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G500-2023-Cigna

The insurer and health services company had a relatively slow year for revenue growth, but profits, at $6.7 billion, were up 24.3%. 
<ul> 
 	<li>Cigna has been working to expand “value-based” care models, which are designed to emphasize primary care and preventive medicine. To strengthen such care, Cigna entered into a strategic partnership with Walgreens-owned primary care provider VillageMD.</li> 
 	<li>Evernorth, Cigna’s service-provider arm, which also oversees the new VillageMD investment, has brought the company growth over recent years, and focuses on value-based care.</li> 
 	<li>Cigna Healthcare, the health-insurance benefits arm of the business, also expanded its margins and customer base.</li> 
</ul>

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F500 2023-Cigna Group

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G500 2022-30-Cigna

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This year’s Fortune 500 marks the 68th running of the list.

F500 2022 Cigna

Global health services company Cigna had an up-and-down year. Despite bringing on an additional 8.4 million customers in its pharmacy division in 2021 and an 8.5% rise in sales, Cigna’s profits plummeted by 36% from 2020, to $5.37 billion. After years of litigation, an appeals court rejected Cigna’s attempt to claim a $1.85 billion breakup fee from Anthem in the wake of a merger agreement that fell apart a few years ago.

This year’s group delivered stellar revenue and profit growth, but it underperformed the broader stock market.

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G500-2021-028-Cigna

If there’s one element you need to home in on to understand health insurer Cigna’s 2020 success, Evernorth is a pretty good place to start. The company climbed more than 50 spots on the Fortune 500 after completing its merger with pharmacy benefits manager Express Scripts. That sent its revenues skyrocketing—and then the pandemic hit. How did Cigna manage to deal with that buzz saw? The Evernorth subsidiary, which encompasses Express Scripts, brought in $30.6 billion in the first quarter of 2021 and moved to expand its plan memberships in five more states and 67 new counties. It doesn’t hurt that Evernorth acquired the virtual care platform MDLive at the beginning of 2021—at a time when telehealth demand is soaring.

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F500-2021-013-Cigna

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FGC 2021-Cigna

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G500-2020-032-Cigna

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F500-2020-013-Cigna

Health insurer Cigna ranked 65th on the Fortune 500 last year. This year? A meteoric rise to 13th, the result of its merger with pharmacy benefits giant Express Scripts—and another instance of the trend toward vertical integration among large health care companies. The Express Scripts integration, completed in December 2018, fueled revenue growth that exceeded even Cigna’s own pre-merger expectations: Adjusted revenues for 2019 soared to $140 billion, compared with the $131 to $133 billion originally forecast.

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Fastest-Growing-Companies-2020-59-Cigna

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Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Fastest-growing Companies

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With roots dating back to 1792, the Cigna Group is an insurance and related services company serving millions of clients in the United States. Its Evernorth Health Services branch offers pharmacy benefits, home delivery, distribution, management solutions for plans, and health care providers. Meanwhile, the company’s Cigna Healthcare segment provides medical, behavioral health, dental, and other products to customers. In 2023, the business underwent a rebrand; Cigna Corp. changed its name to the Cigna Group, and its two segments became the primary business units.

Q2 2026

Q1 2026

Q4 2025

Q3 2025

Q2 2025

Q1 2025

Q4 2024

Cigna Group (CI): Company Profile, Stock Price, News, Rankings

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Cigna Group

cigna group

Ladies and gentlemen, thank you for standing by for The Cigna Group's 4th Quarter 2024 Results Review. At this time, all callers are in a listen only mode. We will conduct a question and answer session later during the conference and review procedures on how to enter queue to ask questions at that time. As a reminder, ladies and gentlemen, this conference, including the Q and A session is being recorded. We'll begin by turning the conference over to Ralph Jacoby.

Thank you. Good morning, everyone. Thanks for joining today's call. I'm Ralph Giacobbe, Senior Vice President of Investor Relations. With me on the line this morning are David Cordani, the Cigna Group's Chairman and Chief Executive Officer Brian Evanko, Chief Financial Officer of the Cigna Group and President and Chief Executive Officer of Cigna Healthcare and Eric Palmer, President and Chief Executive Officer of Evernorth Health Services.

