HARTFORD, Conn.--(BUSINESS WIRE)--July 30, 2003--Aetna (NYSE: AET)
today announced it is revising its earnings guidance for the balance
of 2003. Highlights include Aetna projects:

-- Total company operating earnings, excluding other items, of
approximately $884-$909 million, or approximately $5.55-$5.70
per share, including the $0.70 per share of prior-period
favorable development reported in the first and second
quarters. This compares to our previous full year guidance of
$4.75-$4.90 per share.

-- Membership expected to be stable with this quarter's level, at
approximately 13 million, as new business growth will be
largely off-set by additional losses within existing accounts
this year due to continued sluggish employment levels.

-- Our 2003 expense reduction target to remain in the range of
$200 million.

A full summary of earnings guidance and GAAP reconciliation
information follows:

The following is a summary of certain 2002 financial information
and 2003 projected financial information and metrics provided on
Aetna's investor conference calls on April 24, 2003 or July 30, 2003.
This information is provided for reference only. Aetna does not assume
any responsibility to update the information to reflect subsequent
events. Please also refer to the Cautionary Statement below for
additional information regarding important risk factors that may
affect the forward looking and other information.
A live audio Webcast and replays as well as financial, statistical
and other information related to the July 30 conference call will be
available today at 5:30 p.m. EDT through Aetna's Investor Information
link on the Internet at www.aetna.com. A transcript of the prepared
remarks portion of the call will be available at 8:30 p.m. today on
www.aetna.com. The public also can access the second-quarter
conference call today at 5:30 p.m. EDT by dialing 800-210-9006, or for
international callers, 719-457-2621.
You should read this information in conjunction with Aetna's
earnings press release issued July 30, 2003 and should review the
replay of the related investor call in full, since the press release
provides further discussion of the Company's results, and the investor
call provides important context for the forward looking information.


Aetna Inc. Aetna Inc. Aetna Inc.
2002 Actuals Guidance as of Guidance as of
(Full-year unless 4/24/2003 7/30/2003
otherwise noted,(Full-year unless(Full-year unless
as previously otherwise noted) otherwise noted)
reported)
Aetna Inc.
Operating Earnings $450.3 million $755 - $780 $884 - $909
(1) $2.94 per share million(a) million(a)
$4.75 - $4.90 $5.55 - $5.70
per share(a) per share(a)
$0.85 per share
(2Q03)(a)
Revenue (excluding $19.8 billion $18.0 billion(a) $17.8 billion(a)
net realized
capital gains or
losses) (2)
Operating Expenses $4,232.6 million $200 million $200 million
(3) lower(a) lower(a)
Pretax Operating 4.6% 6.5%(a) 8%(a)
Margin (4)
Effective Tax Rate 32.6% 36%(a) 36%(a)
(5)
Long-term Debt $1.6 billion $1.6 billion $1.6 billion
(12/31/02) (12/31/03)(a) (12/31/03)(a)
Weighted Average 152,960,047 159 million(a) 160 million(a)
Common Shares
Diluted
Employee Level 28,400 (12/31/02)27,500 (12/31/03)27,500 (12/31/03)
(a) (a) (a)
Information by
Segment:
Health Care
Operating Earnings $446.6 million $710 - $730 $830 - $850
(before million(a) million(a)
Intangibles) (1)
Amortization of $85.0 million $33 million(a) $33 million(a)
other acquired
intangible assets
Medical Membership 13.678 million 13.2 million 13.0 million
(6) (12/31/02) (12/31/03)(a) (12/31/03)(a)
36.7% Risk / 35% Risk / 65% 35% Risk / 65%
63.3% ASC ASC ASC
(12/31/02) (12/31/03)(a) (12/31/03)(a)
Commercial Risk 19%(a) 14%(a) 13% - 14%(a)
Premium Yield (6)
(7)
Commercial Risk 14.5%(a) 10%(a) 8%(a)
Cost Trend (6) (8) 10%-11% (2Q03- 8% (3Q03-
4Q03)(a) 4Q03)(a)
Commercial Risk MCR 82.9% 80%(a) 78% - 79% (3Q03-
(6) (9) 4Q03)(a)
Medicare Risk MCR 82.2% 86%(a) 87% - 88% (3Q03-
(9) 4Q03)(a)
Group
Insurance
Operating Earnings $142.2 million $137 - $140 $137 - $140
(1) million(a) million(a)
Revenue (excluding $1,766.9 million 5% growth(a) 5% growth(a)
net realized
capital gains or
losses) (2)
LCP
Operating Earnings $24.2 million $16 - $18 $18 - $20
(1) million(a) million(a)
Corporate Interest $77.7 million $75 million(a) $68 million(a)
Expense (AFIT)


