Cigna Corporation (CI) Bundle
Understanding Cigna Corporation (CI) Revenue Streams
Understanding Cigna Corporation’s Revenue Streams
The revenue streams of Cigna Corporation are diversified across various segments, contributing significantly to its overall financial health. The primary revenue sources include:
- Pharmacy Benefit Services
- Cigna Healthcare
- Other Operations
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Change (%) |
|---|---|---|---|
| Pharmacy Revenues | 48,284 | 34,531 | 40% |
| Premiums | 11,436 | 10,998 | 4% |
| Fees and Other Revenues | 3,889 | 3,198 | 22% |
| Total Revenues | 63,694 | 49,048 | 30% |
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth has shown significant improvement:
- Total revenue for Q3 2024 was $63,694 million, up from $49,048 million in Q3 2023, representing a 30% increase.
- Pharmacy revenues increased from $34,531 million to $48,284 million, a growth of 40%.
- Premiums rose from $10,998 million to $11,436 million, reflecting a 4% growth.
- Fees and other revenues increased by 22%, from $3,198 million to $3,889 million.
Contribution of Different Business Segments to Overall Revenue
In terms of segment revenue contribution for Q3 2024:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Evernorth Health Services | 51,552 | 81% |
| Cigna Healthcare | 11,919 | 19% |
| Other Operations | 137 | 0.2% |
Analysis of Significant Changes in Revenue Streams
Several notable changes were observed in revenue streams:
- Pharmacy revenues saw a substantial increase of 40% in Q3 2024 driven by higher utilization of prescription drugs.
- Premiums experienced a steady growth of 4%, primarily in the U.S. Healthcare segment.
- Fees and other revenues increased by 22%, driven by growth in affordability services within the Pharmacy Benefit Services segment.
- Net investment income decreased significantly by 74%, primarily due to a $182 million impairment of dividend receivable.
Conclusion
In summary, Cigna Corporation's revenue streams are diverse and show robust growth trends, particularly in Pharmacy Benefit Services, contributing significantly to its overall financial performance.
A Deep Dive into Cigna Corporation (CI) Profitability
A Deep Dive into Cigna Corporation's Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the total revenues were $63,694 million, up from $49,048 million in the same period of 2023, representing a 30% increase. The adjusted gross profit for the same period was $11,348 million, resulting in a gross profit margin of approximately 17.8%.
The operating profit for the third quarter of 2024 was $2,576 million, reflecting a 15% increase compared to $2,240 million in Q3 2023.
Net profit for the third quarter of 2024 was $739 million, down 48% from $1,408 million in Q3 2023. The net profit margin for Q3 2024 was approximately 1.16%.
Trends in Profitability Over Time
Analyzing the profitability trends, the adjusted income from operations increased by 5% in Q3 2024 compared to Q3 2023, totaling $2,112 million versus $2,011 million. However, year-to-date adjusted income from operations showed a more significant increase of 8%, reaching $5,896 million in 2024 compared to $5,449 million in 2023.
Comparison of Profitability Ratios with Industry Averages
The company's gross profit margin of 17.8% is below the industry average of approximately 20%. The operating profit margin stands at 4.05%, which is also lower than the industry average of 5.5%. The net profit margin of 1.16% is significantly lower than the industry benchmark of 2.5%.
Analysis of Operational Efficiency
Operational efficiency can be assessed through the selling, general, and administrative (SG&A) expenses, which decreased by 5% to $3,590 million in Q3 2024 from $3,788 million in Q3 2023. The adjusted SG&A expense ratio improved to 4.15% in Q3 2024 from 4.95% in Q3 2023.
Moreover, the medical care ratio increased by 230 basis points for Q3 2024, indicating a rise in medical costs relative to premiums, which affects profitability metrics. The pharmacy and service costs surged by 41%, reflecting higher utilization rates.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $63,694 million | $49,048 million | 30% |
| Adjusted Gross Profit | $11,348 million | $10,197 million | 11% |
| Operating Profit | $2,576 million | $2,240 million | 15% |
| Net Profit | $739 million | $1,408 million | -48% |
| Net Profit Margin | 1.16% | 2.87% | -1.71% |
Debt vs. Equity: How Cigna Corporation (CI) Finances Its Growth
Debt vs. Equity: How Cigna Corporation Finances Its Growth
As of September 30, 2024, Cigna Corporation's debt levels are categorized into short-term and long-term debt as follows:
| Debt Type | Amount (in millions) |
|---|---|
| Short-term debt | $2,572 |
| Long-term debt | $30,230 |
The company's debt-to-equity ratio stands at approximately 0.66. This ratio is slightly below the industry average of approximately 0.75, indicating a balanced approach to financing through debt and equity.
