Equity Report [6/7/2024]

The Cigna Group

Healthcare
NASDAQ Symbol: CI
Recommendation: HOLD
Covering Analyst: Pravahlika Chava
Intrinsic Value:

Valuation Price Target

$600.00

$500.00

$400.00

$300.00

$200.00

$100.00

$0.00
EV/EBITDA DDM Relative Historical 1/1/25 1/1/26 1/1/27 1/1/28 1/1/29

Capital Structure Executive Summary

Equity 78.1% This equity report provides an analysis and evaluation of the current and future performance of The
Debt 21.9% Cigna Group over a future period of five years. My method of analysis includes the discounted cash flows
CAPM Presumptions model (DCF), historical model, relative model and dividend discount model (DDM), as well as various
Beta 0.54 ratios including but not limited to ROA, ROE, ROIC, liquidity ratios, capital structure ratios, and
Risk Premium 4.6% profitability ratios.
Risk-Free Rate 4.6%
Terminal Growth Rate 3.0% The results of the data analyzed show that the company is fundamentally sound. The company maintains
WACC Presumptions a stable cash position and has made strategic investments to benefit its future revenue.
Cost of Equity 7.0%
Cost of Debt 5.9% My report finds that the prospects of the company in its current position are very positive. The primary
Cost of Capital 6.5% catalysts for long-term growth include:
 Growth in Specialty and Care services
Intrinsic Value Margin of safety  Strategic Partnerships and Investments
360.11 6.6%  Rising costs in healthcare
Source: Company Data, Group Estimates

I conclude that this company’s stock is undervalued, resulting in a margin of safety of 6.6%. Reasons that
the market has placed this stock underweight include:
 The market fails to recognize Cigna’s growth in pharmacy benefit and specialty services
 The market fails to recognize Cigns’s stable financial performace
 Growth and market expansion through strategic investments

Key Stock Statistics:

52-Wk Range ($) 253.95-365.71 Dividend Yield 1.66% Book Value/Share (mrq) 144.90
Beta 0.54 Diluted EPS (ttm) 12.16 Operating Margin (ttm) 0.81%
Market Capitalization ($BN) 95.99 P/E (ttm) 27.74 S&P Credit Rating A-
Forward Annual Dividend 5.60 P/B (mrq) 2.33 Institutional Ownership 90.64%
Source: Yahoo! Finance
Recent News & Management Guidance
Cigna's (CI) Express Scripts Collaborates With CPESN USA: Cigna's pharmacy benefits manager, Express Scripts, has partnered
with CPESN USA to enhance care access at independent pharmacies, targeting Medicare members with diabetes and
hypertension. This strategic move aims to reduce costs, improve care access in underserved areas, and enhance customer
experience. With CPESN's proven track record and a network spanning 3,500 pharmacies across 44 states, Cigna aims to
bolster care delivery and bridge gaps in access to care, to empower pharmacists in care delivery.

The Cigna Group Reports Strong First Quarter 2024 Results, Raises 2024 Outlook: The Cigna Group reported strong first-
quarter 2024 results, driven by growth in its Evernorth and Cigna Healthcare businesses. The net loss was $0.3 billion including
loss due to a non-cash after-tax investment loss related to the impairment of VillageMD equity securities. The adjusted
income from operations increased to $1.9 billion or $6.47 per share. The Cigna Group expects adjusted revenues for full year
2024 to reach at least $235.0 billion, with consolidated adjusted income from operations projected to be at least $8.065
billion, or at least $28.40 per share. This outlook accounts for anticipated share repurchases and dividends for 2024.

The Cigna Group Declares Quarterly Dividend: The Board declares a cash dividend of $1.40 per share of its common stock.

The Cigna Group to Sell Medicare Businesses and CareAllies to Health Care Service Corporation (HCSC): The Cigna Group
(has agreed to sell its Medicare Advantage, Cigna Supplemental Benefits, Medicare Part D, and CareAllies businesses to Health
Care Service Corporation (HCSC) for approximately $3.7 billion. The transaction, expected to close in the first quarter of 2025,
includes a four-year services agreement where Evernorth Health Services will continue to provide pharmacy benefit services
to the Medicare businesses. The move aligns with The Cigna Group's strategy to focus on growth opportunities in its Evernorth
Health Services and Cigna Healthcare portfolios, reaffirming its 2024 outlook and long-term growth target of 10-13%.

Business Description
The Cigna Group, a prominent player in the health insurance industry, is incorporated in Delaware, with its global
headquarters in Bloomfield, Connecticut. It was formed as a result of the merger between Connecticut General Life Insurance
Company (CG) and INA Corporation, with the name "Cigna" derived from combining the names of the merged entities
(CIGNA). In 2018, Cigna expanded its operations further through the acquisition of Express Scripts.
The company operates within the managed care and healthcare
insurance sectors, offering a wide range of products and
services, including medical, dental, disability, life, and accident
insurance. These offerings are primarily distributed through
employers and other groups, such as governmental and non-
governmental organizations, unions, and associations. With the
acquisition of Express Scripts, Cigna also entered the pharmacy
benefit management arena, providing services such as network
pharmacy claims processing, home delivery pharmacy services,
and specialty pharmacy benefit management.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Cigna Group primarily operates through its segments - Evernorth Healthcare Services and Cigna Healthcare. Evernorth
Healthcare Services focuses on providing pharmacy benefits and care solutions, while Cigna Healthcare serves as the health
benefit provider.
Furthermore, the company has a global presence through its subsidiary, Cigna Global Health Benefits, headquartered in
Wilmington, Delaware, with additional operations in Scotland, Belgium, and China. This business unit offers comprehensive
health plans, including options for travel and life insurance coverage.

Evernorth Healthcare Services

The Evernorth Health Services platform offers a comprehensive range of healthcare solutions, specializing in Pharmacy Benefit
Services and Specialty & Care Services. With a focus on pharmacy benefits, home delivery pharmacy, specialty pharmacy,
specialty distribution, and care delivery and management solutions, Evernorth serves a diverse array of clients. Its mission is to
provide affordable and flexible healthcare solutions tailored to the unique needs of its clients. Through its integrated
approach, Evernorth aims to deliver high-quality care and improve health outcomes for individuals and organizations alike.
The segment offers comprehensive pharmacy benefit services aimed at ensuring high-quality and cost-effective pharmacy
care for its customers. This includes processing drug claims from various sources such as Express Scripts Pharmacy and
Accredo, as well as managing retail pharmacy networks to provide
customers with access to discounted medications. Additionally,
Cigna provides services like benefit design consultation, drug
utilization review, and drug formulary management, helping clients
create lists of approved drugs that insurance will help pay for. They
also offer various other services such as advising on insurance plan
design, reviewing medication usage for safety and correctness,
managing payments for specialty medicines, and monitoring
medicine usage to avoid wastage and misuse.
In addition to pharmacy benefit services, Cigna Group offers specialty care services through its Evernorth Health Services
segment. This includes operating specialty pharmacies like Accredo, which focus on providing high-cost medications for
complex and rare diseases, along with specialty distribution services through CuraScript SD. Cigna also provides a range of
care delivery and management solutions, including virtual care, in-home care, primary care, benefits management, behavioral
health services, and health coaching. Through these services, Cigna aims to improve whole-person health outcomes and
ensure members receive the right level of care at the right time and place. Additionally, Cigna offers home-based care
services, virtual care through MDLIVE, and pharmacy solutions such as condition and disease management, navigation
services, and digital health formulary solutions, further enhancing its offerings in the healthcare space.
The Evernorth Healthcare Services segment reported adjusted revenues of $153.5 billion and a total of $6.4 billion pre-tax
adjusted income from operations.

