There are several ways to alarm a shareholder. One is to report lower year-over-year revenues. Another is to explain that, thanks to increased competition, the business is rapidly losing customers. And, just to be sure the shareholder is thoroughly spooked, cut the dividend.

Employee benefit provider Cigna (NYSE:CI) told its shareholders all this and more last Friday when it announced its Q4 and year-end results. In reaction, shares have fallen nearly 13% since Thursday's close.

Was the drop merited? You be the judge. Health management organization (HMO) and health insurance premiums declined 5% from last year's Q4, as did Cigna's total medical membership, which fell 11%. Health-care giants such as Aetna (NYSE:AET), UnitedHealth Group (NYSE:UNH), Wellpoint Health Networks (NYSE:WLP), and hundreds of smaller HMOs have been undercutting Cigna's deals.

Even amidst the increased price competition and customer loss, CEO Edward Hanway used Friday's conference call (transcript courtesy of CCBN/Street Events) to assure investors that Cigna would maintain underwriting standards while focusing on its new strategy. With this strategy, the company plans to concentrate less on its general insurance business and more on becoming a leader in employee health services.

An important move in keeping with this focus was the $2.1 billion sale of its retirement business to Prudential Financial (NYSE:PRU). Another focal point of the strategy will be lowering operating costs, which Cigna plans to do by cutting 3,000 jobs. These and other efficiencies will save the company an estimated $300 million in fiscal 2004.

The cost savings will affect the company's core health-care segment, which combines the HMO operations with medical and dental insurance. But even with the lower expenses, management didn't increase the segment's earnings guidance, predicting that cost-cutting profits will be offset by customer loss.

Shareholder woes were further aggravated by the dividend cut, from $0.33 per share quarterly, to $0.025. This knocks the yield down from 2.3% to almost nothing. The company said this cut will put it in line with other dividend-paying managed-care companies.

Despite all of this, the quarter did have a few upsides. The company's health-care segment, although reporting lower revenues, grew earnings by 82% to $153 million. The earnings ramp up was due to lower medical costs and improved underwriting results. These developments bode well for its newly announced focus on health-care services.

If management can stick to this initiative, keep cutting costs, and stop the revenue slide, shareholders dismayed by recent events may have reason to celebrate again one day. But if the revenues keep trending downward and health-care costs go up, call the doctor for Cigna.

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Matt Thurmond is a Motley Fool Contributor. He doesn't own shares in any company mentioned in this article.