The Cigna Group Reports Strong First Quarter 2023 Results, Raises 2023 Outlook

Consolidated Financial Results (dollars in millions):

Three Months Ended

March 31,

December 31,

2023

2022³

2022³

Total Revenues

$           46,517

$           44,006

$           45,753

Net Realized Investment Losses (Gains) from Equity Method Investments⁵

(38)

103

(8)

Adjusted Revenues⁵

$           46,479

$           44,109

$           45,745

Consolidated Earnings, net of taxes

Shareholders' Net Income

$             1,267

$             1,197

$             1,193

Net Realized Investment Losses (Gains)¹

6

358

(17)

Amortization of Acquired Intangible Assets¹

344

356

284

Special Items¹

1

37

73

Adjusted Income from Operations¹

$             1,618

$             1,948

$             1,533

Shareholders' Net Income, per share 

$               4.24

$               3.73

$               3.91

Adjusted Income from Operations¹, per share 

$               5.41

$               6.06

$               5.02

Customer Relationships (in thousands):

As of the Periods Ended

March 31,

December 31,

2023

2022

2022

Total Pharmacy Customers⁸

98,749

94,388

93,905

U.S. Commercial

16,026

14,621

14,852

U.S. Government

1,843

1,402

1,354

International Health

1,604

1,756

1,798

Total Medical Customers⁸

19,473

17,779

18,004

Behavioral Care

26,890

44,078

44,841

Dental

18,731

18,169

18,397

Medicare Part D

2,541

2,904

2,874

Total Customer Relationships⁸

166,384

177,318

178,021

Financial Results (dollars in millions):

Three Months Ended

March 31,

December 31,

2023

2022

2022

Adjusted Revenues⁵

$           36,179

$           33,586

$           36,188

Adjusted Income from Operations, Pre-Tax¹

$             1,320

$             1,302

$             1,725

Adjusted Margin, Pre-Tax⁹

3.6 %

3.9 %

4.8 %

Financial Results (dollars in millions):

Three Months Ended

March 31,

December 31,

2023

2022³

2022³

Adjusted Revenues^5,10

$            12,718

$            11,393

$            11,132

Adjusted Income from Operations, Pre-Tax¹

$              1,115

$              1,297

$                 517

Adjusted Margin, Pre-Tax⁹

8.8 %

11.4 %

4.6 %

Financial Results (dollars in millions):

Three Months Ended

March 31,

December 31,

2023

2022³

2022³

Adjusted (Loss) from Operations, Pre-Tax¹

$              (399)

$              (114)

$              (375)

(dollars in millions, except where noted and per share amounts)

2023 Consolidated Metrics

Projection for Full Year Ending

December 31, 2023

Change from Prior Projection

Adjusted Revenues^2,5

at least $188,000

+$1,000

Adjusted Income from Operations^1,2

at least $7,360

+$30

Adjusted Income from Operations, per share^1,2

at least $24.70

+$0.10

Adjusted SG&A Expense Ratio^2,6

~7.3%

Adjusted Effective Tax Rate^2,7

21.0% to 21.5%

Cash Flow from Operations²

at least $9,000

Weighted Average Shares Outstanding (millions)²

296 to 300

2023 Evernorth Metrics

Adjusted Income from Operations, Pre-Tax^1,2

at least $6,400

2023 Cigna Healthcare Metrics

Adjusted Income from Operations, Pre-Tax^1,2

at least $4,425

+$25

Medical Care Ratio^2,6

81.5% to 82.3%

-10 bps at the midpoint

Total Medical Customer Growth (lives)^2,8

at least 1,300,000

+100,000

Notes:

1.

Adjusted income (loss) from operations is a principal financial measure of profitability used by The Cigna Group's management because it presents the underlying results of operations of the Company's businesses and permits analysis of trends in underlying revenue, expenses and shareholders' net income. Adjusted income from operations is defined as shareholders' net income (or income before income taxes less pre-tax income (loss) attributable to noncontrolling interests for the segment metric) excluding net realized investment results, amortization of acquired intangible assets and special items. The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. Adjusted income (loss) from operations is measured on an after-tax basis for consolidated results and on a pre-tax basis for segment results. Consolidated adjusted income (loss) from operations is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, shareholders' net income. See Exhibit 1 for a reconciliation of consolidated adjusted income from operations to shareholders' net income. 

2.

Management is not able to provide a reconciliation of adjusted income from operations to shareholders' net income (loss) or adjusted revenues to total revenues on a forward-looking basis because it is unable to predict, without unreasonable effort, certain components thereof including (i) future net realized investment results (from equity method investments with respect to adjusted revenues) and (ii) future special items. These items are inherently uncertain and depend on various factors, many of which are beyond The Cigna Group's control. As such, any associated estimate and its impact on shareholders' net income and total revenues could vary materially. 

