Cigna 2Q profit falls 32 percent

[August 05, 2010]  NEW YORK (AP) -- Managed care company Cigna Corp. said Thursday its second-quarter profit fell 32 percent on a negative impact from the company's discontinued death benefits and reinsurance units.

However, adjusted results beat expectations, and the Philadelphia insurer lifted its full-year profit outlook.

Cigna earned $294 million, or $1.06 per share, in the three months that ended June 30. That's down from the $435 million, or $1.58 per share, in net income last year. Excluding items, Cigna earned $1.38 per share.

Revenue rose 19 percent to $5.35 billion.

Analyst polled by Thomson Reuters forecast a profit of $1.01 per share on $5.26 billion in revenue, on average.

Cigna operates health care, group disability and life segments in the United States. It also sells individual insurance in several countries and operates an expatriate business that provides coverage for people living outside their home countries.

Cigna's performance can be affected by its guaranteed minimum income benefits and variable annuity death benefits businesses.

The variable annuity death benefits invest in mutual funds. They were sold as long-term investments that provide a steady return to customers during retirement and then a death benefit. The guaranteed minimum income benefits provide reinsurance to variable annuities issued by other insurers.

Cigna discontinued both businesses in 2000 and operates them in run-off mode, meaning it seeks no new business. Those businesses hurt the company's performance when the market turns bad because Cigna's liabilities toward them increase.

Looking ahead, the company expects full-year profit between $4.10 and $4.40 per share, better than its prior range of $3.75 to $4.15 per share. Analysts expect $4.10 per share.

[Associated Press]

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