What drove CI's earnings growth in 2024?

Cigna's 2024 earnings growth was driven by several key factors:

1. **Revenue Growth**: Total revenues increased by 27% to $247.1 billion. This growth was primarily fueled by strong performance in the Evernorth Health Services segment, which reflected significant contributions from its pharmacy benefit management business. Evernorth's adjusted revenues jumped by 36% to $52.64 billion, benefiting from large client wins and the expansion of its specialty pharmacy services.
2. **Pharmacy Benefit Management Unit**: The pharmacy benefit management (PBM) unit, operated under Evernorth, played a crucial role in boosting earnings. Cigna's PBM segment saw a substantial increase in revenue, with adjusted sales rising nearly 30% to $46.23 billion. This growth was supported by the addition of a major client, Centene, and the expansion of its specialty pharmacy services. The company's ability to negotiate after-market discounts from drug manufacturers and manage prescription drug benefits for health insurance plans contributed to this growth.
3. **Lower Medical Costs**: Cigna experienced lower-than-expected medical costs, which helped improve earnings. The medical care ratio, the percentage of premiums spent on medical care, improved to 79.9% for the first quarter. This ratio was better than analysts' expectations, indicating effective cost management despite the industry-wide pressure of rising medical expenses.
4. **Divestitures and Strategic Shifts**: Cigna's decision to divest its Medicare Advantage business to Health Care Service Corp. for $3.3 billion likely had an impact on its financials, as it sold plans that had been expected to contribute to future earnings. However, the proceeds from this sale were used for share repurchases, aligning with Cigna's capital deployment priorities.
5. **Shareholder's Net Income**: Although the adjusted income from operations decreased by 8% compared to the previous year, the shareholders' net income for the fourth quarter of 2024 was $1.4 billion, or $5.13 per share, an increase from $1.0 billion, or $3.49 per share, in the same quarter of 2023. This indicates that while operational income faced challenges, the company's overall profitability improved due to better financial management and cost control.

In summary, Cigna's 2024 earnings growth was driven by robust revenue from its pharmacy benefit management unit, effective cost management, and strategic divestitures. These factors, combined with a focus on shareholder value through dividends and share repurchases, contributed to the company's financial performance.