NU Online News Service, July 11, 2003, 7:33 p.m. EDT – CIGNA Corp., Philadelphia, says it may have to take a $300 million charge for the second quarter to increase the reserves that back contracts that reinsure variable annuity death-benefit guarantees.
CIGNA put its life and annuity reinsurance business in run-off mode in 2000, but it still has responsibility for reinsurance contracts that back blocks of variable annuities that offer death-benefit guarantees.
CIGNA also says that, even before it takes the death-benefit charge, problems with major medical insurance membership, current and past medical claims costs, and medical insurance operating costs may cut its second-quarter operating earnings to $140 million, from a previous forecast of about $200 million, and operating earnings for all of 2003 to $700 million, from a previous forecast of about $875 million.
Meanwhile, problems with medical insurance sales and customer retention may cause major medical enrollment to fall about 10% between the beginning and end of 2003, CIGNA says.
