The Cigna Group Earnings - Q1 2025 Analysis
Positives
- Pre-tax adjusted earnings were up 4% to $544 million as innovative capabilities continue to drive value and savings for patients, customers, and clients.
- The company delivered $65.5 billion in total revenue and grew adjusted EPS to $6.74 in Q1, and is raising its full-year EPS guidance estimate to at least $29.60.
- The company had strong results in Q1, while continuing to focus on delivering on its commitments to build a better, more sustainable healthcare model.
- The company had strong results in Q1, along with its long-term average annual income growth expectation of 8% to 12% for the high-growth part of the healthcare system.
- The company started 2025 with momentum and is pleased to report that in Q1, The Cigna Group had strong results.
Q&A Highlights - Q1 2025
Analyst asked about the opportunity to negotiate better prices with GLP-1 players and general coverage from an employer or ASO perspective.
David Michael Cordani, CEO of The Cigna Group, explained that the company has a comprehensive approach to the GLP-1 market, which includes EncircleRx, EnReachRx, and EnGuide programs. These programs address access, affordability, clinical safety, and longer-term lifestyle changes. The company has multiple formularies and network options available across its Evernorth platform, and it has a proven track record of dynamically managing the changing prescription drug landscape. The company also has a stable coverage level of 50% of employers providing coverage for weight management, which is relatively stable from 2024 to 2025.
Analyst asked about the company's selling season and how it affects smaller employers in an unsettled economic environment.
Brian C. Evanko, President of Evernorth, explained that the company is tracking toward mid-90s or better retention in its Express Scripts Pharmacy Benefit Services business. In the Cigna Healthcare portfolio, the company continues to view the national accounts market as one that will be a flat to shrinking market overall over time. The company's strategy in the national accounts space is to maintain its current share, and it's not seeing anything unique for 2026 that would cause it to deviate from that general pattern. He also highlighted that the company is seeing interest in more precise and personalized solutions, both in the form of network configurations and clinical programs. The company's Accredo specialty pharmacy business is well-positioned to address the need for specialty drugs, and the company's patient base within Accredo continues to grow through a combination of Accredo being added as a network option in other companies' PBMs, growth in its Express Scripts business, and more existing Cigna Healthcare patients being prescribed specialty drugs.
Analyst asked about the cost trend in the commercial book, specifically in the stop loss business, and if the company is able to recover the margin lost in 2024.
The company is tracking to its stop loss margin improvement plan, which aims to recoup the margin through 2025 and 2026. The plan involves incorporating a revised cost structure in later 2025 client renewals while preserving typical client retention levels. The company has seen progress in implementing this plan and expects to deliver against its expectations.
Analyst asked about the recourse for companies like Cigna that operate both PBMs and pharmacies, and in this case, a mail order specialty pharmacy, given the potential conflicts of interest.
The company disagrees with the core tenet of the bill and believes that the value creation is indisputable. The company advocates for fact-based engagement, client's voice, transparency, and innovation to maintain choice and affordability. The company is also willing to take necessary steps from a regulatory or litigious standpoint if needed.
Analyst asked about the status of the Stelara biosimilar and the rate and pace of its evolution.
The company is pleased to see the building momentum of biosimilars in the US, which was powered forward by Humira biosimilars. The company expects another $100 billion of specialty drug spend to be subject to competition for biosimilars and generics by 2030, representing a tremendous opportunity to reduce net costs for patients and clients. The company has a $0 patient out-of-pocket biosimilar option available for Stelara starting this month, leveraging the learnings from the Humira biosimilar launched last year. The company expects gradual growth in Stelara biosimilars over the balance of the year and further step up in 2026.
Analyst asked about the company's capital deployment strategy and M&A priorities.
The company's capital deployment strategy remains consistent, with a focus on supporting growth, returning excess capital to shareholders, and pursuing attractive M&A opportunities. The company's M&A priorities include strategic assets, financial attractiveness, and certainty of close. The company typically pursues bolt-on acquisitions, and has not identified any specific capabilities it needs to add.
Analyst asked about EncircleRx, EnReachRx, and EnGuide, and the company's GLP-1 strategy.
EncircleRx, EnReachRx, and EnGuide are designed to address the market needs of employers, patients, and pharmacies in the GLP-1 space. The company introduced EncircleRx in early 2024 to provide budget certainty for employers and address patient safety and supply concerns. The EnReachRx solution enhances clinical support and reimbursement stability for participating pharmacies, and the EnGuide solution provides specialized home delivery of GLP-1s. The company's GLP-1 strategy is focused on creating new value in the GLP-1 space through addressing access, affordability, clinical safety, and longer-term lifestyle changes.
Analyst asked about the funding mix of Cigna's Select Segment and the percentage of clients that take stop loss with the ASO versus a full-risk solution.
The company is agnostic when it comes to funding mix, and employers can choose which model they prefer. Among the 3 million or so clients that Cigna has, about half are in a fully insured model, and about half are in an ASO model. Those that pick an ASO or self-funded model typically buy stop loss protection around that, as they need budgetary protection and certainty.
Analyst asked about Cigna's point of view on the disrupted environment for Medicare Advantage and the growth of the space.
Cigna believes in the importance of the strength and overall value of the MA offering in the marketplace. The growth of the space has been indisputable, and the value seniors see is significant. Cigna serves a meaningful number of Medicare Advantage customers through its broad portfolio of Evernorth services, as well as through Accredo's direct service of other health plans. The rating environment is strained, and those in the marketplace are pressing for value and affordability. Cigna brings innovations to help health plan clients have the value of clinical continuity in support of SARS (00:57:14), as well as affordability and value.
Analyst asked about the contribution of the MA business to Cigna's MLR and whether it was a net drag on earnings in the quarter.
The extra month of the Medicare business increased Cigna's MCR by about 100 bps, and the impact on earnings was marginal, less than $20 million. The favorability came from ongoing businesses, and Cigna saw favorability both in earnings and embedded in the MCR for the ongoing businesses.
Analyst asked about the guidance for fiscal 2025 and whether it includes a degree of recession assumption.
The net effect of the Medicare business was about 80 basis points, absent the impact of the Medicare Advantage component. The approximately $20 million is the result of having the business for about a month longer than anticipated. The guidance for fiscal 2025 assumes a dynamic year
