Aetna 2011 Annual Report Download - page 51

Annual Report- Page 45
historically been in the health or group insurance industries, such as health information technology (“HIT”)
companies. If we are unable to anticipate or detect these and other relevant external factors and deploy meaningful
responses to all relevant external factors, our business and operating results may be adversely affected.
Adverse economic conditions in the U.S. and abroad can significantly and adversely affect our businesses and
profitability, and we do not expect these conditions to improve in the near future.
The current volatile U.S. and global economic environment has resulted in significantly diminished expectations of,
and higher uncertainty with respect to, the prospects for the U.S. and global economies going forward. Our
customers, medical providers and the other companies with which we do business are generally headquartered in
the U.S.; however, many of our largest customers are global companies with operations around the world. As a
result, adverse economic conditions in the U.S. and abroad have adversely affected and can in the future
significantly and adversely affect, our businesses and profitability by:
• Leading to reductions in workforce by our customers, which would reduce both the number of members we
serve and our revenues.
• Leading our customers and potential customers, particularly those with the most members, and state and
local governments, to force us to compete more vigorously on factors such as price and service, including
service and other performance guarantees, to retain or obtain their business.
• Leading our customers and potential customers to purchase less profitable mixes of products from us (i.e.,
purchase products that generate less profit for us (such as our administrative services products) than the
ones they currently purchase or otherwise would have purchased) or purchase fewer products from us.
• Leading our customers and potential customers, particularly smaller employers and individuals, to elect not
to obtain or renew their health and other coverage with us.
• Adversely affecting state and federal budgets, resulting in reduced reimbursements or payments to us in
Medicare, Medicaid, SCHIP and/or other federal and state government health care coverage programs.
• Causing unanticipated increases and volatility in utilization of medical services by our members and/or
increases in medical unit costs, each of which would increase our health care and other benefit costs and
limit our ability to accurately detect, forecast, manage and reserve for our members' utilization of medical
services and our self-insured customers' medical cost trends and/or changes in those trends and/or future
health care and other benefit costs.
• Increasing our medical unit costs as hospitals and other providers attempt to maintain revenue levels in their
efforts to adjust to their own economic challenges.
• Contributing to inflation that could cause interest rates to increase and thereby increase our interest expense
and adversely affect that component of our operating results.
• Weakening the ability or perceived ability of the issuers and/or guarantors of the debt or other securities we
hold in our investment portfolio to perform on their obligations to us, which could result in defaults in those
securities or reduce the value of those securities and create realized capital losses for us that reduce our
operating results.
• Weakening the ability of our customers, medical providers and the other companies with which we do
business to perform their obligations to us or causing them not to perform those obligations, either of which
could reduce our operating results.
• Causing governments to impose new or higher taxes or assessments on us in response to budgetary
pressures.
Furthermore, reductions in workforce by our customers in excess of, or at a faster rate than, those we project could
reduce both our membership and revenue below our projected levels and cause unanticipated increases in our health
care and other benefit costs. There can be no assurance that our health care and other benefit costs, business and
profitability will not be adversely affected by these economy-related conditions or other factors.
Our continued business success is dependent on our ability to diversify our sources of revenue and earnings.
As a result of Health Care Reform, the declining number of commercially insured people and other factors, our
ability to grow profitably through the sale of traditional Insured health care and related benefits products in the U.S.
may be limited. In order to profitably grow our business in the future, we are diversifying the sources of our
revenue and earnings through investments in HIT, international expansion and a transformational change to our