Recent debt issuances include:
- $4.5 billion of new senior notes issued in February 2024.
- Interest rates on new issuances range from 5.000% to 5.600%.
As of September 30, 2024, Cigna Corporation maintains a strong credit rating, with major agencies rating it as follows:
- Moody's: A3
- S&P: A-
- Fitch: A-
In terms of refinancing activity, the company successfully completed the repurchase of $1.8 billion in aggregate principal amount of existing senior notes in early 2024, enhancing its financial flexibility.
Cigna balances between debt financing and equity funding through a combination of strategies:
- Utilizing $3.2 billion in accelerated share repurchase agreements as part of its equity funding strategy.
- Declaring quarterly dividends of $1.40 per share, with total amounts paid in 2024 reaching approximately $1.18 billion.
Overall, the company actively monitors its debt obligations and engages in issuance or redemption activities as needed to align with its capital management strategy.
The following table summarizes the debt instruments held by Cigna Corporation as of September 30, 2024:
| Debt Instrument | Principal Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| 3.250% Notes | $900 | 3.250% | April 2025 |
| 4.125% Notes | $1,216 | 4.125% | November 2025 |
| 4.500% Notes | $1,284 | 4.500% | February 2026 |
| 3.400% Notes | $1,500 | 3.400% | March 2027 |
| 5.250% Notes | $1,250 | 5.250% | February 2034 |
As of September 30, 2024, total equity for Cigna Corporation is reported at approximately $42,298 million.
In summary, Cigna Corporation's structured approach to managing its debt and equity financing reflects a commitment to maintaining financial health while pursuing growth opportunities.
Assessing Cigna Corporation (CI) Liquidity
Assessing Cigna Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.22, indicating solid short-term financial health.
Quick Ratio: The quick ratio, excluding inventory, stood at 1.10, reflecting a strong ability to meet short-term obligations without relying on inventory sales.
Working Capital Trends
Working capital as of September 30, 2024, was reported at $4.5 billion, a decrease from $5.2 billion in the prior year, highlighting a shift in current asset management.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $10,500 | $6,000 | $4,500 |
| September 30, 2023 | $11,000 | $5,800 | $5,200 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, cash flows were as follows:
- Operating Activities: $5,151 million
- Investing Activities: $(1,911) million
- Financing Activities: $(4,399) million
The operating cash flow decreased significantly compared to the previous year, primarily due to higher accounts receivable and increased insurance claims.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company maintained $6.0 billion in cash and short-term investments, with $6.5 billion of undrawn committed capacity under revolving credit agreements, indicating robust liquidity.
However, the increase in accounts receivable and the significant cash outflow in financing activities due to share repurchases and debt repayments could raise liquidity concerns going forward.
Overall, the company continues to have a strong liquidity position, supported by diverse financing options.
Is Cigna Corporation (CI) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial ratios, stock price trends, dividend performance, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 27.8 based on a trailing twelve months (TTM) net income of $2,010 million and a market capitalization of approximately $55.8 billion.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.3, calculated using total equity of $42,095 million as of September 30, 2024, and a market capitalization of approximately $55.8 billion.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 11.5, derived from an enterprise value of approximately $64.5 billion and EBITDA of $5,600 million for the last twelve months.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between a low of $280 and a high of $400. As of the latest trading day, the stock price is $344.98.
Dividend Yield and Payout Ratios
The current dividend yield is 1.6%, with the company declaring quarterly dividends of $1.40 per share. The total dividends declared in 2024 amount to $1,182 million, reflecting a payout ratio of approximately 60% based on the adjusted income from operations of $2,112 million.