In our remarks today, David and Brian will cover a number of topics, including our Q4 and full year and our financial outlook for 2025. Following their prepared remarks, David, Brian and Eric will be available for Q and A. As noted in our earnings release, when describing our financial results, we use certain measures, including adjusted income from operations and adjusted revenues, which are not determined in accordance with accounting principles generally accepted in the United States, otherwise known as GAAP. A reconciliation of these measures to the most directly comparable GAAP measures, shareholders' net income and total revenues respectively is contained in today's earnings release, which is posted in the Investor Relations section of thesignogroup.com. We use the term labeled adjusted income from operations and adjusted earnings per share on the same basis as our principal measures of financial performance.

In our remarks today, we will be making some forward looking statements, including statements regarding our outlook for 2025 and future performance. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. A description of these risks and uncertainties is contained in the cautionary note to today's earnings release and in our most recent reports filed with the SEC. Regarding our results in the Q4, we recorded net after tax special item charges of $64,000,000 or $0.23 per share. Details of the special items are included in our quarterly financial supplement.

Additionally, please note that when we make perspective comments regarding financial performance, including our full year 2025 outlook, we'll do so on a basis that includes the potential impact of future share repurchases and anticipated 2025 dividends. With that, I'll turn the call over to David.

Thanks, Ralph. Good morning, everyone, and thank you for joining our call. Today, I'll discuss key headlines from the quarter and our full year 2024 performance. I'll also share more on the actions we are accelerating to build a better and more sustainable healthcare model. And then Brian will provide additional details on our financial results and our 2025 outlook.

And we'll take your questions. Before I get into our earnings, I want to start by sharing a few comments on the current environment. During my tenure as a leader of the Cigna Group, there have been a number of periods in our industry where we faced unique challenges, whether the financial crisis, the introduction of the ACA, the global pandemic or several significant shifts in political, regulatory and societal landscape. At the Cigna Group, our resilience and the durability of our business models have allowed us not only to overcome obstacles, but to lead through change while focusing on achieving our long term objectives for sustainable growth. In early December, we were all witnessed to the tragic murder of Brian Thompson, a leader at the UnitedHealth Group.

The past several weeks have further challenged us to even more intensely listen to the public narrative about our industry. At the Cigna Group, we are further accelerating improvements and innovations to increase transparency, expand support and drive even greater accountability. I'll come back to this important topic in a few moments. With that, let me start with a summary of our 2024 results. We delivered full year revenue growth of 27% to approximately $247,000,000,000 Full year adjusted earnings per share of $27.33 representing an increase of 9% year over year, but short of our expectations.

We returned $8,600,000,000 to shareholders through dividends and share repurchase. And our Board of Directors declared an 8% increase to our quarterly dividend to $1.51 per share and increased our share repurchase authority to $10,300,000,000 The Cigna Group also maintained a strong capital position in 2024. We're also nearly complete with the sale of our Cigna Healthcare Medicare business to HCSC and we continue to expect to close in the Q1 and plan to use the majority of the proceeds for share repurchase. Now turning to our business results and actions, I want to cover just a few headlines. First, our 4th quarter results were below expectations due to higher than expected medical costs in our stop loss product within Cigna Healthcare.

We are taking corrective actions on this near term pressure and expect to recapture margin over the next 2 years. This is a specific issue we identified and are mitigating and I'll reinforce that we believe our U. S. Employer and Cigna Healthcare businesses are strong and remain well positioned and we're confident in our long term growth strategy. Brian will discuss this in greater detail in his remarks.

The second headline from the quarter is that Evernorth continues to drive strong results in line with our expectations, primarily driven by our Specialty and Care Services segment. Our continued leadership of biosimilars is a good example of how we are addressing some of the biggest challenges facing clients and patients today. We began dispensing our Humira interchangeable biosimilar last summer to eligible Accredo patients with $0 cost to our patients. We are pleased that biosimilar use for eligible Humira scripts reached nearly 50% by year end 2024. We took another step forward as we announced that we will be in offering an interchangeable Stelaro biosimilar, again for a $0 cost to our patients.

Looking forward, we expect approximately $100,000,000,000 of specialty drug spend in the U. S. Will be subject to biosimilar and generic competition over the next 5 years. Our Humira and Stelara biosimilar offerings are just the start of this opportunity and Accredo is well positioned to lead and continue to deliver real savings for clients, customers and patients. Now stepping back, prescription drug coverage is the most frequently used healthcare benefit.

On average, it's used about 15 times per year per person. And how our nation and industry captures the full promise of prescription drug innovation while addressing affordability has been subject to continued debate. Pharmacy benefit managers are essential in helping patients access medications at fair and affordable prices. In fact, approximately 80% of Express Scripts patients spend less than $100 out of pocket per year for the prescriptions. Yet we recognize for those Express Scripts patients who paid more than $100 for some it's too high.