Footnotes

(1) In order to provide information that the company believes is
useful regarding its underlying business performance and which is used
by management to assess performance and make operating decisions, all
operating earnings and operating earnings per share (including
projected 2003 operating earnings and projected 2003 operating
earnings per share) exclude the following from net income (loss):
other items, net realized capital gains (losses), income from
discontinued operations and cumulative effect adjustments. For a
reconciliation of full year 2002 actual operating earnings to net
income (loss) under accounting principles generally accepted in the
United States of America ("GAAP") refer to the tables on pages 4 and 5
of this document.
Aetna Inc. and the Health Care segment full year 2002 actual
results include: a) a benefit of approximately $32 million pretax
(approximately $21 million after tax) due to favorable resolution of
prior-period contract matters for a large customer; b) favorable
development of prior-period medical cost estimates of approximately
$89 million after tax, of which approximately 50% relates to
underlying performance for 2002 and the balance relates to 2001.
The April 24, 2003 projected 2003 operating earnings exclude the
following after tax net realized capital gains reported by the company
for first quarter 2003: Aetna Inc. $14.1 million; Health Care $8.6
million; Group Insurance $2.5 million and Large Case Pensions $3.0
million. The July 30, 2003 projected 2003 operating earnings exclude
the following after tax net realized capital gains reported by the
company for the six months ended June 30, 2003: Aetna Inc. $23.6
million; Health Care $13.9 million; Group Insurance $3.6 million and
Large Case Pensions $6.1 million. The company is not able to project
the amount of future net realized capital gains or losses and cannot
therefore, reconcile projected 2003 operating earnings to projected
2003 net income. The July 30, 2003 projected 2003 operating earnings
for Aetna Inc. and Health Care also exclude the estimate of the cost
of settlement of physician class action litigation of approximately
$75 million after tax reported by the company for the second quarter
2003. The projected 2003 operating earnings for the Health Care
segment for both April 24, 2003 and July 30, 2003 also exclude
approximately $33 million of after tax intangibles amortization, which
would reduce net income by that amount.
The April 24, 2003 projected 2003 operating earnings for Aetna
Inc. and the Health Care segment also include favorable development of
prior-period medical cost estimates of approximately $164 million
pretax (approximately $107 million after tax), which were included in
the results reported for the first quarter 2003. The July 30, 2003
projected 2003 operating earnings for Aetna Inc. and the Health Care
segment also include additional net favorable development of
prior-period medical cost estimates of approximately $3 million pretax
(approximately $2 million after tax), which were included in the
results reported for the second quarter 2003.
(2) Aetna Inc. and the Group Insurance segment revenues exclude
net realized capital gains or losses (pretax), which are included in
reported GAAP revenue. Net realized capital losses excluded from full
year 2002 actual revenue are as follows: Aetna Inc. $(23.3) million
and Group Insurance $(12.9) million. Net realized capital gains for
the 2003 first quarter (pretax) excluded from the April 24, 2003
projected 2003 revenue are as follows: Aetna Inc. $21.7 million and
Group Insurance $3.8 million. Net realized capital gains for the six
months ended June 30, 2003 (pretax) excluded from the July 30, 2003
projected 2003 revenue are as follows: Aetna Inc. $36.3 million and
Group Insurance $5.6 million. Refer to Footnote 1 above.
(3) Aetna Inc. full year 2002 operating expenses exclude a
severance and facilities charge (pretax), which is included in
reported GAAP operating expenses. Including the severance and
facilities charge of $161.0 million in full year 2002 actual results,
GAAP operating expenses were $4.4 billion. The projected decline in
operating expenses to $4.0 billion for 2003 excludes the estimate of
the cost of settlement of physician class action litigation of
approximately $115.4 million pretax ($75 million after tax) recorded
in the 2003 second quarter. The projected 2003 GAAP operating expenses
are $4.1 billion.
(4) Pretax operating margins are calculated by dividing pretax
operating earnings, excluding other items, net realized capital gains
or losses, interest expense and amortization of other acquired
intangible assets by total revenue excluding net realized capital
gains or losses. For a reconciliation of the pretax operating margin
for the full year 2002 actual results to a GAAP measure refer to the
tables on pages 4 and 5 of this document. The projected 2003 pretax
operating margins also exclude the favorable development of
prior-period medical cost estimates reported in the 2003 first and
second quarters. The company cannot reconcile the projected 2003
pretax operating margins to a comparable GAAP measure, as it cannot
project net realized capital gains or losses.
(5) Effective tax rates are calculated by dividing income taxes,
excluding income taxes on other items, amortization of other acquired
intangible assets and net realized capital gains or losses, by
operating earnings excluding income taxes, other items, amortization
of other acquired intangible assets, and net realized capital gains or
losses. For a reconciliation of the effective tax rate for the full
year 2002 actual results to the GAAP effective tax rate refer to the
tables on pages 4 and 5 of this document. The company cannot reconcile
the projected 2003 effective tax rates to a comparable GAAP measure,
as it cannot project net realized capital gains or losses.
(6) Commercial Risk includes all medical and dental risk products
except Medicare and Medicaid. Risk includes all medical members for
which the company assumes all or a majority of health care cost,
utilization, mortality, morbidity, or other risk. Administrative
Services Contracts ("ASC") include all medical membership offered on
an employer-funded basis. Under employer-funded plans, the plan
sponsor, not the company, assumes all or a majority of health care
cost, utilization, mortality, morbidity, or other risk.
(7) The rate of increase in premiums, for all Commercial Risk
products, after benefit plan changes and the impact of regional
differences.
(8) The rate of increase in health care costs for all Commercial
Risk products excluding the favorable development of prior-period
medical cost estimates referred to in Footnote 1 above.
(9) The full year 2002 actual Medical Cost Ratios ("MCRs") include
the favorable development of prior-period medical cost estimates
referred to in Footnote 1 above. The projected 2003 MCRs exclude the
2003 favorable or unfavorable development of prior-period medical cost
estimates reported for the first and second quarters 2003 and any
further prior-period reserve development, which the company cannot
project.

