Aetna Inc., the nation's largest health insurer, posted a fourth-quarter loss Thursday that was worse than Wall Street's expectations, but it said a year-long restructuring has positioned the company to return to profitability in 2002.

Aetna's stock, which initially fell after the numbers were reported, turned around to trade more than 5 percent higher by early Thursday afternoon.

"The company stuck to their guidance that they would be profitable in 2002, although they wouldn't say by how much," said UBS Warburg analyst William McKeever, who called Aetna's fourth-quarter results "disappointing."

Aetna also said it would record a $3 billion noncash charge in the first quarter, due largely to the write-down of the value of past acquisitions.

Management said it would provide more specific earnings targets for 2002 at the end of the first quarter.

Aetna reported an operating loss, excluding one-time items, of $84.6 million, or 59 cents a share, in the quarter, compared with a profit of $28.7 million, or 20 cents a share, a year ago.

Analysts on average had expected Aetna to lose 42 cents a share, with loss estimates ranging from 28 cents to 56 cents a share, according to Thomson Financial/First Call.

Aetna shares rose $1.78, or 5.6 percent, on the New York Stock Exchange to $33.66, after an initial dip to $30.35. The stock is up from a September low of $25.15 but off a January peak of $36.25.

The 148-year-old insurance company took a fourth-quarter after-tax charge of $125 million for severance and office closings stemming from job cuts announced in December.

Including items, Hartford, Connecticut-based Aetna posted a net loss of $187.6 million, or $1.30 per share.

"It was a pretty weak quarter, which I think was probably expected," said Joshua Raskin, an analyst at Lehman Brothers, who said investors' focus is on 2002 and how well Aetna emerges from a difficult year in which the company recorded a string of quarterly losses.

Aetna grew to become the largest U.S. managed care provider after an acquisition spree in the late 1990s that saddled it with a number of unprofitable operations. Now, while many of its largest rivals are expanding by enrolling new members, Aetna is concentrating on slimming down.

The company has sliced health plan membership and raised premiums to catch up with medical cost inflation under a new management team led by Chairman and Chief Executive John Rowe.

"We believe this focus on profitability over growth has been successful," Rowe said in a statement. "We have a smaller book of business with a more favorable economic outlook. We now enter 2002 positioned for profitability."

Rowe said Aetna is building up its "fee-based" business of companies that assume the risk of paying their own employees' medical bills while dropping unprofitable commercial health-insurance accounts and government-sponsored plans such as Medicare.

"We've got the right membership, the right size, the right composition, and I think that is what the market is responding to," he told Reuters in an interview.

Aetna's fourth-quarter commercial HMO medical cost ratio, the percentage of premiums paid out in insurance claims, was 89.7 percent, above the 87.2 percent ratio of a year ago but down from 90.1 percent in the third quarter.

Analysts saw the ratio's decline from the previous quarter as a step in the right direction.

"We did not expect the medical loss ratio to improve. It did. That means pricing is holding a little better than what we had thought," said Prudential Securities analyst David Shove.

Health plan membership totaled 17.2 million members at the end of 2001, down 2.2 million from the end of 2000.

The company said it shed another 1.6 million members in January, bringing enrollment in its health plans to 15.6 million. It projected membership would continue to drop, finishing 2002 in the range of 14.5 million to 15 million.