AETNA INC. THIRD QUARTER 2003 EARNINGS CONFERENCE CALL

151 Farmington Avenue Hartford, Conn. 06156 Media Contact: Roy E. Clason Jr. (860) 273-7392 clasonr@aetna.com Investor Contact: David Entrekin (860) 273-7830 entrekind@aetna.com AETNA INC. THIRD QUARTER 2003 EARNINGS CONFERENCE CALL -- Hartford, CT, October 30, 2003 8:30 A.M. ET -- -- Prepared Remarks -- David Entrekin, Vice President Investor Relations Good morning and thank you for joining Aetna s third quarter 2003 earnings call and web cast. This is David Entrekin, Head of Investor Relations for Aetna, and with me this morning are Aetna s Chairman and CEO, Dr. Jack Rowe; President, Ron Williams and Alan Bennett, our Chief Financial Officer. Following their prepared remarks, we will be happy to answer your questions. During the call, we will make forward-looking statements. Risk factors that may impact those statements and could cause actual future results to differ materially from currently expected results are described in our 2002 Form 10-K. Pursuant to SEC Regulation G, we have provided reconciliation of metrics relating to the Company s performance that are non-gaap measures in our Third Quarter 2003 Press Release, Financial Supplement, and 2003 Guidance Summary. These reconciliations are available on the Investor Information portion of the Aetna.com website. Also, as you know, Regulation FD limits our ability to respond to certain inquiries from investors and analysts in non-public forums, so we invite you to ask all questions of a material nature on this conference call. Now let me turn the call over to Dr. Rowe Jack. John W. Rowe, M.D., Chairman and CEO Thank you, David, and thank all of you for joining us this morning. I am very pleased to report operating earnings for Aetna in the third quarter of $1.29 per share. Operating EPS excluding development and other items was $1.27, a 74% increase compared to the third quarter of 2002. Our net income for the quarter was $1.35 per share, which includes net realized capital gains of $0.06 per share. Our accomplishments in the quarter were a function of our successful efforts in a number of areas including: continued, strong focus on disciplined underwriting and active medical cost management; significant reductions in operating expenses; and,

Aetna/2 marketing initiatives, which are generating new customers for Aetna and additional products sold to our existing customer base. We are therefore increasing our full year 2003 guidance and are in a position to provide an indication of how we see 2004 developing. For 2003, operating earnings per share, excluding prior period development, is now projected to be approximately $5.00 to $5.05 per share, which represents a doubling of operating EPS over 2002. Looking ahead to 2004, we are confident our positive momentum will continue and anticipate an increase in operating earnings per share of approximately 15% over the newly revised projected full year 2003 level excluding prior period development. Supporting the increase in earnings is anticipated membership growth of approximately 250,000 members in the first quarter and 400,000 to 650,000 members for the full-year 2004. Ron Williams will elaborate on several of these points today, and we will give additional guidance regarding 2004 on our fourth quarter call in February. Now let me highlight the business segment components of operating earnings in the third quarter: Our Health Care segment, which includes our medical and specialty operations, reported strong earnings of $179.3 million, a doubling of earnings from the third quarter of 2002 on a comparable basis; In Group Insurance, earnings were $33.4 million, a decline of approximately $5 million from the third quarter of 2002, due to an increase in expenses to support our expanded marketing efforts and lower investment income; and, In Large Case Pensions, which is primarily a closed book of business, earnings increased more than $7 million from last year s third quarter to $11 million mainly as a result of a higher level of investment partnership income in the continuing line of business. We have now produced seven consecutive quarters of solid financial performance on all key financial measures. We are moving beyond some of the issues that were unique to the turnaround and focusing our efforts on enhancing this valuable franchise by achieving sustainable, profitable growth. Regarding some of the details of our third quarter performance: First, consistent with our projection, medical membership was essentially unchanged from the second quarter 2003 level of approximately 13 million. In the quarter, we experienced a 42,000 net member increase in our risk membership while our administrative service contract or ASC membership declined by 67,000 members. Included in these numbers were reductions within existing accounts of approximately 70,000. Commercial Risk premium yield was approximately 13%, in line with our expectations; Our year-over-year reported medical cost trend was approximately 8%, also consistent with our projections. Our Commercial Risk Medical Cost Ratio was 78.2%, in line with our expectation and prior guidance; and, In the area of expense management, I am pleased to report that we are on track to achieve our 2003 expense reduction target of approximately $200 million.

