Cigna to Cut 3,000 Jobs, Slash Dividend 92%

Cigna Corp., the third-largest U.S. health insurer, said Friday it would eliminate 3,000 jobs and slash its dividend 92% to save money after customer defections reduced fourth-quarter revenue. Company shares fell 8.9%.

Cigna said net income jumped to $290 million, or $2.06 a share, from $47 million, or 33 cents, a year earlier, when the company had $147 million in costs for job cuts and a legal settlement.

The latest job cuts, equal to almost 9% of Cigna’s workforce, will lower operating expenses by $300 million in 2004, the Philadelphia company said. Reducing the quarterly dividend to 2.5 cents a share from 33 cents will save $170 million a year. Falling costs boosted fourth-quarter earnings even as revenue declined 5.1% to $4.5 billion.

Cigna lost 1.5 million members last year and 1.2 million more in January. Some customers left after Cigna raised fees and others because of customer-service complaints.

Shares of Cigna fell $5.55 to $56.55 on the New York Stock Exchange, their biggest drop in one day since October 2002. They had risen 58% in the last year.

Chief Executive H. Edward Hanway took direct control of Cigna’s healthcare business in July after it failed to raise premiums enough to cover rising medical costs. The company is tracking costs more closely and has renegotiated hospital contracts to further trim expenses.

Premiums will rise 12% to 13% this year, ahead of medical cost increases of 11% to 12%, the company said.

The insurer, which cut 3,900 jobs last year, will have first-quarter expenses of as much as $75 million to pay for the new reductions. Cigna had 33,700 employees last month. Restructuring costs won’t exceed $100 million this year, it said.