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    CI
    Earnings call· Sep 2025(Q3 FY25)

    Cigna Group CI

    Oct 30, 2025 Source

    Executive summary

    The Cigna Group Q3 FY25 — Strong Performance Amidst PBM Transformation and Strategic Investments

    The Cigna Group reported robust Q3 FY25 results, driven by strong performance in Cigna Healthcare and Evernorth's Specialty and Care Services. The company is proactively transforming its Pharmacy Benefit Services with a new rebate-free model and strategic client renewals, which will lead to near-term margin pressure but is expected to ensure long-term durability. Management reaffirmed its full-year EPS outlook, signaling confidence in its diverse portfolio and strategic initiatives.

    Highlights

    5

    • Delivered strong Q3 adjusted earnings of $7.83 per share, reaffirming full-year EPS outlook of at least $29.60.

    • Evernorth Specialty and Care Services achieved 11% adjusted earnings growth, driven by strong specialty volume and biosimilar adoption.

    • Secured long-term renewals and extensions with key Pharmacy Benefit Services clients, including the U.S. Department of Defense, Prime Therapeutics, and Centene, ensuring predictability through the end of the decade.

    • Cigna Healthcare delivered solid performance with an 8% increase in the under 500 Select segment and strong International Health growth.

    • Introduced a transformative rebate-free pharmacy benefits model, expected to reduce brand-name drug costs by 30% for high-deductible plans.

    Concerns

    3

    • Expect margin pressure within the Pharmacy Benefit Services segment over the next two years due to investments in the new rebate-free model and proactive contract adjustments for government programs.

    • Cigna Healthcare's medical care ratio was 84.8% for the quarter, driven by an updated view of risk adjustment in the individual exchange business, leading to a full-year MCR expectation at the high end of the 83.2% to 84.2% guidance range.

    • Anticipate a slight decline in Evernorth operating income in 2026, primarily due to the Pharmacy Benefit Services segment decline offsetting strong Specialty and Care growth.

    Guidance & targets

    22
    CategoryTargetConfidence
    Adjusted EPS
    at least $29.60
    high materiality
    High
    Cigna Healthcare Medical Care Ratio (MCR)
    high end of our full year guidance range of 83.2% to 84.2%
    medium materiality
    Medium
    Pharmacy Benefit Services margin
    margin pressure
    high materiality
    High
    EPS growth
    grow
    high materiality
    High
    Evernorth operating income
    slightly down
    high materiality
    High
    Specialty and Care Services income growth
    towards the higher end of its long-term growth target
    medium materiality
    High
    Pharmacy Benefit Services operating income
    decline
    high materiality
    High
    Cigna Healthcare operating income growth
    grow towards the higher end of its long-term growth target
    medium materiality
    High
    Cash flow from operations
    back half weighted
    medium materiality
    High
    Debt-to-capitalization ratio
    approximately 40%
    medium materiality
    High
    Pharmacy Benefit Services book of business transition to new model
    at least 50% into this new model by the end of 2028
    high materiality
    High
    Cigna Healthcare adoption of new PBM model
    100% for fully insured lives beginning in 2027
    high materiality
    High
    New PBM model standard offering
    standard offering broadly for the Cigna Group to the marketplace starting in January 2028
    high materiality
    High
    Stop Loss margin recovery
    completed by the end of 2027
    medium materiality
    High
    Evernorth long-term growth algorithm
    5% to 8% EBIT growth
    high materiality
    High
    Evernorth aggregate segment income
    decline slightly from the 2025 level
    high materiality
    High
    Pharmacy Benefit Services income decline (2026)
    more than half of the overall Pharmacy Benefit Services decline
    high materiality
    High
    Pharmacy Benefit Services income decline (2026)
    less than half of the 2026 headwind
    high materiality
    High
    Cigna Healthcare income growth
    at the higher end of our long-term growth algorithm off of our full year guide of at least $4.125 billion
    medium materiality
    High
    National accounts customer outlook
    flat to slightly declining
    low materiality
    High
    Individual exchange business membership
    decline roughly commensurate with what the overall industry-wide enrollment is expected to look like
    low materiality
    High
    Enterprise EPS growth
    back on at the enterprise level on algorithm
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Evernorth Health Services
    Pretax adjusted earnings in line with expectations for Q3 FY25.
    		$60.4 billion——$1.9 billion
    Evernorth Specialty and Care Services
    Strong growth reflecting specialty volume growth and increased biosimilar adoption for Q3 FY25.
    Adjusted earnings growth: 11%
    		$26.3 billion10%—$928 million
    Evernorth Pharmacy Benefit Services
    Pretax adjusted earnings in line with expectations for Q3 FY25, reflecting investments and accelerated biosimilar adoption.
    		$34.1 billion——$1 billion
    Cigna Healthcare
    Pretax adjusted earnings in line with expectations for Q3 FY25. Overall results in U.S. employer business and International business consistent with expectations.
    		$10.9 billion——$1 billion

    Operational metrics

    30
    Net after-tax special item benefit
    $61 million
    Q3 FY25

    Benefit recorded in Q3 2025.