Cigna Healthcare
Cigna Healthcare segment offers a diverse portfolio of healthcare insurance products and services, catering to both individuals
and employer groups. These offerings include medical, dental, disability, life, and accident insurance, as well as pharmacy
benefit services. Cigna serves various market segments, ranging from large national employers to small businesses, and
provides tailored solutions such as employer medical plans, individual and family medical plans, and Medicare plans. With a
focus on affordability and flexibility, Cigna distributes its products primarily through employers and other groups, ensuring
widespread access to high-quality healthcare coverage.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
In the fourth quarter of 2023, Cigna Group consolidated its U.S. Commercial and U.S. Government operating segments to
create the U.S. Healthcare operating segment. Under its U.S.
Healthcare segment, Cigna operates employer medical plans,
individual and family plans, and Medicare Advantage, Part D, and
Supplement plans. These offerings are designed to meet the diverse
needs of customers across different demographics, providing
comprehensive healthcare benefits and access to a network of
healthcare providers. Additionally, Cigna offers specialty benefits and
solutions aimed at improving the quality of care, lowering costs, and
promoting better health outcomes. These include behavioral health solutions, consumer health engagement programs, cost
containment initiatives, dental solutions, and pharmacy management services.
Internationally, Cigna provides global healthcare offerings to multinational employers and globally mobile individuals, as well
as local health plans to employers and individuals in specific countries. With a focus on keeping employees healthy and
productive, Cigna's international health segment offers a range of insurance and administrative services for medical, dental,
pharmacy, vision, and life risks. Through various distribution channels such as brokers, direct sales, and private exchanges,
Cigna ensures broad access to its healthcare solutions while maintaining its mission of delivering affordable, high-quality care.
Cigna Healthcare, in 2023, reported adjusted revenues of $51.2 billion and pre-tax adjusted income from operations totaling
$4.5 billion. In January 2024, Cigna entered into a definitive agreement to divest its Medicare Advantage, Medicare Stand-
Alone Prescription Drug Plans, Medicare and Other Supplemental Benefits, and CareAllies businesses within the U.S.
Healthcare segment to HCSC for $3.3 billion in cash, subject to regulatory approvals and customary closing conditions.

Other Operations
Other Operations encompasses Cigna Group's remaining business operations, comprising ongoing and exited businesses.
Ongoing businesses include the Corporate-Owned Life Insurance (COLI) segment, which offers permanent insurance contracts
to corporations for coverage on the lives of select employees. Additionally, run-off businesses entail the settlement annuity
business, focusing on closed, single premium annuity contracts, and reinsurance operations, which became inactive after
exiting the variable annuity reinsurance business in 2013. Exited businesses involve international life, accident, and
supplemental benefits, sold to Chubb INA Holdings, Inc. in July 2022, and the divestment of Cigna Sağlık Hayat ve Emeklilik, a
joint venture in Türkiye, in December 2022. In 2023, Other Operations reported adjusted revenues of $0.6 billion and pre-tax
adjusted income from operations of $96 million.

Revenue Drivers
Pharmacy Revenues
Pharmacy revenues for the company primarily stem from
providing pharmacy benefit management services to clients and
customers. Revenue recognition occurs when control of the
promised goods or services is transferred to clients and
customers, reflecting the expected consideration for those
goods or services. The company offers various services
supporting benefit management and claims administration,
including the provision of prescription drugs through
multiple distribution methods such as retail networks,
home delivery, and specialty pharmacies.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Premiums
Premiums and fees are vital revenue sources for Cigna Group, encompassing diverse insurance products and services. The
company earns fees from clients in self-funded group health plans (ASO arrangements) and premiums from insured plans,
subject to regulatory approval. Revenue recognition is based on prior experience or similar policyholder pools. For Medicare
plans, fixed monthly payments from CMS are supplemented by potential quality performance-based revenue. The ACA's
minimum MLR requirements mandate premium refunds if not met. Premium revenue is recognized ratably over the contract
period for various insurance coverages. Adjustments are made for risk-adjusted premium payments, risk-sharing, and rebates
under MLR provisions.

Fees and other revenues

The Cigna Group derives the majority of its service fees from various arrangements, including administrative services only
(ASO) agreements, fee-for-service clinical solutions, Wholesale Marketplace Drug Formulary Management services, health
benefit management services, and specialty pharmacy manufacturer administration. ASO arrangements, particularly for
medical and specialty solutions like pharmacy benefits, allow plan sponsors to self-fund claims and bear the risk of benefit
costs, often on short-term contracts. In exchange for these fees, Cigna provides access to participating provider networks and
various support services for benefit management, such as claims administration, behavioral health services, disease
management, and utilization management.

Products & Services

Pharmacy Benefits and Home delivery services
Under its Pharmacy Benefit Services, The Cigna Group provides a comprehensive range of services aimed at driving high-
quality, cost-effective pharmacy care. This includes adjudicating drug claims from various sources such as Express Scripts
Pharmacy, Accredo, and retail network participants, as well as offering retail pharmacy network administration services. The
company negotiates with pharmacies nationwide to secure discounted drug prices and offers national and regional network
options to meet client preferences. Additionally, The Cigna Group manages drug formularies, assisting clients in establishing
lists of drugs to determine coverage, costs, and plan preferences, with a focus on clinical appropriateness and affordability.
They also offer benefits design consultation, drug utilization review programs, and specialized services such as myMatrixx for
workers' compensation. Their advanced utilization management programs include prior authorization and step therapy, while
enhanced fraud, waste, and abuse programs help identify unusual utilization patterns. The company also operates group
purchasing organizations, administers Inside Rx prescription savings program, and offers Evernorth Wholesale Marketplace
solutions. Under Value-Based Programs, The Cigna Group provides tailored solutions for therapy classes posing budgetary
threats and clinical challenges, including Express Scripts SafeGuardRx, Copay Assurance, Patient Assurance, and EncircleRx
programs. Additionally, their Home Delivery Pharmacy offers free standard shipping of medications nationwide, convenient
access to maintenance medications, and better cost management through operating efficiencies and generic substitutions,
operated through thirteen licensed pharmacies across the United States.

Specialty Pharmacy, Distribution, Care Delivery and Management Solutions

Under Specialty and Care Services, The Cigna Group offers a range of specialized healthcare solutions. Their Specialty
Pharmacy division, anchored by Accredo, focuses on dispensing high-cost medications for complex and rare diseases,
providing intensive clinical monitoring and specialized support. Freedom Fertility Pharmacy caters exclusively to customers
undergoing fertility treatment. Additionally, CuraScript SD serves as a specialty distributor of pharmaceuticals and medical
supplies to healthcare providers, particularly those treating chronic diseases. The company also provides Care Delivery and
Management Solutions, including eviCore Healthcare for medical benefits management, Evernorth Behavioral Health for

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
simplified treatment navigation, and Evernorth Home-Based Care for in-home population health and clinical services. MDLIVE
offers virtual care services, while Pharmacy Solutions combine various programs to coordinate care for customers.

US Healthcare Plans & Specialty Benefits and Solutions

The company offers a range of employer medical plans,
including HMOs, LocalPlus®, Network, and Open Access Plus,
with cost-sharing incentives to encourage in-network care.
Consumer-Driven Products, such as health savings accounts
and flexible spending accounts, provide tax-advantaged ways
to manage healthcare expenses. Individual and Family Plans
offer ACA-compliant EPO or HMO coverage to those without
employer or government coverage. Cigna has entered a
definitive agreement to sell its Medicare Advantage, Cigna Supplemental Benefits, Medicare Part D, and CareAllies businesses
to Health Care Service Corporation (HCSC). The services offered under these segments included, Medicare Advantage Plans,
Medicare Stand-Alone Prescription Drug Plans, and Medicare Supplement Plans cater to Medicare-eligible individuals. U.S.
Healthcare Specialty Benefits and Solutions encompass Behavioral Health solutions, Consumer Health Engagement programs,
Cost Containment Programs, Dental solutions, Pharmacy Management solutions, and Stop-Loss insurance coverage for self-
insured clients, all aimed at enhancing healthcare access, management, and affordability.

International Health
Catering to multinational employers, intergovernmental and nongovernmental organizations, and globally mobile individuals,
the company provides a comprehensive range of insurance and administrative services covering medical, dental, pharmacy,
vision, life, accidental death and dismemberment, and disability risks. Their global health care offerings focus on ensuring the
health and productivity of employees. Additionally, their local health care offerings encompass medical, dental, pharmacy,
vision, and life coverage for employers and individuals in specific countries where these products and services are available for
purchase.

