Two-thirds will be eliminated in the next three months. The goal is to save $100 million a year.
By Joseph N. DiStefano
Inquirer Staff Writer
Cigna Corp. will cut 2,150 health insurance jobs over the next three months in a bid to reduce expenses by $100 million a year, and will eliminate an additional 1,000 by the end of 2003.
Yesterday, the Center City-based employee benefits company began giving the bad news to the first batch of workers whose jobs are doomed, including 42 in the Philadelphia area.
Cigna has not "refined" how many local jobs it will slice later this winter, but it expects the majority of the affected workers will be in Connecticut, where Cigna's health-care division has headquarters, or at field offices elsewhere in the country, said spokesman Wendell Potter.
The company, one of the nation's largest health insurers, employed 3,180 at its Philadelphia headquarters and at offices in Voorhees, Wilmington, Horsham, Plymouth Meeting and Berwyn, and a total of 41,800 at all its offices, before yesterday's cuts.
Cigna first warned of the job cuts last fall. In October, chairman H. Edward Hanway apologized to shareholders for unprofitable pricing policies and more than $1 billion in unexpected losses, mostly from workers' compensation and investment annuity arrangements the company set up in the 1990s. In November, the company cut 700 workers and said bigger cuts were pending.
While admitting other job cuts in the first half of last year had left the company scrambling to manage customer claims, Hanway and Cigna Healthcare head Patrick Welch maintained last fall that the company can improve services even as it cuts more jobs. Although it is cutting middle-management positions and trimming local office staff, the company will hire 650 new workers this year for customer service, computer and other key positions.
Skeptical investors have dropped Cigna's share price from $111 as recently as last May to a seven-year low of less than $40 in November. Shares closed down 20 cents at $41.30 yesterday, before the latest job announcement.
The yearly savings will total about $100 million after taxes; severance will cost the company $150 million, which will be charged to Cigna's fourth-quarter earnings, after discounting $52 million for a tax write-off.
Cigna will release its fourth-quarter and year-end 2002 earnings next month.