Topics

Cigna Q4 profit takes hit due to medical costs

Cigna pulled in $1.4 billion in profit in Q4, a decrease that company officials say is due to elevated medical costs.

Jeff Lagasse, Editor

Photo: CasarsaGuru/Getty Images

The Cigna Group saw profits take a hit in the fourth quarter, reaching $1.4 billion, while it struggled with elevated medical costs, officials said during an earnings call today.

Cigna's profits for the year were $3.4 billion, a decrease from the $5.2 billion in profit logged in 2023.

Chairman and CEO David Cordani said higher stop-loss medical costs were the primary factor in the company's lower-than-expected performance.

"While higher medical costs in our stop loss product impacted fourth quarter earnings, we are taking corrective actions to address these near-term pressures and we are simultaneously taking steps to further advance our long-term growth strategy," said Cordani. "Through a dynamic environment, we are continuing to focus on building a sustainable model for healthcare by addressing the areas that matter most to our patients and clients, including greater transparency, support, and value." 

Cigna's medical loss ratio was 87.9% in the quarter, up from 82.2% in Q4 2023. Medical loss ratio was 83.2% for the year, compared to 81.3% in 2023.

The company's adjusted income from operations for Q4 was $1.8 billion, or $6.64 per share, compared with $2 billion, or $6.79 per share, for Q4 2023. The decrease, said Cigna, was primarily driven by lower contributions from Cigna Healthcare due to higher stop-loss medical costs – which were partially offset by strong contributions from Evernorth Health Services, particularly within Specialty and Care Services.

"Our results were below expectations," said Cordani. "We are taking corrective actions on this near-term pressure and expect to recapture margin within two years. This is a situation we are monitoring."

WHAT'S THE IMPACT?

Cigna's Evernorth Health Services division finished the year strong. Fourth quarter 2024 adjusted revenues and adjusted income from operations, pretax, increased 33% and 14%, respectively, relative to Q4 2023. For the full year, adjusted revenues and adjusted income from operations, pretax, increased 32% and 9%, respectively, relative to 2023.

For pharmacy benefit services, fourth quarter adjusted revenues increased 47% and full-year 2024 adjusted revenues increased 46%, which Cigna attributed to client wins and organic growth. Fourth quarter and full-year adjusted income from operations, pretax, increased 5% and 3% relative to fourth-quarter and full-year 2023.

Specialty and care services' fourth quarter and full-year 2024 adjusted revenues both increased 18%.

Despite the strong showing by Evernorth, Cigna Chief Financial Officer Brian Evanko said there's still work to do to right the financial ship for the larger company.

"We started the year strong, but enterprise earnings fell short of our expectations," said Evanko. "We are taking corrective action to recapture margin, and we remain confident in the strength of our business despite this short-term pressure."

THE LARGER TREND

The previously announced divestiture of the Company's Medicare businesses to Health Care Service Corporation (HCSC) is expected to close in the first quarter of this year. There is no financing condition.

Last year Cigna entered into a definitive agreement to sell its Medicare Advantage, Supplemental Benefits, Medicare Part D and CareAllies businesses to HCSC for about $3.7 billion. As part of the transaction, Cigna and HCSC have agreed to enter into a four-year services agreement under which Evernorth will continue to provide pharmacy benefit services to the Medicare businesses when the transaction closes.

At the end of 2023, Cigna and Humana reportedly ended previous talks to merge after failing to agree on a price.

Jeff Lagasse is editor of Healthcare Finance News. Email: jlagasse@himss.org Healthcare Finance News is a HIMSS Media publication.

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.