The Company's outlook excludes the potential effects of any other business combinations that may occur after the date of this earnings release. The Company's outlook includes the potential effects of expected future share repurchases and anticipated 2023 dividends.

As announced in January 2021, The Cigna Group currently intends to pay regular quarterly dividends, with future declarations subject to approval by its Board of Directors and the Board's determination that the declaration of dividends remains in the best interests of The Cigna Group and its shareholders. The decision of whether to pay future dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, the requirements of applicable law and any other factors the Board of Directors may deem relevant.

The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternate uses of capital. The share repurchase program may be effected through open market purchases in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended, including through Rule 10b5-1 trading plans, or privately negotiated transactions. The program may be suspended or discontinued at any time.

3.

Effective January 1, 2023, The Cigna Group adopted ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts, and related amendments. Prior year results have been restated to reflect the adoption of the new accounting guidance. 

4.

On July 1, 2022, the Company completed the sale of its life, accident and supplemental benefits businesses in six countries (Hong Kong, Indonesia, New Zealand, South Korea, Taiwan and Thailand) to Chubb INA Holdings, Inc. ("Chubb") for approximately $5.4 billion in cash (the "Chubb transaction"). In December 2022, the Company divested its ownership interest in a joint venture in Türkiye. 

5.

Adjusted revenues is used by The Cigna Group's management because it permits analysis of trends in underlying revenue. The Company defines adjusted revenues as total revenues excluding the following adjustments: special items and The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting. Special items are matters that management believes are not representative of the underlying results of operations due to their nature or size. We exclude these items from this measure because management believes they are not indicative of past or future underlying performance of the business. Adjusted revenues is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, total revenues. See Exhibit 1 for a reconciliation of consolidated adjusted revenues to total revenues. 

6.

Operating ratios are defined as follows:

• 

The Cigna Healthcare medical care ratio ("MCR") represents medical costs as a percentage of premiums for all U.S. Commercial risk products, including medical, pharmacy, dental, stop loss and behavioral products provided through guaranteed cost or experience-rated funding arrangements, as well as Medicare Advantage, Medicare Part D, Medicare Supplement, individual on and off-exchange products, and health care products within our International Health business, within the Cigna Healthcare segment.

•

SG&A expense ratio on a GAAP basis for the first quarter 2023 represents enterprise selling, general and administrative expenses of $3,538 million as a percentage of Total revenue of $46.5 billion at a consolidated level. SG&A expense ratio on a GAAP basis for the first quarter 2022 represents enterprise selling, general and administrative expenses of $3,275 million as a percentage of Total revenue of $44.0 billion at a consolidated level. 

•

Adjusted SG&A expense ratio for the first quarter 2023 represents enterprise selling, general and administrative expenses of $3,537 million excluding special items of $1 million as a percentage of adjusted revenue at a consolidated level. Adjusted SG&A expense ratio for the first quarter 2022 represents enterprise selling, general and administrative expenses of $3,223 million excluding special items of $52 million as a percentage of adjusted revenue at a consolidated level. 

7.

The measure "adjusted effective tax rate" is not determined in accordance with GAAP and should not be viewed as a substitute for the most directly comparable GAAP measure, "consolidated effective tax rate". We define adjusted effective tax rate as the consolidated income tax rate applicable to the Company's pre-tax income excluding pre-tax income (loss) attributable to noncontrolling interests, net realized investment results, amortization of acquired intangible assets, and special items. The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded. Management is not able to provide a reconciliation to the consolidated effective tax rate on a forward-looking basis because we are unable to predict, without unreasonable effort, certain components thereof include (i) future net realized investment results and (ii) future special items.

8.

Customer relationships are defined as follows:

•

Total medical customers includes individuals in the Cigna Healthcare segment who meet any one of the following criteria: are covered under a medical insurance policy, managed care arrangement, or service agreement issued by Cigna Healthcare; have access to Cigna Healthcare's provider network for covered services under their medical plan; or have medical claims and services that are administered by Cigna Healthcare.

•

International Health medical customers excludes medical customers served by less than 100% owned subsidiaries. International Health lives as of March 31, 2023 reflect the transition of certain runoff business to Other Operations beginning January 1, 2023.

•

Effective January 1, 2023, Pharmacy lives have been updated to reflect customer filled prescriptions through Inside Rx. Previously these lives had been estimated based on active customers over a period of time. Pharmacy lives for prior periods have been restated to reflect this change.

•

Behavioral care and total customer relationships as of December 31, 2022 excluding the impact of the supplemental behavioral coverage contract with New York Life were 24,696 thousand and 157,876 thousand, respectively.

9.