Note: The symbol (a) means "approximately".

ADDITIONAL INFORMATION; CAUTIONARY STATEMENT - The 2003
information in this document is forward looking. Forward-looking
information is based on management's estimates, assumptions and
projections, and is subject to significant uncertainties and other
factors, many of which are beyond Aetna's control. Important risk
factors could cause actual future results and other future events to
differ materially from those currently estimated by management. Those
risk factors include, but are not limited to: unanticipated increases
in medical costs (including increased medical utilization, increased
pharmacy costs, increases resulting from unfavorable changes in
contracting or recontracting with providers, changes in membership mix
to lower-premium or higher-cost products or membership-adverse
selection; as well as changes in medical cost estimates due to the
necessary extensive judgment that is used in the medical cost
estimation process, the considerable variability inherent in such
estimates, and the sensitivity of such estimates to changes in medical
claims payment patterns and changes in medical cost trends); decreases
in membership levels; increases in medical costs or Group Insurance
claims resulting from any acts of terrorism; the ability to achieve
targeted savings from work force reductions and to otherwise reduce
administrative expenses in light of significant membership reductions
recently experienced; the ability to maintain targeted levels of
service, and improve relations with providers, as well as operating
performance, while making significant staff reductions and taking
actions to reduce medical costs; the ability to continue to
successfully implement Aetna's new operating model; lower levels of
investment income from continued lower interest rates; adverse
government regulation (including legislative proposals to eliminate or
reduce ERISA pre-emption of state laws that would increase potential
litigation exposure, and other proposals, such as the Patients' Bill
of Rights, that would increase potential litigation exposure or
mandate coverage of certain health benefits); adverse pricing actions
by government payors; changes in size, product mix and medical cost
experience of membership in key markets; and the outcome, including
any negotiated resolution, of various litigation and regulatory
matters, including ongoing reviews of business practices by various
regulatory agencies. For more discussion of important factors that may
materially affect Aetna, please see the risk factors contained in
Aetna's 2002 Annual Report on Form 10-K, on file with the Securities
and Exchange Commission. You also should read Aetna's 2002 Annual
Report on Form 10-K, and Aetna's 2003 Second Quarter Report on Form
10-Q when filed with the Securities and Exchange Commission for a
discussion of Aetna's historical results of operations and financial
condition.


