Gov. Dannel P. Malloy, with Lt. Gov. Nancy Wyman, at a July 2011 ceremony that marked the creation of the First Five program, with Cigna named as the first participating company. Photo courtesy of the governor’s office.
Global health care giant Cigna Corp., the first company to be introduced into the state’s First Five initiative, is retrenching in Connecticut as part of a 4 percent global workforce reduction.
Bloomfield-based Cigna is cutting approximately 1,300 employees, including 200 in Connecticut, as part of a global “realignment and efficiency plan” detailed during the company’s third quarter earnings release conference call Nov. 1.
The disclosure came as Cigna reported stronger-than-expected third quarter revenues and earnings, with the company raising its full year 2012 earnings outlook to between $5.70 and $5.90 a share from an August forecast of between $5.25 and $5.60 a share.
Even with the layoffs, Cigna is still on track to deliver on its pledge of creating at least 200 net new jobs in Connecticut between July 2011 and mid-2013, said Catherine Smith, commissioner of the state Department of Economic and Community Development (DECD).
“When Cigna signed up for the First Five program they promised they would grow at least 200 jobs by the middle of 2013, and we have been assured that they will … easily make the 200,” Smith said.
The layoffs began within Cigna’s European operations during the third quarter, while most cuts occurring within the company’s U.S. units will take place from the fourth quarter through the second quarter of 2013, a Cigna spokesman said.
About one quarter of the layoffs will affect Cigna’s non-U.K. European operations, with the remainder spread between the company’s U.S. units and other international markets.
CEO David Cordani said during the Nov. 1 conference call that Cigna does not take the layoffs lightly, adding that the company has expanded its workforce by about 17 percent over the past few years.
Cordani described the cuts as “small bouts of actions across the franchise where we’re getting tighter alignment.”
Cigna employs about 35,000 people worldwide, up from 30,000 in 2009. The company currently employs 4,000 people in Connecticut.
The 200 layoffs impacting Connecticut employees will affect Cigna’s Bloomfield headquarters and other operations across the state, said spokesman Jon Sandberg.
“They’re small actions in all departments throughout the company,” Sandberg said.
Cigna reported it took a $50 million after-tax charge related to the layoffs and restructuring efforts during the third quarter. The adjustments are expected to reduce annual operating expenses by about $60 million after taxes, the company said.
DECD’s Smith said news of the layoffs doesn’t represent a setback for Gov. Dannel P. Malloy’s trademark First Five program.
“I do not believe it’s a setback for the program at all,” Smith said. “They’re fully abiding by the terms we put in front of them. … The CEO David Cordani stated (Nov. 1) during their earnings announcement that he’s very committed to the state and committed to the program, but that he needed to do the right thing just to keep the company moving forward competitively.”
The First Five initiative, which has since evolved into the “Next Five” program, was signed into law by Malloy in July 2011.
The program, which is overseen by DECD, is a job creation initiative that provides incentives to businesses that create a minimum of 200 new, full-time jobs in Connecticut within either a two- or five-year period.
First Five, which combines various state incentives including tax credits, loans and grants, was designed to attract new companies into the state, keep the companies currently here from relocating, and to encourage businesses to expand.
Businesses to join the First Five and Next Five programs since Cigna include ESPN, NBC Sports, Deloitte, Charter Communications and Bridgewater Associates, among others.
At the unveiling of the First Five program, Malloy said Cigna was, in part, the inspiration behind its creation.
“We began discussions with Cigna a while ago, and one of the reasons that we looked forward to the creation of the First Five program was in fact Cigna,” Malloy said at the time.
In exchange for its pledge to invest $100 million in its new Bloomfield headquarters and to create at least 200 jobs by mid-2013 and as many as 800 jobs over the 10-year span of its agreement with the state, Cigna received a $15 million forgivable loan from the state as it moved its headquarters from Philadelphia.
At the onset of the agreement, Cigna had about 3,880 employees in Connecticut.
Cigna is also eligible for up to $50 million in Urban and Industrial Sites Reinvestment tax credits, which can be earned on an annual basis beginning in the fourth year of the agreement, and up to $6 million in training grants to support new hires.
The loan was extended to Cigna at the origination of its contract with the state, Smith said. If Cigna meets its hiring and investment goals, the loan can either be partially or completely forgiven.
However, if the terms of the agreement between Cigna and DECD are not met, the company is responsible for paying the principal, interest and possibly other penalties on the loan, Smith said.
“There are good incentives for the company to make sure they hit the hurdles that we put out there for them,” she said.
Cigna reported strong third quarter results, with revenues increasing 31 percent to $7.36 billion from $5.6 billion in the third quarter of 2011. The increased revenues were driven in part by the company’s February acquisition of HealthSpring.
Net earnings more than doubled compared to the third quarter of 2011, rising to $466 million, or $1.61 a share, from $183 million, or $0.67 a share, a year ago.
Prior to Cigna’s earnings release, analysts polled by Thomson Reuters forecast earnings of $1.36 a share on revenues of $6.63 billion.