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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 15, 1998
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AETNA INC.
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(Exact Name of Registrant as Specified in its Charter)
Connecticut
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(State or Other Jurisdiction of Incorporation)
1-11913 02-0488491
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(Commission File Number) (I.R.S. Employer Identification No.)
151 Farmington Avenue, Hartford, Connecticut 06156
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(Address of Principal Executive Offices) (Zip Code)
(860) 273-0123
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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TABLE OF CONTENTS
Item 5. Other Events 3
Item 7(c). Exhibits 3
Signatures 4
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ITEM 5. OTHER EVENTS.
On March 15, 1998, Aetna Inc. and a subsidiary entered into
definitive agreements with New York Life Insurance Company ("New York Life")
for Aetna to acquire the NYLCare Health Plans business, the healthcare
subsidiary of New York Life, for $1.05 billion in cash and potential additional
payments contingent upon future performance.
A copy of Aetna's and New York Life's joint press release relating to
the transaction is attached as an exhibit to this report, and is incorporated
herein by reference.
ITEM 7. (c) Exhibits.
Exhibit 99 Press Release of Aetna Inc. dated March 16, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AETNA INC.
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(Registrant)
Date: March 16, 1998 BY: /S/ ALFRED P. QUIRK, JR.
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Alfred P. Quirk, Jr.
Vice President
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EXHIBIT INDEX
Exhibit No. Description
99 Press Release of Aetna Inc. dated March 16, 1998
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Exhibit 99
AETNA MEDIA CONTACT: NYLCARE MEDIA CONTACT
Joyce Oberdorf Bill Werfelman
(860) 273-7392 (212) 576-5385
AETNA INVESTOR CONTACT:
Robyn Walsh
(860) 273-6184
AETNA TO ACQUIRE NYLCARE FOR $1.05 BILLION IN CASH
HARTFORD, CT AND NEW YORK, MARCH 16, 1998 - Aetna (NYSE: AET) and New York Life
Insurance Company announced today that they have entered into definitive
agreements for Aetna to acquire the NYLCare Health Plans business, the health
care subsidiary of New York Life Insurance Company, for $1.05 billion in cash
and potential additional payments contingent upon future performance.
The transaction, which is expected to be financed with fixed income securities,
has been approved by the Boards of both companies and is expected to be
completed in the third quarter of 1998. It is subject to approval by federal
antitrust and state regulators, and other customary closing conditions. In
addition to the cash purchase price, payments totaling up to $300 million may
be made beginning in the year 2000, to the extent that pre-determined earnings
and membership objectives are achieved.
"The NYLCare acquisition represents another important step in our strategy of
continuing to grow our health business, and it meets all of our previously
stated criteria for acquisitions," said Richard L. Huber, Chairman and Chief
Executive Officer of Aetna. "NYLCare is a well-managed organization with an
excellent reputation for quality products and offers us increased membership in
growth markets such as Texas and the Maryland/D.C./Virginia area at an
attractive price. We are projecting the transaction to begin to be accretive to
earnings
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approximately 12 months from closing and expect to achieve approximately
$45 to $55 million after tax in synergies beginning then."
"For us, this sale allows New York Life to focus on its own growth strategy in
building on our core strengths in the domestic life insurance and annuity
businesses, expand our portfolio of proprietary mutual funds in our asset
management business, and project those life insurance, annuity and asset
management strengths into high-growth international markets," said Sy Sternberg,
Chairman, President and CEO of New York Life.
"In considering this transaction, we searched for a leading company in this
field that could provide the best potential for success for the enterprise and
that's what Aetna provides. This sale is a great opportunity for Aetna U.S.
Healthcare since it adds to its leadership position," Sternberg said.
Included in the transaction are NYLCare Health Plans' HMO, POS, PPO and
indemnity health lines as well as its group life and disability businesses, but
not the Avanti physician practice management company. The acquisition would add
approximately 2.2 million health members to Aetna U.S. Healthcare's membership
base. NYLCare is the leading managed care provider in Texas with approximately
630,000 HMO members, and is one of the top three managed care companies in the
Maryland/D.C./Virginia market, with approximately 470,000 members. The
acquisition of NYLCare also increases membership in other attractive markets,
including New York and New Jersey, North Carolina and South Carolina, Illinois
and Washington State. With this acquisition, Aetna U.S. Healthcare would have
15.9 million health members, including 6.2 million HMO members.
