Cigna Profit Drops 31%; Costs Cited

Cigna Corp., the third-largest U.S. health insurer, said fourth-quarter profit fell 31% because of rising medical costs, slow growth in employer health plans and expenses for reducing its work force.

Net income fell to $191 million, or $1.32 a share, from $277 million, or $1.76, a year earlier, the company said. Revenue fell 3.2% to $4.94 billion.

Enrollment in the insurer’s health plans rose less than 1% as U.S. employers cut jobs.

The company also lost some customers to rivals such as UnitedHealth Group Inc. that compete with Cigna to manage health-care benefits for large employers. That business typically is more profitable than health-maintenance organizations.

Cigna said profit would have been $277 million, or $1.92 a share, without expenses for the job cuts and gains on the sale of a reinsurance business and the company’s Japanese life-insurance unit. That was higher than the $1.81 average estimate from analysts surveyed by Thomson Financial/First Call.

Shares of the Philadelphia-based company rose $1.27 to $90.25 on the New York Stock Exchange. Cigna didn’t raise premiums enough to cover higher medical costs last year and is trying to catch up. It’s also investing to move customers to a new claims-processing system that may improve service and cut expenses. Cigna last month said about 2,000 jobs will be lost as part of that restructuring.

Cigna forecast membership to grow about 1% to 2% this year.

The insurer had 14.3 million customers at the end of the year, up about 1% from the previous year though down 2.8% in Cigna’s health-maintenance organizations.

Cigna said it expects operating income of $7.85 to $8.15 a share this year. The company was expected to earn $7.98 a share in the period, according to First Call. First-quarter profit is forecast at $1.75 to $1.95 a share, the company said.