Cigna Sees Boost to Earnings From Covid Impact Fading in 2022

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Cigna Corp. expects about half the negative impact from Covid-19 to fade in 2022, executives said Monday.

Vaccinations will reduce the costs of Covid testing and treatment, and a rebound in U.S. employment should help the health insurer recover membership losses, executives said at its investor day presentation.

The number of new Covid cases and hospitalizations has dramatically dropped in the U.S. since January. Health-care companies are starting to outline their expectations for how Covid-19 will shape their businesses as vaccines become more widely available.

Non-Covid medical care like elective surgeries, routine visits, and even emergency trips have tended to drop when Covid cases are high. Insurers have reported patients returning for those needs when the virus is less prevalent.

What will happen with the volume of non-Covid care remains “the big open question,” Cigna Chief Financial Officer Brian Evanko said in an interview. “Assumptions around the pace of that utilization coming into the system continues to be an open question for us.”

Cigna previously said the pandemic would reduce earnings this year by about $1.25 per share. The company, which insures 16.7 million medical customers globally, mostly in the U.S., affirmed its recent guidance of adjusted earnings of at least $20 per share this year.

Earnings Goal

The waning impact of Covid means the company expects earnings in 2022 to “at or above” the high end of its long-term goal to increase adjusted EPS by 10% to 13% annually.

Cigna also said it expects to generate cash flow from operations of $50 billion through 2025. Of that, about $8 billion annually will be used for share repurchases, dividends and acquisitions.

That’s up from about $3 billion each year in 2019 and 2020, as the company paid down debt and incurred integration costs for its 2018 merger with pharmacy benefit manager Express Scripts.

The net effect of Covid expenses balanced against other medical costs remains a wild card for the health-care industry. The pandemic likely will lead to some lasting shifts in how Americans receive medical care, including the increasing use of telehealth.

Last week at a separate investor event, Anthem Inc. executives said they expected total medical costs to be close to baseline in the second quarter of 2020 and above baseline in the second half of the year.

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