A.M. Best Places Aetna Companies Under Review.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--March 10, 2000

A.M. Best Co. has placed the ratings of the affiliated operating companies of Aetna Inc. Hartford, Conn., under review with developing implications. The rating action also applies to the operating entities within the Global Health (Aetna U.S. Healthcare) and Global Financial Services (Aetna Financial Services) business segments of Aetna Inc.

With the recent appointments of William H. Donaldson, Chief Executive Officer of Aetna Inc., and Robert S. Miller, strategic advisor to the CEO, A.M. Best believes Aetna Inc.'s Board of Directors will begin a critical review of the company's future strategy, operations and current management team. The Board's assessment will be a fairly swift process and it will initiate a program designed to realize maximum shareholder value.

A.M. Best believes one option available to the board is a substantial restructuring of the Aetna organization, including the sale or disposal of one or more business units. The under review status reflects the uncertainty surrounding the future ownership and organizational structure of Aetna, as well as the impact on its market position, operating performance and its financial flexibility.

On a business segment basis, Aetna U.S. Healthcare and Aetna Financial Services have very notable market positions, which enable them to effectively compete in the dynamic and volatile employee benefits market as well as the highly competitive financial-services sector.

Aetna U.S. Healthcare is the largest health-care benefits organization in the United States. Aetna's market position has been achieved primarily through a series of acquisitions. Aetna's recent acquisition, Prudential Health Care, has created integration challenges regarding Prudential's historically problematic health-care blocks of business. A.M. Best notes the poor financial performance of the Prudential business has increased the uncertainty of Aetna Inc.'s ability to return the business to profitability after Prudential Insurance Co., the former parent, stops making required reimbursements to Aetna in late 2000. In addition, A.M. Best believes that managed care organizations--such as Aetna U.S. Healthcare--will continue to be significantly challenged to profitably grow their business in an increasingly difficult regulatory and competitive environment.

Aetna Financial Services maintains a very strong position in the defined-contribution markets due to its strong management strategies. In addition, A.M. Best notes Aetna Financial Services' strong operating performance is enhanced by its expertise in asset/liability management and a favorable liquidity position.

Aetna Inc.'s health care acquisitions increased its financial leverage and added a significant amount of intangible assets to its balance sheet, thus reducing the quality of the capital structure of Aetna Inc. Although Aetna Inc.'s current debt-to-capital ratio is 28%--in line with current ratings for all operating companies--the amortization of the intangible assets has placed additional strain on earnings.

The ratings will remain under review until A.M. Best meets with Aetna Inc.'s management to fully review the possible rating implications of its revised business strategies and their effect on the financial strength and operating performance of the organization.

The A (Excellent) rating of the following companies has been placed
under review with developing implications:

--  Aetna Life Insurance and Annuity Co.
--  Aetna Insurance Company of America
--  Aetna Life Insurance Co.

The A- (Excellent) rating of the following companies has been placed
under review with developing implications:

--  Corporate Health Insurance Co.
--  U.S. Health Insurance Co. (New York)
--  U.S. Health Insurance Co. (Connecticut)

The A rating of the following HMOs has been placed under review with
developing implications:

--  United States Health Care Systems of Pennsylvania, Inc.
--  Aetna U.S. Healthcare Inc. (a New Jersey Corporation)
--  U.S. Healthcare Inc. (a New York corporation)
--  Aetna U.S. Healthcare Inc. (a Texas Corporation)
--  Aetna U.S. Healthcare of North Texas
--  Aetna U.S. Healthcare Inc. (a Virginia Corporation)
--  Aetna U.S. Healthcare Inc. (a Delaware Corporation)
--  NYLCare Health Plan of New Jersey
--  NYLCare Health Plan of New York
--  NYLCare of the Mid Atlantic
--  Prudential Health Care of New York

The A- rating of the following HMOs has been placed under review with
developing implications:

--  Aetna U.S. Healthcare Inc. (a Connecticut Corporation)
--  Aetna U.S. Healthcare Inc. (a Massachusetts Corporation)
--  Aetna U.S. Healthcare of California, Inc.
--  Aetna Health Plan of Southern New England, Inc.
--  NYLCare Health Plan of Connecticut
--  Aetna U.S. Healthcare, Inc. (a Florida Corporation)
--  Aetna U.S. Healthcare of Illinois Inc.
--  Aetna U.S. Healthcare Inc. (a Louisiana Corporation)
--  NYLCare Health Plan of Louisiana
--  Aetna U.S. Healthcare of the Carolinas, Inc.
--  Aetna Health Plans of the Carolinas, Inc.
--  Aetna U.S. Healthcare, Inc. (an Arizona Corporation)
--  Aetna U.S. Healthcare Inc. (an Ohio Corporation)
--  Aetna U.S. Healthcare Inc. (a Georgia Corporation)
--  Aetna U.S. Healthcare Inc. (a Washington Corporation)
--  Aetna U.S. Healthcare of Colorado
--  Aetna U.S. Healthcare of Maine
--  Aetna U.S. Healthcare of New Hampshire
--  Aetna U.S. Healthcare of Tennessee
--  Prudential Health Care of California
--  Prudential Health Care of Connecticut
--  Prudential Health Care of Georgia
--  Prudential Health Care Plan, Inc.

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.