Aetna to Drop 5,000 Jobs in Cost-Cut Move

Monday, December 18, 2000

HARTFORD, Conn. (Reuters) - Aetna Inc. (AET.N), the No. 1 U.S. health insurer, said on Monday it plans to reduce its workforce by about 13 percent, or 5,000 positions, and record about $565 million in after-tax charges in the fourth quarter, in a bid to cut costs and boost profits.

The Hartford, Conn.-based company said its cost-saving initiatives are expected to result in pretax savings in 2001 of about $200 million. Aetna said it also plans to reorganize its sales force to place greater emphasis on higher-potential middle-market business.

"These actions not only reflect today's need for a more streamlined infrastructure, but our commitment to restoring Aetna as a major competitive force, with industry-leading financial performance and a heightened ability to serve our customers effectively," said Aetna President and Chief Executive John Rowe in a statement.

In addition, Aetna said it will put in place "significant price increases" on health plan business renewing Jan. 1, 2001, along with a focus on "disciplined underwriting," in order to improve medical cost ratios.

Aetna said it will take a after-tax charge of about $100 million in the fourth quarter in connection with the restructuring initiatives.

Further, Aetna said it will record a fourth-quarter after-tax charge of about $235 million related to goodwill associated with the exiting of certain Medicare markets.

A charge of approximately $35 million after taxes will result from other costs related to the spin-off of Aetna, and results of discontinued operations will include an after-tax fourth-quarter charge of about $195 million related to transaction costs from the sale of Aetna Financial Services and Aetna International to ING Groep NV, the company said. "Now that we are solely focused on health care and related benefits, we are taking a number of initiatives designed to improve customer service, strengthen the profitability of Aetna and increase our competitiveness," said William Donaldson, Aetna's chairman, in the statement.

Membership levels in 2001 are expected to fall due to Medicare market exits, Prudential HealthCare membership attrition and HMO product withdrawals, Aetna said.

More than half of the 5,000 job cuts will be achieved through attrition, while the rest -- about 2,400 -- will come through targeted job eliminations, the company said.

The Aetna plans to reorganize the sales force, to place a greater emphasis on higher-potential middle-market business and to more efficiently serve smaller cases, the company said.

"The resulting sales organization is designed to be smaller but more effective at both selling and retaining business," the company said.

http://news.lycos.com/headlines/Business/article.asp?docid=RTBUSINESS-HEALTH-AETNA-DC&date=20001218

-- Martin Thompson (mthom1927@aol.com), December 18, 2000

Answers

Source: Prudential to Cut Up to 175 Jobs Dec 18 10:11am ET

NEW YORK (Reuters) - Prudential Securities Inc., the brokerage arm of Prudential Insurance Co. of America, will eliminate as many as 175 investment banking positions, or about 87 percent of that unit, a source with the company told Reuters on Monday.

Prudential, which recently closed its institutional bond business, held a meeting this morning to discuss the job cuts with its employees, said the source, who spoke on the condition of anonymity. The company will cut between 160 to 175 investment banking jobs, the source said. The firm has about 200 investment bankers.

Prudential, which declined to comment on the matter, said it is releasing a statement later Monday morning. Its parent company on Monday said its board approved a decision to become a publicly-traded company.

The company's securities division has gone through some recent changes, including the retirement of Chief Executive Hartwick Simmons in October. Simmons was replaced by John Strangfeld.

Prudential, which has nearly 300 offices in 22 countries, has struggled to compete with larger rivals like Goldman Sachs Group Inc. (GS.N) and Morgan Stanley Dean Witter & Co. (MWD.N) in the investment banking sector.

Prudential bought technology investment banking boutique Volpe Brown Whelan & Co. in December 1999 in the hopes of gaining a foothold in the lucrative business of helping tech companies go public, but subsequently failed to pull in many hot initial public offerings

http://www.siliconinvestor.com/headlines/financial/20001218/262117.htm l

-- Martin Thompson (mthom1927@aol.com), December 18, 2000.