Analyst Consensus
Analysts show a consensus rating of Buy, with a median price target of $380, indicating a potential upside of approximately 10% from the current stock price.
| Metric | Value |
|---|---|
| P/E Ratio | 27.8 |
| P/B Ratio | 1.3 |
| EV/EBITDA Ratio | 11.5 |
| 12-Month Stock Price Range | $280 - $400 |
| Current Stock Price | $344.98 |
| Dividend Yield | 1.6% |
| Quarterly Dividend per Share | $1.40 |
| Total Dividends Declared (2024) | $1,182 million |
| Payout Ratio | 60% |
| Analyst Consensus Rating | Buy |
| Median Price Target | $380 |
Key Risks Facing Cigna Corporation (CI)
Key Risks Facing Cigna Corporation
Overview of Internal and External Risks:
The company faces several internal and external risks impacting its financial health. Key risks include:
- Industry Competition: The healthcare industry is highly competitive, with numerous players vying for market share, leading to potential pricing pressures.
- Regulatory Changes: Changes in healthcare regulations, including those related to Medicare and Medicaid, can impact revenue streams and operational costs.
- Market Conditions: Economic downturns can affect consumer spending on healthcare services, impacting overall revenue.
Operational, Financial, or Strategic Risks:
Recent earnings reports highlight several operational and strategic risks:
- Medical Customers Decrease: Total medical customers decreased by 3% as of September 30, 2024, largely due to a decline in Individual and Family Plans customers.
- Net Income Decline: Shareholders' net income fell by 48% for the three months ended September 30, 2024, compared to the previous year.
- Investment Losses: The company recorded net realized investment losses of $921 million for the three months ended September 30, 2024.
Mitigation Strategies
The company has implemented several strategies to mitigate risks:
- Debt Management: As of September 30, 2024, total long-term debt stood at $30.230 billion, with compliance on debt covenants confirmed.
- Liquidity Support: The company has access to a $5.0 billion revolving credit facility, maturing in April 2029, and a $1.5 billion 364-day revolving credit agreement.
Financial Summary Table
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Medical Customers | Decrease by 3% as of September 30, 2024 | Potential revenue loss from individual plans |
| Net Income | Decreased by 48% in Q3 2024 | Loss of shareholder confidence |
| Investment Losses | Net realized investment losses of $921 million in Q3 2024 | Increased pressure on profitability |
| Long-term Debt | Total long-term debt of $30.230 billion | Higher interest expense affecting net income |
| Revolving Credit Facility | $5.0 billion available for liquidity support | Mitigates short-term cash flow risks |
Future Growth Prospects for Cigna Corporation (CI)
Future Growth Prospects for Cigna Corporation
Analysis of Key Growth Drivers
The company is positioned for growth through several key drivers, including:
- Product Innovations: The launch of new health plans and digital health solutions.
- Market Expansions: Increased presence in international markets and Medicare Advantage programs.
- Acquisitions: Strategic acquisitions, notably the planned sale of Medicare Advantage and related businesses, which is expected to generate approximately $3.7 billion.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth for 2024 is estimated at 26%, with total revenues anticipated to reach $181.5 billion. Earnings estimates for 2024 suggest adjusted income from operations could increase to approximately $5.9 billion, reflecting an 8% growth from 2023.
Strategic Initiatives or Partnerships
Key strategic initiatives include:
- Partnerships with Technology Firms: Collaborations aimed at enhancing digital healthcare services.
- Investment in Health Services: Expansion in Evernorth Health Services has shown a revenue increase of 40% in the third quarter of 2024 compared to the previous year.
Competitive Advantages
The company possesses several competitive advantages:
- Diverse Offerings: A broad range of health services including pharmacy benefits, medical insurance, and wellness solutions.
- Strong Brand Recognition: Established reputation in the healthcare industry enhances customer trust and retention.
- Financial Strength: As of September 30, 2024, total assets were reported at $157.6 billion with total liabilities of $115.3 billion, reflecting a robust balance sheet.
Financial Summary of Key Segments
| Segment | Revenues (Q3 2024) (in millions) | Pre-tax Adjusted Income (Q3 2024) (in millions) | Growth Rate (%) |
|---|---|---|---|
| Evernorth Health Services | $52,637 | $1,876 | 9% |
| Cigna Healthcare | $13,163 | $1,174 | -4% |
| Other Operations | $234 | ($6) | N/A |
| Total | $63,694 | $2,619 | 4% |
Conclusion
Overall, the company's growth prospects are supported by innovative products, strategic partnerships, and a strong financial foundation, positioning it well for future success.
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Article updated on 8 Nov 2024
Resources:
- Cigna Corporation (CI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Cigna Corporation (CI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Cigna Corporation (CI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.