Oct. 30 (Bloomberg) -- Cigna Corp., the U.S. insurer that specializes in employer-sponsored medical benefits, said profit declined 53 percent on falling stock values tied to its annuities business and shrinking health-plan membership.

Third-quarter net income fell to $171 million, or 62 cents a share, from $365 million, or $1.28, a year earlier, Philadelphia-based Cigna said today in a statement. Profit per share, excluding certain items, missed analysts' estimates, and the company's revised forecast for this year fell short of analysts' projections.

Cigna 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 insurer said. The company stopped issuing new contracts for the annuities in 2000. The five biggest U.S. managed-care companies have reported investment losses 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.''

The insurer fell $2.40, or 11 percent, to $19.85 yesterday in New York Stock Exchange composite trading. The company has fallen 63 percent this year.

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.

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.

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.

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 plans that bear the financial risk of paying claims.

U.S., International Business

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

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 06:55 EDT