Prices and Fee Structure:

The company's revenue streams primarily include premiums for insurance and healthcare services, payments for government
policies and administrative and pharmacy services fees. Premiums for The Cigna Group's insured arrangements, including
individual and group insurance premium rates, are typically subject to approval by state regulatory agencies and may be based
on prior experience or a pool of similar policyholders. Approximately 24% of U.S. Healthcare medical customers are in insured
arrangements. Premiums for short-duration group health, accident, and life insurance, as well as managed care coverages, are
recognized on a pro rata basis over the contract period, with benefits and expenses recognized when incurred. The company
also receives premiums for Medicare Advantage plans, Medicare Part D plans, and Individual and Family Plans from CMS and
customers, recognized as revenue ratably over the contract period. Revenue from Medicare plans is received through fixed
monthly payments from CMS and may include additional revenue based on quality performance measures. The ACA imposes
minimum Medical Loss Ratio (MLR) requirements, necessitating premium refunds if not met.
Fees are earned through various channels, including administrative services only (ASO) arrangements, pharmacy benefit
management, and health benefit management solutions. ASO arrangements involve collecting fees for providing access to
provider networks and solutions supporting benefit management, while pharmacy benefit management includes fee-for-
service clinical solutions and drug formulary management services. Health benefit management solutions drive cost
reductions and quality outcomes for clients, with fees recognized based on contracted rates and performance obligations over

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
the contract period. Other service fees related to administering services to specialty pharmacy manufacturers are also
recorded.

Business Strategy:
Evernorth Health Services aims to expand its market reach by adapting services to evolving customer needs, particularly in
Care Solutions. Enhancing transparency and predictability, seizing biosimilar opportunities, and advancing affordability
initiatives are key priorities. Strategic investments in business, infrastructure, and talent are leveraged to drive enterprise
growth. Additionally, the company is focused on fostering its partnership with Centene to further augment its growth
trajectory. Cigna Healthcare growth strategy revolves around customer engagement, provider partnerships, and optimized
care delivery. They aim to empower customers with health information, incentivize providers to improve performance, and
facilitate aligned health goals. This involves developing integrated, data-driven programs and digital solutions to enhance
affordability and clinical outcomes while prioritizing customer experience. Key elements include an extensive participating
provider network, collaborative care arrangements like the Cigna Collaborative Accountable Care program, specialist
programs with value-based reimbursement, and hospital
quality programs. Independent Practice Associations and
site of care optimization initiatives further drive cost
savings and quality care, supported by virtual care
services like MDLIVE. The Cigna Group's growth strategy
emphasizes cross-enterprise leverage to maximize the
value of their capabilities and drive expansion. They
leverage their wide-ranging capabilities across Evernorth
Health Services and Cigna Healthcare to deepen client relationships and meet evolving needs efficiently. This approach
involves bringing teams together to create solutions that broaden their presence in the healthcare delivery system, reduce
costs, and enhance overall care quality. By cross-leveraging Evernorth Health Services' offerings within Cigna Healthcare and
vice versa, they aim to improve affordability, access, and innovation while ensuring transparency and delivering value to
clients and customers.

Cost Drivers
Pharmacy and other services costs
These costs encompass several components, including the expenses related to prescriptions sold, network pharmacy claim
costs, and copayments. Direct costs associated with dispensing prescriptions, such as supplies, shipping, handling, and clinical
programs like drug utilization management, are also factored in.
Costs for home delivery and specialty pharmacy services are Pharmacy and other services costs
recognized upon drug shipment, while retail network costs are
acknowledged upon processing and approval for payment. 133,801
117,553 124,834
Rebates and vendor considerations received in exchange for 103,484
97,668
pharmacy benefit management services are deducted from
pharmacy costs, with rebates recognized as prescriptions are
shipped or processed for payment. The company maintains
reimbursement guarantees with certain retail network 2019A 2020A 2021A 2022A 2023A
pharmacies, recording payable or prepaid assets based on
actual performance against contractual rates. Incremental costs for obtaining service and pharmacy contracts for short-term
arrangements are expensed as incurred. The company also recognizes direct costs incurred offering fee-for-service clinical

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
solutions to clients, as part of its integrated pharmacy benefits performance, direct costs incurred from Wholesale
Marketplace Drug Formulary Management services and other services under pharmacy and other service costs.

Medical costs and other benefit expenses

Medical costs, measured as a percentage of premiums, known as the
medical care ratio (MCR), are a key metric for insured businesses. Medical costs and other benefit
Universal life product expenses encompass benefit claims exceeding expenses 36,287
policyholder account balances and income credited to policyholders in
33,565
line with contract provisions. Expenses are recognized upon claim 32,710 32,184
occurrence, while income is credited according to contractual terms. 30,819
Other benefits and expenses are recognized when incurred, with
pharmaceutical manufacturer rebates netted for Cigna Healthcare 2019A 2020A 2021A 2022A 2023A
business.

SG&A
The Selling, general and administrative costs include all other operating costs
incurred while performing its service obligations. Expenses associated SG&A with
administrative programs and services are recognized as incurred in 14,822
Selling, general and administrative expenses. The related expenses
14,053 14,072
incurred from service programs under fee-for-service pharmacy benefit
services, Wholesale Marketplace Drug Formulary Management 13,174
13,012
services, services from health management solutions are recognized
under Selling, general and administrative expenses. 2019A 2020A 2021A 2022A 2023A

Industry Overview
The U.S. healthcare system is characterized by high costs and a lack of universal coverage, with the government assisting to
economically disadvantaged groups such as the elderly, disabled, and underprivileged individuals. In the absence of a
nationwide health insurance system, most Americans rely on their employers for health insurance coverage or purchase
individual plans directly from insurers. Employer-sponsored health insurance plays a crucial role in healthcare provision,
allowing for premium cost-sharing between employers and employees through negotiated group rates. The individual health
insurance market serves those without access to employer-sponsored plans or government programs like Medicare and
Medicaid, offering plans through the Health Insurance Marketplace established by the Affordable Care Act, as well as directly
from insurance companies. The government participates in the health insurance sector through Medicare for individuals aged
65 and above, and Medicaid and the Children's Health Insurance Program (CHIP) for low-income individuals and families. The
Health Insurance Marketplace, or Exchange, is an online platform where people can compare and purchase health insurance
plans from private insurers, categorized into Bronze, Silver, Gold, and Platinum levels based on coverage and cost-sharing.
Post-COVID, the U.S. health insurance market is experiencing increased demand and evolving coverage options.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Industry Growth
The United States health insurance market has experienced significant growth over the past decade, driven by rising
healthcare costs, increasing awareness of health insurance, and a growing population. The prevalence of chronic diseases such
as diabetes, cancer, cardiovascular, and neurological diseases has heightened the need for health insurance. In 2021, the U.S.
spent $12,914 per person on healthcare, significantly higher than other high-income countries, illustrating the rising cost of
healthcare. Investments in new treatments and technologies continue to drive these costs up, necessitating insurers to
manage expenses while providing adequate coverage. According to the United States Census Bureau, 216 million individuals
had private health insurance and 117 million had public health insurance in 2021, though these numbers overlap as individuals
may have multiple types of coverage. This increasing demand for health insurance coverage has been crucial in boosting the
uptake among consumers. The United States Health And Medical Insurance Market size is estimated at USD 1.5 trillion in 2024
and is expected to reach USD 2.01 trillion by 2029, growing at a CAGR of greater than 6% during 2024-2029.

Growth of Technology in Healthcare and Health Insurance Sectors

The use of technology in healthcare and health insurance has been on the rise, significantly transforming both sectors. Many
insurers and providers are now offering mobile apps and digital tools to help patients manage their health more effectively.
The emergence of telemedicine, which allows patients to receive care remotely through video consultations and other digital
tools, saw a significant boost during the COVID-19 pandemic as patients were encouraged to avoid in-person visits. This has
led many insurers, such as Anthem Inc. and Cigna, to offer coverage for telemedicine services, allowing patients to connect
with doctors via phone or video call. This trend is expected to continue over the next few years.
Simultaneously, the US health insurance market is experiencing significant growth in the online channel segment, driven by
the convenience of purchasing insurance policies online and the availability of discounts, offers, and comprehensive plan
information provided by insurance companies. The widespread use of the internet and smartphones, coupled with
advancements in technology, has led to changes in consumer purchasing behavior, driving rapid expansion in the online
insurance segment. Insurance companies are leveraging technologies like artificial intelligence, chatbots, and machine
learning to streamline processes, optimize risk management, and enhance medical billing while ensuring compliance with
HIPAA regulations. AI enables insurers to collect, analyze, and utilize large volumes of healthcare data to identify new business
opportunities and improve risk management. This integration of technology in healthcare and health insurance is set to
continue driving growth and innovation in the industry.

