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Updated from 1:44 p.m. EST

The chief executive of



resigned Friday in the wake of a sharp decline in the insurance company's stock price.

Aetna's board replaced Richard Huber, who resigned, with William Donaldson, a board member of the Hartford-based company since 1977. Donaldson will also replace Huber as chairman and president.

Donaldson is a co-founder of investment bank Donaldson, Lufkin & Jenrette. He is also a former chairman and chief executive of the New York Stock Exchange and U.S. undersecretary of state.

"We have under way an urgent review of the company's strategy and operations and will initiate a program designed to realize our full potential for present and future shareholders," Donaldson said in a statement.

After the news was announced, Aetna rose as high as 43 Friday before closing up 9/16, or 1%, at 41 1/8. Earlier, it was halted at 39 7/8. The stock had been down 28% since the company posted disappointing earnings in early February.

Huber, who joined Aetna five years ago, stepped down as chairman following widespread investor dissatisfaction with his performance.

"It's a start," said John Rex, an analyst at

Bear Stearns

. He added that Huber's persona in the press "has been a bit hard or edgy, and that's been a little bit of a problem." Rex rates Aetna an attractive and his firm has done no underwriting for the company.

"Now the job ahead is how to extract value. This is a very large and complex business," Rex said. "It has tremendous value buried within it, and it trades at a 30% discount to its peers."

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Aetna can try to extract value by selling or spinning off parts of the company.

The Wall Street Journal

reported Friday that Aetna would consider spinning off part of the company -- likely its


consumer-oriented Web site -- into a publicly traded entity. Aetna did not release any information about this matter, and a call to the company for comment was not immediately returned.

But Rex suggested that the company's Web site has a very large business-to-business component that could be packaged as a spin-off and marketed outside Aetna, along with InteliHealth. That component is an internal operation that is primarily a back-office function for such services as claims submission and payment. "In this market, it's B2B or nothing," he said.

Rex also said some of Aetna's international assets could be spun off. Aetna International's 17% increase in operating earnings for the fourth quarter, minus costs for precautions against possible year 2000 disruptions, were bolstered by a one-time $33 million capital gain.

Without that gain, operating earnings would have declined significantly because of losses in Brazil, the lack of earnings from the Canadian operation divested in October and the impact of the earthquake in Taiwan. "The Latin American health care operation is more problematic on an ongoing basis," Rex said.

Though Aetna handily beat its earnings expectations for the fourth quarter, Wall Street's estimates had been sharply lowered as a result of the impact of the review by the

Securities and Exchange Commission

into its accounting practices. The company's earnings were also buoyed by a lower tax rate and a one-time capital gain.

But there are concerns over the company's core medical cost ratios. Excluding Aetna's

Prudential HealthCare

unit, acquired last year, the commercial medical loss ratio rose to 83.1% from 82.6% a year earlier and the


medical loss ratio surged to 95.3% from 90.9%.