For example, consider the increased use of GLP-1s in the United States. It is the number one driver of drug trend across employers of all sizes since 2024. Despite these medications being relatively cheap to produce, Americans are paying prices that are multiples higher for GLP-1s compared to other countries, even with full pass through of rebates. Said otherwise, even including all discounts and rebates, the end result is that the U. S.

Costs are multiples higher than other OECD countries. This is not acceptable nor sustainable. As for innovations, led by Evernorth and Express Scripts, we are proud that last year our EncirpalRx solution grew to approximately 8,000,000 lives enrolled. We are supporting the best possible patient outcomes by providing those on GLP-1s additional lifestyle support and tools to help sustain long term improvement. Now the next headline I want to touch on a bit more is the current environment.

We have long been on a path to evolve and drive continuous improvement. As we step into 2025, we have further strengthened our urgency and resolve on this path. That means we are accelerating investments that will positively impact the way our customers and patients experience healthcare. To that end, this week we announced actions we are taking in Express Scripts, our pharmacy benefit service business within Evernorth. Our commitment will help patients directly benefit further from the negotiations we drive to lower out of pocket costs as well as work to further enhance transparency.

Let me briefly recap the announcements. Going forward, our standard products will provide patients lower prices at the pharmacy counter, protecting them from paying full list prices for drugs and they will fully benefit from our lower net negotiated prices. Next, patients will also have improved predictability, especially and importantly in their deductible phase by receiving the benefit of Express Scripts negotiated savings like their employer does. We will also expand the benefit summaries and disclosures we provide. Patients will receive a personalized summary that details our annual total prescription drug costs, plan paid amounts and the savings we delivered.

And plan sponsors will also receive an enhanced report beyond what Express Scripts already provides, including additional transparency on costs and pharmacy claim level insights. We know that more can be done within our health plan offering as well for customers and patients as well as clinical partners to further ease access to care, timeliness and expand support programs. More specifically Cigna Healthcare will soon be announcing steps to improve value and address patient points of friction. Our focus is on making higher authorizations faster and simpler and expanding access to advocates for those facing complex health conditions to help them navigate every stage of their care journey. These initiatives will require that costs, but we firmly believe these are critical actions for the benefit of customers and patients.

We will continue to take a prudent approach to these and future Cigna Healthcare and Evernorth actions in the weeks months ahead. As we are determined to continue to evolve for the benefit of those we serve and build a more sustainable healthcare model. Now let me briefly summarize. Against the backdrop of a dynamic and challenging environment, in 2024, we delivered full year adjusted earnings per share of $27.33 and we returned $8,600,000,000 to shareholders through dividends and share repurchase. Looking ahead to 2025, our EPS outlook of at least $29.50 reinforces the sustained growth and strength of our company and we are focused on taking the prudent steps necessary to ensure our company is well positioned for future growth.

And we remain confident in our long term 10% to 14% growth target fueled by our differentiated capabilities and portfolio of businesses. Finally, we recognize the need for accelerated positive change in our healthcare system to make it simpler and more affordable for everyone. And the Cigna Group is committed to continuing to take actions to drive further accountability and transparency as well. With that, I'll turn the call over to Brian.

Thank you, David. Good morning, everyone. Today, I'll review Cigna's 4th quarter and full year 2024 results and I'll provide our outlook for 2025. For full year 2024, we reported consolidated adjusted revenues of $247,100,000,000 adjusted after tax earnings of $7,700,000,000 and adjusted earnings per share of $27.33 Our performance within the Evernorth Health Services segment ended the year strong with particular momentum in specialty and care services. Despite this, our enterprise earnings results fell short of our expectations driven by higher than expected medical costs and our stop loss products within the Cigna Healthcare segment.

This resulted in a full year medical care ratio of 83.2 percent which was above our guidance range. We are taking corrective action to recapture margin and we remain confident in the long term strength of our business despite the short term pressure. Now more specific to Cigna Healthcare's 4th quarter results, 4th quarter 2024 revenues were $13,300,000,000 pre tax adjusted earnings were $511,000,000 and the medical care ratio was 87.9%. As I noted, 4th quarter earnings fell below our expectations as we observed elevated medical costs in stop loss. Results of our other products were in line with expectations exhibiting a continuation of elevated trends that we had seen throughout the year.

