Cigna(CI) - 2024 Q1 - Quarterly Results

The Cigna Group Q1 2024 Earnings Release Financial Highlights 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] - The company raised its full-year 2024 outlook for adjusted income from operations to at least $28.40 per share[1][22] Consolidated Performance 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] 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] Customer Relationships 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] - The decrease in total medical customers was primarily driven by a reduction in Individual and Family Plans customers due to targeted pricing actions[6] Segment Performance 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] - Cigna Healthcare's adjusted income from operations (pre-tax) increased 20% relative to Q1 2023, primarily driven by a lower MCR[52] Evernorth Health Services 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] - 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] Cigna Healthcare 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] - The MCR improved to 79.9% from 81.3% in Q1 2023 due to effective pricing execution, affordability initiatives, and favorable business mix[30] Corporate and Other Operations 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] 2024 Full-Year Outlook 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][56] Shareholder Activities 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] - 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] Important Notes and Disclosures 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] - 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] - 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][72]