CI Financial Analysis

Analysis Date: 1/31/2025

Business Model

Cigna generates revenue primarily through two segments: Evernorth Health Services (~60% of earnings) and Cigna Healthcare (~40% of earnings)

Revenue Sources

• Evernorth Health Services - Pharmacy Benefit Services revenues of $111.8B in 2024
• Evernorth Health Services - Specialty and Care Services revenues of $90.3B in 2024
• Cigna Healthcare - Premiums and fees from medical insurance and services of $52.9B in 2024

Revenue Distribution by Channel

• Pharmacy Benefit Services: $111.8B (45% of total revenue)
• Specialty and Care Services: $90.3B (37% of total revenue)
• Cigna Healthcare: $52.9B (21% of total revenue)

Income Statement Analysis

• Full year revenues increased 27% to $247.1B driven by significant growth in Evernorth Health Services
• Full year adjusted EPS grew 9% to $27.33 despite Q4 pressure from higher stop loss medical costs
• Q4 adjusted EPS declined 2% due to higher stop loss medical costs in Cigna Healthcare segment

Balance Sheet Analysis

• Strong cash position with $10.4B operating cash flow generated in 2024
• Shareholders' equity of $41.0B at year-end 2024
• Medical costs payable of $4.86B at year-end 2024, stable versus prior year

Cash Flow Analysis

• Generated $10.4B operating cash flow in 2024
• Returned $8.6B to shareholders through dividends and share repurchases in 2024
• Projects ~$10B operating cash flow for 2025

Capital Allocation

Company maintains balanced capital deployment strategy with ~20-25% to fund growth through capital expenditures, ~15% to dividends, and ~60-65% available for strategic M&A, share repurchase and debt repayment. Board increased share repurchase authorization by $6B to $10.3B total and raised quarterly dividend 8% to $1.51 per share.

Management Commentary

Strong performance in Evernorth segment with continued growth in specialty pharmacy

Taking corrective pricing actions to address stop loss medical cost pressures

Confident in long-term 10-14% EPS growth target

Overall Sentiment: Cautiously optimistic despite near-term stop loss pressure, focused on long-term growth strategy and value creation

Recommendation

Rating: Hold

Reason for Rating: While higher stop loss costs create near-term headwinds, long-term growth drivers remain intact

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/31/2025, 8:07:48 AM