Standard & Poor’s commented on Aetna Inc.’s (BBB/Stable/A-2) announcement that it has reached an agreement to settle the class action lawsuits involving more than 700,000 doctors and allegations dating back to 1990. In the agreement, Aetna has agreed to pay $100 million to physicians and $20 million to a newly established foundation.
As part of this agreement, Aetna will be implementing certain changes in its practices and procedures that will make it easier for doctors to do business with the company. In connection with the agreement, Aetna expects to take an after-tax charge in the second quarter of 2003 of about $75 million, which factors in up to $50 million in legal fees as well as insurance recoveries that Aetna expects to receive. No amounts will be paid out until the agreement is approved by the U.S. district judge overseeing the class action suits, which is expected in late 2003.
Standard & Poor’s does not expect the settlement of the lawsuits to have a material financial impact on Aetna because of Aetna’s improved operating performance and cash flows in 2003.
As a result, Standard & Poor’s is taking no rating action in connection with the announcement.
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