Cigna profits fell 53%, stock plunges

INDIANAPOLIS - Cigna Corp. said today that its third-quarter profit fell 53 percent due to equity market losses, and the insurer cut its 2008 outlook for operating income.

The Philadelphia-based managed-care company also said it now expects full-year membership to decline by about 1 percent, excluding its acquisition of Great-West Healthcare, which was completed earlier this year. Cigna previously said it expected an increase of about 1 percent for 2008.

Cigna's net income in the third quarter fell to $171 million, or 62 cents per share, from $365 million, or $1.28 per share, a year earlier.

Revenue rose 10 percent to $4.85 billion from $4.41 billion.

The company also reported adjusted income from operations of 89 cents per share, which falls well short of Wall Street expectations. Thomson Reuters said analysts expected the company to earn $1.06 per share in the quarter on $4.86 billion in revenue.

The insurer lowered its adjusted operating income guidance for 2008 to a range of $3.40 to $3.50 per share. The company said previously it expected $4.05 to $4.25 per share.

Premiums and fees, the largest portion of Cigna's revenue, rose 10 percent to $4.11 billion, up from $3.74 billion last year.

Cigna CEO H. Edward Hanway said in a statement that the company's ongoing business posted solid results, but that its reinsurance segment was hurt by "capital market turmoil," which largely included equity market losses and unfavorable interest rates. The reinsurance business was discontinued in 2000.

The company incurred a $44 million loss, or 47 cents per share, from two parts of that business: variable annuity death benefits and guaranteed minimum income benefits. Cigna officials said those losses were largely tied to market performance because the company's liabilities increase when returns are poor.

Cigna also cited an expected fourth-quarter loss of 45 cents per share in the variable annuity business as the reason it lowered operating income guidance.

Shares were down $4.45, or 22 percent, to $15.40 around mid-day on the New York Stock Exchange.