Private Health Insurance is Expected to Fuel the Market Growth in the United States
The private health insurance market in the United States has seen significant growth due to an increasing number of private
insurance programs and the rising prevalence of chronic diseases. According to the NAIC, more than 68% of healthcare
coverage in the U.S. is provided by private insurance programs,
such as PPOs, HMOs, and POS plans. In 2019, the top 25
insurers accounted for around USD 130 billion in revenue, with
over 60% of Americans having employer-provided insurance,
35% covered by Medicaid or Medicare, 6% acquiring non-group
insurance, and around 9% remaining uninsured. Private health
insurance plans include group insurance offered by employers
and individual insurance purchased directly or through
marketplaces. These plans vary in coverage and cost-sharing
arrangements, involving premiums, deductibles, co-payments, and co-insurance. The increasing prevalence of chronic
diseases, such as diabetes and heart disease, drives higher enrollment in private health insurance to manage the high costs of

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
treatment. Despite affordability challenges, the demand for comprehensive health coverage continues to fuel the private
health insurance market.

Industry Disruptors:
Rising Costs of Healthcare
The rising costs of healthcare and the associated increase in insurance premiums are major disruptors in the health insurance
market. Insurers are under pressure to balance the need to offer affordable coverage with the necessity of covering escalating
healthcare costs. This dynamic creates a challenging
environment for both insurers and consumers, with
insurers struggling to maintain profitability and consumers
facing difficulties in affording comprehensive coverage.
One of the most significant contributors to rising
healthcare costs in the United States is the high price of
prescription drugs, which are substantially higher
compared to other countries due to factors such as lack of
price regulation, extensive patent protections, and high
research and development costs. Additionally, the cost of
advanced medical procedures, such as surgeries, MRIs, and
other diagnostic tests, is notably high, further driving up healthcare expenses. These elevated costs are passed on to patients
through increased insurance premiums and out-of-pocket expenses. Compounding the issue is the shortage of primary care
providers, which leads to increased reliance on more expensive specialists and emergency services. This shortage exacerbates
overall healthcare costs, subsequently raising insurance premiums and making it challenging for many Americans to afford
necessary medical care.

Complex nature of the industry

Another significant challenge in the United States health insurance market is its complexity, which can make it difficult for
consumers to understand their coverage and make informed decisions about their healthcare. The system is characterized by
a wide range of plans with varying levels of coverage, copayments, deductibles, and other features. This diversity of options,
while intended to provide tailored solutions, often results in confusion for many consumers who struggle to navigate the
intricate details of each plan. The complexity is further exacerbated by the use of industry-specific jargon and a lack of
transparent information, making it difficult for consumers to compare plans effectively and choose the best option for their
needs. Moreover, the administrative burden of managing insurance claims and payments adds another layer of complexity for
healthcare providers. Providers must navigate a maze of paperwork, adhere to varying insurance protocols, and ensure
compliance with different billing practices for each insurer. This administrative complexity not only increases operational costs
for healthcare providers but also contributes to delays in patient care and billing errors, which can lead to disputes and
additional costs for both providers and patients. The complexity of the health insurance system also impacts the efficiency of
the healthcare delivery system. Patients often experience frustration and delays in accessing care due to the need to obtain
prior authorizations, understand their coverage limits, and manage out-of-pocket costs. These barriers can result in deferred
care, worsening health outcomes, and ultimately higher healthcare costs. Additionally, the fragmented nature of the U.S.
healthcare system, with its multiple payers and varying coverage models, hinders the ability to implement standardized best
practices and coordinate care effectively. This fragmentation leads to inefficiencies, duplicated services, and gaps in care, all of
which contribute to the overall challenge of managing healthcare costs and delivering high-quality care.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Market Share
The US health insurance market is moderately consolidated, with established players facing increasing competition from new
entrants. Factors such as the rapid adoption of advanced technology and the introduction of new policies influence the
competitive landscape. Key players in the market include UnitedHealth Group, Elevance Health, Cigna Group, HCSC Group,
and Centene Corporation.
During the COVID-19 pandemic, merger and acquisition activity in the health insurance, hospital, and health system sectors
declined but is rebounding significantly. Some planned deals have been scrapped due to various reasons, while others
proceed as planned or have recently closed. Notably, Kaiser Permanente's acquisition of Geisinger Health Plan of Pennsylvania
through Risant Health indicates a major move in California's healthcare market, with Kaiser Permanente investing $5 billion in
Risant over the next five years. However, certain
deals faced opposition, such as Tenet Healthcare's
planned sale of San Ramon Regional Medical Center,
which was scrapped due to concerns raised by the
Federal Trade Commission (FTC) about increased
costs and reduced competition.
Amazon's foray into healthcare services faced
setbacks in previous years but seems back on track.
Despite shutting down Amazon Care in late 2022,
Amazon made progress in 2023 by acquiring One
Medical and offering discounts for Amazon Prime
members using One Medical for primary care. Additionally, Amazon's RxPass service provides Prime members with
prescription fills for a monthly fee, hinting at further expansions in the healthcare sector.
According to AMA, Cigna has a 10% market share in health insurance, making it the fourth largest among the 10 largest health
insurers by market share. Cigna also has about 11% of the U.S. prescription drug market. In the health insurance industry,
Cigna's main competitors are UnitedHealth Group, Humana, Aetna, and Anthem.

Competitive Analysis
SWOT Analysis
A comprehensive SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of Cigna provides valuable insights into its
internal capabilities and external environment, aiding in strategic planning and decision-making. This analysis delves into the
key factors impacting Cigna's position in the market, including its strengths in innovation and customer engagement,
weaknesses in regulatory challenges, opportunities in expanding markets and digital health, and threats posed by competitive
pressures and healthcare industry dynamics. Understanding these factors is essential for Cigna to capitalize on its strengths,
address weaknesses, seize opportunities, and mitigate threats in the ever-evolving landscape of healthcare.
Strengths
 Strong Brand Reputation: Cigna has fostered a loyal customer base through its value-based and affordable healthcare
services, building a strong brand reputation.
 Strong Financial Performance: The company has consistently demonstrated strong financial performance, regularly
beating analysts' expectations and maintaining a solid financial position.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
  Strategic Alliances and Investments: Cigna Group has entered into advantageous alliances and made strategic
investments with other players in the healthcare industry, expanding and consolidating its market share.
Weaknesses
 Dependency on the US Market: Cigna's operations are primarily based in the USA, and its international segments
have shown weaker performance. Strategic divestitures from the international market have further consolidated its
dependency on the US market.
 Highly Regulated Industry: Operating in the healthcare sector, Cigna faces extensive regulatory scrutiny, which can
lead to significant compliance costs and operational restrictions.
 Ethical Dilemmas: Previous decisions regarding insurance policies and pharmacy networks have led to customer
criticism, potentially harming the company's reputation and customer trust.
Opportunities
 Expansion into New Markets: Leveraging its affordability, Cigna can expand into new international markets,
diversifying its revenue sources and reducing its dependency on the US market.
 Increased Demand for Healthcare Services: The rising demand for healthcare services presents a significant
opportunity for Cigna. Its value-based approach can attract more customers as healthcare costs continue to rise.
 Acquisitions and Partnerships: Strategic acquisitions and partnerships can help Cigna expand its service portfolio,
enter new markets, and strengthen its competitive position.
Threats
 Regulatory Compliance: Stricter regulations and potential changes in healthcare laws pose a significant threat,
potentially increasing operational costs and limiting business practices.
 Intense Competition: The healthcare industry is highly competitive, with numerous players vying for market share.
Increased competition can pressure pricing and margins.
 Economic Conditions and Inflation: Economic downturns and high inflation rates can reduce consumer spending on
healthcare, impacting Cigna’s revenue and profitability.

