Cigna Corp, allegedly, had hidden major problems with a new computer system it installed to handle claims. Next, stock shares plunged when it bungled for one of the largest publicly owned providers of health care, disability, life and accident insurance benefits in the United States and selected markets around the world.
The fingers pointed to four of the company's senior executives accused of making materially false and misleading statements to investors to drive up the stock price and concealing material adverse information.
On December 8, Cigna Corp. agreed to pay $93 million to settle a class-action lawsuit filed by the Pennsylvania State Employees' Retirement System. Payments from the settlement will benefit those who purchased Cigna stock from Nov. 2, 2001, through Oct. 24, 2002.
The deal also takes a nonrecurring charge in the fourth quarter of 2006 amounting to $25 million after tax, which includes defense costs and other expenses not covered by insurance.
However, in making the settlement, the Philadelphia-based insurance company said in a statement that it and its officers were not admitting any wrongdoing. Counsels of CIGNA said the company agreed to reach settlement in order to avoid the time and expense involved in proceeding to trial.
In April 2007, the settlement, which is dependent upon a certain level of class participation, will be tried in a fairness hearing -- with final approval from a federal judge expected shortly thereafter.
CIGNA's consolidated adjusted income from operations is estimated between $995 million to $1.035 billion. The company maintained that the charge will be reported as a special item and will not affect the company's 2006 adjusted income from operations, excluding special items and realized investment results.
With this new case, CIGNA revisits a familiar turf, to recall, in 2003 the company agreed to an $85 million settlement against accusations that it routinely underpaid doctors.