Aetna 2006 Annual Report Download - page 38

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manner, including through technology outsourcing, within the context of a limited budget of human resources and
capital. Certain of our technology systems (including software) are older, legacy systems that are less efficient and
require an ongoing commitment of significant capital and human resources to maintain. We also need to develop
new systems to meet current standards and keep pace with continuing changes in information processing
technology, evolving industry and regulatory standards, and customer demands. System development projects are
long-term in nature and may cost more than we expect to complete and may not deliver the benefits we project once
they are complete. If we do not effectively and efficiently manage and upgrade our technology portfolio, our
operating results may be adversely affected.
We face risks from industry and economic forces that can change the fundamentals of the health and related
benefits industry and adversely affect our business and operating results.
Various factors particular to the health and related benefits industry including, among others, the rapid evolution of
the business model, shifts in public policy, consumerism, pricing actions by competitors, competitor consolidation
and a shrinking number of commercially insured people may impact our business model. We also face the potential
of competition from existing or new companies that have not historically been in the health or group insurance
industries. For example, the GLBA gives banks and other financial institutions the ability to affiliate with
insurance companies, which may lead to new competitors with significant financial resources in the insurance and
health benefits fields. If we are unable to anticipate, detect and deploy meaningful responses to these external
factors, our business and operating results may be adversely affected.
Our ability to manage general and administrative expenses affects our profitability.
Our profitability depends in part on our ability to drive our general and administrative expenses to competitive
levels through controlling salaries and related benefits and information technology and other general and
administrative costs, while being able to attract and retain key employees, maintain robust management practices
and controls and implement improvements in technology.
We would be adversely affected if we do not effectively deploy our capital.
Our operations have generated significant capital in recent periods, and we have the ability to raise additional
capital. In deploying our capital to fund our investments in operations (including information technology projects),
share repurchases, potential acquisitions or other capital uses, we would be adversely affected if we do not
appropriately balance the risks and opportunities that are inherent in each method of deploying our capital.
We are subject to potential changes in public policy that can adversely affect the markets for our products
and our profitability.
It is not possible to predict with certainty or eliminate the impact of fundamental public policy changes that could
adversely affect us. Examples of these changes include policy changes that would fundamentally change the
dynamics of our industry, such as the federal or one or more state governments assuming a larger role in the health
care industry. Legislative proposals that would significantly reform the health care system are currently pending in
many states and have been advanced by a number of candidates running for president in 2008. Our operating
results could be adversely affected by such changes even if we correctly predict their occurrence.
Managing key executive succession is critical to our success.
We would be adversely affected if we fail to adequately plan for succession of our senior management and other
key executives. While we have succession plans in place and we have employment arrangements with certain key
executives, these do not guarantee that the services of these executives will continue to be available to us.
We would be adversely affected if we fail to adequately protect member health related and other sensitive
information.
We maintain large amounts of personal health and financial information and other sensitive data about our
members in the ordinary course of our business. Our business therefore depends substantially on our members’ and
customers’ willingness to entrust us with their health related and other sensitive information. Events that negatively
affect that trust, including failing to maintain appropriate safeguards to keep sensitive information secure, whether
as a result of our action or inaction or that of one of our vendors, could adversely affect our reputation and also
expose us to litigation and other proceedings, fines and/or penalties, any of which could adversely affect our
business, operating results or financial condition.