Cigna Group (NYSE:CI)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes experienced a substantial decline from 9227 million USD in 2020 to 6235 million USD in 2021. Following this, there was a moderate recovery to 7303 million USD in 2022. However, the profit declined again in the subsequent years, reaching 4831 million USD in 2023 and slightly increasing to 4868 million USD in 2024. Overall, the trend indicates volatility and difficulty in sustaining higher profit levels after 2020.

Cost of Capital

The cost of capital showed a gradual increase over the period. It started at 7.66% in 2020 and slightly decreased to 7.58% in 2021. Subsequently, it rose to 8.33% in 2022, then to 8.48% in 2023, before slightly decreasing to 8.33% in 2024. This upward trend suggests a generally rising expense associated with funding the company’s operations, which could impact the overall profitability and investment decisions.

Invested Capital

The invested capital demonstrates a downward trend over the five-year period. Beginning at 93748 million USD in 2020, it declined steadily each year, ending at 81638 million USD in 2024. This reduction in invested capital may reflect divestitures, asset sales, or other strategic capital management decisions, indicating a smaller asset base being employed in the business operations over time.

Economic Profit

Economic profit exhibited considerable fluctuations, starting positively at 2047 million USD in 2020, then turning negative to -643 million USD in 2021. It briefly returned to a positive value of 171 million USD in 2022 but dropped sharply to -2446 million USD in 2023 and remained negative at -1936 million USD in 2024. The persistent negative economic profit in the last two years signals that the company was generating returns below its cost of capital, implying value destruction during that period.

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

The economic profit exhibited significant variability over the five-year period, starting at a positive value of 2,047 million US dollars in 2020. It then declined sharply to a negative figure of 643 million in 2021, followed by a moderate recovery to 171 million in 2022. Subsequently, economic profit deteriorated again to negative values of 2,446 million in 2023 and 1,936 million in 2024. This pattern indicates fluctuating profitability with an overall trend toward substantial economic losses in the most recent years.

Invested Capital

The invested capital showed a downward trend throughout the period. It decreased gradually from 93,748 million US dollars in 2020 to 81,638 million in 2024. The reduction was relatively steady, with moderate declines each year, suggesting a consistent contraction or divestment of the capital base over time.

Economic Spread Ratio

The economic spread ratio followed a similar trend to economic profit, starting positively at 2.18% in 2020, before turning negative at -0.71% in 2021. There was a slight return to positive territory at 0.2% in 2022, but thereafter the ratio decreased sharply into negative values of -2.85% in 2023 and -2.37% in 2024. This indicates declining efficiency in generating returns above the cost of capital, with increasing negative spreads in recent years.

Overall, the data reflect a challenging financial environment characterized by declining invested capital, volatile and generally negative economic profit, and consistently worsening economic spread ratios in the later years. These trends suggest difficulties in maintaining profitability and capital efficiency.

Revenues from External Customers

There is a consistent upward trend in revenues over the five-year period. Starting at $159,157 million in 2020, revenues increased each year, reaching $246,148 million by 2024. This indicates steady top-line growth and expanding business operations.

Economic Profit

The economic profit shows significant volatility across the years. It started positive at $2,047 million in 2020 but dropped sharply into negative territory in 2021 with a loss of $643 million. A recovery occurred in 2022, albeit modestly positive at $171 million, before declining further into larger losses in 2023 and 2024, reaching -$2,446 million and -$1,936 million respectively. This pattern suggests challenges in generating value above the cost of capital, despite increasing revenues.

Economic Profit Margin

The economic profit margin mirrors the trend in economic profit, reflecting profitability relative to revenues. It began positively at 1.29% in 2020, turned negative in 2021 at -0.37%, recovered to a marginally positive 0.1% in 2022, and then declined again to -1.26% and -0.79% in 2023 and 2024 respectively. The margins confirm persistent profitability pressures and inefficiencies affecting earnings despite revenue growth.

Overall Analysis

The data reveals a paradox of rising revenues coupled with declining economic profitability. While sales have grown substantially, the company has struggled to convert this top-line growth into sustainable economic profit. The recurring negative economic profits and margins from 2021 onward point to increased costs, pricing pressures, or other operational challenges that outweigh the benefits of increased sales. This trend raises concerns about long-term value creation and suggests a need for strategic review to improve profitability and capital efficiency.