A.M. Best Lowers Rating of Certain Aetna Subsidiaries.Business & Insurance Editors OLDWICK, N.J.--(BUSINESS WIRE)--Aug. 3, 2001 A.M. Best Co. has lowered the financial strength rating of Aetna Life Insurance Company, (Aetna Life), Hartford, Conn., and certain Aetna Inc. (Aetna) affiliated insurance companies and HMOs to A- (Excellent) from A (Excellent). The A- (Excellent) financial strength rating of the remaining Aetna HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, subsidiaries has been affirmed. The rating action reflects the substantial decline in Aetna's operating performance, which A.M. Best believes has been driven by the organization's inefficient operating infrastructure. The organization has been removed from under review with negative implications. Aetna's operating performance has deteriorated recently because the pricing of its commercial risk products has not adequately reflected the increase in the medical cost trend. As a result, Aetna recognized an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $36.6 million for the first quarter of 2001 as compared to operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $86.2 million for the first quarter 2000. Aetna's commercial risk business, which accounts for the majority of the organization's revenue stream, drove the poor operating performance. The company's losses have been augmented by certain underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and business practices - driven by Aetna's historical bias towards growth - which contributed to adverse selection over the last few years. However, A.M. Best believes Aetna's capital base has the capacity to withstand a moderately deteriorated operating performance environment over the near-term. During 2000 and early 2001, a new management team was recruited and is leading Aetna's financial and strategic turnaround. The plan includes an assessment of Aetna's competitive posture and prospect for profitability on a market-by-market basis as well as a realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. of the organization's administrative infrastructure. From the viewpoint of A.M. Best, this team will be challenged over the near-term to achieve a successful financial and strategic turnaround, despite the organization's strong market presence. Moreover, in A.M. Best's opinion, Aetna's operating performance will remain below its expectations over the near-term. Aetna is the nation's largest health care and group benefits provider and serves approximately 18.3 million health care members, 14.2 million dental members and 11.5 million group insurance members. The organization reported approximately $47.5 billion in assets and $10.1 billion in stockholder's equity Stockholder's equity The residual claims that stockholders have against a firm's assets, calculated by subtracting all current liabilities and debt liabilities from total assets. at year-end 2000. Additionally, the financial strength ratings for NYLCare Health Plans of New Jersey, Inc., Fairfield, N.J. and Aetna U.S. Healthcare U.S. Healthcare is a now-defunct healthcare company. The logo had an apple. The merger with Aetna In 1996, the company merged with Aetna, calling it Aetna U.S. Healthcare. The U.S. Healthcare apple logo was next to the Aetna name, and U.S. Healthcare under it. U.S. Inc. (a Louisiana corporation), Metairie, La., were changed to "NR-3" (Rating Procedure Inapplicable in·ap·pli·ca·ble adj. Not applicable: rules inapplicable to day students. in·ap ) from A (Excellent) and A- (Excellent), respectively. For a complete listing of companies with affected financial strength ratings please visit: http://www.ambest.com/press/aetna.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. |
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