Aetna Inc. chairman and chief executive Richard L. Huber resigned yesterday after a period of disappointing profits, a swooning stock price, and growing public resentment toward the managed-health care company.
Aetna‘s board of directors, at a scheduled meeting in Hartford, Conn., named longtime board member William H. Donaldson, a former head of the New York Stock Exchange, to replace Huber. Donaldson is a founder of the investment banking firm Donaldson, Lufkin and Jenrette and has been on the Aetna board since 1977.
Speaking to reporters in a conference call, Donaldson declined to say whether the board asked Huber to leave. He pledged a complete, immediate review of “all aspects of the company” to help restore its performance, including reevaluating a new organization plan Huber unveiled last month.
“The board and I share the frustration with the recent returns received by Aetna shareholders,” Donaldson said.
Unhappy shareholders have been calling for Huber’s head for months. Aetna‘s stock has collapsed from a 52-week high of $ 99.87 1/2 in May, closing yesterday at $ 40.75, up 18 3/4 cents for the day.
What’s more, the outspoken executive had stoked the public’s anger toward the managed-care industry with callous-sounding remarks, last year referring to a woman who won a judgment against Aetna in the death of her husband as a “weeping widow.”
“Aetna, because of its size and its activity, has been a lightning rod for what people don’t like about HMOs–big, bureaucratic and caustic,” said Lawrence C. Marsh, a senior vice president at Lehman Bros. He added that today’s managed-care market is concerned about “presenting a kinder, gentler face to the public about what an HMO is, and Huber is not the person who can carry that off very well.”
One consumer group had sarcastically petitioned the board to keep Huber, arguing that he unwittingly was aiding the health-care reform movement. “His very arrogance made the case for reform,” said Jamie Court of the Foundation for Taxpayer and Consumer Rights.
Nonetheless, the resignation “is a symbolic victory [because] the company is showing some remorse over its conduct and problems with physicians, patients and regulators,” Court said.
It was Huber who helped make Aetna into one of the nation’s biggest purveyors of managed care, spending billions of dollars to buy competitors–including Prudential and NYLCare in the past two years. Aetna now serves more than 47 million people.
He joined the company in 1995 and was chief financial officer and lead strategist as Aetna sold its property and casualty insurance business for $ 4 billion, then bought U.S. Healthcare for $ 8 billion–an acquisition some criticized as severely overpriced.
Huber, 63, became chief executive in 1997 and chairman in 1998. He said in a statement yesterday that “I am proud of the work we have done. We have created the largest health-care benefits company in America, doubled Aetna‘s revenues and strategically positioned the company for a bright future.”
Earlier this month, Aetna announced it would have to lower reported earnings for 1998 and the first three quarters of 1999 following a Securities and Exchange Commission review.
Huber suggested last year that the company spin off one or two of its segments to help revive its stock performance, but the board rejected the idea. He reportedly was planning to submit another such proposal yesterday. Donaldson declined to discuss whether that took place.
Donaldson, 68, insisted yesterday that “I definitely am not an interim CEO.”