Cigna's Q4 Earnings Miss: Rising Medical Costs Take a Toll

Cigna Group (CI) reported fourth-quarter financial results on Thursday, missing analyst estimates due to higher-than-expected medical costs. The health insurer's shares fell 11.1% to $269.63 at the time of publication. Here's a breakdown of the key figures and the impact of rising medical costs on Cigna's performance.



Key Financial Figures:

* Revenue: $65.68 billion, beating estimates of $63.36 billion
* Adjusted earnings: $6.64 per share, missing estimates of $7.82 per share
* Total revenue: Up 27% year-over-year (YoY)
* Pharmacy benefit services revenue: $30.27 billion, up from $20.55 million in the prior year's quarter
* Specialty care and services revenue: $23.47 billion, up from $19.97 billion YoY
* Cigna Healthcare revenue: $13.33 billion, up from $13 billion YoY



Impact of Rising Medical Costs:

Cigna's adjusted income from operations declined 8% year-over-year, primarily driven by lower contributions from Cigna Healthcare due to higher stop loss medical costs. The company's medical loss ratio (MLR) increased to 87.9% in the fourth quarter, compared to 82.2% in the prior-year quarter. For the full year 2024, MLR was 83.2%, higher than the 81.3% reported in 2023.



Cigna's CEO, David Cordani, acknowledged the impact of higher medical costs on the company's earnings, stating, "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."

Corrective Actions and Outlook:

Cigna's board approved an increase of $6 billion to the company's share repurchase program, bringing the total authorization up to $10.3 billion. The company also declared an 8% increase in the quarterly dividend to $1.51 per share.

For the full year 2025, Cigna expects revenue of at least $252 billion and adjusted earnings of at least $29.50 per share. Analysts, on average, forecast Cigna to report adjusted income per share of $31.49, on revenue of $252.42 billion, for the year.



In conclusion, Cigna's Q4 earnings miss was primarily driven by higher-than-expected medical costs, which negatively impacted the company's MLR and adjusted income from operations. Despite the setback, Cigna remains focused on addressing these near-term pressures and advancing its long-term growth strategy. The company's corrective actions and positive outlook suggest that it is well-positioned to navigate the challenges posed by rising medical costs and continue its growth trajectory.