Porter’s Five Forces

Threat of Substitutes | Low - Moderate
The threat of substitutes for Cigna's services is low to moderate. Although there are alternative health insurance portfolios in
the market, the comprehensive, affordable, and integrated nature of Cigna's offerings, including its extensive provider
network and advanced health management, specialty, and care services, reduces the likelihood that customers will switch to
substitute services. Cigna focuses on providing superior quality and unique benefits to its products, thereby differentiating
itself from substitutes and maintaining customer loyalty.
Supplier Bargaining Power | Low-Moderate
Supplier bargaining power is low to moderate. Cigna works with a large network of healthcare providers, pharmaceutical
companies, and medical equipment suppliers. The sheer volume of business Cigna provides to these suppliers often gives
Cigna significant leverage in negotiations. However, specialty drug manufacturers and highly specialized medical service
providers may have more bargaining power due to the lack of alternative suppliers for certain critical treatments. Cigna
mitigates supplier bargaining power by strategically sourcing materials at low costs, maintaining multiple suppliers, and
fostering close relationships to ensure mutual benefits.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Threat of New Entrants | Low – Moderate
Cigna operates in an industry where achieving economies of scale is challenging, resulting in high production costs for new
entrants. However, strong product differentiation and high capital requirements act as significant barriers to entry. Despite
easy access to distribution networks, stringent government policies and licensing requirements deter potential new players.
However, emerging healthcare segments from companies with high market share in their own industries, such as Amazon,
could present some level of substitution risk. To tackle this threat, Cigna focuses on expanding its services portfolio and
consolidating its market presence.
Buyer Bargaining Power | High
Customers, both individual policyholders and large corporate clients, have numerous options to choose from, increasing their
leverage when negotiating terms and premiums. Additionally, the rise of information transparency and online comparison
tools empowers customers to make more informed choices, further enhancing their bargaining power. To address this, Cigna
focuses on product innovation and quality differentiation to attract and retain customers, and building a large customer base
through effective marketing strategies.
Competitive Rivalry Amongst Sellers | High
The competitive rivalry in the health insurance industry is high. Major players like UnitedHealth Group, Elevance Health, HCSC
Group, and Centene Corporation fiercely compete for market share. This intense competition drives companies to
continuously innovate, improve service offerings, and engage in aggressive pricing strategies. Additionally, the rapid adoption
of advanced technology and the introduction of new healthcare policies further intensify the competitive landscape.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Financial Analysis
The financial metrics such as return on equity (ROE), return on assets (ROA), and return on capital (ROC) are essential
indicators of performance. ROE is particularly important when evaluating the attractiveness of Cigna's investments, as it
reflects how efficiently the company generates profit relative to shareholders' equity. ROA measures profitability in relation to
total assets, providing insight into how effectively the company utilizes its assets. ROC highlights the efficiency of capital
allocation, considering both debt and equity, which is crucial for insurers managing policyholder funds. These metrics enable
Cigna to evaluate its financial performance, set strategic objectives, and ensure sustainable growth while maintaining
regulatory compliance and investor confidence.

DuPont Analysis
Return on Assets (ROA)
The sustained performance of the Cigna Group's Return on Assets Return on Assets
(ROA) measure, consistently surpassing the 4% mark, indicates a
7.0 % 6.2 %
commendable level of operational efficiency and effectiveness in 6.0 % 5.2 %
5.0 % 4.6 %
utilizing its asset base This stability in ROA not only instills 4.1 %
4.0 %
confidence in investors but also underscores Cigna's strategic focus 3.0 % on
maximizing returns from its asset investments. Additionally, 2.0 %
1.0 %
maintaining a stable ROA above 4% positions Cigna as a reliable 0.0 %
2020A 2021A 2022A 2023A
player in the healthcare industry, capable of delivering consistent
and predictable financial outcomes.

Return on Equity (ROE)

Cigna Group's Return on Equity (ROE) has consistently remained
above 11%, reflecting the company’s strong financial performance Return on Equity and
efficient capital utilization. This stable and robust ROE indicates that 18.0 % 16.9 %
16.0 % 15.2 %
Cigna is effectively leveraging its equity base to generate substantial
14.0 % 11.5 % 11.6 %
profits, which is a positive sign for investors. The high ROE suggests 12.0 % that
10.0 %
the company has sound management practices and is adept at 8.0 %
deploying shareholders' funds to yield favorable returns. 6.0 %
4.0 %
Consequently, Cigna's sustained ROE signifies financial health and 2.0 %
strategic competence, positioning the company well for continued 0.0 %
2020A 2021A 2022A 2023A
competitiveness and long-term success in the health insurance
industry.

Return on Invested Capital (ROC)

The ROC measure of the Cigna Group has consistently remained above 16%,
reflecting the company's strong capital allocation strategy and robust Return on Capital
financial performance. This stable and high ROC indicates that Cigna is
30.0 %
efficiently utilizing its debt and equity to generate substantial returns. 24.1 % For a
25.0 % 21.4 %
20.0 % 16.7 % 16.3 % 18.2 %
company operating in the heavily regulated health insurance sector, this
15.0 %
efficiency is crucial. It demonstrates Cigna's ability to effectively 10.0 %
manage its available capital, reducing reliance on external funding. 5.0 %
Moreover, it underscores Cigna's capability to maintain financial 0.0 %
2019A 2020A 2021A 2022A 2023A

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
stability while delivering higher returns for both policyholders and shareholders, highlighting the company's resilience and
strategic agility in a dynamic industry.
As observed, all the metrics exhibit similar dips and rises. The rise in 2020 can be attributed to the surge in the
healthcare industry during the COVID-19 pandemic. However, in 2021, Cigna, along with other companies and the broader
economy, faced challenges due to ongoing disruptions caused by the pandemic, such as supply chain issues and workforce
shortages. The relief measures from the government and companies' adaptation to newly established supply chains and
workforce adjustments led to a recovery in 2022. However, this recovery was short-lived as persistent inflation and the
Federal Reserve's higher interest rates negatively impacted returns. Furthermore, geopolitical disruptions exacerbated these
economic challenges, contributing to the observed dip in 2023.

Valuation
Discounted Cash Flow (DCF) – 50% Weighted
Using the EV/EBITDA valuation method, we arrived at an intrinsic value of $543.03, representing a margin of safety of 60.7%.
EV/EBITDA is a robust and appropriate measure for the Discounted Cash Flow (DCF) model in valuing Cigna Group. It
effectively captures operational performance, facilitates comparability, includes debt, and reflects the company’s growth
potential while remaining straightforward and efficient. This makes it a critical component in arriving at a comprehensive and
accurate intrinsic value for Cigna.

Revenue
The revenue forecasts for the upcoming years are primarily based on market growth projections, with a significant
contribution from Cigna's partnership with Centene. However, a dip in revenue for the healthcare segment is expected in
2024, primarily due to the sales of its Medicare and Medicaid segments. Beyond 2024, the growth projections for the
healthcare segment align with overall industry growth. These forecasts were derived using a year-over-year (YOY) growth rate.
The risks to these forecasts are moderate, as they are largely based on the expected growth of the healthcare market.
Potential risks include Cigna’s failure to capture market growth or unexpected geopolitical, economic, or social circumstances
that could impact the industry’s growth trajectory.

Pharmacy, Medical and other costs and expenses

These costs are primarily forecasted based on the expected growth in revenue generation. The increase in revenue is
anticipated to result from the expansion of Cigna's activities and market share. However, this expansion will inevitably lead to
increased expenses. Additionally, there is little flexibility to adjust these costs due to rising inflation and increasing expenses
within the healthcare industry.

Selling, General and Administrative Costs

The forecasts for SG&A expenses for Cigna Group follow the trend of revenue forecasts, with the company's 2024 adjusted
SG&A projected at 6.1%. However, the company did not provide any reconciliation for the adjusted SG&A, therefore this
figure cannot be assumed as the direct outlook for the year.

Provision for Income Taxes

The tax provision forecasts were outlined based on the company’s adjusted tax rate outlook for 2024. Historical trends of the
tax burden from previous years were also considered. To keep the projections conservative, the maximum tax burden from
the historical data and given outlook, fluctuates from 20.9% to 21% throughout the forecasts.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Capital Expenditure
For Cigna Group, investments in equipment and technology are essential to maintaining its services and operations in
insurance and medical facilities. The company has not provided any outlook or guidance on future capital expenditures,
making it challenging to forecast capital expenditures for the company. Therefore, the projections for Cigna Group's capital
expenditures are based on historical averages.