Taking a step back, it's important to note that stop loss is a unique product within our portfolio where employers limit their risk from unexpected high cost claims by transferring that risk for medical costs above a specific individual or aggregate employer dollar amount. We can see variability in this product at times, but we've generated and continue to expect attractive margins over the long term. This year variability was more pronounced in the Q4 as we had an increase in the number of high cost claimants related to cost pressures from the continued acceleration in the prescribing and use of specialty medications as well as elevated high acuity surgical activity. The 4th quarter also tends to be when more client settlements transpire including true ups for the full calendar year of activity. We had seen some of these trends emerge in the Q3 and began pricing for higher trend on high dollar claims, but did not capture the full extent of this trend acceleration that materialized in the Q4.

And as a result, we expect a slightly higher MCR for stop loss in 2025. While this negatively impacts near term margin, we expect to recapture approximately 100 basis points of margin in the overall Cigna Healthcare segment over the next 2 years with the majority in 2026 and the remaining in 2027. We will do this by balancing pricing action, affordability initiatives, operating cost efficiency and continued investments. Now turning to Evernorth, 2024 highlighted another year of sustained growth, particularly within the Specialty and Care segment, highlighting the attractiveness of our market leading clinical capabilities and innovative solutions that create affordability for customers and patients amidst the growing trend of pharmacological innovation. Adjusted revenues for Q4 2024 grew 33 percent to $53,700,000,000 and pretax adjusted earnings grew 14% to $2,100,000,000 in line with expectations.

Moving to our businesses within Evernorth, Specialty and Care Services adjusted revenue grew 18% to $23,500,000,000 and adjusted earnings grew 27% to $948,000,000 This continues the pattern observed from last quarter, which reflects growth across our specialty businesses driven by higher utilization of specialty medications as well as a continued increase in the adoption of HUMIRA biosimilars. By the end of the Q4, we saw almost half of eligible HUMIRA scripts transition to biosimilars. Pharmacy Benefit Services also posted robust growth reflecting client wins and the continued demand for new drugs through our innovative products and solutions. Pre tax adjusted earnings increased to $1,200,000,000 as our differentiated capabilities continue to drive affordability and value to our patients, customers and clients. Overall, the 4th quarter capped another strong year for Evernorth with full year pretax adjusted earnings growing 9% for the year.

We are the industry leader in pharmacy benefit services and in specialty pharmacy and our strong 2024 performance gives us confidence for sustained attractive growth over the long term. Now turning to our 2025 outlook. First, I'd note that the divestiture of our Medicare businesses to HCFC remains on track to close in the Q1 and this is contemplated in our outlook. We expect full year 2025 consolidated adjusted revenues of at least $252,000,000,000 and we expect full year 2025 consolidated adjusted income from operations to be at least $7,900,000,000 or at least $29.50 per share. As David mentioned, we are accelerating investments that will positively impact the way our customers and patients experience healthcare.

Our outlook reflects up to $150,000,000 in costs for these initiatives split between Evernorth and Cigna Healthcare. When considering earnings seasonality, 2024 is not representative of typical patterns given the dynamics I referenced with our stop loss products. As such, we would expect the adjusted earnings per share pattern for 2025 to be more similar to 2023's pattern. Now turning to our 2025 outlook for each of our segments. In Evernorth, we expect full year 2025 adjusted earnings of at least $7,200,000,000 This represents year over year growth within our long term growth target range on a normalized basis.

Within Evernorth, we expect 1st quarter earnings to contribute slightly below 20% of full year Evernorth earnings. For Cigna Healthcare, we expect full year 2025 adjusted earnings of at least $4,100,000,000 This represents mid single digit year over year growth on a normalized basis. Within Cigna Healthcare, we expect approximately 55% of full year earnings to be in the first half of the year, slightly more weighted to the Q1. Assumptions in our Cigna Healthcare outlook for 2025 include our medical care ratio to be in the range of 83.2 percent to 84.2 percent. This reflects the expectation that our stop loss MCR continues to be above target levels for full year 2025.

We expect the Q1 2025 medical care ratio to be below the low end of the full year guidance range to reflect typical seasonal patterns. We expect approximately 18,100,000 total medical customers at year end, reflecting the divestiture of our Medicare businesses to HCSC, a reduction in individual exchange customers and growth within our U. S. Employer select and middle market segments. For the enterprise, we project an adjusted SG and A ratio of approximately 5.4% for 2025.

