Aetna currently makes more people feel better than ever before, thanks to an $8.9 billion merger with U.S. Healthcare, one of the nation's largest HMOs. Aetna and its new partner now provide health care services to one in every 12 people in the U.S. The merger marks a change in focus for the company, away from its property/casualty insurance business and toward its partner's specialty, health care. Aetna provides HMOs, group and individual health insurance, standard indemnity insurance, and preferred provider plans. The 145-year old business still provides several life insurance services, but hardly on the scale that it once did; health plans now account for a full 65 percent of the company's business.

Judge who?

In 1853, Judge Eliphalet Bulkeley was dead set on founding an insurance company. He achieved fleeting success when he founded Connecticut Mutual Life Insurance in 1846, but one year later a group of the company's agents usurped control. Undeterred by this setback, Bulkeley started a second company, Aetna Life Insurance, with a group of Hartford businessmen in 1853. The company expanded steadily through the 1860s and 1870s, when Eliphalet's son, Morgan, took the reigns as president. Morgan Bulkeley, who also served as mayor of Hartford, governor of Connecticut, and U.S. senator, brought the company into the limelight by opening up multiple insurance lines. Morgan went on to serve a 43 year term as Aetna's president. By 1922, the company had become the largest multiple-line insurance provider in the U.S., with interests in every branch of insurance from auto to maritime.

Growth spurt

The company continued to grow throughout the first half of the century, particularly after World War II. The massive - and by that time - unwieldy company boosted its bottom line in the early 1990s through a drastic corporate reorganization that included "downsizing" 8,000 employees in 1990 and 1993. Meanwhile, health care services emerged as Aetna's major focus - and biggest money-maker - after a two-step move that saw its property/casualty business sold to Travelers, followed by a recent merger with U.S. Healthcare Corp.

Billions and billions

Aetna has reorganized its businesses under different divisions. The remaining life and health insurance products, and some financial services, are grouped together under Aetna International. Retirement and investment products, which account for nearly $1.8 billion annually, are part of the Aetna Retirement division. But by far the largest department at the company is Aetna U.S. Healthcare, which accounts for almost $10 billion of the company's $15 billion in annual sales with its managed care, indemnity, and group health insurance products.

Aetna has also increased its international interests through a series of joint ventures along the lines of the company's 1997 deal with Sul America Seguros, Brazil's largest insurer. With failing national health systems in many countries, the company feels, managed care systems will see "explosive growth" overseas. Throughout 1999, the company cut a slew of deals with health care providers in Mexico, Japan, Hong Kong, Argentina, Columbia, Chile and Poland.

Are you happy now?

Aetna sold off its NYLCare Texas commercial HMO to Blue Cross & Blue Shield of Texas for $420 million in September 1999. The move was in compliance with federal antitrust regulations requiring Aetna to sell NYLCare so that it could concentrate on integrating Prudential Health (which it acquired in August 1999 for $1 billion) into its own operations. Both deals were finalized in April 2000.

Follow the leader

In November 1999 Aetna announced that it was considering following United Health Care's lead in dropping approval systems that take decisions out the hands of doctors. The United tactic proved immensely successful, leading former Aetna CEO Richard Huber to send a letter of congratulations to the rival organization. Aetna already required little in the way of approval for medical procedures, and the company considered possibly abandoning them altogether in the near future.

Divide and conquer

In January 2000, Aetna announced that it would realign the Company's operations into two main business units: Global Health and Global Financial Services. Under the new structure, Global Health would consist of Aetna U.S. Healthcare's health business and Aetna International's health businesses. Global Financial Services would consist of Aetna Financial Services, the life and pension business currently in Aetna International, and the Group Insurance business that is currently part of Aetna U.S. Healthcare. In March, Aetna also announced that its Board of Directors had decided to separate the global health and global financial services businesses into two independent, publicly traded companies as soon as an orderly separation could be achieved.

Aetna also announced that it would begin to sell group-life insurance over the Internet. The company said that its Web-based ''i.Choose Life'' product would eliminate paperwork for employers, and give their employees a range of options, including applying for additional life coverage or changing their beneficiary. The program would allow employees to crunch the numbers to find out if their company-paid life benefits were sufficient, or if they needed to buy supplemental or voluntary (non-employer-paid) coverage. Workers would also be able to make changes any time of the year instead of waiting for their employer's annual enrollment period, Aetna said.

Some growing pains

Despite promising results from the first quarter of 2000, post-merger Aetna/U.S. Healthcare has had its struggles, leading to speculation that the company may be a takeover target. Although the company has withdrawn its services from some cities' markets and it has seen some doctors cancel their Aetna contracts, it is far from quitting. In summer 2000, the company fired its abrasive Chief Litigation Officer, David F. Simon, in order to improve relationships with doctors, policyholders, and the public. Also in 2000, the company launched its Affordable Health Choices program, a program aimed at reducing the number of uninsured workers in the country.