NU Online News Service, Feb. 6, 2004, 6:15 p.m. EST – CIGNA Corp. is cutting 3,000 jobs and slashing its quarterly dividend more than 90%.[@@]
The Philadelphia company is moving ahead with previously announced plans to sell its retirement business to Prudential Financial Inc., Newark, N.J. Completing the deal would leave CIGNA with a large managed care operation, a domestic group benefits unit and an international benefits unit.
CIGNA will restructure its remaining operations by spending about $75 million, after taxes, to eliminate 3,000 of its 33,000 jobs through attrition and layoffs.
The restructuring charge amounts to an average of $25,000 per eliminated position.
The company also says it intends to act more like other dividend-paying managed care companies rather than like a traditional, dividend-paying financial services company. The company will reduce its quarterly dividend to 2.5 cents per share, from 33 cents per share.
The company says it will pay 33 cents per share for only one more quarter.
After April, CIGNA will return any excess capital to shareholders by buying back stock, the company says.
“The amount and pace of future repurchase activity will depend on market conditions and other considerations,” says CIGNA Chairman H. Edward Hanway.
Buying back stock can help shareholders by increasing average earnings per share. But traditional dividends have become more popular in recent years, in part because of the dismal performance of many dividend-spurning dot-com companies once the dot-com bubble burst.
In related news, CIGNA is reporting $290 million in net income for the fourth quarter of 2003 on $4.5 billion in revenue from continuing operations, up from $44 million in net income on $4.7 billion in revenue for the fourth quarter of 2002.
The company ended the quarter providing or administering health coverage for 11.5 million people, 12% fewer than it covered a year earlier.