Aetna/3 Our pre-tax operating margin was 8% in the quarter. Our balance sheet is in excellent shape with strong liquidity, and corporate leverage is well within our current target of 20%. I d like to spend some time on this call highlighting some of the issues that are critical to the continued success of Aetna and are important to investors. The main areas I would like to highlight and which will be detailed by Ron and Alan are: Growth; Pricing; and Expense Management. I will also comment on some recent Aetna and industry events. First, regarding growth, Aetna is delivering a unique value proposition designed to meet the specific needs of each of our customer markets. This value proposition is driving increased customer interest and acceptance as evidenced by our higher level of sales activity. We are nearly complete with the sales and renewal cycle effective January 1 st 2004 for National Accounts business, and I am very pleased to report that sales for 2004 business increased by more than 30% compared to the 2003 new business sales at the same point last year. These sales are accompanied by a reduced level of lapses. In addition, sales activity in the Middle Market has been robust and in Consumer Markets we are poised for selected market expansions and product introductions in 2004. These changes will lead to solid membership growth in 2004. Concerning pricing, we continue to adhere closely to our disciplined approach to underwriting and pricing, which has been a key factor in our success to date. We continue to believe that there is market discipline. Our focus on profitable growth incorporates a forward view of anticipated medical cost increases in our pricing decisions. Our pricing actions for new and renewing business, combined with our expense reduction efforts, are expected to produce a higher operating margin in 2004 compared to this year. Our ongoing expense management efforts are expected to not only produce additional improvements in expense levels in 2004, but will drive continuous improvement in our business, will enable us to achieve additional operating efficiencies beyond next year. I d like to make a few comments on recent Aetna events. In our Physician Class Action Settlement, which involves approximately 950,000 physicians, final approval was issued on October 24 th. We are very pleased with this confirmation of the settlement and we are continuing to implement the transparency and other commitments we ve undertaken. In August, Aetna reached an agreement with approximately 150,000 dentists on a settlement which focuses on improving efficiencies and increasing cooperation between Aetna and dentists. This settlement will require Court approval although a hearing date has not yet been set. Overall, we welcome the New Era of Cooperation that accompanies these settlements and believe that improved relations with physicians will be an important feature of our business strategies going forward. Regarding the recent industry merger activity, industry consolidation has been ongoing and the transactions were not surprising. As part of our strategic planning process over the course of the last 18 months, we understood that transactions such as these could occur and considered the impact on our business operations and strategy. Based on these detailed analyses, we do not feel the recent events materially alter the competitive landscape. Aetna is well positioned in our

Aetna/4 markets and our strategy is producing positive momentum with customers and solid financial results. Our strategy includes organic growth as well as other opportunities that will enhance our existing businesses. We have established guidelines for evaluating external opportunities. These include the following: they must be strategically consistent; there must be identifiable sources of value; they must meet or exceed our financial targets; and, there must be ease of integration. These guidelines are consistent with the discipline we have instilled in all facets of our business, and are supportive of profitable growth. We have made tremendous progress over the last two years in improving the operational effectiveness of the company. During this same time, we have also been laying the foundation for marketplace success through significant improvements to our sales and marketing capabilities, and to our product and service offerings. As a result of these efforts, Aetna is increasingly viewed as an industry leader in meeting customer needs, and we are well positioned to deliver solid growth for the company. I will hand the call over to Ron Williams to discuss our success in the marketplace. Ron..... Ronald A. Williams, President Thank you, Jack. As Jack mentioned, we are now moving beyond some of