This percentage is lower in 2025, largely reflecting mix due to the absence of our Medicare businesses which carried a higher SG and A ratio compared to the consolidated average. And we expect the consolidated adjusted tax rate to be approximately 19%. Now moving to our 2024 capital management position and 2025 capital outlook. Our 4th quarter cash flow is quite strong and we finished full year by delivering $10,400,000,000 of cash flow from operations. In 2024, we repurchased 20,900,000 shares of common stock for approximately $7,000,000,000 In addition, the Board of Directors recently approved an increase of $6,000,000,000 in incremental share repurchase authorization, bringing the company's total share repurchase authorization to $10,300,000,000 as of December 31, 2024.

Finally, we returned $1,600,000,000 to shareholders via dividends in 2024. Now framing our 2025 capital outlook, we expect to deliver approximately $10,000,000,000 of cash flow from operations with the strength of our efficient service based model. We expect to deploy approximately $1,400,000,000 to capital expenditures and we expect to deploy approximately $1,600,000,000 to shareholder dividends, reflecting our quarterly dividend of $1.51 per share, an 8% increase on a per share basis. Our guidance assumes full year weighted average shares outstanding to be in the range of 266,000,000 to 270,000,000 shares. Our capital deployment priorities remain consistent with our long term framework.

We expect some debt pay down in 2025 as we look to bring our leverage ratio closer to our 40% target. As it relates to the sale of our Medicare businesses, we continue to expect a majority of proceeds will go towards share repurchase. Now to close, as we look to 2025 and beyond, we remain confident in our long term strategy and our ability to deliver sustainable growth through our differentiated portfolio of businesses. As David mentioned, we're operating in a highly dynamic environment. But as we've demonstrated in the past, we have a proven track record of meeting challenges and taking the actions to deliver affordable and innovative solutions for our customers and patients.

We're confident in our ability to deliver full year 2025 adjusted earnings of at least $29.50 per share, which we believe is prudent at this time given the dynamic environment. With that, we'll turn it over to the operator for the Q and A portion of the call.

Our first question comes from Justin Lake with Wolfe Research. Your line is open. You may ask your question.

Thanks. Good morning. I wanted to ask a couple of things on the stop loss business. First on the $7,000,000,000 of premium, I Was hoping you can give us some split between the aggregate versus specific stop loss premiums and then maybe tell us if there was any more margin pressure in one segment versus the other in the 4th quarter. And then wanted to just make sure I'm understanding the magnitude of the miss correctly here.

You talked about the 4th quarter miss being all stop loss. So I'm getting to like 1500 basis points in the Q4. Is that in the ballpark? And then I think you said your margins overall are 100 basis points higher because of this or lower that you'll recapture, which would seem to indicate stop losses off by about 5% given the percentage of revenue. Just trying to make sure I all just making sure I understand all of that correctly.

Good morning, Justin. It's Brian. A number of components to your question, so I'll do my best to capture as much of that as possible. Let me just start with a little bit of context on the stop loss business and then I'll try to get to your very specific questions there on my way through here. So obviously, we're disappointed by the shortfall that we reported in the Q4.

And as I mentioned in my prepared comments earlier, the vast majority of the shortfall was driven by our stop loss products within Cigna Healthcare and the rest of the company performed broadly as we expected. Now it's important to keep in mind that our stop loss product performance in the quarter is really more representative of the full year impact as it's an accumulation product reflecting 12 months of healthcare activity for a given individual or an employer. And we continue to feel very good about the long term fundamentals of our U. S. Employer portfolio and the stop loss products specifically.

And the shortfall that we're currently experiencing represents an embedded earnings opportunity for the future. And as we look back at 2024, the aggregate healthcare costs within the Cigna Healthcare portfolio were broadly in line with our expectations, reflecting the persistently elevated cost trend environment that I referenced. But the mix of those costs shifted more toward high cost claimants than we had expected, which has a disproportionate impact on the stop loss products. And given when we identified the magnitude of the 2024 stop loss pressure, we were not able to fully recognize this in our January 2025 renewal pricing as much of that pricing work was completed in the fall. Now, some of the later 2025 renewals will reflect the updated estimates, but the majority of the 2025 stop loss pricing will not capture that elevated cost structure.

So when you put all those pieces together, we would expect to see 100 basis points of margin improvement across the Cigna Healthcare portfolio by 20 27 with the majority of that to be captured in 2026. Now more specifically to your questions, when you think about the $6,700,000,000 of premium in our stop loss book of business, there's a mix of individual and aggregate stop loss in there. And there are a variety of attachment points and different client choices embedded in there. You can think of it as more tilted toward the individual versus the aggregate, but we have a wide range of stop loss offerings that are out there. And for full year 2024, the overall stop loss MCR ran in the low 90s in terms of the percentage, which you can think of as being a mid single digit percentage amount worse than our expectations had been in 2024.

