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Aetna Will Cut 9% of Its Work Force

Insurance: Elimination of 2,750 jobs is latest step by firm to turn itself around after losses.

September 27, 2002|From Reuters

Health insurer Aetna Inc. said Thursday that it would cut about 9% of its work force to mirror its shrunken health-plan membership as it reins in costs to become more competitive.

The second-biggest U.S. health insurer said it would take an after-tax charge of $58 million in the third quarter to cover costs of eliminating 2,750 jobs. After these cuts, Aetna will employ about 28,000 workers.

The Hartford, Conn., insurer is trying to turn itself around after a string of losses in recent years. Aetna became profitable this year after losing money in every quarter in 2001.

"They've had two decent quarters this year, and this is part of the turnaround," said Dan Gillespie, portfolio manager at the Rydex Health Care Fund.

The action by the 150-year-old insurer is the latest in a series of moves to become more profitable since selling its property-casualty operations in 1996 and reinventing itself as a health-care specialist. Chief Executive John Rowe came aboard in September 2000, shortly after Aetna agreed to sell its financial services and international businesses to Dutch banking and insurance giant ING Groep.

Aetna also is in the midst of completing a separate round of layoffs--of about 4,400 jobs--announced in December. About 1,000 of those jobs have yet to be cut, Aetna spokesman Fred Laberge said.

Aetna shares closed up 41 cents at $37.78 on the New York Stock Exchange.

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