the issues that were unique to the company s turnaround and are focused on building a platform for sustainable, profitable growth. During the past two years we: defined and implemented our corporate strategy; executed on our business model, which includes a keen focus on underwriting discipline and medical cost management; laid a solid foundation for marketing success by defining our customer markets and developing products and services to meet their specific needs; and, converted our data into information and developed robust tools that support fact-based decision making. We are clearly transitioning from Back to Basics to a company focused on producing sustainable, profitable growth. We believe that much of our success to date, and a point of differentiation, has been our ability to effectively execute each dimension of our strategy. I d like to add to Jack s comments regarding growth and pricing. First, my thoughts on pricing. If you look at our successful turnaround, it is due to a great number of factors but none more important than our disciplined approach to underwriting and pricing of our products. This discipline has enabled Aetna to successfully turn the company from loss to profitability. As we price our 2004 business, we are factoring in a forward view of anticipated medical cost increases. Currently, our view of 2004 commercial medical cost trend is in the range of 9 10%,

Aetna/5 a range which is slightly favorable as compared to the current view reported by industry consultants and competitors. We project an expansion in operating margin in 2004 as a result of our pricing actions combined with planned reductions in general and administrative expenses. Our 2004 pricing actions reflect the discipline that Aetna has adhered to over the course of the last two years. We expect our mix of business to produce a Commercial Risk Medical Cost ratio in the range of 79 80% next year. Looking at our strategy to achieve profitable growth in 2004, growth will come from two sources: first, increases in membership resulting from new business activity; and, second, cross-selling of products, which means increased penetration of our existing book of business through sales of additional Aetna products. Now let me highlight some specific accomplishments to date in achieving profitable growth for 2004. As Jack indicated, we are projecting net medical membership growth of 400,000 to 650,000 members for full year 2004, due to our strengthened competitive position in all of our customer markets. As a result of our solid sales of new and renewing business with 1/1/04 effective dates, combined with lower lapse levels, we expect approximately 250,000 of the full year net medical membership growth to come in the first quarter, consisting mainly of ASC members. The balance of the full year growth, following the first quarter, will consist primarily of commercial risk members. These profitable growth results demonstrate our effectiveness within each of our three customer markets. We believe there are clear points of differentiation for customers in choosing Aetna within our National Accounts, our Middle Market and Consumer Markets. In National Accounts, which we define as employers with 3,000+ employees, we are pleased to report 123 customer sales for 1/1/04 effective dates, with 31 of these representing completely new customers for Aetna. The remaining 92 National Account sales come from increased penetration within existing customers. In addition, 25 of the 31 new customer account wins included the purchase of more than 1 Aetna product. Aetna has been progressively more effective in the marketplace. We have been winning against all of our major competitors and across many industry sectors. I would like to discuss how we are achieving this. While price is always important to customers, of increasing importance is our ability to: impact medical costs; offer product breadth; and integrate and report timely information for plan sponsor decision making. One value-added dimension of Aetna s product portfolio that specifically addresses the issue of rising medical costs is Aetna s integrated pharmacy benefit management capability or PBM. As you are aware, we retained our PBM and added a mail order delivery facility, as well as developed and implemented new drug utilization review programs. Our ability to control total health care spend, meaning medical and pharmacy, has been a key dimension of many new account wins. Our strong results to date reflect the repositioning of our PBM in the marketplace, which has resulted in 58 account sales this year for 2004 effective dates, representing a substantial increase in our pharmacy customers. Of the 31 new National Account customers, 19 include pharmacy.

