Oct. 30 (Bloomberg) -- Cigna Corp. fell the most in six years in New York trading after reporting a 53 percent decline in quarterly profit tied to shrinking health-plan membership and falling values of stocks held by its annuities business.

The Philadelphia-based insurer plunged $4.39, or 22 percent, to $15.46 at 4 p.m. in New York Stock Exchange composite trading, the biggest decline since Oct. 25, 2002, and the lowest close in five years. Third-quarter net income fell to $171 million, or 62 cents a share, Cigna said in a statement.

Cigna, the U.S. insurer that specializes in employer- sponsored medical benefits, lost $61 million on declining prices of equities held for the company's retirement income and death- benefit businesses and an additional $15 million after taxes on other investments. The company indefinitely suspended share buybacks, a move that troubled investors, said Ana Gupte, an analyst with Sanford C. Bernstein & Co.

``They didn't indicate when they'll resume share buybacks, and I think that's important,'' Gupte said in a telephone interview today. ``This company has historically done a lot of buybacks, and it has contributed to their growth.''

Profit, excluding certain items, missed analysts' estimates, and the company's forecasts for this year and 2009 fell short of analysts' projections.

Cigna's report of investment losses followed those of the four larger U.S. managed-care companies. Each reported writedowns on investments this month because of the global financial crisis.

Cigna ``is the most reliant on investment income relative to the rest of the sector, with this line item comprising nearly two-thirds of pretax income,'' said John Rex, an analyst with JP Morgan Securities Inc. in New York, in a note to clients before earnings were reported. That ``compares to just 15 to 20 percent for the rest of the group.''

Revenue Rose

Revenue for the quarter rose 9.9 percent to $4.85 billion. Earnings, excluding certain items, of 89 cents a share fell short of the $1.06 average of 16 analysts surveyed by Bloomberg. Net income in the year-earlier quarter was $365 million, or $1.28 a share.

For 2008, Cigna forecast adjusted earnings of $3.40 to $3.50 a share, including an expected fourth-quarter loss of $125 million for its annuity business, compared with the average analyst projection of $4.16 a share. Enrollment, excluding customers added through acquisitions, is expected to decline 1 percent in 2008, compared with the company's previous forecast of growth exceeding 1 percent, Cigna said.

For next year, Cigna forecast adjusted earnings of $4 to $4.30 a share, short of the analysts' projection of $4.72. The company said enrollment in its medical plans is expected to decline by about 2 percent.

Health-Plan Enrollment

While Cigna's health-plan enrollment climbed to 11.9 million, up 16 percent from a year earlier, the gain included 1.7 million customers from the acquisition of Great-West Healthcare in April. Excluding that deal, membership fell 31,000. Employers have been trimming payrolls in response to the economic slowdown, Cigna said.

About 80 percent of the company's health-plan members are covered by self-insured employers that pay Cigna flat fees for its network of doctors and hospitals and for its claims-handling services. Employers have been shifting toward such fee-based plans and away from more profitable, higher-revenue policies for which insurers bear the financial risk of paying claims.

After-tax operating profit for Cigna health plans in the U.S., the company's biggest business segment, rose 8 percent to $187 million from a year earlier, helped by a 13 percent increase in premiums and fees. The international unit fell 8.5 percent to $44 million, and the group life and disability business rose 11 percent to $70 million.

Medical Costs

Analysts and investors view changes in the share of premium revenue spent on medical care as an indicator of future profitability. For employer-based plans, the so-called medical loss ratio was 83.8 percent in the third quarter, compared with 83 percent a year earlier.

Other managed care companies that reported third-quarter writedowns and losses from investments were Indianapolis-based WellPoint Inc., $562.6 million; Humana Inc., of Louisville, Kentucky, $108.3 million; Bethesda, Maryland-based Coventry Health Care Inc., $36.2 million; UnitedHealth, of Minnetonka, Minnesota, $45 million; and Aetna Inc., of Hartford, Connecticut, $259.4 million.

To contact the reporter on this story: Avram Goldstein in Washington at agoldstein1@bloomberg.net.

Last Updated: October 30, 2008 16:26 EDT