Aetna Reports First Quarter 2002 Results



HARTFORD, Conn., April 25, 2002 — Aetna (NYSE: ΑET) today announced first quarter 2002 operating earnings, excluding other items1, of $64.9 million, or $0.44 per share.

"Aetna's turnaround strategy clearly has taken root, as evidenced by these positive first-quarter results," Chairman, President and CEO John W. Rowe, M.D., said. "And while we have made significant progress, we view this as only one milestone in an effort that will continue throughout this year and 2003. Our goal is to become a more cost-effective, efficient organization, with the right consumer-focused products and services to return the company to a position of industry leadership."

Quarterly Financial Results at a glance

Three Months Ended
March 31
2002
March 31
2001
December 31
2001
Revenues $5.26 billion $6.43 billion $6.04 billion

Operating earnings (loss) excluding other items1
$64.9 million $(36.6) million $(84.6) million
Per share operating earnings (loss) excluding other items $0.44 $(0.26) $(0.59)
Operating margin* 3.2 percent 1.7 percent 0.4 percent
* Pretax operating margin is calculated by dividing pretax operating results excluding other items, interest expense and goodwill/intangibles amortization by total revenue, excluding net realized capital gains or losses.


FAS No. 142 Pro Forma Basis

Financial Accounting Standard No. 142, "Goodwill and Other Intangibles," was implemented on January 1, 2002. This standard requires the elimination of goodwill and certain types of intangible asset amortization on a prospective basis. Accordingly, operating earnings for 2002 do not include amortization of goodwill. The following supplemental table provides operating results for the 2001 period on a comparable basis to that of 2002:

Three Months Ended
March 31
2002
March 31
2001
December 31
2001

Operating earnings (loss) excluding other items
$64.9 million $15.0 million $(34.6) million
Per share operating earnings (loss) excluding other items $0.44 $(0.10) $(0.24)
Health Care business results

Health Care, which provides a full range of insured and self-insured health care, indemnity, and dental products and services, reported:



Group Insurance business results

Group Insurance, which includes Group Life, Disability and Long-Term Care products, reported:



Large Case Pensions business results

Large Case Pensions, which manages a variety of discontinued and other retirement and savings products for defined benefit and defined contribution plan customers, reported:



Total company results



The public can access the first-quarter conference call today at 9 a.m. EDT by dialing 888-209-4007. At that time, Aetna will give its full 2002 earnings outlook. A live audio Webcast and replays will be available through Aetna's Investor Information link on the Internet at www.aetna.com. A transcript of the call will be available at 3 p.m. today on www.aetna.com.

Aetna is one of the nation's leading providers of health care and related group benefits, serving approximately 15.0 million health care members, 12.1 million dental members and 11.9 million group insurance customers, as of March 31, 2002. Information about Aetna is available at www.aetna.com.

1 All operating results exclude discontinued operations, net realized capital gains and losses, cumulative effect adjustments and other items, in order to provide a comparison that the company believes better reflects its underlying business performance. Set forth below is an itemization of other items excluded from operating results and a reconciliation of operating results to net loss under generally accepted accounting principles for each period shown:


Three Months Ended:
March
31
2002
March
31
2001
December
31
2001
Operating earnings (loss) from continuing operations before other items $ 64.9 $ (36.6) $ (84.6)

Other items, net of tax:
           
Health Care Segment:            
Income tax reserve release (prior period related)
  19.8    
Favorable (unfavorable) reserve developments related to Medicare markets exited January 1, 2001
    (34.3)   1.1
Severance and facilities charge
      (125.1)
Net realized capital gains       3.3      22.2       9.6
Income (loss) from continuing operations   88.0   (48.7)   (199.0)
Income from discontinued operations, net of tax      50.0           -       11.4
Income (loss) before cumulative effect adjustments   138.0   (48.7)   (187.6)
Cumulative effect adjustments, net of tax   (2,965.7)           .5           - 
Net loss $ (2,827.7) $ (48.2) $ (187.6)
ADDITIONAL INFORMATION; CAUTIONARY STATEMENT - Aetna's 2002 Proxy Statement was filed with the Securities and Exchange Commission on March 18, 2002 and mailed to Aetna's shareholders on or about March 20, 2002. Aetna filed additional participant information with the SEC on April 4, 2002. Aetna's shareholders should read these materials and all additional materials that Aetna files with the SEC, because they contain important information relating to the 2002 Annual Meeting. Certain information in this press release is forward looking. 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 actual future results and other future events to differ materially from those currently estimated by management. Those risk factors include, but are not limited to: unanticipated increases in medical costs (including increased medical utilization, increased pharmacy costs, increases resulting from unfavorable changes in contracting or recontracting 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 or Group Insurance claims resulting from the aftermath of the events of September 11, 2001 and the continued threat of terrorism; the ability to achieve targeted savings from work force reductions and to otherwise reduce administrative expenses in light of significant membership reductions being experienced in 2002; 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 implement Aetna's new customer model approach; lower levels of investment income from continued lower interest rates; adverse government regulation (including legislative proposals to eliminate or reduce ERISA pre-emption of state laws that would increase potential litigation exposure, and other proposals, such as the Patients' Bill of Rights, that would increase potential litigation exposure or mandate coverage of certain health benefits); adverse pricing actions by government payors; changes in size, product mix and medical cost experience of membership in key markets, particularly given the significant membership reductions being experienced in 2002; and the outcome of litigation and regulatory matters, including numerous purported health care class actions and ongoing reviews of business practices by various regulatory agencies. For more discussion of important factors that may materially affect Aetna, please see the risk factors contained in Aetna's 2001 Report on Form 10-K, on file with the Securities and Exchange Commission. You also should read Aetna's 2002 first quarter Form 10-Q when filed with the Securities and Exchange Commission for a discussion of Aetna's historical results of operations and financial condition.


Related Links



Copyright Aetna Inc.