Cigna Net Rises, to Cut 3,000 Jobs

Feb. 6, 2004

CHICAGO (Reuters) - U.S. health insurer Cigna Corp. (NYSE:CI - news) said on Friday net income rose, but health plan membership rolls dwindled and it announced 3,000 job cuts.

The Philadelphia-based health plan provider, struggling to recover after failing to price premiums in line with skyrocketing medical costs in recent years, also said it would slash its quarterly dividend.

Cigna posted net income of $290 million, or $2.06 per share, in the fourth quarter, compared with $47 million, or 33 cents a share, a year earlier. Before items such as investment gains, the company said it earned $1.65 per share in the recent quarter.

That beat the consensus estimate among Wall Street analysts of $1.40 per share, according to a poll by Reuters Research, a unit of Reuters Group Plc.

In the period a year earlier, the company was weighed down by charges for restructuring and litigation charges.

The company will cut the dividend to $0.025 per share from the current $0.33 although the higher figure will still be paid in April.

Cigna deviates from its health maintenance organization peers in its troubles pricing medical premiums enough higher than medical costs to still reap a profit.

The company said it expects to take an after-tax charge of not more than $75 million in the first quarter, and said 2004 restructuring would come in lower than $100 million.

Cigna said it still expects 2004 healthcare adjusted segment earnings, excluding these charges, of $450 million to $500 million, after tax.

REVENUE, MEMBERSHIP FALLING

Revenue fell to $4.5 billion in the fourth quarter, from $4.75 billion a year earlier, as it continues to lose members. Membership sank to 11.5 million from 13 million a year ago.

Bank of America Securities analyst Joe France said membership is likely to continue falling this year.

"The company could lose 1 million lives over the year, as others capitalize on its higher costs and perceived service problems," France said in a research note Friday.

The company said it expects to reduce its operating expenses by $300 million as a result of the job cuts.

Investors are eager to see proof the company has solved its operational and pricing glitches, but are wary.

"We believe there still remains a lot of uncertainty about Cigna's outlook," Merrill Lynch Doug Simpson said before the earnings figures were released.

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