Cigna Group (NYSE:CI)

Over the observed periods, several notable patterns emerge in the financial performance indicators.

Net Operating Profit After Taxes (NOPAT)

The NOPAT demonstrates significant fluctuation. Starting from a relatively high point, it declines markedly in the subsequent year, then partially recovers before experiencing another sharp decrease. The figure stabilizes at a lower level toward the most recent period. This indicates volatility in operating efficiency or profitability over time.

Cost of Capital

The cost of capital remains relatively stable with a slight upward trend. It starts around 7.67% and peaks in the later years above 8%, indicating an increase in the rate required to justify investments, potentially reflecting changing market or risk conditions.

Invested Capital

Invested capital shows a downward trend overall, gradually decreasing from the initial high point to a lower value at the end of the timeline. This reduction may suggest asset disposals, efficiency improvements, or shifts in capital allocation strategies.

Economic Profit

Economic profit begins positively but turns negative from the second year onward with fluctuations in magnitude. This transition to negative values highlights that the company’s returns on invested capital no longer exceed the cost of capital, suggesting value erosion during the latter periods.

In summary, the company experiences decreasing profitability and value creation pressure throughout the time frame examined. The growth in cost of capital combined with declining invested capital and inconsistent NOPAT emphasizes challenges in sustaining above-cost returns in recent years.

Shareholders’ Net Income

The shareholders’ net income demonstrates a fluctuating but overall downward trend over the five-year period. Starting at US$ 8,458 million in 2020, it declined significantly in 2021 to US$ 5,365 million. A recovery is observed in 2022, with an increase to US$ 6,668 million, but this is followed by consecutive decreases in 2023 and 2024, reaching US$ 5,164 million and US$ 3,434 million respectively. The decline from 2020 to 2024 amounts to approximately 59%, indicating decreasing profitability returned to shareholders.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a somewhat similar pattern to shareholders’ net income, with a decline from US$ 9,227 million in 2020 to US$ 6,235 million in 2021. It improved moderately in 2022 to US$ 7,303 million, but then experienced a marked drop to US$ 4,831 million in 2023. Contrary to shareholders’ net income, NOPAT shows a slight recovery in 2024, increasing marginally to US$ 4,868 million. Despite the recovery in 2024, NOPAT decreased by roughly 47% when comparing 2020 to 2024, signaling reduced operational efficiency or increased costs impacting the company’s profitability after tax.

Comparative Observations

Both financial indicators show volatility, with notable declines early in the period followed by partial recoveries and subsequent decreases. Shareholders’ net income declined more steeply than NOPAT over the five years, particularly between 2023 and 2024. The divergence in trends for 2023 and 2024, where shareholders’ net income continued falling while NOPAT rebounded slightly, suggests potential impacts from non-operating items, taxes, or other extraordinary factors affecting net income specifically. Overall, the trends point to challenges in maintaining consistent profitability and returns to shareholders over the recent years.

Income Taxes

The income taxes exhibit significant fluctuations over the years. In 2020, the amount stood at 2,379 million US dollars before experiencing a notable decline to 1,367 million in 2021. Subsequently, there was an increase to 1,607 million in 2022, followed by a sharp drop to 141 million in 2023. In 2024, income taxes rose again to 1,491 million. The volatility suggests changes in taxable income, tax planning strategies, or legislative impacts during this period.

Cash Operating Taxes

Cash operating taxes show a downward trend with some fluctuations. Starting at 3,064 million US dollars in 2020, the value fell sharply to 1,864 million in 2021. There was then an increase to 2,363 million in 2022, followed by a decline to 2,097 million in 2023 and further to 1,901 million in 2024. Despite the fluctuations, the overall pattern points towards a reduction in cash tax outflows over the five-year period.

Comparative Analysis

Comparing income taxes and cash operating taxes reveals that cash operating taxes consistently remain higher than income taxes across all years. Both metrics have experienced declines from 2020 to 2021, followed by recoveries in 2022. However, while income taxes sharply fell in 2023 to a very low level, cash operating taxes decreased more moderately that year. The 2024 data indicates a recovery in income taxes to near previous levels, whereas cash operating taxes continued a slight downward trend. This pattern may reflect timing differences between tax accruals and payments, or changes in tax assets and liabilities.