So again that $6,700,000,000 of premium multiplied by a mid single digit percentage miss gets you about the earnings impact that we're seeking to recover over time on the stop loss portion of the portfolio. But importantly, the balance of the Cigna Healthcare portfolio ran broadly in line with expectations. Thanks for the question.

Thank you. Our next question comes from Steven Maxxer with Wells Fargo. Your line is open. You may ask your question.

Hi. Thanks for the question. I asked another one on stop loss. I guess, when you've gone through these cycles in the past, can you talk a little bit about how it's impacted retention and membership for the impact of accounts that have seen these kind of larger above trend increases for stop loss? And can definitely appreciate why it takes until at least 2026 to get meaningful improvement.

But when you're talking about some of this improvement leaking out into 2027 potentially, could you just help us understand a little bit why it can become even that far extended? Thank you.

Hi, Stephen. It's Brian again. So one thing that's critical to keep in mind as it relates to our stop loss portfolio is that we don't write standalone stop loss coverage. So our entire book of business reflects an integrated employer offering where we're providing the 1st dollar coverage alongside. So as a result, our overall relationship with the employer is multifaceted in nature and involves many products and solutions, which ends up creating numerous opportunities for value creation and the associated value capture.

And even with the stop loss claims pressure that we experienced in our 2024 results, our overall client level relationships are profitable for those employers who choose our stop loss offerings. When we look back historically over many years, decades in fact, we've been able to overcome the short term ups and downs of our stop loss portfolio and generate attractive long term returns. And our clients value these long term relationships and the associated budget certainty that our offerings can provide to them, which really is evidenced by the fact that well over 50% of our employer clients who choose our stop loss products have been clients of Cigna Healthcare for 5 years or more. So the shortfall in our 2024 results offers a substantial embedded earnings opportunity for the company and we're confident in our ability to execute against this, balancing the timing of margin recovery with client persistency.

Thank you. Our next question comes from Charles Rhyee with TD Cowen. Your line is open. You may ask your question.

Yes. Thanks for taking the question. Just related to sort of the stop loss again a little bit, you called out specialty meds at the start contributing to that. Is that related to GLP-1s at all? And related to that, as we think about the Evernorth guide going forward, you're starting at a 3% operating income growth starting point.

You finished 24% up 9%, which if I remember correctly right included on boarding costs related to Centene in the first half of the year. Anything to call out relative to 25% because otherwise it seems this part of the guidance seems pretty conservative, particularly given the growth you saw in specialty in the back half of twenty twenty four? Thanks.

Good morning, Charles, it's Brian. So as it relates to the stop loss specific drivers, which I think was the core of your first question, you can think of this as being a situation where we had a greater frequency of high dollar claimants than we had been expecting, particularly driven by high cost specialty pharmaceuticals and by high acuity surgical activity. Now within the specialty drugs, I would not point to GLP-1s as a driver of this. Think of it as more specialty injectables. So when you look at the nature of that, particularly for the stop loss books, it's drugs like KEYTRUDA or KREVUS, those sorts of specialty injectables that drove some of the upward pressure.

And then on the high acuity that drove some of the upward pressure. And then on the high acuity surgical side, think of that as more tilted to inpatient procedures, for example, oncology and cardiac oriented procedures. So that was really the core of the upward pressure on the stop loss products. Now as it relates to Evernorth's 2025 income outlook, I'd start by saying how pleased we are with the overall performance of that portion of the company. We delivered a strong result in 2024 as you noted in your question.

As it relates to 2025 specifically, our outlook for the income growth is within our long term growth rate range of 5% to 8% when a few adjustments are made. So specifically the absence of VillageMD net investment income, which was recorded in 2024 as well as the Evernorth share of stranded overhead from the Medicare divestiture. And then as I noted in my prepared comments, we have earmarked up to $150,000,000 across the company for incremental 2025 investments in patient and provider facing initiatives and our guidance reflects a portion of that spending in the Evernorth segment. So adjusting for these factors, we look forward to Evernorth delivering income growth within our long term average annual growth rate range. So overall, Evernorth performing well, we're positioned for another good year.

Thank you. Our next question comes from Lisa Gill with JPMorgan. Your line is open. You may ask your question.

Thanks very much and good morning. David, I wanted to go back to the comments that you made around Express Scripts and some of the offerings that you now have lowering the price at the counter, etcetera, and really tie that back to comments you've made in the past around roughly 20% of total profits coming from rebate retention. Can you talk about 2 things? 1, are clients shifting more where they want more of the rebate retention? And if so, how do we think about that impact to profitability over time?

