Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
Economic Profit
Cigna Group, economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 4,868 – 9.68% × 81,638 = -3,037
The analysis of economic profit from 2020 to 2024 reveals a transition from value creation to consistent value destruction. While 2020 was the only year characterized by a positive economic profit, the subsequent four years show a persistent inability to generate returns exceeding the cost of invested capital.
- Net Operating Profit After Taxes (NOPAT)
- A volatile and generally downward trend is observed in NOPAT. After a peak of 9,227 million US$ in 2020, the figure declined to 4,868 million US$ by 2024. The most significant contractions occurred in 2021 and 2023, indicating a substantial reduction in core operational earnings available to satisfy capital providers.
- Cost of Capital and Invested Capital
- The cost of capital remained relatively stable in the first two years but shifted upward starting in 2022, rising from 8.78% in 2021 to a peak of 9.89% in 2023, before settling at 9.68% in 2024. Concurrently, invested capital followed a steady downward trajectory, decreasing from 93,748 million US$ in 2020 to 81,638 million US$ in 2024. This continuous reduction in the capital base indicates a contraction in the total assets employed in operations.
- Economic Profit Trajectory
- Economic profit shifted from a positive 931 million US$ in 2020 to deep negative territory, reaching a trough of -3,648 million US$ in 2023. The persistent negative values confirm that the company has failed to meet its cost of capital hurdle since 2021. This erosion in economic value is primarily driven by the sharp decline in NOPAT, as the reduction in invested capital was insufficient to offset the loss in operating profitability.
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Net Operating Profit after Taxes (NOPAT)
Cigna Group, NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in equity equivalents to shareholders’ net income.
3 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 0 × 4.29% = 0
4 2024 Calculation
Tax benefit of interest expense on long-term and short-term debt = Adjusted interest expense on long-term and short-term debt × Statutory income tax rate
= 1,500 × 21.00% = 315
5 Addition of after taxes interest expense to shareholders’ net income.
The financial performance between 2020 and 2024 is characterized by a general contraction in both operating and net profitability, punctuated by a temporary recovery in 2022.
- Net Operating Profit After Taxes (NOPAT) Trend
- NOPAT experienced a volatile trajectory, starting at 9,227 million USD in 2020 and decreasing to 6,235 million USD in 2021. A partial recovery occurred in 2022, with the value rising to 7,303 million USD, followed by a sharp decline to 4,831 million USD in 2023. The metric demonstrated stabilization in 2024, ending the period at 4,868 million USD, which represents a marginal increase of approximately 0.7% from the previous year.
- Shareholders' Net Income Trend
- Net income followed a similar downward trajectory, initiating at 8,458 million USD in 2020 and falling to 5,365 million USD in 2021. After a temporary increase to 6,668 million USD in 2022, a consistent decline was observed, with figures dropping to 5,164 million USD in 2023 and further decreasing to 3,434 million USD by 2024. This represents a cumulative decrease of approximately 59% over the five-year observation window.
- Comparative Analysis of Operating vs. Net Profitability
- A consistent gap exists where NOPAT remains higher than shareholders' net income, indicating that non-operating expenses, interest, or other non-core financial items have consistently reduced the final earnings available to shareholders. This divergence became most pronounced in 2024, where NOPAT of 4,868 million USD exceeded net income of 3,434 million USD by approximately 1,434 million USD, suggesting an increased impact of non-operating factors in the final year of the period.
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Cash Operating Taxes
Cigna Group, cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
An analysis of tax expenditures from 2020 to 2024 reveals a marked divergence between reported income taxes and cash operating taxes. While both metrics exhibit volatility, cash operating taxes demonstrate a more consistent baseline, whereas income taxes show extreme fluctuations, particularly during the 2023 fiscal year.
- Cash Operating Tax Trends
- Cash operating taxes peaked in 2020 at 3,064 million US dollars before experiencing a decline to 1,864 million US dollars in 2021. A recovery occurred in 2022, with figures rising to 2,363 million US dollars, followed by a gradual downward trajectory to 1,901 million US dollars by the end of 2024. This suggests a general reduction in the actual cash outflow for taxes over the observed period.
- Income Tax Volatility
- Income taxes exhibit significant instability, characterized by a sharp decline from 2,379 million US dollars in 2020 to 1,367 million US dollars in 2021. The most notable anomaly occurs in 2023, where income taxes dropped precipitously to 141 million US dollars, before rebounding sharply to 1,491 million US dollars in 2024.