Aetna/6 This is a notable achievement for our first year of offering the newly integrated model. There is a significant opportunity for further penetration of our membership base, both in National Accounts and Middle Market, as only one-third of our self-insured customers currently utilize our PBM. An additional point of differentiation for Aetna in the marketplace is our consumer-directed healthcare suite of products, the Aetna HealthFund. The Aetna Healthfund s extensive product options are further evidence of our leadership in this important category as well as in providing innovative solutions to managing healthcare costs. We are currently on the third generation of Aetna HealthFund, which now includes options for pharmacy, dental, and long-term care. We now have 40 Aetna HealthFund sales with 1/1/04 effective dates, bringing the total number of customer accounts to 135. These sales will result in a more than doubling of total Aetna HealthFund membership in 2004 to approximately 150,000 members. These sales include an important endorsement through inclusion in the Federal Employees Health Benefit Program. During the quarter, we also introduced our new, quality-based, cost efficient specialist network, named Aexcel. The Aexcel network has been introduced in three metropolitan areas and is the result of collaboration with a number of our larger employers. Some of the country s largest employers are enthusiastic about this approach. We have 9 confirmed sales, representing approximately 60,000 members, since the network s introduction in September. We intend to expand the network next year, incorporating ideas that we learn in the three initial markets. Our disease management programs have continued to be an important component of our success in medical cost management. This quarter, our chronic heart failure disease management program was recognized as The Best Disease Management Program in Managed Care from the Disease Management Association of America. This third party confirmation of our leadership in this critical area is important to Aetna and our customers as it validates our ability to improve quality of care and reduce costs. As further evidence of our commitment and confidence in the area of disease management, we are now offering performance guarantees that demonstrate the effectiveness of these programs to our customers. From the perspective of both Middle Market and Consumer Markets, a key differentiator in the sales process has been our successful efforts in making Aetna easier to do business with for both employers and brokers. Very specifically in Middle Market, which includes employers with 51-3000 employees, we have implemented a number of operational and administrative changes such as a single point of contact for brokers and plan sponsors, the launch of a new release of our E-Z Link billing and enrollment web-based self-service tool, and the implementation of a new, streamlined case installation process. These changes, combined with a strengthening of our career regional sales force, have been critical components in changing the view of Aetna among key brokers in this market. The breadth of Aetna s product offering across medical, dental, pharmacy, group life and disability is leading to increased penetration of existing accounts. For example, our success in cross-selling efforts with our Middle Market customers is showing momentum, with 25% of new sales combining either a group insurance or dental product with an Aetna medical product.

Aetna/7 Focusing on Consumer Markets, which includes Small Group employers of 1-50 employees, Retiree Markets, and selected Individual markets, we have continued to implement new plan designs and ratings structures to address very specific market needs around choice and affordability. In addition, we also implemented a new system to simplify rating and quoting, streamline case installation, and produce consolidated billing. Our initial implementation in Texas resulted in small group sales increasing five fold in the third quarter as compared to the first quarter of this year prior to implementation. A key dimension of our growth strategy for Small Group customers in 2004 is the identification and selection of specific geographic markets that offer attractive growth opportunities. These dynamics include the opportunity to leverage our existing network of physicians and hospitals, suitable demographics, and a favorable regulatory environment. In 2004, we have targeted 16 markets for further development. These markets represent a meaningful opportunity for growth since, historically, the majority of our small group enrollment has been concentrated in a limited number of states. Focusing on the Retiree Market, we have reaffirmed our commitment to the Medicare + Choice program via our filing to continue plan offerings in all of our existing markets and expanding into two new markets. Additional opportunity for growth will come from our plans for a first quarter 2004 roll-out of Medicare Supplement products, which will ultimately span 13 states. Product development and state filings for these new offerings are complete and we believe we are well positioned to further serve the needs of the growing retiree market. Within our dental suite of products, we recently launched a new dental discount program, Vital Savings. This new product offers employees and retirees, who do not have dental insurance, access to one of the nation s largest dental discount networks. Vital Savings provides access to a network of over 48,000 dental offices nationwide and targets the 40% of Americans who currently lack dental insurance. In conclusion, I am very pleased by the solid foundation of operational success that has been established and am encouraged by our progress towards achieving profitable growth in 2004. I want to thank my Aetna colleagues for their hard work and dedication that has helped to ensure our success. And now Alan will address some of the key financial metrics for the quarter. Alan Bennett, Chief Financial Officer Thank you, Ron. As Jack mentioned, operating earnings for the third quarter were $1.29 per share. Included in this result is approximately $3 million after tax or $.02 per share of favorable prior period development associated with our Medicare block of business. We also benefited from higher than run rate investment income in the continuing line of business of our Large Case Pension segment from increased partnership income of approximately $4.5 million after tax in the quarter. The small favorable development that we are reporting this quarter of $0.02 per share is associated with our Medicare book. We certainly do not consider this development as material but have provided this detail to give visibility as to our current view of run rates for medical costs, medical cost ratios, and operating earnings.

