CIGNA posts $877 million shortfall in third quarter

The insurer pledges to correct the decline in earnings by instituting cost-saving measures, including job cuts.

By Mike Norbut, AMNews staff. Nov. 18, 2002.

Blaming its own exuberance and miscalculations, CIGNA Corp. announced a net loss of $877 million in the third quarter, and executives said the company would be subject to an informal inquiry by the Securities and Exchange Commission.

At a time when many health insurers have announced earnings that exceed Wall Street estimates, CIGNA is facing the ire of investors. Several class action lawsuits were filed on behalf of stockholders in late October, accusing the company of issuing false and misleading statements regarding its financial position.

The company's stock, which traded at more than $100 a share earlier this year, plummeted into the $30 range in late October. Company executives said the SEC inquiry was related to the drop in stock price, which wasn't shocking to them given the rapid sell-off following the company's earnings warnings.

CIGNA's plan to get back on track, including cost-reduction measures such as job cuts, could cause more headaches for participating doctors down the road, physician advocates said.

"Certainly, if they downsize, the administrative hassles which are already frustrating are just going to get worse," said Tim Norbeck, executive director of the Connecticut State Medical Society. "The more hassles they have, the more expense it will be to physicians."

Based on the poor performance of its health care product, CIGNA's third-quarter earnings, before extraordinary write-offs, were $208 million, or $1.49 a share, down from $273 million, or $1.83 per share, a year ago. Original analyst estimates for the quarter were as high as $2 a share. [...]