Cigna tumbles after medical costs hit quarterly profit

Cigna Group shares fell sharply after the health insurer reported fourth-quarter profit that was dragged down by medical costs, a trend that’s concerned investors in the sector for months. 

The shares lost 9.6% before US markets opened, setting the stock up for its biggest slide since November 2022. If the drop holds into regular trading, it would almost wipe out Cigna’s gain of 9.8% this year through Wednesday’s close. Shares of Humana Inc., UnitedHealth Group Inc. and CVS Health Corp. also fell.

Investors have been wary of the industry, with UnitedHealth also reporting surprise jumps in medical costs. Cigna’s insurance business, which focuses on private health plans, was thought to be less exposed to the higher expenses that Medicare and Medicaid health plans have reported in recent quarters. 

Cigna’s health benefits segment spent 87.9% of premium revenue on medical expenses in the fourth quarter, more than analysts were expecting. Cigna blamed those costs on stop loss plans that some employers buy to limit losses from outlier medical claims.

Adjusted income from operations was $6.64 a share in the three months ended Dec. 31, lower than the average estimate. Profit in 2025 will be at least $29.50 a share, Cigna said. That’s below the average analyst estimate of $31.50 compiled by Bloomberg. 

These results are “likely to get the most attention today given solid recent performance of Cigna shares,” Mizuho’s Jared Holz said in a note. The forecast looks “more conservative than not but need to see how this shakes out.”

The insurer also operates a top pharmacy benefits manager, which negotiates drug prices between manufacturers, insurers, and pharmacies. The drug middlemen have been under fire from some Washington lawmakers and regulators who say that PBMs elevate drug costs. 

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