Cigna Group reaffirmed its 2025 guidance Thursday on the back of solid growth within its Evernorth businesses and limited exposure to higher costs embroiling government-backed plans.
The company reported total revenues of $67.2 billion in the second quarter, up 11% year over year and well ahead of the $62.7 billion consensus estimate.
Net income landed at $1.5 billion or $5.71 per share with adjusted income from operations hitting $1.9 billion or $7.20 per share, the latter of which narrowly topped Wall Street’s $7.16 forecast. Each of those numbers were slight improvements over the second quarter of 2024’s earnings performance.
Adjusted revenues within its insurance division dropped 18% year over year to $10.8 billion but would have increased 7% when discounting the company’s recent sale of its Medicare business to Health Care Service Corporation. Adjusted income from operations (pretax) also dipped 9% year over year to $1.1 billion.
Though that deal helped protect Cigna from the skyrocketing costs peers like Molina Healthcare, Centene and UnitedHealthcare reported on the marketplaces, Medicaid and Medicare Advantage, it still reported a year-over-year rise in medical cost ratio from 82.3% to 83.2%.
The company attributed the increase to higher stop loss medical costs among its employer customer base. Speaking Thursday morning, executives said that the stop loss portfolio is broadly in line with the company’s expectations—the company is projecting a full-year medical cost ratio between 83.2% and 84.2% as costs remain elevated throughout the year.
Executives also said elevated costs will drive employer adoption of Cigna’s “more disruptive” offerings and noted that commercial client renewals have included revised cost structures while preserving demand.
“All of the stop loss business that we write is through an integrated offering with the employer where we also administer their overall medical benefits—and we continue to see very strong market demand for these solutions as evidenced by the 13% growth in stop loss premiums in the second quarter,” Cigna Group President and Chief Operating Officer Brian Evanko said on the morning’s earnings call. “As we’ve talked about on prior calls, we’re working to improve the margin profile on this business over the course of the next two renewal cycles, and we’re confident in our ability to deliver against this.”
While its insurance business slightly tightened, Cigna leaned on its Evernorth segments to deliver revenue growth. Here, adjusted revenues rose 17%, split between 20% within pharmacy benefit services “reflecting strong organic growth” and 13% for specialty and care services “reflecting strong specialty volume growth.” Adjusted income from operations was 5% higher year over year across the segment—2% within pharmacy benefit services and 7% within specialty and care services.
Executives touted a broad swath of offerings, such as a newly launched GLP-1 benefit option negotiated directly with drug manufacturers, and the high-growth potential of specialty medications as drivers of continued growth for both portions of the Evernorth segment.
In response to a question regarding Evernorth’s tepid margins, Evanko and Ann Dennison, Cigna Group's chief financial officer, pointed to a combination of investment income headwinds, large volume but low margin client renewals and higher priced drug sales.
“We feel really good about the strength of the business and the ability to drive sustained growth across both of those businesses,” Dennison said.
Cigna is projecting at least $29.60 adjusted income from operations per share across the full year. Despite topping the market’s estimates, the company’s stock was trading about 8% below open as of Thursday afternoon.