Without an admission of wrongdoing, Aetna has agreed to pay $82.5 million to settle a class-action suit accusing the insurer of misleading investors about its financial status. The agreement is subject to court approval and includes all investors who bought Aetna stock from March 6, 1997 through Sept. 29, 1997.
The shareholder lawsuit accused Aetna of failing to disclose problems relating to its mid-1997 purchase of U.S. Healthcare that affected the company’s finances. On Sept. 29, 1997 Aetna said third-quarter earnings would fall short of forecasts. That shortfall, Aetna said, would require the company to take up to a $105 million charge due to higher than expected medical costs as well as problems integrating U.S. Healthcare.
Shareholders were caught off guard by the announcement due to Aetna earlier positive portrayal about the company’s financial position. Aetna’s stock fell from $106 on Sept. 18, 1997 to $81 on Sept. 29. Insurance will cover much of the settlement payout according to Aetna officials, but the company will still have to take a $5 million after-tax charge to settle in full.
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