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Business Services Industry

A.M. Best Affirms Ratings of Aetna Inc. and Its Subsidiaries

Business Wire, June 11, 2007

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength ratings (FSR), issuer credit ratings (ICR) and debt ratings of Aetna Inc. (Aetna) (Hartford, CT) (NYSE: AET) and its life/health insurance and HMO subsidiaries. The outlook for all ratings is stable. (See link below for a detailed listing of the companies and ratings.)

The FSRs and ICRs of Aetna's life/health insurance and HMO subsidiaries reflect these companies' positive operating results, good organic membership growth and solid risk-based capitalization levels. Offsetting rating factors include a concentration of business in the self-funded commercial market, expansion into markets A.M. Best considers lower margins including Medicaid and labor and increased competitive pressures in the commercial health insurance market.

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Aetna's positive operating performance is the result of profitable organic membership growth, effective medical management and an improved administrative cost ratio. Aetna's revenue growth has well outpaced membership gains as a result of successful cross selling of its health products with pharmacy, disability, dental and behavioral health products. Positive operating earnings are being driven by a stable medical trend and a decrease in the administrative cost ratio. Aetna has significantly improved its administrative cost ratio in recent years, but its expenses remain higher than some of its peers. The higher expenses can be explained, in part, by Aetna's business mix, in that a significant portion of total medical membership is in self-funded accounts (lower per member revenue than risk business). Aetna's continued favorable net income has contributed to its solid capital levels through retained earnings.

Almost two-thirds of Aetna's medical membership is from commercial self-funded accounts. Aetna's success in the commercial self-funded market segment comes from cross selling of complementary health and group insurance products. As employers become more pressured by cost concerns, this could affect the sales of complementary products. Aetna has been growing its membership in the small group and individual markets segments. These segments are very price sensitive and have become more competitive; due to these factors margins in these industry segments could be pressured.

For a complete list of Aetna Inc.'s FSRs, ICRs and debt ratings, visit www.ambest.com/press/061104aetna.pdf.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.

Business Services Industry

A.M. Best Affirms Ratings of Aetna Inc. and Its Subsidiaries

Business Wire, June 11, 2007

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