Aetna Loss Projection Does Not Affect Financial Strength Ratings Of HMO and Operating Units, A.M. Best Says.

OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 1, 1999--

Aetna Inc.'s recent announcement that, prior to the acquisition by Aetna, its Prudential Health Care unit expects to report a 1999 loss of $200 million--more than twice what was previously projected--does not in itself warrant a change in the financial strength ratings of the company's operating units, A.M. Best Co. said today. Due to payments and protections negotiated as part of the Prudential transaction, the Prudential block is expected to add slightly to Aetna Inc.'s consolidated results in 1999.

The rating agency acknowledged that Aetna's August acquisition of Prudential Health Care has created "integration challenges" with respect to Prudential's problematic health-care blocks of business. The poor financial performance of this business has increased the uncertainty surrounding Aetna's ability to quickly return the business to profitability after Prudential Insurance Co. stops making required reimbursements to Aetna in late 2000.

Nevertheless, A.M. Best believes Aetna will maintain a solid financial structure and that the merger ultimately will result in considerable expense savings. A.M. Best also believes the acquisition will substantially strengthen Aetna's market presence in such key markets as New York, New Jersey, Pennsylvania and Texas, as well as the Southeast and Mid-Atlantic regions.

"The lessons Aetna learned in integrating U.S. Healthcare and NYLCare will help it integrate the Prudential business in a timely fashion," said Ken Frino, managing senior financial analyst in A.M. Best's life/health division. "When this is accomplished, the long-term financial performance of the block of business should improve."

Aetna Inc. and its subsidiaries constitute one of the nation's largest employee-benefits, insurance and financial services organizations. Aetna U.S. Healthcare Inc.--a major subsidiary--is the nation's largest health-care benefits company, with more than 6.1 million insured HMO members, 8.2 million members in self-funded, administrative-services-only programs and 1.3 million members receiving insurance under point-of-service, preferred-provider organization and traditional indemnity contracts.

The HMO operations are supported by the life/health insurance companies, a third-party administrator, dental HMOs and a number of other subsidiary companies providing ancillary products and services to the managed health care delivery system.

The financial strength ratings of the Aetna HMO units, which range from A (Excellent) to A- (Excellent), and its major operating units--Aetna Life Insurance Co. and Aetna Life Insurance & Annuity Co., both rated A--already take into account the issues raised by the purchase of the Prudential health business.

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