Adjusted margin, pre-tax, is calculated by dividing adjusted income (loss) from operations, pre-tax by adjusted revenues for each segment.

10.

The Cigna Group owns a 50% noncontrolling interest in its China joint venture. As such, the adjusted revenues for the Cigna Healthcare segment only include the Company's 50% share of the joint venture's earnings reported in Fees and Other Revenues using the equity method of accounting under GAAP.

11.

Medical costs payable within the Cigna Healthcare segment are presented net of reinsurance and other recoverables. The gross medical costs payable balance was $4.96 billion as of March 31, 2023, $4.18 billion as of December 31, 2022, and $4.49 billion as of March 31, 2022.

THE CIGNA GROUP

Exhibit 1

COMPARATIVE SUMMARY OF FINANCIAL RESULTS (unaudited)

Three Months Ended

Three Months Ended

March 31,

December 31,

(Dollars in millions, except per share amounts)

2023

2022 ⁽¹⁾

2022 ⁽¹⁾

REVENUES

Pharmacy revenues

$ 32,144

$ 30,697

$ 33,135

Premiums

11,025

10,356

9,548

Fees and other revenues

3,071

2,539

2,858

Net investment income

277

414

212

Total Revenues

46,517

44,006

45,753

Net realized investment results from certain equity method investments

(38)

103

(8)

Adjusted revenues ⁽²⁾

$ 46,479

$ 44,109

$ 45,745

Shareholders' net income

$  1,267

$  1,197

$  1,193

Pre-tax adjusted income (loss) from operations by segment

Evernorth Health Services

$  1,320

$  1,302

$  1,725

Cigna Healthcare

1,115

1,297

517

Corporate and Other Operations

(399)

(114)

(375)

Consolidated pre-tax adjusted income from operations

2,036

2,485

1,867

    Adjusted income tax expense 

(418)

(537)

(334)

Consolidated after-tax adjusted income from operations

$  1,618

$  1,948

$  1,533

Weighted average shares (in thousands)

298,999

321,282

305,413

Common shares outstanding (in thousands)

296,249

318,502

298,676

SHAREHOLDERS' EQUITY at March 31,

$ 44,502

$ 46,123

SHAREHOLDERS' EQUITY PER SHARE at March 31,

$ 150.22

$ 144.81

Three Months Ended

Three Months Ended

March 31,

December 31,

2023

2022 ⁽¹⁾

2022 ⁽¹⁾

(Dollars in millions, except per share amounts)

Pre-tax

After-tax

Pre-tax

After-tax

Pre-tax

After-tax

SHAREHOLDERS' NET INCOME

Shareholders' net income

$  1,267

$  1,197

$  1,193

Adjustments to reconcile adjusted income from operations

Net realized investment losses (gains) ⁽³⁾

18

6

425

358

(14)

(17)

Amortization of acquired intangible assets

459

344

458

356

457

284

Special Items

Integration and transaction-related costs

1

1

52

37

23

17

Loss (gain) on sale of businesses

—

—

—

—

73

56

Adjusted income from operations ⁽⁴⁾

$  1,618

$  1,948

$  1,533

DILUTED EARNINGS PER SHARE

Shareholders' net income

$    4.24

$    3.73

$    3.91

Adjustments to reconcile to adjusted income from operations

Net realized investment losses (gains) ⁽²⁾

0.06

0.02

1.32

1.10

(0.05)

(0.06)

Amortization of acquired intangible assets

1.54

1.15

1.43

1.11

1.50

0.93

Special Items

Integration and transaction-related costs

—

—

0.16

0.12

0.08

0.06

Loss (gain) on sale of businesses

—

—

—

—

0.23

0.18

Adjusted income from operations ⁽⁴⁾

$    5.41

$    6.06

$    5.02

(1) Effective January 1, 2023, The Cigna Group adopted ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts, and related amendments. Prior year results have been restated to reflect the adoption of the new accounting guidance. Please refer to the Summary of Significant Accounting Policies footnote in The Cigna Group's Form 10-Q for the period ended March 31, 2023, expected to be filed on May 5, 2023, for additional details.

(2)  Adjusted revenues is defined as total revenues excluding the following adjustments: special items and The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting. These items are excluded because they are not indicative of past or future underlying performance of our businesses.

(3) Includes The Cigna Group's share of certain realized investments results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting.

(4) Adjusted income (loss) from operations is defined as shareholders' net income (or income before income taxes less pre-tax income (loss) attributable to noncontrolling interests for the segment metric) excluding the following adjustments: net realized investment results, amortization of acquired intangible assets and special items. The Cigna Group's share of certain realized investment results of its joint ventures reported in the Cigna Healthcare segment using the equity method of accounting are also excluded.