A.M. Best Co. has placed the ratings of several Aetna Inc. subsidiaries under review, noting the insurance giant faces an uncertain future in the wake of a recent management shakeup. The action also comes amid talk of a possible takeover of Aetna.

Best, of Oldwick, N.J., announced March 9 that it took the ratings action with "developing implications." The rating agency says Aetna's board of directors will begin a critical review of its company's future strategy, operations and current management team, which could affect its future ratings.

The ratings review was spurred by a management shakeup that includes the Feb. 25 resignation of CEO Richard L. Huber. Aetna's board of directors appointed a new CEO, William H. Donaldson, and a strategic adviser to the CEO, Robert S. Miller.

Meanwhile, Memphis, Tenn.-based Southeastern Asset Management Inc. bought 6 percent of Aetna and says it has held talks with other companies about a takeover of the insurer, according to documents filed with the Securities and Exchange Commission.

Best's rating action applies to the affiliated companies of the Hartford, Conn.-based Aetna. The companies all currently have either A or A- ratings (both excellent).

Best's financial analyst Ken Frino says the review won't affect service to Aetna's customers. "The claims will still be paid. Operations will continue as they have been,'' he says.

An eye on Aetna

Frino says Best will closely monitor Aetna's progress under new management. "There's going to be more things coming out from Aetna's side. The board is meeting. There's a lot going on," he says.

Best believes the Aetna board's assessment of its future strategy "will be a fairly swift process." The board is looking at ways to boost the company's stock price, which tumbled under Huber's reign.

The rating agency believes Aetna should consider a substantial restructuring of its organization, including the sale of one or more subsidiaries. Best acknowledges Aetna U.S. Healthcare and Aetna Financial Services have "very notable market positions." Both can compete effectively in a volatile employee-benefits market, as well as in financial services, Best notes.

The rating service points out that Aetna U.S. Healthcare, the country's largest health care benefits organization, achieved its standing in the market through a series of acquisitions. Among them, Aetna acquired Prudential HealthCare in December 1998. Best finds that the poor financial performance of Prudential has increased the uncertainty of Aetna's ability to transform the business into a profitable one.

William Pargeans, another financial analyst with Best, explains that the action does not necessarily mean Aetna will lose its current ratings. "The reason it's under review is that development, at this point, is uncertain," he says.

Aetna representatives could not be reached for comment.

The ratings group Standard & Poor's on Feb. 29 placed Aetna Inc. on "CreditWatch with developing implications," which means it could be upgraded or downgraded, says S&P analyst Jack Reichman.

Moody's Investors, which also provides credit ratings, on March 13 placed Aetna and its affiliates on review. Moody's action followed Aetna's announcement March 12 that its Board of Directors plans to divide its health care and financial services businesses into two publicly traded companies.

The ratings

The A (Excellent) rating of the following companies has been placed under review with developing implications:

• Aetna Life Insurance and Annuity Co.
• Aetna Insurance Company of America
• Aetna Life Insurance Co.

The A- (Excellent) rating of the following companies has been placed under review with developing implications:

• Corporate Health Insurance Co.
• U.S. Health Insurance Co. (New York)
• U.S. Health Insurance Co. (Connecticut)

The A rating of the following HMOs has been placed under review with developing implications:

• United States Health Care Systems of Pennsylvania, Inc.
• Aetna U.S. Healthcare Inc. (a New Jersey Corporation)
• U.S. Healthcare Inc. (a New York corporation)
• Aetna U.S. Healthcare Inc. (a Texas Corporation)
• Aetna U.S. Healthcare of North Texas
• Aetna U.S. Healthcare Inc. (a Virginia Corporation)
• Aetna U.S. Healthcare Inc. (a Delaware Corporation)
• NYLCare Health Plan of New Jersey
• NYLCare Health Plan of New York
• NYLCare of the Mid Atlantic
• Prudential Health Care of New York

The A- rating of the following HMOs has been placed under review with developing implications:

• Aetna U.S. Healthcare Inc. (a Connecticut Corporation)
• Aetna U.S. Healthcare Inc. (a Massachusetts Corporation)
• Aetna U.S. Healthcare of California Inc.
• Aetna Health Plan of Southern New England Inc.
• NYLCare Health Plan of Connecticut
• Aetna U.S. Healthcare Inc. (a Florida Corporation)
• Aetna U.S. Healthcare of Illinois Inc.
• Aetna U.S. Healthcare Inc. (a Louisiana Corporation)
• NYLCare Health Plan of Louisiana
• Aetna U.S. Healthcare of the Carolinas Inc.
• Aetna Health Plans of the Carolinas Inc.
• Aetna U.S. Healthcare, Inc. (an Arizona Corporation)
• Aetna U.S. Healthcare Inc. (an Ohio Corporation)
• Aetna U.S. Healthcare Inc. (a Georgia Corporation)
• Aetna U.S. Healthcare Inc. (a Washington Corporation)
• Aetna U.S. Healthcare of Colorado
• Aetna U.S. Healthcare of Maine
• Aetna U.S. Healthcare of New Hampshire
• Aetna U.S. Healthcare of Tennessee
• Prudential Health Care of California
• Prudential Health Care of Connecticut
• Prudential Health Care of Georgia
• Prudential Health Care Plan Inc.