Cigna Group (NYSE:CI)

The financial data for the analyzed periods reveals several key trends in profitability, capital efficiency, and economic value creation.

Net Operating Profit After Taxes (NOPAT)

NOPAT experienced a notable decline from 2020 to 2021, dropping from 9,227 million USD to 6,235 million USD. Although there was a partial recovery in 2022 with an increase to 7,303 million USD, the profit dipped again in the following years to 4,831 million USD in 2023 and slightly improved to 4,868 million USD in 2024. Overall, the trend suggests diminished operational profitability after 2020 with increased fluctuations and lower sustained profit levels.

Cost of Capital

The cost of capital showed a modest upward trend throughout the period, starting at 7.68% in 2020 and rising to a peak of 8.51% in 2023 before slightly decreasing to 8.36% in 2024. The gradual increase indicates a rising expense or risk premium associated with the company's capital structure over time.

Invested Capital

Invested capital steadily declined from 93,748 million USD in 2020 to 81,638 million USD in 2024, with consistent decreases each year except for a minor increase between 2022 and 2023. This trend implies a reduction or optimization in the capital deployed to support the business operations, possibly reflecting divestitures, asset sales, or efficiency improvements.

Economic Profit

Economic profit displayed significant volatility, starting positively at 2,026 million USD in 2020, then turning negative from 2021 onwards with -663 million USD, briefly returning to a small positive figure of 149 million USD in 2022. However, economic profit sharply declined into negative territory again in 2023 (-2,469 million USD) and improved slightly to -1,956 million USD in 2024. This pattern indicates challenges in generating returns above the cost of capital, highlighting increased destruction of shareholder value during most of the assessed period.

In summary, the company exhibits a weakening profitability profile with declining NOPAT and invested capital. The increasing cost of capital and repeated negative economic profit suggest that the returns on the capital employed frequently fall short of investors' required returns, which may raise concerns regarding long-term value creation.

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 a volatile trend across the five-year period. It started positively at 2,026 million USD at the end of 2020 but declined sharply to a negative value of -663 million USD in 2021. A modest recovery was observed in 2022, with economic profit returning to a positive value of 149 million USD. However, this was followed by significant declines in 2023 and 2024, with economic profits falling to -2,469 million USD and -1,956 million USD respectively. Overall, the economic profit demonstrates instability and a downward trajectory in recent years.

Invested Capital

Invested capital showed a gradual decreasing trend from 93,748 million USD at the end of 2020 to 81,638 million USD in 2024. The most notable reductions occurred between 2021 and 2022, and from 2023 to 2024, though a slight increase was recorded in 2023 compared to 2022. The overall decline suggests a reduction in capital investment or asset base over the period.

Economic Spread Ratio

The economic spread ratio followed a pattern similar to economic profit, signaling declining profitability relative to invested capital over time. Initially, the ratio was positive at 2.16% in 2020 but swung negative in 2021 to -0.73%. A minor improvement occurred in 2022, returning to a positive 0.17%, though this was again reversed with more pronounced negative values in 2023 (-2.88%) and 2024 (-2.4%). This ratio indicates deterioration in the company’s ability to generate returns above its cost of capital during the last two reported years.

Summary

Collectively, the data illustrates challenges in maintaining economic profitability and efficient capital utilization. Despite a substantial invested capital base, the recurring negative economic profit and declining economic spread suggest that the company faced profitability pressure and possibly higher capital costs in the later years. The downward trends in both economic profit and the economic spread ratio point to weakening financial performance and diminished value creation for capital providers over the analyzed period.

Revenue Trends

Revenues from external customers exhibited a consistent upward trend throughout the five-year period. Starting at approximately $159.2 billion, revenues increased each year, reaching about $246.1 billion by the end of the final year. This represents a significant growth trajectory with an overall increase exceeding 50% over the period.

Economic Profit Fluctuations

Economic profit demonstrated considerable volatility. The period began with a positive economic profit of around $2.0 billion; however, the following year saw a sharp reversal into negative territory, with a loss of approximately $663 million. A partial recovery occurred in the subsequent year, with economic profit turning modestly positive again at $149 million. The last two years registered substantial declines, showing economic losses of about $2.5 billion and $2.0 billion respectively, marking the lowest points in the observed timeframe.

Economic Profit Margin Analysis

Reflecting the economic profit trends, the economic profit margin moved in a similar volatile pattern. The margin started positively at 1.27% but slipped into negative in the second year at -0.38%. A minimal recovery to slightly positive (0.08%) was noted in the third year, followed by a pronounced decline in the fourth year to -1.27%. Although there was some improvement in the final year, the margin remained negative at -0.79%. These fluctuations indicate significant challenges in maintaining profitability relative to revenue.

Overall Insights

The consistent growth in revenues contrasts with the unstable and generally negative economic profit outcomes in recent years. Despite increasing sales volumes, the company faced difficulties in generating corresponding economic value, as illustrated by persistently negative economic profit margins in the latter part of the period. This suggests rising costs, pricing pressures, or investments that have yet to yield positive economic returns. The data points to a need for strategic focus on improving operational efficiency and cost management to translate revenue growth into sustained economic profitability.