Aetna 2009 Annual Report Download - page 42

Annual Report – Page 36
Our strategic projects include, among other things, addressing rising health care costs, achieving profitable membership
growth, further improving the efficiency of our operations, managing certain significant technology projects, further
improving relations with health care providers, negotiating contract changes with customers and providers, and
implementing other business process improvements. The future performance of our businesses will depend in large
part on our ability to design and implement these initiatives, some of which will occur over several years. If these
initiatives result in increased health care costs or do not achieve their objectives, our operating results could be
adversely affected.
We have completed a number of acquisitions over the last several years, and we expect to continue to pursue
acquisitions as part of our growth strategy. In addition to integration risks, some additional risks we face with respect
to acquisitions include:
 The acquired business may not perform as projected;
 We may assume liabilities that we do not anticipate, including those that were not disclosed to us;
 Acquisitions could disrupt our ongoing business, distract management, divert resources and make it difficult to
maintain our current business standards, controls and procedures;
 We may finance future acquisitions by issuing common stock for some or all of the purchase price, which could
dilute the ownership interests of our shareholders;
 We may incur additional debt related to future acquisitions; and
 We frequently compete with other firms, some of which may have greater financial and other resources and a
greater tolerance for risk, to acquire attractive companies.
Managing CEO succession and retention of key executive talent is critical to our success given the current
environment.
We would be adversely affected if we fail to adequately plan for succession of our CEO and senior management and
retention of key executives particularly given the current environment. 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 operate in a highly competitive environment; loss of membership or failure to achieve profitable
membership growth and diversify the geographic concentrations in our core Insured membership (including
strategies to increase membership for targeted product types and customers, such as commercial or public
sector business) could materially adversely affect our profitability.
Competitive factors (including our customers’ flexibility in moving between us and our competitors), the current
economic environment and ongoing changes in the health benefits industry (including merger and acquisition activity
in the industry) create pressure to contain premium price increases despite being faced with increasing health care
costs. Our customer contracts are subject to negotiation as customers seek to contain their benefit costs, particularly in
a slow economy. Customers may elect to self-insure or to reduce benefits in order to limit increases in their benefit
costs. Such elections may result in reduced membership in our more profitable Insured products and/or lower
premiums for our Insured products, although such elections also may reduce our health care costs. Alternatively, our
customers may purchase different types of products from us that are less profitable, or move to a competitor to obtain
more favorable pricing. Our membership is also concentrated in certain geographic areas, and increased competition in
those geographic areas could therefore have a disproportionate adverse effect on our operating results. Among other
factors, we compete on the basis of overall cost, plan design, customer service, quality and sufficiency of medical
provider networks and quality of medical management programs. In addition to competitive pressures affecting our
ability to obtain new customers or retain existing customers, our membership can be affected by reductions in
workforce by existing customers due to soft general economic conditions, especially in the geographies where our
membership is concentrated. Failure to profitably grow and diversify our membership geographically or by product
type may adversely affect our revenue and operating results.
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,
implement improvements in technology and achieve our strategic goals.