A.M. Best Upgrades Aetna's Debt Ratings, Assigns Financial Strength a

    Business Editors/Insurance Writers

    OLDWICK, N.J.--(BUSINESS WIRE)--March 4, 2005--

Revises Several Outlooks to Stable and Affirms All Financial Strength
    and Assigns Issuer Credit Ratings

    A.M. Best Co. has upgraded the debt ratings of Aetna Inc.'s (Aetna) (NYSE: AET) (Hartford, CT) outstanding senior notes and shelf registration. A.M. Best has also affirmed the debt rating of Aetna's AMB-2 commercial paper.
    Concurrently, A.M. Best has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of "a-" to Aetna Dental Inc. (a New Jersey corporation) (Fairfield, NJ). The rating outlook has been revised to stable from positive for three HMOs, and the financial strength ratings have been affirmed, while the issuer credit ratings have been assigned to all the Aetna subsidiaries, including Aetna Life Insurance Company (Hartford, CT). All remaining ratings have a stable outlook. (Please see attached for detailed listing.)
    Aetna's financial and strategic focus has shifted to profitable membership growth, product innovation and niche market entry from financial, membership and product stabilization. A.M. Best anticipates Aetna would continue to engage in manageable and near-term accretive acquisitions, complementing organic growth in its Consumer and Middle Markets segments, targeting sub-segments of the uninsured population and expanding its specialty health care operations.
    Aetna has a high quality balance sheet and earnings stream, providing excellent debt service coverage, which drove the upgrading of the debt rating. Aetna maintains conservative financial leverage, a strong holding company cash position, well-capitalized regulated entities, sufficient reserves, high-quality invested assets and excellent financial flexibility. Health care earnings have continued their positive momentum, aided by the timing of the turnaround effort and positive secular industry changes, complementing its historically profitable group insurance and discontinued large-case pension product segments.
    Nonetheless, A.M. Best is concerned that any shortfall in Aetna's attaining its membership growth goals could tighten future margins beyond A.M. Best's expectation of overall medium-term industry margin contraction. Aetna's administrative infrastructure is more costly than its peers' due to high residual fixed costs after the rapid decline of its unprofitable membership. A.M. Best's concern is somewhat mitigated by the traction demonstrated through Aetna's revised health care membership growth forecast for 2005: an increase to 1 million new members from the previous estimate of 800,000.
    For a comprehensive list of Aetna Inc.'s financial strength, issuer credit and debt ratings, please visit http://www.ambest.com/press/030405aetna.pdf.
    For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.
    For current Best's Ratings, independent data and analysis on more than 1,050 health companies and more than 130 HMO industry composites, please visit http://www.ambest.com/health.
    A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.

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CONTACT: A.M. Best Co. Public Relations: Jim Peavy, 908-439-2200, Ext. 5644 james.peavy@ambest.com or Rachelle Striegel, 908-439-2200, Ext. 5378 rachelle.striegel@ambest.com or Analysts: Christian Miles, CPA, 908-439-2200, Ext. 5026 christian.miles@ambest.com or Dana Mehta, CFA, 908-439-2200, Ext. 5061 dana.mehta@ambest.com

KEYWORD: CONNECTICUT NEW JERSEY INDUSTRY KEYWORD: INSURANCE BANKING PRODUCT SOURCE: A.M. Best Co.

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