Analysts: Aetna Consolidation Called a Short-Term Solution.

Aetna Inc.'s move to consolidate its business into two worldwide units is an attempt to reverse a sagging stock price hurt by rapid expansion, according to several equity analysts who follow the company.

Aetna, Hartford, Conn., said in early January that it would form a Global Health division to run Aetna U.S. Healthcare and Aetna International's health businesses. Its new Global Financial Services division would consist of Aetna Financial Services, Aetna International's international life and pension business and Aetna U.S. Healthcare's group insurance business.

Analysts said the move will do little for the company's perceived value. "They have expanded too aggressively and have overpaid for their acquisitions," said Todd B. Richter, analyst for Banc of America Securities.

He said Aetna has been hurt by uncertainty following its $1 billion Prudential HealthCare acquisition.

In August 1999, the Prudential acquisition made Aetna the largest health-benefits provider in the United States. The merged company has 21 million members, including 18 million managed-care members.

Two months later, Aetna sought to explain to analysts the details of the Prudential buy, which was losing money for Aetna.

James A. Lane, an analyst for Salomon Smith Barney, said the new realignment plan may have improved the overall perception of the company, but that Aetna must consistently improve its core underlying operating earnings in order to earn higher stock valuations. For example, the company must convey that the Prudential acquisition will show improvement and begin to contribute positively to operating earnings growth, "exclusive of the payments they're getting from the Prudential Insurance Company of America, because those will stop," he said.

In the first year after the acquisition, Prudential reimburses Aetna if the PruCare business does not meet certain loss-ratio targets.