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Aetna Says Restructuring-Related Charges Will Cost $60-$65 Million

Source: Dow Jones Newswire

Posted on 30 Dec 2009

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Insurance giant Aetna Inc. announced today that it expects fourth-quarter restructuring-related charges to total $60 million to $65 million for workforce reduction plans the insurer made public in November 2009. The restructure is Aetna's attempt to align its cost structure with projected 2010 membership.

Last month, Aetna announced a 1.8% reduction of its work force and planned a similar cut at the end of the first quarter.

The planned fourth-quarter charges include $40 million for a completed headcount reduction of 625 workers and real-estate consolidation. Aetna expects a charge of $20 million to $25 million for the first-quarter downsizing.

The company said it expects to have about 34,300 workers once the cuts are completed. A date hasn't been set to notify employees in the next round of cuts.

The industry has been struggling with tepid or declining enrollment in commercial plans, while awaiting the final outcome of the government's overhaul of health-care policy.

Prior to November, Aetna last announced job cuts in December 2008, when it said it was eliminating 1,000 positions, or nearly 3% of its work force at the time.

Aetna has reported a negative spread this year between increases in medical costs and growth of premiums. The company is taking pricing actions meant to reverse that condition, although doing so brings the risk of losing customers who don't want to pay higher premiums.

In its most recent earnings report, Aetna noted that unexpectedly high costs related to the H1N1 flu and rising numbers of unemployed members using COBRA insurance had hurt margins in its commercial health plans. Aetna also reported a sequential-quarter membership decline and forecast full-year earnings at the low end of its previous estimated range.