    Net after-tax special item benefit per share
    $0.23
    Q3 FY25

    Benefit recorded in Q3 2025.

    Cigna Healthcare earnings contribution
    40%
    FY25

    Approximately 40% of enterprise earnings.

    Evernorth Specialty and Care Services earnings contribution
    30%
    FY25

    Approximately 30% of enterprise earnings.

    Evernorth Pharmacy Benefit Services earnings contribution
    30%
    FY25

    Approximately 30% of enterprise earnings.

    Portfolio with Cigna Healthcare and Specialty and Care Services
    70%
    FY25

    Combined earnings contribution of Cigna Healthcare and Specialty and Care Services.

    Brand name drug cost reduction (new model)
    30%
    future

    Average reduction for a brand name drug prescription for high deductible plans under the new rebate-free model.

    Generic drugs as % of prescriptions
    90%
    current

    Generic drugs account for 90% of all prescriptions.

    Generic drugs cost comparison
    1/3 cheaper
    current

    On average, generic drugs are 1/3 cheaper in the US than in other countries.

    Median price of new FDA-approved drugs
    $390,000
    2025

    Estimated median price per treatment course for new FDA-approved drugs in 2025.

    Brand name drugs as % of pharmaceutical volumes
    10%
    current

    Brand name drug medications comprise only 10% of overall pharmaceutical volumes in the United States.

    Brand name drugs as % of pharmaceutical spend
    88%
    current

    Brand name drug medications account for 88% of the spend.

    HUMIRA list price (monthly)
    $7,000
    current

    List price of HUMIRA per month.

    HUMIRA list price (annual)
    $85,000
    current

    List price of HUMIRA per year.

    Number of clinical safety checks (new PBM model)
    18,000
    ongoing

    Clinical safety checks provided by the new PBM model.

    Pharmacy Benefit Services client retention
    approximately 97%
    2026 selling season

    Expected retention for the 2026 selling season.

    Under 500 Select segment customer growth
    8%
    Q3 FY25

    Increase in customers in the under 500 Select segment.

    Medical care ratio (Cigna Healthcare)
    84.8%
    Q3 FY25

    Overall Cigna Healthcare segment-wide medical care ratio, driven by an updated view of risk adjustment in the individual exchange business.

    Specialty market size
    over $400 billion
    current

    Total specialty market size.

    Provider-administered specialty market share
    40%
    current

    Provider-administered portion represents approximately 40% of the specialty market.

    Specialty pharmacies prescriptions delivered
    approximately 7 million
    YTD 2025

    Prescriptions delivered by specialty pharmacies year-to-date.

    Specialty pharmacies prescription growth
    double-digit rate
    YTD 2025

    Growth rate of prescriptions delivered by specialty pharmacies.

    Evernorth income guidance
    at least $7.2 billion
    FY25

    Full year 2025 income guidance for Evernorth.

    Evernorth income split (Specialty/Care)
    about $3.6 billion
    FY25

    Approximate split of Evernorth income for Specialty and Care Services.

    Evernorth income split (PBM)
    about $3.6 billion
    FY25

    Approximate split of Evernorth income for Pharmacy Benefit Services.

    Large client renewals annual revenue
    roughly $90 billion
    annual

    Annual revenue represented by the three large client renewals.

    Out-of-pocket cap for GLP-1s
    $200
    current

    Cap on out-of-pocket costs for GLP-1 medications for employers.

    Debt-to-capitalization ratio
    44.9%
    September 30, 2025

    Debt-to-capitalization ratio as of Q3 2025.

    Cigna Healthcare full year income guide
    at least $4.125 billion
    FY25

    Full year 2025 income guide for Cigna Healthcare.

    PBM margin benchmark
    4%
    long-term

    Long-term margin benchmark for Pharmacy Benefit Services.

    Industry KPIs

    6
    MetricValueDetails
    Medical loss care ratio84.8%%
    Client retention new winsapproximately 97%%
    Pharmacy scripts specialtyapproximately 7 millionprescriptions
    Membership covered lives by line8% increase%
    Segment revenue operating incomeEvernorth Specialty and Care Services: $26.3 billion revenue, $928 million pretax adjusted earnings; Evernorth Pharmacy Benefit Services: $34.1 billion revenue, $1 billion pretax adjusted earnings; Cigna Healthcare: $10.9 billion revenue, $1 billion pretax adjusted earningsUSD
    Adjusted EPS EBITDA leverage guidanceat least $29.60USD

    Deals & partnerships

    5
    Shields Health SolutionsStrategic investment to expand existing specialty capabilities to serve health systems, hospitals and other providers.

    Investment completed earlier in September.

    U.S. Department of DefenseLong-term renewal and extension of Pharmacy Benefit Services contract.through the end of the decade and beyond

    Proactively secured renewal.