And then secondly, the programs that you talked about, are those more of an opt in? So you're selling those into the marketplace. And I'm just curious around what you're seeing on the uptake side. So really two questions here, how I think about the future and if we have changes, what that could do to the profit of the model and then secondly the uptake around this?

Good morning Lisa, it's David. I'll start and I'm going to ask Eric to expand. I think your latter part of your comment and question was the summary you're seeking. At the enterprise level, we do not see this as a change to our profit model. So I'll come back to that headline in a moment.

We've worked for elongated period of time through innovation, through ongoing efficiency to continue to deliver more value while maintaining an attractive margin and by maintaining a stable low single digit margin, which we think is responsible given the nature of this book of business. Coming back up to the top, I'd ask you to not think that your statement was 20% of the profit is correlated to rebate retention. The vast majority of rebates are passed through today. The model has evolved rather rapidly through the vast majority of all rebates being passed through. We continue to offer choice in the marketplace.

There are instances where employers, large sophisticated employers or collective bargaining arrangement unions want to continue to use rebates a little differently, in their overall benefit program. And then to the core of the center part of your question, we're really excited about and I couldn't be more appreciative and proud of the innovation of our team with the most recent innovations we announced this week, which take even more precision to identify those patients who due to deductible phases or otherwise have some financial dislocation. As I noted 80% of all Express Scripts customers have less than $100 cumulative out of pocket through the course of the entire year. However, we recognize some have more and we need to bring more precision there and that's where some of the new innovations are targeted. So I'll ask Eric to expand a little bit more on those exciting innovations.

Great. Thanks, David and good morning, Lisa. As David noted, as you noted, we announced yesterday a couple of additional enhancements that just build on our track record of innovation to make medicines more affordable. So first, we announced that customers will not have to pay list price at the pharmacy counter regardless of where they're at with deductibles, our go forward approach will be to ensure that they get the benefits of the discounts we negotiate. 2nd, for customers who are in a phase of a deductible or co insurance plan work to ensure that they receive the same price as their underlying plan would pay.

And we also announced additional series of patient and plan sponsor level recording enhancements building on the transparency we deliver. So taken together, those are just another example set of examples in our track record and our history of continuing to bring innovations to market. And then the kind of last piece of your question, I'd expect this will be the default way that we bring these solutions to market for employers and like. As David noted, our clients undertake significant work to structure their benefits in a deliberate way, and we offer them choice in how they wish to structure them. But as in years past, rebate value that we share with our clients is continuing to increase and we're proud of the choices we're able to offer and the work that we do to bring improved affordability to Medi Sense to the millions of people we serve.

Thank you. Our next question comes from A. J.

Rice with UBS. Your line is open. You may ask your question.

everybody. Just to maybe get a little bit of clarification on a couple of points with respect to the 2025 guidance. I think now and when you gave some preliminary comments on Q3, I don't think you have incorporated this, but now you're incorporating the sale of the MA book by the end of the Q1 in the outlook as well as presumably some redeployment of that capital. I'm trying to figure out how much what is the underlying assumption around what that does to the earnings outlook of the company when you start to factor that in? Also, I think the other aspect of the 25% outlook was there was some pressure on the Evernorth margin in 2024 related to the big new contract wins that you were absorbing and that there was presumably going to be some favorable step up in 2025 as that those contracts that one big contract in fact matured a little bit.

Are you assuming some level of step up on that? Or are you now sort of assuming it's sort of steady state margin?

Good morning, AJ. It's Brian. So let me do my best with your questions here. The former in terms of the Medicare divestiture, as I mentioned earlier, on track to close in the Q1. We reflected that in the revenue and the income guide as well as the capital deployment expectations here for the year.

And you can think of it as about $12,000,000,000 of revenue from 2024 that will be obviously removed with the divestiture. We'll recognize a stub year here with 1 month of January revenue and then whenever the closing date happens to be in February March. As it relates to capital deployment, as I mentioned earlier, we expect to use the majority of the proceeds for share repurchase. That's reflected in our share count guide. And then relative to the other contributions, when you think about the Cigna Healthcare income guide, the removal of Medicare is reflected in that.

