Cigna Corporation Q4 FY2025 earnings call

Management Statement and Operational Highlights

• 2025 was a pivotal year with full-year adjusted revenue of $275 billion (11% growth) and adjusted earnings per share of $29.84 (9% increase).
• Global settlement with FTC resolved pharmacy benefits matters, providing $7 billion in out-of-pocket cost relief over 10 years. New pharmacy benefit model developed in 2025 supports this settlement.
• Portfolio shaping includes expanding specialty capabilities, selling Medicare business, and investing in Shields Health Solutions.
• Innovations in pharmacy benefits include a rebate-free model, and in Cigna Healthcare, AI-powered digital tools, new partnerships for fertility and mental health, and the Clarity offering.
• Specialty and care services business had 14% adjusted revenue growth in 2025, driven by demand for services and biosimilar use.

Segment Performance

• EverNorth: 2025 marked growth with the introduction of an industry-leading pharmacy benefit services innovation. Fourth quarter revenues grew to $63.1 billion and pretax adjusted earnings grew to $2.2 billion. Specialty and care services business generated $26.7 billion in revenue, a 14% year-over-year increase, and $1 billion in adjusted earnings. Pharmacy benefit service business delivered $36.3 billion in revenue and $1.2 billion in adjusted earnings. Full-year 2025 consolidated adjusted revenues were $275 billion.
• Cigna Healthcare: Delivered strong results in 2025. Fourth quarter 2025 adjusted revenues were $11.2 billion and pretax adjusted earnings were $734 million. 2026 outlook includes full-year consolidated adjusted revenues of approximately $280 billion and adjusted income from operations of at least $30.25 per share. Cigna Healthcare expects full-year 2026 adjusted earnings of at least $4.5 billion.

Guidance

• Expect full-year 2026 consolidated adjusted revenues of approximately $280 billion.
• Expect full-year 2026 consolidated adjusted income from operations of at least $30.25 per share.
• EverNorth expects full-year 2026 adjusted earnings of at least $6.9 billion, with first quarter representing over 20% of full-year earnings.
• Cigna Healthcare expects full-year 2026 adjusted earnings of at least $4.5 billion, with first quarter representing over 30% of full-year adjusted earnings expectations for the business.

Risks

• Risks associated with regulatory changes and market dynamics affecting health care costs. For example, the transition to new pharmacy benefit models and potential impacts of unmitigated tax rate changes related to GPO relocation.

Q: Lisa Gill asked about the margin profile of the PBM in steady state and the financial implication of moving the GPO back to the US.

A: David Cordani stated the margin profile of the PBM will remain similar, and the maximum impact of moving the GPO back to the US on the effective tax rate is up to 1%.

Q: Scott Fidel followed up on PBM adoption and traction of the new pricing model.

A: David Cordani and Brian Evanko discussed that the Cigna Healthcare fully insured book will adopt the new model in 2027, and at least 50% of the EverNorth business will adopt it by year-end 2028, with early positive feedback from stakeholders.

Q: Charles Rhyee asked about settlement requirements alignment with the new rebate-free model and liability if clients don't take the new offering.

A: David Cordani and Brian Evanko responded that Cigna will lead the market in adopting the new model, there is no liability assumed if adoption rates are above or below targets, and the new model includes price assure technology guaranteeing lowest patient prices.

Q: Kevin Fischbeck inquired about MLR in 2026 and current business mix.

A: Ann Dennison explained that the 2026 MCR outlook incorporates pricing actions, one-time impacts, and elevated cost environment assumptions.

Q: Justin Lake asked about PBM earnings growth in 2027 and revenue recognition changes.

A: Brian Evanko stated the FTC agreement won't impact 2027 financial outlook, and no changes in revenue recognition are expected for the PBM segment.

Q: Erin Wright asked about the specialty business drivers and biosimilar pipeline.

A: Brian Evanko discussed strong growth in the specialty business driven by secular tailwinds, growth in prescriptions, and positive biosimilar momentum like Humira becoming mainstream.

Q: AJ Rice asked about PBM outlook and formulary changes.

A: David Cordani responded that the PBM outlook remains consistent, work is needed on technology and manufacturer arrangements, and formulary changes are guided by clinical efficacy and comparative effectiveness.

Q: Steven Baxter inquired about health care medical membership outlook and in-group enrollment trends.

A: Brian Evanko mentioned flat membership outlook with growth in select and middle market offset by decline in individual exchange, and stable group risk business.

Q: Jason Cassorla asked about specialty and care AOI growth in 2026.

A: Ann Dennison stated expectations remain consistent with high end of 8%-12% target, including contribution from Shield investment.

Q: Andrew Mok asked about operating cash flow and impact of the new rebate-free model on working capital.

A: Ann Dennison and Brian Evanko discussed cash flow expectations and that the rebate-free model won't impact 2026 cash flow outlook.