Cigna suffers $300 million loss as VillageMD clinic investment reels

Cigna Group reported a first-quarter loss of $300 million as the company’s Evernorth health services business grapples with the loss of value from its investment in physician-staffed clinic operator VillageMD.

On Thursday, Cigna reported a non-cash investment loss of $1.8 billion, or $6.31 per share, related to the impairment of VillageMD’s equity values. That turned a profitable quarter into a fund loss of $300 million, or 97 cents per share, compared with the first quarter of 2023, when Cigna reported net income of $1.3 billion, or 4.24 dollars per share.

Cignas Evernorth has a minority stake in VillageMD, a Chicago-based startup that is now scaling back the expansion of physician practices and clinics that the company ties to Walgreens. In late March, Walgreens posted a $6 billion loss in its second quarter thanks to the loss of value of its controlling stake in VillageMD.

Tim Wentworth, who took over as CEO of Walgreens last October from Roz Brewer, has described VillageMD’s expansion effort as a need to diet. Wentworth said Walgreens and its partner VillageMD have slowed the number of clinic openings in part because the operators have been unable to fill their so-called patient panels, which are a certain number of individual patients under the care of a specific supplier.

Excluding the loss from the clinic investment, Cignas’ underlying businesses performed well, with total revenue up 23% to $57.3 billion in the first quarter, compared to $46.5 billion million dollars from last year’s period.

Cigna said its first-quarter 2024 adjusted earnings from operations were $1.9 billion, or $6.47 per share, compared with $1.6 billion, or $5.41 per share, in first quarter of 2023, reflecting strong contributions from both Cigna Healthcare, which includes a variety of government health insurance plans, and Evernorth Health Services, which operates pharmacy benefit management company Express Scripts and specialty pharmacy business Accredo , as well as some other services from health care providers.

Across all of its businesses, customers and health plan members were on the rise.

Total pharmacy customers as of March 31, 2024 increased 25% from December 31, 2023 to 122.8 million due to new sales and continued relationship expansion, Cigna said in its report Total medical customers as of March 31, 2024 were 19.2 million, primarily reflecting a year-over-year decline in individual and family plan customers, driven by targeted pricing actions in certain geographic areas.

Unlike rival health insurance companies that are seeing profits hurt as seniors use more health care services in Medicare Advantage health plans administered by a growing number of insurers, Cigna did not report of these problems. In fact, Cigna said it remains on track to sell its Medicare Advantage business to Health Care Service Corp., the parent of Blue Cross and Blue Shield plans in five states.

Cigna said the sale of our Medicare businesses to HCSC remains on track as the expiration of the waiting period under the Hart-Scott Rodino Act occurred on April 17. The transaction is expected to close in the first quarter of 2025.

Meanwhile, Cigna’s first-quarter business performance was driven by Cigna management’s decision to raise its outlook for the rest of this year for adjusted earnings from operations to at least $28.40 per action, the company said.

Our strong first quarter results reflect the performance of our Evernorth and Cigna Healthcare businesses, as well as our leadership in meeting the evolving needs of those we serve with the breadth of our differentiated capabilities, David M. Cordani, president and CEO of The Cigna Group said in a statement included in the company’s results statement. Based on our track record of growth and continued momentum in 2024, we are pleased to raise our earnings outlook for the full year.