Beta
The selected beta for the valuation is 0.54 with an R-squared value of 11.9%. This beta was chosen to align with Cigna’s
general risk profile and is consistent with annual beta predictions from other analysts. Operating in the healthcare sector,
Cigna’s volatility is lower than the overall stock market, as healthcare is an essential industry. The chosen beta effectively
captures the company's volatility in relation to its industry and market share and aligns with the beta of other players in the
healthcare industry.

Terminal Value Calculations

The derived terminal growth rate of 0.2% for the DCF EV/EBITDA valuation of the Cigna Group is very modest, suggesting that
the company is expected to grow at a rate just slightly above zero in perpetuity. This cautious assumption reflects
uncertainties or challenges in the long-term growth prospects of the company. It aligns with the conservative approach taken
with the forecasts for the DCF valuation of the Cigna Group.

Capital Asset Pricing Model and Weighted Average Cost of Capital

The beta chosen for the CAPM assumptions is 0.54, which effectively captures the stock's volatility. The equity risk premium
was set at 4.6%, and the risk-free rate for the local currency was also 4.6%. This resulted in a derived cost of equity of 7.0%.
Moody's credit rating for the company was Baa1, indicating a long-term credit yield of 5.9%, which was used to derive the cost
of debt at 5.9%. Consequently, the derived cost of capital is 6.5%.

Historical Model – 20% Weighted

When evaluating a company, conducting vertical research to understand previous trends and financial performance is crucial.
The Historical model in the Cigna group evaluation assesses the risk, trends, and overall performance of the company over the
past 5 years. The historical model yielded an intrinsic value of $110.94 with a margin of safety of (67.2%)

P/E – 50%
The Price-to-Earnings (P/E) ratio is a critical metric in evaluating healthcare insurance companies like Cigna Group. It measures
the company’s current share price relative to its per-share earnings. This ratio is essential in the historical model because it
helps investors understand how much they are paying for each dollar of earnings. For healthcare insurance companies, which
often have stable and predictable earnings, the P/E ratio can indicate whether the stock is overvalued or undervalued
compared to its historical performance. By weighting the P/E ratio at 50%, we can gauge the company's profitability and
market sentiment over time, providing insights into its long-term sustainability and investor confidence.

EV/EBITDA – 50%
The EV/EBITDA ratio is another significant metric, especially for assessing companies in the healthcare sector. It is particularly
useful for healthcare insurance companies as it accounts for the debt they often carry, providing a more comprehensive
valuation than the P/E ratio alone. By weighting the EV/EBITDA ratio at 50%, we can better understand Cigna Group's
operational efficiency and profitability, ensuring a balanced evaluation that considers both earnings and enterprise value.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Relative Model – 20% Weighted
A Relative model emphasizes horizontal research to understand and evaluate the company in comparison with its peers in the
same industry. The relative model evaluation of the Cigna Group assesses its performance within the industry, providing
insights into its competitive positioning and market dynamics. The relative model yielded an intrinsic value of $318.16 with a
margin of safety of (5.8%)

UnitedHealth Group Incorporated(UNH) – 40%

UnitedHealth Group Incorporated is a diversified healthcare company and a leader in the health insurance sector. It operates
through two primary businesses: UnitedHealthcare, which provides health benefits, and Optum, which offers health services
through technology and information. UnitedHealth Group's comprehensive range of services and its extensive network make
it a key player in the healthcare industry.

CVS Health Corporation(CVS) – 35%

CVS Health Corporation is an integrated healthcare company that combines a chain of retail pharmacies with a leading
pharmacy benefits manager (PBM) and a health insurance provider, Aetna. CVS Health's extensive retail presence, along with
its diversified healthcare services, positions it as a significant competitor in the healthcare market, offering a wide range of
health solutions to consumers.

Humana Inc.(HUM) – 25%

Humana Inc. is a health and well-being company focused on offering a range of insurance products and health services.
Specializing in Medicare, Humana provides comprehensive healthcare plans and services to senior citizens, including Medicare
Advantage plans, stand-alone prescription drug plans, and other health and supplemental benefits. Humana's targeted focus
on the senior market differentiates it within the industry.

P/E – 30%
The Price-to-Earnings (P/E) ratio is an essential metric in the relative model, especially for healthcare insurance companies like
Cigna Group. The P/E ratio compares the company’s current share price to its earnings per share, providing a snapshot of how
the market values its earnings relative to its peers. In the healthcare insurance sector, where companies often have stable and
predictable earnings, the P/E ratio is a key indicator of market sentiment and investor expectations. By weighting the P/E ratio
at 30%, we can assess how Cigna's valuation compares to other companies in the industry, helping to determine if it is
overvalued or undervalued relative to its competitors.

EV/EBITDA – 70%
The Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) ratio is another critical
metric in the relative model. This ratio measures the company's total value, including debt and excluding cash, relative to its
EBITDA. For healthcare insurance companies, EV/EBITDA is particularly useful as it provides a clearer picture of operational
performance and financial health by considering both earnings and enterprise value. By weighting the EV/EBITDA ratio at 70%,
we gain insights into Cigna's operational efficiency compared to its industry peers. This metric helps to highlight whether Cigna
is managing its resources effectively and maintaining a competitive edge in terms of profitability and operational
performance.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Dividend Discount Model – 10% Weighted
The Dividend Discount Model (DDM) is a valuable tool for evaluating Cigna Group, given its consistent dividend payments and
recent increases in dividend amounts due to growing revenue streams. Cigna's commitment to continuing dividend payouts,
unless otherwise decided by the board, highlights its financial stability and shareholder focus, making DDM an appropriate
method for assessing its intrinsic value. The model yielded an intrinsic value of $27.81 with a margin of safety of (91.8%).

Catalysts for Long-Term Growth

Growth In Specialty and Care services
The specialty care and care services markets are poised for substantial growth in the coming years, driven by the increasing
prevalence of complex medical conditions and the continuous innovation in specialty drug development. Specialty drugs,
which treat conditions such as rheumatoid arthritis, multiple sclerosis, and rare genetic disorders, are expected to see their
market size more than double over the next decade. This is supported by the fact that over 70% of the drugs approved by the
FDA in recent years have been specialty drugs, highlighting a significant trend towards more targeted and complex therapies.
Furthermore, the growth of the aging population is
contributing to the expansion of the specialty care and
services markets. As individuals age, they often require
specialized medical attention for chronic conditions and
age-related illnesses. This demographic shift is driving
increased demand for specialty drugs and care services
tailored to the unique needs of older adults. It's worth
noting that the cost of caring for individuals with specialty
conditions can be substantially higher compared to
traditional pharmacy benefits, often reaching up to 20
times more per patient. As a result, healthcare payers and providers are prioritizing investments in specialty care to effectively
manage the healthcare needs of aging populations and ensure optimal health outcomes. In addition to the growth in specialty
drugs, the care services market is expanding rapidly, driven by a shift towards more integrated and patient-centered care
models. Virtual care, behavioral health services, and home-based care are among the high-growth subsegments, reflecting a
broader trend towards accessibility and convenience in healthcare delivery.
Cigna is exceptionally well-positioned to capture this growth, thanks to its comprehensive capabilities and strategic initiatives.
The company's specialty pharmacy, Accredo, is a market leader, managing over 7 million specialty prescriptions annually and
serving more than 1 million patients. Accredo's broad reach, covering approximately a quarter of the pharmacy benefit
market, underscores Cigna's strong foothold in this lucrative sector. Cigna's ability to manage both the pharmacy and medical
benefits of specialty drugs sets it apart. With its specialty distributor CuraScript and the recent acquisition of CarepathRx,
Cigna can deliver complex medications and services across a wide range of care settings, from patients' homes to hospitals
and infusion centers. This end-to-end service capability ensures comprehensive care and creates a unique value proposition in
the market.
Moreover, Cigna's care services portfolio, including MDLIVE and Evernorth Behavioral Health, positions it well to meet the
growing demand for digital healthcare solutions. With its adaptability and patient-centric approach, Cigna is primed to
capitalize on the expanding specialty care and services markets, leveraging its clinical expertise and broad service capabilities
to drive significant growth and maintain a competitive edge.