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"The combination of NYLCare with Aetna U.S. Healthcare is an excellent
strategic fit. Together, we will be able to offer our customers - which include
many of the leading employers throughout the nation - flexibility in product
offerings, as well as access to larger provider networks over a broader service
area," Huber said.
"Both of our companies will be working in concert to make this a very smooth
transition for clients, patients, physicians and providers, as well as NYLCare
employees," Sternberg said. "We want to safeguard all of the key relationships
of the company while we move it into Aetna U.S. Healthcare when the transaction
is completed. For all of us, it is business as usual with an emphasis on
providing great service."
"Our ability to maintain quality service while we integrate NYLCare into Aetna
U.S. Healthcare's operations is of critical importance," Huber said. "We already
have plans for integration based on a market-by-market approach, and we intend
to proceed on a gradual, paced timetable. By integrating the smaller, more
easily absorbed markets first, and continuing to run parallel systems in the
larger markets in the interim, we intend to minimize the potential for service
disruption and substantially complete the integration by the end of the year
2000.
"In addition, NYLCare has many talented people throughout the organization, and
we hope to draw upon them to increase our management strength. While some jobs
will be affected, we plan to rely as much as possible on attrition and growth in
our business as we streamline operations over the course of the integration
period," Huber said.
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New York Life will retain its interest in Express Scripts, Inc. (NASDAQ: ESRX),
a St. Louis-based pharmacy benefits management company with $1.2 billion 1997
revenues. Aetna U.S. Healthcare has agreed to continue NYLCare's existing
business relationship with Express Scripts under similar terms for the duration
of the current contract period (December 31,1999), Express Scripts will
continue to provide pharmacy benefit management and infusion therapy services
to members of NYLCare's HMOs under new terms through December 31, 2003.
About 17 percent of Express Scripts' current sales are to NYLCare.
Aetna is a leading provider of health and retirement benefit plans and financial
services, with three core businesses: Aetna U.S. Healthcare, Aetna Retirement
Services and Aetna International. Aetna provides nearly 30 million people
worldwide with quality products, services and information that help them manage
what matters most: their health and financial well-being. Aetna's Web site
address is www.aetna.com.
NYLCare was formed in 1996 with the merger of New York Life's group indemnity
insurance business and its Sanus health maintenance organization, which had been
acquired by New York Life in 1987. NYLCare had more than $3.1 billion in
revenues in 1997.
New York Life Insurance Company, a Fortune 100 company, is one of the largest
insurance companies in the United States and the world. Founded in 1845 and
headquartered in New York City, New York Life and its affiliates offer
traditional life and group insurance and annuities. On the investment side, New
York Life and its affiliates provide institutional asset management and trust
services, and through a subsidiary, NYLIFE Distributors, Inc., provide an array
of securities
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products and services such as institutional and retail mutual
funds, including 401(k) products. New York Life's Web site address is
www.newyorklife.com.
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CAUTIONARY STATEMENT - Certain information in this press release is forward
looking including, but not limited to, statements concerning the projected
estimated earnings impact of the proposed acquisition on Aetna, potential
synergies and cost savings that may result from the acquisition, the expected
timing of the closing of the acquisition, and amounts potentially payable under
the earnout. That information is based on management's estimates, assumptions
and projections and is subject to significant uncertainties, many of which are
beyond the control of the company. Important risk factors that could cause
Aetna's actual future results to differ materially from those currently
estimated by management include, but are not limited to, the ability to
successfully close and integrate the NYLCare transaction on a timely basis and
in a cost-efficient manner, adverse government regulation (particularly in key
markets where NYLCare operates), unanticipated increases in medical costs
resulting from changes in contracting or recontracting with providers, and
changes in membership in key markets following the transaction. Also, the
amounts potentially payable under the earnout are contingent upon a number of
factors, and no assurances can be made that the payments will be made or
received by the respective parties. For a discussion of these and other
important risk factors that may materially affect the forward-looking statements
herein, please see the risk factors contained in Aetna's 1997 Annual Report on
Form 10-K filed with the Securities and Exchange Commission and 1997 Annual
Report to Shareholders, which risk factors are incorporated herein by reference.
This press release does not constitute an offer or solicitation of an offer to
purchase Aetna securities.
