updated 5/1/2008 9:50:24 AM ET 2008-05-01T13:50:24

Health insurer Cigna Corp. posted an 80 percent drop in first-quarter profits due to softness in its core health care unit and hefty charges in its annuities business.

The Philadelphia-based company earned $58 million, or 21 cents per share, in the quarter, compared with $289 million, or 98 cents, in the quarter a year earlier.

Profits include $195 million, or 69 cents per share, of charges from Cigna’s guaranteed minimum income benefits business mainly related to accounting and litigation matters.

Revenue rose 4.4 percent to $4.6 billion.

Excluding one-time items, Cigna reported adjusted earnings from operations of $265 million, or 94 cents per share, compared with $279 million, also 94 cents due to fewer shares outstanding.

Analysts surveyed by Thomson Financial expected a slightly higher profit — 95 cents per share — but lower revenue, $4.55 billion.

In the quarter, health care profits fell 18 percent to $138 million after taxes, as higher costs ate into premiums and fees, which rose 1 percent to $2.7 billion. Expenses included the integration costs for Colorado-based Great-West Healthcare, which Cigna agreed to acquire last year.

Health care membership rose to 10.4 million, including 1.4 million members acquired from Great-West, from 9.8 million a year ago.

Cigna’s group disability, life and accident insurance business earned $68 million after taxes, up from $60 million a year earlier. The boost included a $3 million one-time gain related to reserve studies. Premiums and fees were up over 9 percent to $631 million.

Cigna’s insurance to expatriates earned $52 million in the quarter, up 37 percent. Premiums and fees were $472 million vs. $414 million.

Looking ahead, Cigna forecast full-year adjusted earnings per share of $4.05 to $4.25, compared with analysts’ average estimate of $4.25.

Cigna sees health care earnings coming in between $735 million and $775 million, including the Great-West acquisition. Medical membership is expected to rise between 2 percent and 2.5 percent organically.

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