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Cigna Tells of Probe by SEC

November 02, 2002|From Associated Press

Cigna Corp., the nation's third-largest health insurer, reported Friday an $887-million loss for the third quarter and said the Securities and Exchange Commission has opened an informal inquiry into the firm. The company said it will cooperate fully with the SEC probe. Cigna said it learned of the investigation a few days ago, but gave no details of what regulators were examining.

"Given the market reaction last week, we don't think it was unexpected," said company spokesman Wendell Potter.

Last week, the company disclosed that a pricing miscalculation in its health-care division would sharply reduce profit. The announcement caused Cigna's stock to lose nearly 40% of its value.

In a bid to remain competitive and retain dissatisfied customers, Cigna last year had offered some clients deep price discounts that the company could not afford, officials said.

Cigna's loss reported Friday amounted to $6.27 a share for the July-September quarter, including one-time charges of $1.04 billion. It earned $270 million, or $1.81 a share, for the same period last year.

Goldman Sachs analyst Matthew Borsch said investors should be careful about Cigna stock.

"Our continued caution reflects concern that management may not yet be fully aware of the depth of operating and financial problems," Borsch wrote Friday in a note to investors.

The company took charges, both announced previously, of $720 million and $317 million to strengthen its reserves for its remaining reinsurance contracts.

Cigna rose $2.26 to $38.40 on the New York Stock Exchange.

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