Dive Brief:
- Cigna beat investor expectations on earnings and revenue in the second quarter as the insurer reported strong growth in its Evernorth health services arm.
- The company reported revenue of $57.8 billion for Evernorth in the second quarter, up 17% year over year. Adjusted income from operations in the unit was $1.7 billion, increasing 5% from last year, according to Cigna’s second-quarter earnings released Thursday.
- Meanwhile, Cigna’s health insurance segment is performing within expectations, even as the insurer has seen “persistently elevated medical costs throughout the year,” COO Brian Evanko said during an earnings call Thursday.
Dive Insight:
Many insurers have struggled with heightened medical costs in the second quarter, particularly those offering health plans on the Affordable Care Act exchanges as well as in Medicare and Medicaid.
But Cigna is likely more insulated from these challenges, given the company’s focus on employer-sponsored health plans. The insurer also closed the sale of its Medicare business to Health Care Service Corporation this spring.
“We have intentionally positioned our Cigna Healthcare portfolio with a product mix that has proven favorable in the current environment, as we have no exposure to Medicaid or Medicare,” Evanko said on the call Thursday morning.
Cigna’s healthcare insurance unit reported $10.8 billion in adjusted revenue, down 18% year over year, largely due to divesting the Medicare business.
Adjusted income from operations was $1.1 billion, decreasing 9% from the previous year linked to a higher medical loss ratio — a key marker of spending on patient care.
Cigna’s MLR was $83.2% in the second quarter, up from $82.3% in 2024 as the company grappled with higher costs in stop-loss insurance.
The health insurance unit also faced heightened utilization in individual plans as medical costs increased across the ACA marketplace, CFO Ann Dennison said.
“However, this pressure was manageable due to the smaller relative size of our ACA book, aided by our disciplined pricing actions over the past two years,” she said.
On the Evernorth side of the business, adjusted income for pharmacy benefit services was up 2% to $833 million. Adjusted revenue for pharmacy benefit services was up 20%.
The positive results for Cigna’s pharmacy benefit manager Express Scripts — one of the nation’s largest PBMs — comes as the pharmacy middlemen have faced increased scrutiny from regulators and lawmakers for driving up drug costs.
Arkansas recently passed a law that would force PBMs to divest pharmacies, but it was put on hold by a federal judge earlier this week.
CEO David Cordani said the company is “quite pleased” with the decision, arguing that while the law is potentially well-intended, it constrains access to care and restrains patient choice.
But “we believe that the industry will continue to operate in an active legislative and regulatory environment” when it comes to PBMs, he said.
Overall, Cigna reported revenue of $67.2 billion, increasing 11% from $60.5 billion during the same period last year. Net income was $1.5 billion, relatively flat year over year.
The company reaffirmed its outlook on adjusted income from operations of at least $29.60 per share.
