Evercore initiates Cigna at 'in line', flags risks in PBM model transition

** Evercore ISI initiates coverage of health insurer Cigna CI.N with an "in line" rating and price target $290

** Brokerage says Cigna could cut its long-term growth outlook at its Sept. 30 investor day, with adjusted EPS growth possibly falling to 10%-13% from 10%-14%

** Says Cigna's pharmacy benefit management business, which generates about 60% of operating profit, faces execution risks as it shifts to a rebate-free model

** Pharmacy benefit managers negotiate drug prices and coverage with manufacturers for employers and health plans

** Evercore says the shift could ease regulatory pressure, but expects pharmacy-benefit profit to grow about 2% annually from 2026 to 2030, with margin falling to 1.6% by 2028 from about 2.7% in 2025

** Sees limited margin recovery through 2030 as clients demand more pricing transparency at contract renewal, particularly in the competitive market for smaller accounts

** Remains positive on Cigna's employer-focused insurance business but assumes results at the low end of management's outlook until margins become clearer