The Waiting Game.

Wall Street analysts say it will be six months to a year before shareholders will reap the benefits of Aetna's plan to split its global health and financial-services businesses.

Aetna Inc.'s decision to separate its global health and financial-services businesses into two independent, publicly traded companies is designed to enhance its ability to sell its services and build shareholder value.

But Wall Street analysts said the restructuring plans would need six to 12 months before Aetna's stock price improves and shareholder confidence is somewhat restored.

The company's Aetna U.S. Healthcare unit is the largest U.S. provider of health benefits, with 29 million members. Aetna Life Insurance Co. is one of the top five providers of group long-term-care, life and disability insurance.

Aetna, Hartford, Conn., announced the restructuring after it rejected a $10 billion acquisition offer by WellPoint Health Networks Inc. and ING America Insurance Holdings Inc.

Aetna's new chairman and chief executive officer, William H. Donaldson, said the offer significantly understated the current value and future potential of Aetna and its core businesses.

Additionally he said the board was uncomfortable with a stipulation that the bidding companies--in effect, competitors--would have to look at Aetna's books to make further offers.

By turning down the acquisition bid, Aetna's board extinguished the "opportunity to explore possible strategic alternatives; said Greg Crawford, an analyst for Fox-Pitt, Kelton. But, they "didn't slam the door" entirely on future acquisition discussions, Crawford said.

"This may be a way to quiet the scene," he added. "If Donaldson had thought that was more of a serious proposal, they would have considered it more. He felt more that it was part of a fishing expedition."

Besides plans for improving its financial performance, Aetna also announced it would focus on improving its relationships with doctors, hospitals and patients.

The new company is going to show more flexibility in contracting with providers, Crawford said.

"With the patients, I expect them to shift to more flexible kinds of products and benefits designs, which place more responsibility on the patient for their own health-care cost," Crawford said. "The trade-off is less administrative oversight by Aetna and fewer restrictions."

Aetna also is considering selling about half of its international business.

If it made such a sale, coupled with the separation of operations, the company's stock price should hit the $70 mark by the end of the year, said David H. Shove, an analyst for Prudential Securities. "That's a pretty good return."

Aetna's decision to abandon the WellPoint-ING offer is going to "create a furor" among stockholders, said Ira L. Zuckerman, an analyst for Nutmeg Securities Ltd.

Aetna's outlook is going to be very volatile, Zuckerman said. "This is not what the market wanted to hear," he said.

Zuckerman said it was "not a wise move" for Aetna's board to completely dismiss the acquisition offer. "I think it would have behooved them to show at least a semblance of being willing to ta1k," he said.

Although Aetna's restructuring plan is similar to what WellPoint and ING were going to do--with Well-Point taking over the health maintenance organization and ING the international financial-services operations--it doesn't solve the problems Aetna has had with its HMO, he said.

"Two independently traded companies are not what people want to hear," Zuckerman said. This doesn't solve the problem of getting the stock price up to $70--the price offered by WellPoint and ING.

Previously, the health and financial-services operations had "limited or negative synergies," in addition to customer overlap, Donaldson said.

Now, through separate independent companies, management will be more directly aligned with the performance of those businesses, which can then be better evaluated, he said.

Donaldson said he was confident the company could turn itself around. "We don't want somebody else to do what we think we could do for ourselves," he said. He stressed that the rejection of the offer was not a ploy to get a higher one.

Still, the company will entertain other offers. "We are also going to be open to any legitimate expression of interest," he said.

Donaldson also takes full responsibility for turning down the offer, noting that he also owns shares and stock options.

"If I can turn this around, I will profit from it as [will] all of you," he said in a conference call with analysts.

Donaldson, co-founder of Donaldson, Lufkin & Jenrette, an investment banking firm, succeeded Richard Huber, who stepped down Feb. 25. Disgruntled investors wanted Huber either to resign or be dismissed.

Reorganization Plan Designed to Boost Market Share

Aetna inc. laid out a reorganization plan designed to increase its market share and bolster its stock price, which dropped some 60% in a year.

Aetna previously launched a realignment of its units into two businesses, Global Health and Global Financial Services. Global Health will consist of Aetna U.S. Healthcare, except its group life and disability insurance business, and Aetna International's health businesses. Global Financial Services will encompass Aetna Financial Services, Aetna International's life and pension businesses, Aetna U.S. Healthcare's group life and disability insurance business and its large-case pensions business.

Details of the reorganization, announced by Chairman and Chief Executive Officer William H. Donaldson, include the following:

* The company's global health and global financial-services businesses will be split into two independent, publicly traded companies. It is anticipated that this will occur by year's end, subject to regulatory approvals. Decisions about company names, head-quarter locations, boards of directors and corporate staff are integral to the separation.

* Aetna might leave some of its health business. "I could see us exiting certain markets, and obviously, the market most suspect to us is the Medicare market," Donaldson said.

* The company might sell nonstrategic international assets totaling $500 million to $1.5 billion. Aetna's international assets total $4 billion in market value and about half of that in book value, he said.

* Aetna has launched the first phase of a cost-reduction program designed to save the company between $100 million to $150 million and be realized in a year or less, he said.

* Donaldson said that a full progress report, including more details about the cost-reduction program, would be presented during the company's board meeting, which was scheduled for April 27.