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January 31, 2017

Aetna weighing merger options, Hartford presence

Flickr Creative Commons | Chez Julius Livre 1 Aetna headquarters in Hartford

Aetna CEO and Chairman Mark Bertolini said Tuesday the Hartford health insurer still is unsure what its next steps will be after the federal government recently blocked its proposed $37 billion merger with Humana.

In a conference call with investors, Bertolini said the insurer will take the next two weeks -- up until its Feb. 15 merger deadline --  to decide whether or not it will continue to pursue the merger or give up on it. If it abandons the deal, Aetna must pay Humana a $1 billion breakup fee.

A federal judge last week rejected the proposed merger saying the deal would "be likely to substantially lessen competition" in the Medicare Advantage market.

“We have a merger agreement that goes to Feb. 15 so we’re going to take all of that time to make sure we have pursued all potential opportunities to appeal or not,” said Bertolini, in response to a question on the morning earnings call.

Meantime, the future of Aetna’s Hartford presence remains uncertain. On Friday, the Boston Business Journal reported that Aetna is exploring the possibility of setting up an office of up to 150,000 square feet in Boston to house a group of workers from Connecticut, according to real estate sources. The company declined to comment on the report directly, but its presence in Hartford has been a concern for some time.

"We remain headquartered in Hartford, and we’re committed to our employees here, who continue to be an important part of our future," said Matthew Clyburn, Aetna media relations, in a statement after the call.

Bertolini has been an outspoken critic of Connecticut’s business climate and has made no secret the insurer that employs around 6,000 in Hartford has been rethinking its real estate footprint. Aetna was likely going to relocate some jobs to Louisville, if the Humana deal was completed.

Financial performance

During the conference call, Aetna also announced its fourth quarter and full-year results.

Although fourth quarter profits declined 57 percent, 2016 profits were only down slightly.

Fourth quarter net income was $139 million, or 39 cents a share, compared with $321 million, or 91 cents a share, for the same year-ago period, a decline of 57 percent. Full-year 2016 net income was $2.27 billion, or $6.41 a share, compared with $2.39 billion, or $6.78 a share, for full-year 2015.

In both cases, the declines were due primarily to restructuring costs associated with a previously announced voluntary early retirement program, the company said.

Aetna has 23.1 million medical members and expects to grow to 22.2 or 22.3 million members, according Shawn M. Guertin, Aetna executive vice president and chief financial officer.

The company is also focused on value-based care, Bertolini said.

“We believe Medicare and Medicaid will be growth markets for us,” he added in response to a question on the earnings all. “We feel good about the approach to our group market on the commercial side.”

Bertolini also said Aetna is still committed to working with the Trump administration in “preserving positive aspects” of the Affordable Care Act while developing a healthcare market that works well for younger people less inclined to buy insurance. The “next wave” could be good for the industry, he said.

“We can preserve the good parts of the ACA but also bring forward ideas that … could encourage younger people to come in and could move the retail market much faster,” Bertolini said.

If the Humana deal were to fall through, Bertolini said, the company would leverage data analytics and home care services “as a way of impacting growth and frankly retention of customers.”

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