Aetna/8 At September 30, Healthcare Costs Payable was $1.9 billion, which was level with June 30. As expected, Healthcare Days Payable of 67.2 were slightly lower by.7 days from the second quarter due to a decrease in our reserves held for lapsed members. Despite the reduction in the third quarter, days payable remain higher than our normalized levels in the low sixties and should continue to decline in subsequent quarters. Anticipated future declines in Healthcare Days Payable will result from continued pay down of remaining claims on lapsed members and, more significantly, the payment or resolution of accruals related to certain state assessment pools. Operating Cash Flow before balance sheet changes in the third quarter was $265 million, compared to $297 million in the second quarter. After changes in the balance sheet, cash flow from operations improved significantly to $146 million in the third quarter compared to cash flow of $25 million in the second quarter. Cash flow in the third quarter was reduced by the voluntary $180 million pretax contribution to our pension plan and by $32 million for payments against prior year severance and facility charges and $20 million in medical claims payments on lapsed members. Our outlook for 2004 is for continued significant improvement in operating cash flow, which we would expect to be more in line with net income levels, despite additional planned funding of our pension plan. As always, this analysis of cash flow excludes changes to Large Case Pension reserves, as those liabilities are satisfied by related invested assets and, as such, do not impact our operating cash flow. We continue to have a strong balance sheet and excellent liquidity. At September 30, we had cash and marketable securities at the Parent company of $900 million compared to $760 million at June 30. In addition, we had capital in excess of target surplus at our regulated subsidiaries of approximately $880 million as of September 30. Target surplus refers to the level of capital the Company has determined is appropriate to hold, which is in excess of regulatory requirements. Currently, $330 million of this excess capital in subsidiaries is available for dividends to the Parent without prior regulatory approval. In the quarter, our share buyback activity totaled 2.8 million shares purchased for $162 million. Our year-to-date share buyback activity totals 6.1 million shares purchased for $351 million. Weighted average shares outstanding increased modestly in the quarter to 160.3 million. Our efforts to effect net year-over-year reductions in the Company s operating expenses, excluding other items, continue to be successful. In the third quarter, consolidated selling, general, and administrative expenses were $68 million lower than the third quarter of 2002. And on a year-to-date basis, we have now realized a $172 million decline as compared to the same period last year. We anticipate that expenses will be higher in the fourth quarter than the third quarter as a result of costs associated with the 1/1 enrollment process, but we remain on track to achieve our full year goal of $200 million net deflation in SG&A expenses. The higher level of fourth quarter projected expenses was expected and is reflected in our full year 2003 EPS guidance. This year s operating cost achievement brings our three year net deflation total to $700 million or nearly 15% of the operating expenses incurred in the year 2000. We are applying the same rigor and discipline to expense management that we have to other areas of our operations. For 2004, we expect to reduce total SG&A by approximately $50

Aetna/9 million. This result will be the combination of an increase in direct selling costs of approximately $100 million, due to increased sales, more than offset by a decline in G&A expenses of approximately $150 million. In order to assure that we realize these targets, I have created a dedicated, full time expense management team focused on assisting our P&L owners in identifying and effecting improvements throughout the organization. We have already identified specific opportunities in real estate and with technology to drive additional lower cost self-service capabilities, as well as by leveraging more efficiently our procurement spend. Since 2004 will be a year of membership growth triggering some incremental variable expense, we plan to provide more visibility in the expense area by detailing selling costs separately from our general and administrative expenses. Selling expenses