Cigna's Strong Q4 Performance and Future Outlook
Cigna Corporation's fourth-quarter performance surpassed expectations, driven primarily by strong results in its health services division. This positive outcome led to a 3% increase in Cigna's stock during Thursday's morning trading. Despite this success, Cigna's 2026 outlook indicates potential shortfalls in both earnings and revenue compared to current market predictions.
Unlike many competitors, Cigna has strategically reduced its participation in the Medicare Advantage and Affordable Care Act markets. Instead, it focuses on pharmacy benefits management (PBM) and employer-sponsored insurance plans. In October, Cigna anticipated that the transition away from offering rebates could impact profits over the next two years as clients adjust to a new pricing structure.
Strong Performance in Evernorth Segment
Cigna's Evernorth pharmacy benefit segment saw a significant increase in earnings, climbing by 20% to reach $36.3 billion for the quarter. PBM entities are essential in negotiating drug prices and determining coverage with pharmaceutical manufacturers for clients, including employers and health plans. This showcases Cigna's adaptive strategy in its PBM operations.
According to Oppenheimer analyst Michael Wiederhorn, while Cigna anticipates pressure on Evernorth due to its new model in 2026, the business appears aligned with its strategic plan as the new year begins. The proactive measures highlight the company's resilience in the face of changing regulatory compliance requirements.
Financial Projections and Strategy
The medical loss ratio, reflecting the percentage of premiums spent on healthcare services, increased to 88% due to individual and family plan segments, slightly above analysts' forecasts of 87.34%. Cigna projects its adjusted earnings per share for 2026 to be at least $30.25, narrowly missing analysts' expectations of $30.36. Forecasted revenue is around $280 billion, below the anticipated $283.86 billion.
Chief Financial Officer Ann Dennison stated that their financial projections are "appropriately prudent given the continued elevated cost environment." With quarterly adjusted earnings per share of $8.08 surpassing market expectations of $7.88, Cigna demonstrates strong performance amidst industry-wide challenges.
The company recently settled with the U.S. Federal Trade Commission regarding its insulin pricing practices. This settlement includes initiatives to reduce costs for patients, insurers, and small pharmacies, though it is not anticipated to impact Cigna's 2027 financial outlook. These strategic adjustments underscore Cigna's commitment to navigating AI-driven prior authorization delays and broader market challenges.