    Prime TherapeuticsLong-term renewal and extension of Pharmacy Benefit Services contract.through the end of the decade and beyond

    Proactively secured renewal.

    CenteneLong-term renewal and extension of Pharmacy Benefit Services contract.through the end of the decade and beyond

    Proactively secured renewal.

    EMD SeronoExpanded partnership to deliver fertility treatments from Evernorth Fertility Pharmacies in 2026, in conjunction with TrumpRx.

    Announced earlier this month.

    Risks & headwinds

    3
    Pharmacy Benefit Services Margin Pressure2026-2027

    Expected over the next two years.

    Mitigation: Strategic investments in new rebate-free model, recontracting efforts, technology improvements, process reengineering, and proactive improvements to economic terms for government program partners.

    Elevated Medical CostsQ3 FY25 and full year 2025

    Cigna Healthcare MCR of 84.8% in Q3, full-year MCR expected at high end of 83.2%-84.2% range.

    Mitigation: Targeted customer growth, corrective action to reprice Stop Loss business, investments in predictive capabilities, value-based reimbursement models, and operating cost efficiencies.

    Absence of Nonrecurring Benefits2026

    Specifically related to divested Medicare businesses and individual exchange business prior-year true-ups.

    Mitigation: Expected growth in Cigna Healthcare operating income towards the higher end of its long-term target.

    What to watch in Q4 FY25

    5

    Pharmacy Benefit Services investment spend

    Next quarter (for 2026 outlook details)
    CurrentLess than half of 2026 PBS headwind
    TargetSpend levels broadly consistent between 2026 and 2027, not a year-over-year headwind in 2027

    Why it matters

    To understand the trajectory of PBM profitability and the timing of📎 margin recovery as the new model is implemented.

    You should think of the spend levels as being broadly consistent between the 2 years.

    Q&A highlights

    7

    Clarification on rebate guarantees, understanding the economics of the new rebate-free model and its impact on renewal pricing, and how the PBM transformation affects Evernorth's long-term growth algorithm, especially for 2026.

    David Cordani stated the new model is fee-based, delinked, transparent, and ensures the lowest price for consumers. He confirmed Evernorth's long-term algorithm remains intact, but 2026 will be off-algorithm due to significant investments and proactive contract renewals for government programs. Brian Evanko elaborated that large client renewals (approx. $90B revenue) will have a new run-rate margin profile through the decade, and investment spend for the new model will cause margin pressure in 2026-2027. He emphasized the new model's earnings profile should be comparable to existing solutions at the client level.

    “Our long-term algorithm for the Evernorth portfolio stays intact, number one. Two, for 2026, Evernorth will not be on that long-term growth algorithm.”

    asked by Lisa Gill · answered by David Cordani

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic PBM Transformation

    The Cigna Group is implementing a new rebate-free pharmacy benefits model, aiming to simplify pricing and improve affordability for consumers. This model will replace complex post-purchase rebates with upfront discounts, ensuring customers pay the lowest price at the counter and apply payments to deductibles. Cigna Healthcare will adopt this for 100% of fully insured lives by 2027, and it will be the standard offering for Evernorth by 2028, with at least 50% of the book transitioning by year-end 2028.

    02

    Investment in Future Growth

    The company is making significant investments over the next two years to support the new PBM model, including recontracting efforts, technology improvements, process reengineering, and enhancing data capabilities. These investments, alongside proactive improvements to economic terms for government program partners, are expected to cause short-term margin pressure in Pharmacy Benefit Services but are crucial for long-term growth and market leadership.

    03

    Specialty and Care Services Strength

    Evernorth's Specialty and Care Services segment continues to be a strong growth driver, delivering 11% adjusted earnings growth in Q3. This performance is fueled by increased specialty volumes and biosimilar adoption, saving patients millions. A strategic investment in Shields Health Solutions further expands capabilities in the provider-administered specialty market, which represents approximately 40% of the over $400 billion specialty market.

    04

    Cigna Healthcare Resilience

    Cigna Healthcare demonstrated resilience in a dynamic environment, with Q3 results in line with expectations. The segment saw targeted customer growth, including an 8% increase in the under 500 Select segment and strong performance in International Health. Management is taking corrective actions to reprice the Stop Loss business, expecting margin expansion in 2026, and is investing in predictive capabilities and value-based reimbursement models to manage medical costs.

    05

    Addressing Drug Affordability

    Cigna is actively engaged in efforts to lower drug costs, particularly for brand-name medications, which account for 88% of spend despite being only 10% of volume. The company advocates for biosimilar access and has partnered with the Trump administration on initiatives like making fertility treatments more accessible and expanding access to fair pricing on prescriptions.

    06

    Client Retention and Partnerships

    Evernorth achieved approximately 97% retention in its Pharmacy Benefit Services business for the 2026 selling season. The company proactively secured long-term renewals and extensions with major clients like the U.S. Department of Defense, Prime Therapeutics, and Centene, ensuring these partnerships through the end of the decade.

    AI-generated summary of the company’s earnings call. Not investment advice.