Cigna(US:CI)2024-05-02 15:10PART I - FINANCIAL INFORMATION Item 1. Financial Statements (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 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 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 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 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)1213 - 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 20252858 - 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 shares31649 - The company recognized a $1.8 billion impairment loss on its equity investment in VillageMD, which was recorded in Net realized investment losses36495 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) 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 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 operations184 Liquidity and Capital Resources 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 debt226 - 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) program219220 - In April 2024, the company replaced its existing credit agreements, increasing total revolving credit capacity to $6.5 billion215 Segment Reporting 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 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 position274 - 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 properties275129 Quantitative and Qualitative Disclosures About Market Risk 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 2023120 - 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 2023121 Controls and Procedures 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 SEC107109 - No material changes were made to the company's internal control over financial reporting during the first quarter of 2024110 PART II - OTHER INFORMATION Legal Proceedings 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 claims157127 Risk Factors 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-K290128 Issuer Purchases of Equity Securities 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 program317 Other Information 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, 2024307318291 Exhibits 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 data293309