The Cigna Group (CI) Q1 2024 Earnings Call Transcript Highlights: Robust Performance Amid Challenges

• Total Revenue: $57.3 billion

• Adjusted Earnings Per Share (EPS): $6.47

• Full Year Adjusted EPS Guidance: Increased to at least $28.40

• Medical Care Ratio: 79.9%

• Cash Flow from Operations: $4.8 billion

• Evernorth Revenue: $46.2 billion

• Evernorth Pretax Adjusted Earnings: $1.4 billion

• Cigna Healthcare Adjusted Revenues: $13.3 billion

• Cigna Healthcare Pretax Adjusted Earnings: $1.3 billion

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The Cigna Group reported strong financial results with total revenue of $57.3 billion and adjusted earnings per share of $6.47 for the first quarter.

• The company increased its guidance for full year adjusted earnings per share to at least $28.40, reflecting confidence in continued strong performance.

• Evernorth Health Services showed strong results, particularly in Pharmacy Benefit Services and Specialty Care, demonstrating growth and effective execution.

• The Cigna Group's focus on innovative solutions like EnCircleRx for Cardiodiabesity and biosimilars in specialty pharmaceuticals is driving greater access and affordability.

• The company's strategic investments in areas like accountable care, virtual, home-based, and behavioral care are showing positive progress and expansion.

Negative Points

• The Cigna Group recorded a shareholders' net loss of $277 million in the first quarter, primarily due to a noncash after-tax net realized investment loss of $1.8 billion related to a VillageMD impairment charge.

• There were disruptions in claim submissions and payments due to issues with Change Healthcare, impacting first quarter operations.

• The company experienced incremental operating expenses due to the Change Healthcare incident, which were reflected in the first quarter results.

• Despite strategic pricing actions to improve margins, the individual exchange business is tracking to end slightly below the target profit margin range of 4% to 6%.

• The Specialty and Care Services margin within Evernorth was down year-over-year, showing some variability and impacting the overall margin profile for the quarter.

Q & A Highlights

Q: Can you discuss the early view on membership for the PBM and RFP cycle into 2025, particularly any significant wins or losses? A: David Michael Cordani, President, CEO & Chair of the Board, The Cigna Group, noted that the selling season is off to a good start with strong client retention expected to continue. Eric Paul Palmer, CEO, President & Director of Evernorth Health, added that while the market remains competitive, they are optimistic about their positioning and do not foresee major headwinds or tailwinds.

Q: Regarding the Specialty business and the biosimilar opportunity, particularly with HUMIRA, can you discuss the profitability and market share implications? A: David Michael Cordani explained that the specialty market is large and growing, with Cigna's capabilities well-aligned to benefit from this trend. Eric Paul Palmer elaborated that their unique capabilities in managing complex therapies position them to drive superior value and attractive margins.

Q: Could you elaborate on MLR trends this quarter and provide insights into the performance of individual ACA margins? A: Brian C. Evanko, Executive VP, CFO and President & CEO for Cigna Healthcare, highlighted that the medical care ratio performed better than expected, with favorable trends in the U.S. employer book. He also noted that individual exchange margins are improving towards the target range of 4% to 6%.

Q: What are the key priorities for VillageMD following the impairment, and how does this align with Cigna's investment strategy? A: David Michael Cordani reassured that the strategic direction with VillageMD remains unchanged despite the impairment, focusing on established markets and leveraging Cigna's value-based care model to enhance performance.

Q: Can you provide an update on capital deployment strategies, particularly regarding share repurchases and potential M&A activities? A: David Michael Cordani outlined that capital priorities include internal reinvestment, maintaining an attractive dividend, and strategic M&A, with a significant portion of discretionary cash flow directed towards share repurchases. Brian C. Evanko confirmed plans to complete at least $5 billion in share repurchases by mid-year.

Q: How is the GLP-1 program performing, and what are the characteristics of employers interested in value-based care solutions? A: Eric Paul Palmer discussed the traction of the GLP-1 program, noting its unique value proposition and guaranteed outcomes for clients. David Michael Cordani added that their value-based care strategies resonate broadly with employers, particularly larger ones focused on specific care states and benefit designs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.