So maybe just to put a finer point on that, if you look at our segment income guide for Cigna Healthcare this year and you compare it to 2024, if you look at 2024's actual income and remove the contribution from the Medicare Financials, remove the stranded overhead from the divestiture and remove the favorable prior year development that we saw in 2024, the normalized Cigna Healthcare earnings would have been slightly below $4,000,000,000 in 2024. So that just gives you a basis to compare our 2025 outlook reflecting the removal of Medicare and the removal of the prior year development. We do not forecast future prior year development. As it relates to the client contribution in Evernorth and the guide that I walked through to the earlier question that Charles asked me. The implied normalized growth rate that I referenced being within our 5% to 8% long term growth rate range reflects the continued maturation of our large client contracts.

So it's in there. The relationship continues to be very strong across the teams and we're pleased with the overall financial contribution of that relationship.

Thank you. Our next question comes from Scott Fidel with Stephens. Your line is open. You may ask your question.

Hi, thanks. Good morning. Just wanted to sort of put the stop loss repricing efforts into some context. First, just curious around the fact that we know that this the stop loss pressures were not unique to Cigna. We did see data points during the quarter from other large stop loss carriers also discussing very similar effects.

So the first piece would be as you reprice the business in 2025 and into 26, do you think that the persistency of the clients may benefit from the fact that others in the market will also be needing to take similar pricing actions? And then when we think about the sort of the renewal cycle of the clients that typically take stop loss for Cigna, which has always been a bit more weighted towards selected in middle market, there's a different renewal cycle for those clients. They're not as entirely weighted to sort of Gen 1, for example. So basically, also if you could remind us for 2025 basically, walk us how much of the business you still have an opportunity to reprice on where you see these higher stop loss costs? Thanks.

Good morning, Scott. It's Brian. So as it relates to your first question in terms of the client relationships, the timing to recover etcetera and putting that into context. As I mentioned to the earlier question, I think Stephen had asked me, important to keep in mind these are all integrated client relationships where we have both the 1st dollar and the stop loss coverage. And if you look across the totality of the relationships, on average about 20% of a given client's cost is stop loss oriented in terms of the clients that choose to work with us on stop loss.

About on average 20% of it is stop loss. Some are higher, some are lower depending on how much risk appetite they have, how much risk they seek to transfer. So the point being, a point of overall claim cost is only 20% of that on the stop loss. So there's a little bit more of a buffer here as it relates to repricing in terms of the overall client persistency, which in our estimation gives us an advantage being an integrated stop loss carrier compared to the standalone stop loss carriers who might be competing up against this. Now your question on the renewal cycles, the way that our stop loss products happen to work, actually a little bit more tilted toward the beginning of the year.

So we have about 2 thirds of our stop loss premium that renews in the Q1, given that we also have large clients who purchase stop loss from us. So it's not quite as uniformly distributed throughout the calendar year as our select segment happens to be. And as a result of that, that's one of the primary reasons why we're not able to recapture more in 2025. But again, we have the confidence that will capture majority of that 100 basis points of Cigna Healthcare margin expansion in 2026 with any residual in 2027.

Thank you. Our next question comes from Erin Wright with Morgan Stanley. You may ask your question. Your line is open.

Great. Thanks. So you spoke to the buyback authorization increase, but how are you thinking about, I guess, capital deployment from an acquisition standpoint? And just any sort of change in your thought process around the regulatory environment on that front or just your broader framework and thought process around acquisitions? I guess has anything changed there?

Erin, good morning, it's David. First to frame the M and A question, our capital priorities remain intact and consistent in terms of how we deploy our capital in terms of supporting ongoing growth of the business including our CapEx, which we have a disciplined process attached to that. And then evaluating both strategic M and A and ongoing deployment of targeted M and A activities, which I'll come back to in a moment. And as both Brian and I noted, an attractive dividend sits in there as a part of it that continues to grow. Now specific to M and A, first our 3 growth platforms continue to perform well, and we just highlight and amplify how pleased we are overall with the sustained performance there and call out the specific significant growth opportunity we continue to see in the specialty and care platform.

By way of just our actions and our words lining up as we noted, we deployed in excess of $8,500,000,000 in 2024 mostly for share repurchase as well as with dividend payments and our capital outlook and our cash flow outlook of greater than 10% cash yield for 2025 remains attractive. So as we look forward, we will continue to evaluate strategic what we consider bolt on acquisitions that will advance our portfolio, but our ongoing growth of our core platforms will be the underlying driver and we will support that with ongoing share repurchase as we believe that is a prudent ongoing investment back into the organization and we'll evaluate those targeted bolt on acquisitions as they make good strategic sense for us.

Thank you. Our next question comes from Andrew Mok with Barclays. Your line is open. You may ask your question.

Cigna Group (CI) Q4 2024 Earnings Call Transcript

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