth Health Services](index=4&type=section&id=Evernorth%20Health%20Services) Adjusted revenues grew 28% to $46.2 billion driven by new clients, though pre-tax adjusted margin compressed due to onboarding costs and strategic investments Evernorth Financials (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Adjusted Revenues | $46,226 | $36,179 | | Adjusted Income from Operations, Pre-Tax | $1,360 | $1,320 | | Adjusted Margin, Pre-Tax | 2.9% | 3.6% | - Revenue growth was driven by several large client wins and continued expansion of existing relationships, along with strong organic growth in Specialty and Care Services[49](index=49&type=chunk) - The 3% increase in adjusted pre-tax income reflects growth in Specialty and Care Services, partially offset by planned investments for new client onboarding and advancing digital and care solutions[28](index=28&type=chunk) [Cigna Healthcare](index=5&type=section&id=Cigna%20Healthcare) Adjusted revenues grew 4% to $13.3 billion, with a 20% increase in pre-tax adjusted income due to an improved Medical Care Ratio Cigna Healthcare Financials (in millions) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Adjusted Revenues | $13,277 | $12,718 | | Adjusted Income from Operations, Pre-Tax | $1,340 | $1,115 | | Adjusted Margin, Pre-Tax | 10.1% | 8.8% | | Medical Care Ratio (MCR) | 79.9% | 81.3% | - Adjusted revenue growth of 4% was attributed to premium rate increases designed to cover expected rises in underlying medical costs, as well as business mix[11](index=11&type=chunk) - The **MCR improved to 79.9%** from 81.3% in Q1 2023 due to effective pricing execution, affordability initiatives, and favorable business mix[30](index=30&type=chunk) [Corporate and Other Operations](index=5&type=section&id=Corporate%20and%20Other%20Operations) This segment reported a pre-tax adjusted loss from operations of $391 million, largely consistent with the prior year's loss of $399 million Adjusted Loss from Operations, Pre-Tax (in millions) | Period | Amount | | :--- | :--- | | Q1 2024 | ($391) | | Q1 2023 | ($399) | - The Corporate segment reflects interest expense and amounts not allocated to operating segments, including intersegment eliminations and results from run-off operations[17](index=17&type=chunk) [2024 Full-Year Outlook](index=6&type=section&id=2024%20Full-Year%20Outlook) The company raised its full-year 2024 adjusted EPS forecast to at least $28.40 and increased its outlook for Cigna Healthcare's pre-tax adjusted income Full Year 2024 Projections | Metric | Projection | Change from Prior | | :--- | :--- | :--- | | **Consolidated** | | | | Adjusted Revenues | at least $235,000M | Unchanged | | Adjusted Income from Operations | at least $8,065M | +$40M | | Adjusted EPS | at least $28.40 | +$0.15 | | **Cigna Healthcare** | | | | Adj. Income from Operations, Pre-Tax | at least $4,775M | +$25M | | Medical Care Ratio | 81.7% to 82.5% | -10 bps at midpoint | - The outlook includes the impact of expected future share repurchases and anticipated 2024 dividends[13](index=13&type=chunk)[56](index=56&type=chunk) [Shareholder Activities](index=2&type=section&id=Shareholder%20Activities) The company repurchased 10.1 million shares for approximately $3.4 billion year-to-date through May 1, 2024, via open market and ASR agreements - From year-to-date through May 1, 2024, the company **repurchased 10.1 million shares for approximately $3.4 billion**[24](index=24&type=chunk) - The repurchases include an initial delivery of **7.6 million shares under Accelerated Share Repurchase (ASR) agreements**, with final settlement expected in Q2 2024[24](index=24&type=chunk) [Important Notes and Disclosures](index=7&type=section&id=Important%20Notes%20and%20Disclosures) This section defines key non-GAAP financial measures and includes a cautionary note regarding forward-looking statements and associated risks - **Adjusted income from operations** is a key non-GAAP measure that excludes net realized investment results, amortization of acquired intangible assets, and special items to present the underlying operational results[34](index=34&type=chunk) - **Adjusted revenues** is a non-GAAP measure defined as total revenues excluding special items and the company's share of certain realized investment results from its joint ventures[68](index=68&type=chunk) - The report contains a cautionary note that **forward-looking statements are subject to numerous risks and uncertainties**, and should not be relied upon as guarantees of future performance[61](index=61&type=chunk)[72](index=72&type=chunk)