Aetna Announces Actions To Align Workforce With Membership Levels
Company to reduce workforce, and record severance and facilities charge
HARTFORD, Conn., December 13, 2001 — Aetna (NYSE: ΑET) announced today that, as
part of a series of actions designed to improve operating performance and increase competitiveness, the company intends to reduce the overall workforce by approximately 6,000 positions through targeted job reductions and expected attrition to better align its workforce with membership levels. As a result, the company will record a fourth quarter after-tax charge of approximately $125 million related to severance and associated facilities costs.
"These actions are necessitated by changes being made as we press forward with our turnaround plan, implement our new strategy, and reduce costs and improve efficiency,"
said Chairman and CEO John W. Rowe, M.D. "They are being taken to properly align our business resources with lower membership levels and our stated goal of emphasizing profitability over size. With health membership levels in 2002 expected to decline materially as a result of implementing pricing that is more reflective of projected medical cost trends, as well as previously announced commercial HMO product withdrawals and Medicare market exits in selected markets, we must be sized to match the needs of our business."
Aetna plans to reduce its workforce by approximately 6,000 positions from the September 30 employee base of approximately 37,000. Approximately 4,400 of these reductions are expected to be achieved through targeted job eliminations, while the remainder, or approximately 1,600, are expected to be achieved through attrition. The severance actions began in the fourth quarter 2001 and are scheduled to continue throughout 2002. The majority of the positions eliminated reflect the deliberate reduction in membership that is a key element of the company's turnaround plan. Additional positions are being eliminated because of business process improvements.
"Aetna is committed to making these changes without affecting service levels to the customers and members who rely on us," Rowe said. "In fact, we expect to continue to implement service improvements, and we believe that the steps we are taking today will enhance our ability to meet customer needs and expectations going forward."
"We intend to be sensitive to the needs of affected employees," Rowe said. "In cases where employees' jobs are eliminated, Aetna is committed to managing the process in a respectful manner and to helping ease the transition for affected employees."
Aetna is the nation's leading provider of health care and related group benefits, serving
17.5 million health care members, 13.7 million dental members and 11.7 million group insurance customers. Information about Aetna is available at www.aetna.com.
CAUTIONARY STATEMENT - Certain information in this press release is forward looking, including, without limitation, the statements regarding improved operating performance, competitiveness and efficiency, the timing of workforce reductions, expected membership declines in 2002, pricing that is more reflective of medical cost trends, and customer service expectations. Forward-looking information is based on management's estimates, assumptions and projections, and is subject to significant uncertainties and other factors, many of which are beyond Aetna's control. Important risk factors could cause future events, including actual future results, to differ materially from those currently estimated by management. Those risk factors include, but are not limited to: continued or further unanticipated increases in medical costs (including increased medical utilization, increased pharmacy costs, increases resulting from unfavorable changes in contracting or re-contracting with providers, changes in membership mix to lower-premium or higher-cost products or membership-adverse selection; as well as changes in medical cost estimates due to the necessary extensive judgment that is used in the medical cost estimation process, the considerable variability inherent in such estimates, and the sensitivity of such estimates to changes in medical claims payment patterns and changes in medical cost trends); increases in medical costs resulting from the aftermath of the events of September 11, 2001 and the continued threat of terrorism; the ability to achieve targeted savings from workforce reductions, the ability to maintain targeted levels of service, and improve relations with providers, as well as operating performance, while making significant staff reductions and taking actions to reduce medical costs; the ability to successfully complete the integration of the Prudential HealthCare transaction on a timely basis and in a cost-efficient manner (which also is affected by the ability to retain targeted membership, eliminate duplicative administrative functions and integrate management information systems); and changes in size and product mix of membership in key markets, including changes due to pricing and other actions, that may be different from current management assumptions. For more discussion of important factors that may materially affect Aetna, please see the risk factors contained in Aetna's 2000 Report on Form 10-K and 2001 third quarter Form 10-Q, on file with the Securities and Exchange Commission. You also should read Aetna's 2000 Form 10-K and 2001 Form 10-Qs for a discussion of Aetna's historical results of operations and financial condition.