will be comprised of broker commissions, the variable component of our internal sales force compensation, and premium taxes. We believe this enhanced disclosure will provide investors with more meaningful information to measure our progress in the expense area. Our earlier stated goal of $50 million net expense savings, when combined with 400,000 to 650,000 net new medical members in 2004, will drive our costs per member, per month down approximately $1. We believe there are additional opportunities to realize increased efficiencies in future years. In summary, I am very pleased with the overall financial results of the Company and our solid financial position. As I have indicated, we believe the Company has the ability to perform at an even higher level and the guidance for 2004 is an indication of this confidence. Thank you for listening and we would be happy to answer your questions. David David Entrekin Q&A Session Thank you, Alan. Jack, Ron and Alan are ready for your questions. We ask that you limit yourself to one question and one follow-up so that as many individuals as possible have an opportunity to ask their questions. Operator, the first question please. David Entrekin Closing A transcript of the prepared portion of this call will be posted shortly on the Investor Information section of the Aetna web site at Aetna.com. If you have any questions about matters discussed this morning, please feel free to call me or one of my colleagues in the Investor Relations office. Thank you again for joining us this morning. -- End of Prepared Remarks --

Aetna/10 ADDITIONAL INFORMATION; CAUTIONARY STATEMENT -- Certain information in this presentation is forward looking, including projections of 2003 and 2004 operating earnings. Forward-looking information is based on management's estimates, assumptions and projections, and is subject to significant uncertainties and other factors, many of which are beyond Aetna's control. Important risk factors could cause actual future results and other future events to differ materially from those currently estimated by management. Those risk factors include, but are not limited to: unanticipated increases in medical costs (including increased medical utilization, increased pharmacy costs, increases resulting from unfavorable changes in contracting or recontracting with providers, changes in membership mix to lower-premium or higher-cost products or membership-adverse selection; as well as changes in medical cost estimates due to the necessary extensive judgment that is used in the medical cost estimation process, the considerable variability inherent in such estimates, and the sensitivity of such estimates to changes in medical claims payment patterns and changes in medical cost trends); decreases in membership levels; increases in medical costs or Group Insurance claims resulting from any acts of terrorism; the ability to achieve targeted savings from work force reductions and to otherwise reduce administrative expenses in light of significant membership reductions recently experienced; the ability to maintain targeted levels of service, and improve relations with providers, as well as operating performance, while making significant staff reductions and taking actions to reduce medical costs; the ability to continue to successfully implement Aetna's new operating model; lower levels of investment income from continued lower interest rates; adverse government regulation (including legislative proposals to eliminate or reduce ERISA pre-emption of state laws that would increase potential litigation exposure, and other proposals, such as the Patients' Bill of Rights, that would increase potential litigation exposure or mandate coverage of certain health benefits); adverse pricing actions by government payors; changes in size, product mix and medical cost experience of membership in key markets; and the outcome, including any negotiated resolution, of various litigation and regulatory matters, including ongoing reviews of business practices by various regulatory agencies. For more discussion of important factors that may materially affect Aetna, please see the risk factors contained in Aetna's 2002 Annual Report on Form 10-K, on file with the Securities and Exchange Commission. You also should read Aetna s 2002 Annual Report on Form 10-K and Aetna's 2003 Third Quarter Report on Form 10-Q when filed with the Securities and Exchange Commission for a discussion of Aetna's historical results of operations and financial condition. ###