Cigna Earnings: Medical Insurance Momentum Growing While PBM Preps for Centene Onboarding

Narrow-moat Cigna turned in strong third-quarter results and mildly raised its 2023 outlook. At first glance, we will likely keep our $344 fair value estimate intact. Shares appear moderately undervalued, probably reflecting the renewed regulatory risks in its pharmacy benefit management business. However, those risks appear manageable, as PBMs like Cigna will probably be able to convert most of their rebate or spread-based contracts (a low-double-digit percentage of profits) to fee-based relationships, if necessary.