Cigna Says It Will Take a $720-Million Charge
Cigna Corp., the third-largest U.S. health insurer, said Tuesday that it expects to record a charge of $720 million this quarter because it’s putting more money aside to make up for investments that have dropped in value.
Cigna is trying to cover future payments to customers who bought contracts that offered them fixed annual payments as well as death benefits guaranteed at a specific level.
The insurer has to boost reserves because the stock market’s decline means that Cigna may have to pay out more than it expected.
“It’s a bit larger than people had anticipated,” said Greg Crawford, an analyst at Fox-Pitt, Kelton Inc. who has an “attractive” rating on Cigna and doesn’t own the shares. “The smart thing to do in these situations is to erase any future risk that the company sees--to put the entire issue to bed. That’s what they did here.”
Last month, Cigna said it might have to boost reserves because certain variable-annuity contracts require the company to make up the difference between the market value of mutual fund investments and specified death benefits. Cigna said it had set aside $300 million for the business as of June 30.
The payments relate to a reinsurance business that Cigna is exiting.
The Philadelphia-based company said per-share earnings would be $1.95 to $2.05 for the third quarter and $7.85 to $8.15 for the year, not including the reserve expenses.
Cigna shares fell $2.47 to $82.65 on the New York Stock Exchange before the charge-off was announced.
Stilwell to Merge Units Under Janus Name
Stilwell Financial Inc. said Tuesday that it will combine its operations under the banner of its flagship Janus Capital Management mutual fund unit, and tapped a Janus insider to head the merged firm.
The moves come as the company tries to boost the once-hot Janus funds, which have plunged during the stock downturn, and to diversify its investment offerings. The new structure also resolves speculation about the future leadership of Janus, whose founder and former Chief Executive Tom Bailey stepped down July 1--with no obvious successor in place.
The combined company will be led by Mark Whiston, 41, who will take over Dec. 31. Whiston, an 11-year Janus veteran, will oversee all of Stilwell’s divisions, including the Berger fund group and U.K.-based Nelson Money Managers.
The structure will allow Janus, whose growth-oriented strategy has been bludgeoned by the rough stock market, to market other Stilwell investments under its own brand name.
The Stilwell name will effectively disappear. The combined company will shut down its headquarters in Kansas City, Mo., and move its base to Janus’ hometown of Denver. The company said it expects to cut 130 to 140 jobs.
Stilwell shares gained $1.06 to $15 Tuesday on the New York Stock Exchange, but are still down about 45% this year.
Reuters
Briefly
Merrill Lynch & Co. said Tuesday that it will adopt all stock-research reform measures under a settlement with New York Atty. Gen. Eliot Spitzer even if a few states don’t sign onto the deal.
About 40 states have adopted the landmark $100-million settlement announced in May and other adoptions are imminent, according to the North American Securities Administrators Assn.
After releasing subpoenaed e-mails showing that Merrill analysts had publicly touted Internet stocks while privately disparaging them, Spitzer secured a settlement with Merrill to put in place reforms to ensure that its stock analysis wasn’t compromised by efforts to secure investment banking business from companies Merrill analysts rated.
Associated Press