Total reported debt & leases

The total reported debt and leases showed an overall downward trend from 2020 to 2023, decreasing from 33,562 million US dollars in 2020 to 31,375 million US dollars in 2023. However, in 2024, there was a slight increase to 31,972 million US dollars. This indicates a general reduction in debt levels over the period with a minor reversal in the final year.

Shareholders’ equity

Shareholders’ equity consistently declined over the analyzed period, starting at 50,321 million US dollars in 2020 and decreasing each year to reach 41,033 million US dollars in 2024. This represents a significant reduction, suggesting that the company's net assets or retained earnings diminished over time, which might impact its financial stability and capital structure.

Invested capital

Invested capital exhibited a steady decline from 93,748 million US dollars in 2020 to 81,638 million US dollars in 2024. The decrease was gradual without any abrupt changes, reflecting a possible contraction in the total capital used for business operations. This trend corresponds with the reductions seen in both debt and equity, implying overall scaling down of the company's capital base.

Economic Profit Analysis

The economic profit exhibited significant volatility over the five-year period. Initially, there was a strong positive economic profit of 2035 million USD at the end of 2020. However, this was followed by a sharp decline to a negative figure of -654 million USD in 2021. The year 2022 showed a partial recovery with a positive economic profit of 159 million USD. Unfortunately, this trend reversed in 2023 and 2024 with notable negative economic profits of -2459 million USD and -1947 million USD respectively, indicating financial challenges and reduced value creation during those years.

Invested Capital Trends

Invested capital showed a generally downward trend over the period. It started at 93,748 million USD in 2020 and decreased each year with slight variation, reaching 81,638 million USD by the end of 2024. The decline suggests either divestment activities, asset write-downs, or other adjustments reducing the capital base. The relatively small increase between 2022 and 2023 is an exception within the overall declining pattern.

Economic Spread Ratio

The economic spread ratio, reflecting the return on invested capital over the cost of capital, mirrored the economic profit trend but with more pronounced negative values in the later years. Initially positive at 2.17% in 2020, it dropped to -0.72% in 2021. A slight recovery to 0.19% occurred in 2022, followed by sharp declines to -2.87% and -2.39% in 2023 and 2024 respectively. This indicates a deterioration in the company’s ability to generate returns exceeding its cost of capital, especially in the recent reporting years.

Overall Summary

Over the analyzed time frame, the company faced considerable financial strain. The combination of declining invested capital, negative economic profits in most years after 2020, and a worsening economic spread suggests increasingly unfavorable returns relative to investment. These trends point to potential challenges in operational efficiency, strategic investments, or market conditions affecting profitability and value creation.

Revenues from external customers

The revenues exhibit a consistent upward trajectory across the analyzed periods. Starting from approximately $159.2 billion, revenues increased steadily each year, reaching about $246.1 billion by the final period. This reflects a significant growth trend and an expanding market presence or increased sales volume over the five-year horizon.

Economic Profit

The economic profit shows pronounced volatility and a negative trend in recent years. While the initial period reported a positive economic profit of $2.0 billion, subsequent years display considerable fluctuations, including negative economic profits in most years after the first. The steep declines in the final two periods, with losses approaching $2.5 billion and $1.9 billion respectively, suggest challenges in achieving value creation despite the revenue growth.

Economic Profit Margin

The economic profit margin mirrors the pattern observed in economic profit. There is a transition from a positive margin in the first year to consistent negative margins in following years, ranging from -0.38% to -1.27%. This indicates that profitability relative to revenue has deteriorated, with the company experiencing losses as a proportion of its sales in the majority of the periods analyzed.

Overall Insights

Despite robust revenue growth, profitability metrics highlight a concerning trend of declining value creation and operational efficiency. The divergence between rising revenues and deteriorating economic profit suggests increased costs, pricing pressures, or other adverse factors impacting profitability. This pattern warrants a detailed examination of cost structures, pricing strategies, and operational effectiveness to identify underlying causes and reverse the negative economic profit trend.