- Cash-to-Accrual Divergence
- A consistent gap exists where cash operating taxes remain higher than reported income taxes. This variance is most pronounced in 2023, where cash operating taxes of 2,097 million US dollars stood in stark contrast to the reported income tax of 141 million US dollars. Such a discrepancy typically indicates substantial non-cash tax adjustments, deferred tax assets, or liabilities impacting the reported income statement without reducing the actual cash outflow.
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Invested Capital
Cigna Group, invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of equity equivalents to shareholders’ equity.
4 Removal of accumulated other comprehensive income.
The capital structure analysis from 2020 through 2024 indicates a consistent reduction in the total amount of invested capital. This decline reflects a contraction in the funding base, with total invested capital decreasing from 93,748 million USD in 2020 to 81,638 million USD by the end of 2024.
- Invested Capital Trends
- A progressive downward trend is observed in total invested capital, which fell by approximately 12.9% over the five-year period. The most significant contraction occurred between 2021 and 2022, while 2023 showed a period of relative stability before another decline in 2024.
- Shareholders' Equity Analysis
- Shareholders' equity served as the primary driver of the reduction in invested capital. Equity decreased from 50,321 million USD in 2020 to 41,033 million USD in 2024, representing a total reduction of approximately 18.5%. While a moderate increase was recorded in 2023, it was offset by a sharp decline in 2024, which reached the lowest level within the analyzed period.
- Debt and Lease Obligations
- Total reported debt and leases exhibited higher stability relative to equity. After reaching a peak of 34,265 million USD in 2021, the balance transitioned to a slightly lower range, ending at 31,972 million USD in 2024. The limited variance in debt levels suggests that the overall decrease in invested capital was predominantly driven by equity movements rather than a significant deleveraging strategy.
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Cost of Capital
Cigna Group, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 82,903) | 82,903) | ÷ | 112,259) | = | 0.74 | 0.74 | × | 11.91% | = | 8.80% | ||
| Debt3 | 29,356) | 29,356) | ÷ | 112,259) | = | 0.26 | 0.26 | × | 4.29% × (1 – 21.00%) | = | 0.89% | ||
| Operating lease liability4 | —) | —) | ÷ | 112,259) | = | 0.00 | 0.00 | × | 4.29% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 112,259) | 1.00 | 9.68% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 98,272) | 98,272) | ÷ | 128,095) | = | 0.77 | 0.77 | × | 11.91% | = | 9.14% | ||
| Debt3 | 29,378) | 29,378) | ÷ | 128,095) | = | 0.23 | 0.23 | × | 4.07% × (1 – 21.00%) | = | 0.74% | ||
| Operating lease liability4 | 445) | 445) | ÷ | 128,095) | = | 0.00 | 0.00 | × | 3.45% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 128,095) | 1.00 | 9.89% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 87,529) | 87,529) | ÷ | 116,741) | = | 0.75 | 0.75 | × | 11.91% | = | 8.93% | ||
| Debt3 | 28,752) | 28,752) | ÷ | 116,741) | = | 0.25 | 0.25 | × | 3.89% × (1 – 21.00%) | = | 0.76% | ||
| Operating lease liability4 | 460) | 460) | ÷ | 116,741) | = | 0.00 | 0.00 | × | 2.80% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 116,741) | 1.00 | 9.70% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 72,032) | 72,032) | ÷ | 110,326) | = | 0.65 | 0.65 | × | 11.91% | = | 7.78% | ||
| Debt3 | 37,699) | 37,699) | ÷ | 110,326) | = | 0.34 | 0.34 | × | 3.66% × (1 – 21.00%) | = | 0.99% | ||
| Operating lease liability4 | 595) | 595) | ÷ | 110,326) | = | 0.01 | 0.01 | × | 2.81% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 110,326) | 1.00 | 8.78% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 73,655) | 73,655) | ÷ | 113,058) | = | 0.65 | 0.65 | × | 11.91% | = | 7.76% | ||
| Debt3 | 38,760) | 38,760) | ÷ | 113,058) | = | 0.34 | 0.34 | × | 3.96% × (1 – 21.00%) | = | 1.07% | ||
| Operating lease liability4 | 643) | 643) | ÷ | 113,058) | = | 0.01 | 0.01 | × | 3.51% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 113,058) | 1.00 | 8.85% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Cigna Group, economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (3,037) | (3,648) | (1,002) | (1,724) | 931) | |
| Invested capital2 | 81,638) | 85,777) | 85,650) | 90,679) | 93,748) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -3.72% | -4.25% | -1.17% | -1.90% | 0.99% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | -4.57% | -4.75% | -2.51% | -2.02% | — | |
| Elevance Health Inc. | -0.68% | -1.03% | 0.01% | 1.33% | — | |
| Intuitive Surgical Inc. | 3.74% | -2.71% | -2.99% | 12.62% | — | |
| Medtronic PLC | -6.60% | -6.38% | -5.14% | -6.78% | — | |
| UnitedHealth Group Inc. | -0.04% | 4.85% | 3.88% | 3.74% | — | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,037 ÷ 81,638 = -3.72%
