Aetna 2002 Annual Report Download - page 6

We now have reached the midpoint in Aetna’s turnaround; not necessarily in time, but in terms
of achieving the benchmarks we have set. In this report, we are pleased to share with you our
progress so far, plus preview what still needs to be done.
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Improving profitability by getting “back to basics”
In , Aetna was losing millions of dollars, the residual effect of our company’s past problems.
In , we began to see measurable results. Among our accomplishments:
~Aetna reported  operating earnings, excluding other items, of $. million.
That was a significant reversal of our  operating loss of ($.) million.
~Aetna’s market capitalization increased nearly  percent over a -month period,
from $. billion at year-end  to $. billion at year-end , as Aetna’s stock
outperformed both the Morgan Stanley HMO and S&P  indexes.
These positive results didn’t arrive by chance or overnight. They came by the hard work
of thousands of Aetna employees — day after day, week after week, month after month.
Contributing individually, but unified in our discipline and dedication, we fulfilled our
promise to return Aetna to profitability.
We put Aetna back on track by getting back to basics. We implemented a new customer-
focused operating model that stressed financial discipline in all aspects of the business. We
demonstrated progress on many critical fronts.
Most notably, we achieved a seven-point reduction in the medical cost ratio (MCR), driven
by three factors: a reduction of membership with historically higher MCRs; price increases
that better aligned our prices with competitors and with our own costs; and more effective
contracting, benefit plan designs and medical management programs.
At the same time, we successfully tackled the twin challenges of lowering our operating
expenses and improving service for all constituencies. New online, real-time quoting systems
were launched for brokers. Auto-adjudication rates were increased to speed up provider claims
payments. Telephone and Web-based tools were enhanced to give members and doctors
better access to claims and benefits information  hours a day.
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Profitable growth from new market opportunities
In  and beyond, we intend to continue margin expansion by lowering our medical
cost trend and reducing administrative expenses. Still, the next half of our turnaround
will be importantly different from the first; it will be focused on profitable growth from
new market opportunities.
We will continue to implement the new detailed strategic plan we completed in . We
have plans to fully integrate our health products with adjunctive elements such as in-house
pharmacy, mental and behavioral health, disability, and long-term care.
We also will refine our segmentation strategy, drilling down further into the different
employer and membership populations we can serve particularly well. This means continuing
in  to introduce innovative products targeted to the needs of customer segments. For
example, we’ll release the next generation of our consumer-directed Aetna HealthFundTM
plan, which has attracted more than , members — a fast start for a new product
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