Strategic Partnerships and Investments

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Cigna Group's strategic partnerships and agreements underscore its commitment to expanding its influence and consolidating
its market share in the healthcare sector. By executing the pharmacy benefit industry's largest implementation with Centene
Corporation, Cigna extends Evernorth's pharmacy solutions to a vast customer base of 20 million Centene members. Through
the strategic partnership with Centene Corporation, Cigna stands to benefit in several key ways. Firstly, the increased market
power resulting from extending Evernorth's pharmacy solutions to 20 million Centene members allows Cigna to negotiate
higher rebates with pharmaceutical manufacturers. These rebates
can translate into significant cost savings for Cigna, enhancing its
profitability and competitive position in the healthcare market.
Additionally, by providing pharmacy benefit services to a broader
customer base, Cigna can generate additional revenue streams
through administrative fees.
The strategic investment in CarepathRx Health System Solutions
(CHSS) marks another step forward in Cigna's growth trajectory.
Through the acquisition of a minority interest in CHSS, Cigna seeks
to elevate pharmacy care delivery for patients dealing with
chronic and complex conditions. By diversifying its offerings to
include specialty and care services, Cigna capitalizes on the
growing demand for tailored healthcare solutions for diverse
patient populations. This expansion not only enhances Cigna's ability to meet the evolving needs of its customers but also
positions the company for sustained growth and competitiveness in the healthcare industry. Collaborations with TRICARE and
Monogram Health illustrate Cigna's efforts to offer specialized services and in-home care for individuals with chronic
conditions like chronic kidney disease. Therefore, these strategic partnerships signify Cigna's broader strategy to capture
opportunities across various segments of the healthcare market, beyond its core pharmacy benefit management business.
Overall, Cigna's strategic partnerships and investments play a pivotal role in market consolidation and improving market
share. By leveraging synergies with industry leaders and expanding its service offerings, Cigna strengthens its competitive
advantage and drives sustainable growth in the healthcare sector.

Increasing costs of the Healthcare industry and the need for Health Insurance
With rising healthcare costs, there is a growing necessity for individuals to obtain health insurance to protect themselves from
financial ruin. In this context, Cigna Group is well-positioned to experience an increase in customers across both its segments:
Evernorth and Cigna Healthcare. Cigna's operational excellence in providing affordable healthcare solutions is a critical factor
that will drive customer growth. The company's ability to manage costs effectively while maintaining high service quality
makes it attractive to both individual consumers and corporate clients. As healthcare costs continue to rise, more individuals
and organizations will seek out insurers that offer comprehensive coverage at competitive rates. Cigna's proven track record
in this area positions it well to capture a larger market share. In addition to increasing customer numbers, Cigna is likely to see
revenue growth through higher premiums. As the demand for comprehensive healthcare coverage grows, insurers often
adjust premiums to reflect the enhanced value and expanded services they provide. While premium increases can sometimes
be a deterrent, Cigna's focus on affordability and value-added services can justify these adjustments, leading to sustained
revenue growth.

Risks to Projections and Expectations

Failure to reach strategic partnerships
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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Failure to establish strategic partnerships not only jeopardizes Cigna's market share but also undermines its financial growth
prospects, particularly in an industry increasingly reliant on consolidation for competitiveness. Without forging key alliances,
Cigna may struggle to expand its market reach and could lose ground to competitors who have secured strategic partnerships,
thereby eroding its market share. In a healthcare landscape where consolidation is becoming more prevalent, failure to
engage in strategic partnerships could leave Cigna isolated and unable to leverage synergies and economies of scale,
ultimately impacting its bottom line.
Moreover, the absence of strategic partnerships may hinder Cigna's ability to achieve financial growth targets, as such
alliances are often instrumental in driving revenue diversification and cost efficiencies. With the industry trend toward
consolidation, strategic partnerships serve as a crucial avenue for Cigna to access new markets, enhance its service offerings,
and capitalize on emerging growth opportunities. Without these partnerships, Cigna risks falling behind competitors who are
better positioned to adapt to industry dynamics and evolving customer needs. Therefore, failing to establish strategic
partnerships not only threatens Cigna's market share but also undermines its long-term financial viability in an increasingly
consolidated healthcare landscape.

Rising Healthcare costs

Rising healthcare costs present a dual challenge for Cigna's projections of growth. On one hand, these escalating costs
translate into higher revenue potential for the company, as individuals and organizations seek comprehensive coverage to
mitigate financial risks associated with healthcare expenses. However, on the other hand, the increasing costs pose significant
operational challenges for Cigna. Failure to effectively manage these costs can undermine the company's core policy of
affordability, which is central to its value proposition.
While rising healthcare costs may boost revenue streams through higher premiums and increased demand for comprehensive
coverage, they also entail greater expenses for Cigna in delivering healthcare services and managing claims. If the company
fails to manage these costs efficiently, it risks eroding its competitive edge and compromising its ability to offer affordable
healthcare solutions to its customers. Moreover, in an industry where affordability is a key consideration for consumers and
businesses alike, any deviation from this core policy could result in loss of market share and diminished customer trust.
Therefore, while rising healthcare costs offer revenue opportunities, they also underscore the importance of cost
management and affordability as essential components of Cigna's growth strategy.

Portfolio Recommendation
Based on thorough analysis and assessment of The Cigna Group's financial stability and future prospects, I recommend
maintaining a HOLD position within the Large-Cap Portfolio. The current allocation of 2.47% aligns appropriately with Cigna's
position in the healthcare sector, particularly its strong presence in Pharmacy Benefits Management (PBMs) and Specialty and
Care Services. Cigna's potential for dividends further enhances the attractiveness of holding its stock within the portfolio.
Considering the expected growth trajectory of the healthcare sector, maintaining exposure to Cigna provides a solid
foundation for long-term stable portfolio performance.

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Corporate Governance
The executive Board of The Cigna Group are as follows:
David M.Cordani | Chairman and Chief Executive Officer | The Cigna Group | $20,965,504
David Cordani assumed the role of Chairman of the Board in January 2022. He has been at the helm of The Cigna Group as
Chief Executive Officer since 2009, and prior to that, he served as President starting from 2008. With a tenure at The Cigna
Group dating back to 1991, Mr. Cordani has held various significant positions, including Chief Operating Officer, President of
Cigna HealthCare, and Senior Vice President of Customer Segments and Marketing. Under his leadership, The Cigna Group has
experienced remarkable growth, evolving into a Fortune 15 global health enterprise. Presently, it boasts around 189 million
customer and patient relationships and employs approximately 72,500 colleagues worldwide.
William J. DeLaney | Former Chief Executive Officer | Sysco Corporation | $310,283
William DeLaney held the position of Chief Executive Officer at Sysco Corporation, a company specializing in food marketing
and distribution, from March 2009 until his retirement in December 2017. Prior to his role as CEO, DeLaney served as
President of Sysco from March 2010 to January 2016, and as Executive Vice President and Chief Financial Officer from July
2007 to October 2009. Over his 29-year tenure with Sysco, he held various corporate and operational roles, steadily increasing
in responsibility.
Eric J. Foss | Former Chair, President, and Chief Executive Officer | Aramark | $ 335,283
Eric Foss held executive roles at leading companies including Aramark and PepsiCo. He served as President and CEO of
Aramark from May 2012 until his retirement in August 2019. Before Aramark, he was CEO of Pepsi Beverages Company from
2010 to 2011 and CEO and Chairman of The Pepsi Bottling Group, Inc., from 2008 to 2010.
Retired Maj. Gen. Elder Granger, M.D. | President and Chief Executive Officer | THE 5Ps, LLC | $ 335,283
Retired Army Major General Elder Granger, M.D., has been the President and CEO of THE 5Ps, LLC, a healthcare, education,
and leadership consulting firm, since August 2009. He served over 35 years in the U.S. Army, retiring in June 2009, and held
the position of Deputy Director and Program Executive Officer of TRICARE Management Activity from December 2005 to June
2009.
Neesha Hathi | Head of Wealth and Advice Solutions | The Charles Schwab Corporation | $ 310,283
Neesha Hathi has been Head of Wealth and Advice Solutions at The Charles Schwab Corporation since 2022. Over her 18-year
career at Charles Schwab, she has held increasingly senior roles. She was Chief Digital Officer from 2017 to 2022, overseeing
digital transformation and business innovation. Before that, she was Executive Vice President of Investor Services Platforms
from 2016 to 2017, and Senior Vice President of Advisor Services and COO of Schwab Performance Technologies from 2012 to
2016.
George Kurian | Chief Executive Officer | NetApp, Inc | $ 310,283
George Kurian has been CEO of NetApp, Inc., a cloud-led, data-centric software company, since 2015. He served as President
from 2016 to 2020, Executive Vice President of Product Development from 2013 to 2015, and Senior Vice President of the
Software Group from 2011 to 2013. Prior to NetApp, he held various roles at Cisco Systems, including Vice President and
General Manager in different business units from 2002 to 2011.
Kathleen M. Mazzarella | Chair, President, and Chief Executive Officer | Graybar Electric Company, Inc | $ 335,283

