Company to reduce work force, record third-quarter charge
HARTFORD, Conn., September 26, 2002 — Aetna (NYSE: ΑET) announced today that the company intends to reduce the overall work force by approximately 2,750 positions through targeted job reductions over the next year. As a result, the company will record an after-tax charge of approximately $58 million against third-quarter operating results related to severance and associated facilities costs.
"Our turnaround is on track, and we have two solid quarters behind us so far this year," said Aetna Chairman and CEO John W. Rowe, M.D. "However, our costs must be reduced to reflect our reduced membership and the realignment of operations with our new business segment model. These new actions will help position Aetna for future profitable growth."
Once these and previously announced actions are completed, Aetna expects to have approximately 28,000 employees.
"These decisions are not easy, but Aetna must become more competitive, profitable and efficient, so that we can better serve the needs of our key constituents, including customers, members and shareholders," Dr. Rowe said. "We will be sensitive to the needs of affected employees. 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 one of the nation's leading providers of health, dental, group life, disability and long-term care benefits, serving 14.4 million health care members, 11.9 million dental members and 12 million group insurance customers as of June 30, 2002. The company has expansive nationwide networks of more than 527,000 health care services providers, including over 321,000 primary care and specialist physicians and 3,300 hospitals.
ADDITIONAL INFORMATION; CAUTIONARY STATEMENT -- Certain information in this press release is forward looking, including, without limitation, the statements regarding the turnaround, competitiveness, efficiency and future growth. 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 operating model; 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 2001 Form 10-K and 2002 second-quarter Form 10-Q filed with the Securities and Exchange Commission for a discussion of Aetna's historical results of operations and financial condition.