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Aetna (NYSE: AET)
Aetna Inc. (NYSE: AET)
151 Farmington Avenue, Hartford 06156
Chairman, President and Chief Executive Officer: Richard L. Huber
Revenues (FYE December 31, 1999):
$26.453 billion
Net Income (FYE December 31, 1999): $716.9 million
Market Capitalization: $6.885 billion
Employees: 41,100
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Business New Haven
2/21/2000
By: BNH
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For more than a decade, Aetna Inc. (NYSE: AET) has progressed through re-engineering, reorganization, layoffs, divestitures, acquisitions and litigation. Then came a review by the Securities & Exchange Commission (SEC). Included in the review were financial statements for the years 1996 through 1998, the first three quarters of 1999 and SEC filings for 1998 and 1999, a time during which the company took on corporate actions, divestitures and acquisitions of immense proportions and far-flung implications.
In early 1996, Aetna shed its property-casualty business, selling it to an affiliate of Travelers Insurance Group Inc. With the sale, the company departed from a line of business that had been synonymous with the name Aetna for generations. Later the same year, Aetna merged with US Healthcare.
Ensuing transactions solidified the current structure of Aetna US Healthcare, including the 1997 sale of Human Affairs International to Magellan Health Services Inc., the acquisition of the NYLCare health business of New York Life Insurance Co. in 1998, and the following year's acquisition of the health-care business of the Prudential Insurance Co. of America.
Included among several transactions in the company's financial-services business was the 1998 sale of its domestic individual life insurance business to Lincoln National Corp., followed last year by the sale of the company's Canadian operations to John Hancock Canadian Holdings Limited.
Largely due to timing and reclassification related to the 1997 sale of Human Affairs International and to changes in accounting for Prudential HealthCare, Aetna recently announced that it had agreed to the restatement of certain financial statements as a result of the SEC review. Net income for the 1999 first and second quarters will be reduced by approximately $10 million (seven cents per share). Net income for the 1999 third quarter will increase by approximately $30 million (20 cents per share).
Although results for the fourth quarter ended December 31 (announced on February 8) reflected operating earnings of $173 million ($1.18 per share), up from 1998 fourth quarter operating earnings of $144.5 million (91 cents per share), the 1999 fourth quarter results included a gain of $33 million related to the sale of a Brazilian operation. Net income for the 1999 fourth quarter was $134.5 million (92 cents per diluted share), compared to $231.8 million ($1.50 per diluted share) for the comparable 1998 period.
Results for the 1999 fiscal year reflected net income of $716.9 million ($4.72 per diluted common share), down from net income of $848.1 million ($5.41 per diluted common share) for 1998. Total revenues for the year were up for 1999 at $26.5 billion, compared to $20.6 billion for 1998.
Some analysts view the completion of the SEC review as a plus, but since the reporting of fourth quarter results there is concern that the company's positive operating performance was a result of a one-time gain. International operations have suffered due to the loss of contribution in earnings from the Canadian business, sold in 1999, and Brazilian operating losses. Also of concern is the increase in the company's medical-loss ratio due to a rise in pharmacy costs.
Analyst recommendations have been about evenly split between hold and moderate/strong buy. Estimates for the first quarter 2000 come in at $1.22 per share, and for the 2000 fiscal year at $5.36 per share. The company's stock had traded at a 52-week high of 99 7/8 early last summer, but since then has been dropping to lows in the 40s and 50s. Following the earnings announcement, the company's stock took a 9 3/4-point plunge to 46 on February 8.
Aetna recently announced another plan to realign its operations, now into two primary business units, Global Health and Global Financial Services, from its present three: Aetna US Healthcare, Aetna Financial Services and Aetna International. The company's current core lines of business provide an array of indemnity, managed care and other health and group insurance products, as well as retirement and investment products including financial planning and pension-plan administration.
On the cover of the company's 1998 annual report Aetna proclaims, “Now We're Getting Somewhere.” Perhaps this year will reveal more about the “where.”
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