Cigna Posts Profit, Cuts Jobs and Dividend

The health care provider's earnings beat estimates.
By TSC Staff ,

Cigna

(CI) - Get Report

posted a rise in fourth-quarter earnings that topped expectations, and unveiled job cuts and dividend cuts.

The Philadelphia-based health care provider said net income totaled $290 million, or $2.06 a share, compared with net income of $47 million, or 33 cents a share, a year earlier. Excluding investment results and other special items, Cigna earned $233 million, or $1.65 a share, up 31% from $178 million, or $1.27 a share, a year earlier. Wall Street was expecting earnings of $1.40 a share, according to Thomson First Call.

Revenue fell to $4.5 billion from $4.75 billion a year earlier.

Meanwhile, the company rolled out a "new strategic direction" that involves eliminating 3,000 positions -- through job cuts and attrition -- and reducing operating expenses by $300 million in 2004. The company said it expects to report an after-tax charge of $75 million during the current quarter, and less than $25 million more in after-tax charges through the remainder of the year. The cuts will contribute $450 million to $500 million to the health care segments earnings, Cigna said.

Cigna also said its board agreed to cut the company's dividend "to position Cigna more in line with other dividend-paying managed-care companies." The new dividend will be 2.5 cents a share, down from the current 33 cents a share. The board expects that the dividend to be declared this month and paid in April will remain at 33 cents a share, and the new dividend will take effect around the end of the quarter.

The company said share-repurchase plans will replace dividends as "the primary means for distributing excess capital to shareholders."

"Strong earnings for the quarter reflect higher results in our health care business ... as well as continued good performance in our disability and life, international, and retirement businesses," said H. Edward Hanway, Cigna's chairman and chief executive.

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