Reconciliations of Full Year 2002 Actual Results
($ in Millions, except per common share data)

Full Year
2002 Actuals

Aetna Inc.
Reconciliation of Operating Earnings and
Per Share (Footnote 1)
Operating earnings, excluding other items (A) $450.3
Income tax reserve release (prior period related) 19.8
Reduction of reserve for anticipated future
losses on discontinued products, net of tax 5.4
Severance and facilities charge, net of tax (104.6)
Net realized capital gains, net of tax 22.3
Income from continuing operations (B) (GAAP measure) 393.2
Income from discontinued operations 50.0
Income before cumulative effect adjustment 443.2
Cumulative effect adjustment (2,965.7)
Net loss (GAAP measure) $(2,522.5)

Weighted average common shares - diluted (C) 152,960,047

Operating earnings per common share:
Operating earnings, excluding other items (A)/(C) $2.94
Income from continuing operations (B)/(C) (GAAP measure) $2.57

Reconciliation of Pretax Operating Margin (Footnote 4)
Cash operating earnings, excluding interest expense
and other items, before income taxes (D) $913.5
Interest expense (119.5)
Cash operating earnings, excluding other items,
before income taxes (E) 794.0
Amortization of other acquired intangible assets (130.8)
Reduction of reserve for anticipated future
losses on discontinued products 8.3
Severance and facilities charge (161.0)
Net realized capital gains 34.3
Income from continuing operations
before income taxes (F) (GAAP measure) $544.8

Revenue, excluding net realized capital gains (G) $19,844.4
Net realized capital gains 34.3
Total revenue (H) (GAAP measure) $19,878.7

Pretax operating margin (D)/(G) 4.6%
Pretax operating margin (F)/(H) (GAAP measure) 2.7%

Reconciliation of Effective Tax Rate (Footnote 5)
Income taxes (I) $258.7
Tax on amortization of other acquired intangible assets (45.8)
Income tax reserve release (prior period related) (19.8)
Tax on reduction of reserve for anticipated
future losses on discontinued products 2.9
Tax on severance and facilities charge (56.4)
Tax on net realized capital gains 12.0
Income taxes (J)(GAAP measure) $151.6

Effective tax rate (I)/(E) 32.6%
Effective tax rate (J)/(F) (GAAP measure) 27.8%



Reconciliations of Full Year 2002 Actual Results
($ in Millions)

Full Year
2002 Actuals
Health Care
Reconciliation of Operating Earnings (Footnote 1)
Operating earnings, excluding amortization of other
acquired intangible assets and other items $446.6
Amortization of other acquired intangible
assets, net of tax (85.0)
Income tax reserve release (prior period related) 19.8
Severance and facilities charge, net of tax (101.4)
Net realized capital gains, net of tax 36.4
Income from continuing operations (GAAP measure) 316.4
Cumulative effect adjustment (2,965.7)
Net loss (GAAP measure) $(2,649.3)


Group Insurance
Reconciliation of Operating Earnings (Footnote 1)
Operating earnings, excluding other items $142.2
Severance and facilities charge, net of tax (3.2)
Net realized capital loss, net of tax (14.0)
Net income (GAAP measure) $125.0


Large Case Pensions
Reconciliation of Operating Earnings (Footnote 1)
Operating earnings, excluding other items $24.2
Reduction of reserve for anticipated future
losses on discontinued products, net of tax 5.4
Net realized capital loss, net of tax (.1)
Net income (GAAP measure) $29.5