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(CI) - Get Cigna Corporation Report

will take a $720 million charge to reserve against variable annuity death benefits it reinsured. The benefits became an expense issue because the annuities guarantee payouts that aren't currently supported by the contracts' underlying equity value.

"Recent declines and volatility in the equity markets significantly increased the company's exposure to future death claims on certain variable annuity run-off reinsurance contracts. The actions we are taking substantially reduce the impact of future equity market declines arising from these contracts and maintain the financial strength that our customers expect," the company said in a press release.

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Cigna is currently exiting the business of reinsuring the contracts.

The company also said it expects operating income for the third quarter and full year 2002, excluding nonrecurring items, to be in line with previous guidance. Last month Cigna said on its conference call said that it expected third-quarter earnings to come in between $1.90 and $2.05 a share, and full-year earnings to be in the range of $7.85 to $8.15 a share.

The shares closed down 2.9% to $82.65 Tuesday.