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ANTM or CI: Comparing Cash Flows and Capital Investments in 2019

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Cash flow projections

On its fourth-quarter earnings conference call, Anthem guided for operating cash flows of more than $5.2 billion in 2019, a YoY (year-over-year) rise of more than $1.4 billion. In 2018, the company reported operating cash flows of $3.8 billion—higher than its net income but lower than its cash flow expectations—attributable to delayed payments from certain state Medicaid programs and a $500 million headwind associated with a claims payment it had to bear for exiting certain individual markets.

Wall Street analysts expect Anthem’s operating cash flows to be $5.45 billion, $6.53 billion, and $7.67 billion, respectively, in 2019, 2020, and 2021, implying YoY rises of 42.44%, 19.77%, and 17.54%, respectively.

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Analysts expect Cigna’s (CI) operating cash flows to be $8.01 billion, $9.08 billion, and $9.69 billion, respectively, in 2019, 2020, and 2021, implying YoY rises of 112.41%, 13.38%, and 6.68%, respectively.

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Capex

Wall Street analysts expect Anthem’s capex to be $1.17 billion, $1.26 billion, and $1.34 billion, respectively, in 2019, 2020, and 2021, implying YoY changes of -2.78%, 7.17%, and 6.24%, respectively.

On its fourth-quarter earnings conference call, Cigna said that its top capital deployment priority was accelerated debt repayment. The company aims to reduce its debt-to-capitalization ratio from 50.9% to the upper-30% range and to reduce its debt-to-EBITDA ratio to the upper-20% range in the next 18–24 months. Cigna has guided for total capital available for deployment of ~$6.2 billion in 2019. The company expects to allocate $4.2 billion toward debt repayment and $0.8 billion toward capex in 2019.

Analysts expect Cigna’s capex to be $937.28 million, $973.38 million, and $920.31 million, respectively, in 2019, 2020, and 2021, implying YoY changes of 77.52%, 3.85%, and -5.45%, respectively.

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