A.M. Best Affirms Aetna's Financial Strength Ratings and Assigns a Positive Outlook to Several Subsidiaries.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 30, 2003

A.M. Best Co. has affirmed the financial strength ratings of Aetna Inc.'s (NYSE: AET) (Hartford, CT) regulated entities and assigned a positive outlook to several of its subsidiaries, including Aetna Life Insurance Company (Hartford, CT).

The outlook is stable for Aetna's other HMOs and insurance company.

The progress in Aetna's financial and strategic turnaround has been better than expected, generating improved financial returns, reestablishing the company's credibility in the marketplace and driving A.M. Best's positive outlook assignment. Aetna's experienced leadership team, profit-focused and consumer-directed strategies, strong brand name recognition, national presence and widespread provider networks have driven its recent success. A.M. Best is encouraged by Aetna's progress and remains cautiously optimistic about Aetna's future prospects as A.M. Best believes the execution of the first half of Aetna's turnaround plan is successfully complete.

The corporation's regulated entities are well capitalized and sufficiently reserved. Aetna also maintains conservative leverage, high-quality invested assets and good financial flexibility.

The management team's goal is to reach industry-leading profit margins. Aetna's health care earnings have improved significantly since 2001, complementing its historically profitable group insurance and discontinued large-case pension product segments.

However, Aetna's profit margin still lags that of other industry leaders. Although Aetna's medical care ratio has improved dramatically, its administrative expense ratio is high because of infrastructure overcapacity driven by ahead-of-plan membership reductions. Furthermore, declining profitability in corporate America and tightening consumer liquidity could diminish Aetna's--and other health underwriters'--ability to pass increased medical care expenses to subscribers through future premium hikes. Aetna's ability to recognize industry-leading margins depends upon its capability to expand profitably its health membership base, right-size its administrative infrastructure and sell higher margin group insurance products.

Nonetheless, the organization is still subject to turnaround-related execution risk and material outstanding litigation. Also, Aetna's financial strength had been hindered previously by several large-scale issues: a significant health-care earnings decline, measurable asset impairments and strained relationships with the provider community. In the past, these issues weakened Aetna's competitive posture against other national carriers and its reputation with multiple stakeholders.

For a complete list of financial strength ratings for Aetna Inc., please visit http://www.ambest.com/press/013001aetna.pdf.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.