4 Click competitor name to see calculations.
The period between 2020 and 2024 is characterized by a transition from economic value creation to a sustained period of economic value destruction. A positive economic profit recorded in 2020 was followed by four consecutive years of negative results, indicating that the returns generated on invested capital consistently failed to meet the cost of that capital.
- Economic Profit Trends
- Economic profit shifted from a positive 931 million USD in 2020 to a loss of 1,724 million USD in 2021. While a partial recovery occurred in 2022, the decline accelerated significantly in 2023, reaching a low of negative 3,648 million USD, before moderating slightly to negative 3,037 million USD in 2024.
- Invested Capital Dynamics
- Invested capital exhibited a general downward trajectory, decreasing from 93,748 million USD in 2020 to 81,638 million USD by 2024. This contraction of the capital base occurred alongside worsening economic profit, suggesting that the decline in value creation is driven by a reduction in return efficiency rather than an excessive expansion of the invested capital.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the trajectory of economic profit, moving from a positive 0.99% in 2020 to negative territory for the remainder of the analysis period. The ratio reached its lowest point in 2023 at negative 4.25%, highlighting a substantial gap between the internal rate of return and the weighted average cost of capital. A slight correction to negative 3.72% in 2024 indicates a marginal narrowing of this gap, although value destruction persists.
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Economic Profit Margin
Cigna Group, economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | (3,037) | (3,648) | (1,002) | (1,724) | 931) | |
| Revenues from external customers | 246,148) | 194,099) | 179,361) | 172,529) | 159,157) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.23% | -1.88% | -0.56% | -1.00% | 0.59% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | -6.55% | -7.06% | -3.52% | -2.92% | — | |
| Elevance Health Inc. | -0.30% | -0.42% | 0.00% | 0.62% | — | |
| Intuitive Surgical Inc. | 3.48% | -2.70% | -2.58% | 9.93% | — | |
| Medtronic PLC | -13.98% | -14.41% | -11.28% | -16.28% | — | |
| UnitedHealth Group Inc. | -0.02% | 2.41% | 1.99% | 1.83% | — | |
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues from external customers
= 100 × -3,037 ÷ 246,148 = -1.23%
3 Click competitor name to see calculations.
The financial performance from 2020 through 2024 reveals a divergence between top-line revenue growth and the generation of economic value. While revenues expanded consistently throughout the period, economic profit transitioned from a positive state to a sustained deficit, indicating that the return on invested capital failed to exceed the company's cost of capital for four consecutive years.
- Economic Profit Trends
- A significant reversal is observed after 2020, where economic profit fell from a positive US$ 931 million to a deficit of US$ 1,724 million in 2021. Although there was a partial recovery in 2022 to negative US$ 1,002 million, the deficit widened sharply in 2023 to reach a period low of negative US$ 3,648 million. By 2024, the economic profit remained negative at US$ 3,037 million, confirming a persistent inability to create economic value above the required threshold.
- Revenue Trajectory
- Revenues from external customers demonstrated steady growth, increasing from US$ 159,157 million in 2020 to US$ 194,099 million in 2023. A substantial acceleration occurred in 2024, with revenues rising to US$ 246,148 million. This upward trend indicates a successful expansion of the business scale, yet it stands in contrast to the declining economic profit metrics.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the trend of absolute economic profit, starting at 0.59% in 2020 before turning negative. The margin fluctuated between -1.00% in 2021 and -0.56% in 2022, before dropping to its lowest point of -1.88% in 2023. In 2024, the margin improved slightly to -1.23%. The persistence of negative margins suggests that the increase in revenue volume has not been accompanied by sufficient operational efficiency or capital optimization to restore positive economic value creation.
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