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
Kathleen Mazzarella has been Chair of Graybar Electric Company, Inc., a distributor of electrical, communications, and data
networking products, since January 2013. She has also served as President and CEO since June 2012 and as a Director since
January 2004. She is the first woman to lead Graybar since its founding in 1925.
Mark B. McClellan, M.D., Ph.D. | Director | Duke-Robert J. Margolis, M.D., Center for Health Policy | $ 310,283
Dr. Mark McClellan became the first Director of the Duke-Robert J. Margolis, M.D., Center for Health Policy and the Margolis
Professor at Duke University in January 2016. He holds leadership roles with the National Academy of Medicine, the University
of Texas Dell Medical School, and the Institute for Clinical and Economic Review. He was also the founding Chair of the
Reagan-Udall Foundation for the FDA. Dr. McClellan has received the Kenneth Arrow Award for Outstanding Research in
Health Economics twice.
Philip O. Ozuah, M.D., Ph.D. | President and Chief Executive Officer | Montefiore Medicine | $ 248,498
Since 2019, Dr. Philip Ozuah has been the President and CEO of Montefiore Medicine, overseeing the Albert Einstein College
of Medicine and Montefiore Health System’s 13 hospitals and 300 ambulatory sites. He has been with Montefiore Medicine
for 32 years, previously serving as President of Montefiore Health System (2018-2019) and EVP/COO (2012-2018). A NIH-
funded researcher and award-winning educator, Dr. Ozuah was also Professor and University Chairman of Pediatrics at Albert
Einstein College of Medicine and Physician-in-Chief at the Children’s Hospital at Montefiore (CHAM).
Kimberly A. Ross | Former Chief Financial Officer | Baker Hughes Company | $ 337,783
Kimberly Ross was the Chief Financial Officer of WeWork (the We Company), a flexible space solutions provider, from March
to September 2020. Prior to that, she served as Senior Vice President and Chief Financial Officer of Baker Hughes Company, an
energy technology firm, from September 2014 to July 2017.
Eric C. Wiseman | Lead Independent Director | The Cigna Group | $ 360,283
Eric Wiseman has been the Lead Independent Director of The Cigna Group since January 2022. He previously served as
Executive Chair of VF Corporation, an apparel and footwear company, from August 2008 to October 2017. Wiseman was VF
Corporation’s CEO from January 2008 to December 2016, President from 2006 to June 2015, and COO from 2006 to 2008.
Prior to these roles, he held various senior management positions at VF Corporation.
Donna F. Zarcone | Former President and Chief Executive Officer | The Economic Club of Chicago | $ 337,783
Donna Zarcone was the President and CEO of The Economic Club of Chicago from February 2012 to July 2020, and Interim
President from October 2011 to February 2012. She led D.F. Zarcone & Associates LLC, a strategic advisory firm, from 2007 to
February 2012. Previously, she was President and COO of Harley-Davidson Financial Services, Inc., and founded Eaglemark
Savings Bank, serving as its Chair and President. Earlier in her career, she was CFO for two start-ups, which were later sold to
strategic investors.

Environmental, Social, and Governance (ESG) Observations

Environmental
Cigna is deeply committed to addressing environmental concerns and mitigating the impact of climate change, particularly in
underserved regions. They have established ambitious targets, aiming to achieve carbon neutrality by 2040, transition to
100% renewable energy sources by 2030, and reduce water usage and waste generation across their real estate portfolio.
These initiatives underscore Cigna's proactive stance on environmental sustainability and their commitment to responsible
environmental stewardship.
Social
Cigna demonstrates a strong commitment to diversity, equity, and inclusion (DEI) through initiatives such as the DEI Council
and the annual DEI Scorecard. They have set ambitious goals to promote gender equality in leadership roles and have linked

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
DEI performance to the financing of their Enterprise Incentive Plan, ensuring accountability and progress tracking through the
DEI index. With a diverse workforce, including 39% ethnic minority representation among American employees and 71%
women, Cigna is dedicated to fostering an inclusive workplace environment and advancing diversity at all levels.
Governance
Cigna places great emphasis on ethical business practices and effective governance. They have established a comprehensive
Code of Ethics and Principles of Conduct as a guiding framework for their global workforce. Their Board of Directors reflects a
commitment to diversity and sound governance practices, surpassing S&P benchmarks in terms of age, tenure, gender, and
ethnicity representation. Through mandatory ethics and compliance training and a robust risk management culture, Cigna
ensures that ethical standards are upheld throughout the organization. Their "Three Lines Model" approach to risk
management assigns responsibilities for daily risk management, supervision, and independent audits to different
organizational levels, with the Board of Directors ultimately overseeing risk management activities through specialized
committees.

Investment Summary
Based on my analysis, Cigna emerges as a promising investment option within the healthcare sector. The company
demonstrates a strong foundation, coupled with a proactive approach towards enhancing its product offerings and expanding
its digital healthcare initiatives. My research has yet yielded an intrinsic value of with a margin of safety of. I consider Cigna's
current position in Large-Cap portfolio, at 2.47%, to be appropriate for a hold strategy. Cigna's strategic positioning and
growth potential suggest that it is well-positioned to capitalize on evolving trends in the healthcare industry. Therefore, I
recommend maintaining maintaining current allocation in Cigna and closely monitoring its performance for potential future
adjustments.
Disclosure: I have no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.

I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is
mentioned in this equity report. This report is written explicitly for the Oregon State Investment Group; however, I hold the right to distribute this document to
potential employers or for other educational purposes as a sample of my work.

Signed:

[Pravahlika Chava]

[6/7/24]

References
https://www.prnewswire.com/news-releases/the-cigna-group-to-sell-medicare-businesses-and-careallies-to-health-care-
service-corporation-hcsc-302049322
https://www.darwinresearch.com/our-take-centene-to-switch-pbms-in-2024-awarding-new-contract-to-express-scripts/
https://www.forbes.com/sites/brucejapsen/2022/11/08/cignas-25-billion-stake-in-villagemds-summit-venture-to-grow-
evernorth-provider-portfolio/?sh=e3685207d699
https://s202.q4cdn.com/757723766/files/doc_financials/2023/ar/2024-Proxy-Statement.pdf
https://s202.q4cdn.com/757723766/files/doc_events/2024/03/06/the-cigna-group-2024-investor-day-presentation.pdf
https://www.mordorintelligence.com/industry-reports/united-states-health-and-medical-insurance-market
https://www.researchandmarkets.com/report/united-states-health-insurance-market?
utm_source=GNE&utm_medium=PressRelease&utm_code=ksz9sl&utm_campaign=1918454+-
+United+States+Health+Insurance+Market+Analysis+Report+2023-
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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
2028%3a+Wellness+Programs+and+Ancillary+Services+Drive+Growth
%2c+Demand+for+Affordable+Solutions+on+the+Rise+&utm_exec=chdo54prd
https://dcf.fm/products/ci-swot-analysis
https://www.mbaskool.com/brandguide/pharmaceuticals-and-healthcare/5685-cigna.html
https://www.evernorth.com/articles/express-scripts-awarded-7-year-tricare-pharmacy-program-contract
https://www.essay48.com/term-paper/12686-Cigna-Porter-Five-Forces
https://en.wikipedia.org/wiki/Pharmacy_benefit_management
https://www.prnewswire.com/news-releases/carepathrx-health-system-solutions-and-evernorth-health-services-forge-
strategic-partnership-to-enhance-specialty-care-for-patients-301839464.html

Appendix

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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
 27 | P a g e
Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
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Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .
 29 | P a g e
Disclaimer: The Oregon State Investment Group is not a registered financial institution or advisor and has no affiliation with any regulative agency in the United
States. This document was created exclusively for educational purposes and should not be viewed as advice on investment .