Aetna returning to profitability

HARTFORD, CONNECTICUTT - A slimmer and trimmer Aetna is beginning to find its way back to profitability, Chief Executive Officer John Rowe told shareholders at the annual meeting on Friday. <br> <br> Hundreds of shareholders met the day after the insurance giant posted stronger-than-expected first quarter operating earnings of $64.9 million, or 44 cents per share, well above the 3 cents per share forecast by analysts. <br> <br> ``Thanks to the hard work at everyone at Aetna, our efforts have begun bearing fruit,&#39;&#39; Rowe said. ``We have made substantial progress on our turnaround plan. And we are now, in fact, profitable.&#39;&#39; <br> <br> Aetna has been trying to recover from losses stemming from high medical claims and insufficient premium increases by shedding unprofitable business, cutting costs and layoffs. Aetna said in December it would cut its work force of 37,000 by 6,000 this year. <br> <br> Aetna&#39;s health care insurance membership has declined from a peak of 21 million in 1998 to 15 million and is expected to reach 14 million by the end of the year. <br> <br> Including the effect of a one-time charge of $2.97 billion, non-cash charge related to a new accounting standard, Aetna reported a first-quarter 2002 net loss of $2.8 billion. <br> <br> But Rowe said Friday the turnaround ``is clearly on track.&#39;&#39; Aetna, which will celebrate its 150th anniversary next year, is poised to re-emerge as an industry leader, he said. <br> <br> ``The new Aetna is within our grasp,&#39;&#39; he said. <br> <br> Rowe also used the meeting to publicly apologize for the old Aetna, which insured slaves for their owners in the 19th century. Rowe said the board of directors learned of the company&#39;s role in the slave trade two years ago. <br> <br> ``They were deeply disappointed and embarrassed. Today, I wish to reiterate a sincere apology for the actions of our company in its earliest days,&#39;&#39; Rowe said. ``Slavery is morally wrong and reprehensible.&#39;&#39; <br> <br> Aetna is one of three companies named in a reparation lawsuit by Deadria Farmer-Paellmann, a New York woman and descendant of slaves. The others named in the suit are FleetBoston Financial Corp. and railroad giant CSX Corp. <br> <br> The suit was filed last month, but Rowe said the company has not yet been formally served and couldn&#39;t comment on the specific complaint. <br> <br> Also Friday, shareholders rejected a move by dissident shareholders, who wanted the right to vote on hostile takeovers. The dissidents were represented by Herbert Denton, the head of a New York investment firm, whose nominee for the board, Lawrence Schafran, was soundly defeated Friday. <br> <br> Shareholders instead elected three company-endorsed members to the board - Ellen Hancock, 59, former CEO of Exodus Communications; Joseph Newhouse, 60, a health policy expert at Harvard University; and Judith Rodin, 57, the president of the University of Pennsylvania. <br> <br> Currently, Aetna&#39;s management team has the power to confiscate value from a shareholder or group of shareholders if the group owns at least 15 percent of the company&#39;s stock. Aetna&#39;s ``poison pill&#39;&#39; - a defense against hostile takeovers - mandates that would-be bidders take their offers directly to the board of directors and not shareholders. <br> <br> Denton argued that the company should be governed by the principals of democracy. <br> <br> ``The majority rules,&#39;&#39; he said. ``More accountability is in the shareholders best interest.&#39;&#39; <br> <br> In response, Rowe said the company will begin a three-year review of its corporate governing system and shareholders rights.