Aetna 2013 Annual Report Download - page 73

Annual Report- Page 67
security and related cybersecurity risks, including the risk of undetected attacks, damage, loss or unauthorized
disclosure or access, increases, and the cost of attempting to protect against these risks also increases.
We face a wide range of risks, and our success depends on our ability to identify, prioritize and appropriately
manage our enterprise risk exposures.
As a large company operating in multiple complex industries and in a growing number of countries, we encounter a
variety of risks. The risks we face include, among other matters, the range of industry, competitive, regulatory,
financial, operational or external risks identified in this “Forward Looking Information/ Risk Factors” discussion.
We continue to devote resources to further develop and integrate our enterprise-wide risk management processes.
Failure to identify, prioritize and appropriately manage or mitigate these risks, including risk concentrations across
different industries, segments and geographies, can adversely affect our operating results, our ability to retain or
grow business, or, in the event of extreme circumstances, our financial condition or business operations.
We also face other risks that could adversely affect our business, operating results or financial condition, which
include:
• Health care benefits provider fraud that is not prevented or detected and impacts our medical cost trends or
those of our self-insured customers. In addition, in an uncertain economic environment, whether in the
United States or abroad, our businesses may see increased fraudulent claims volume, which may lead to
additional costs because of an increase in disputed claims and litigation;
• Assessments under guaranty fund laws for obligations of insolvent insurance companies (including Penn
Treaty Network America Insurance Company and one of its subsidiaries) to policyholders and claimants;
• Failure of our corporate governance policies or procedures, for example significant financial decisions
being made at an inappropriate level in our organization;
• Inappropriate application of accounting principles or a significant failure of internal control over financial
reporting, which could lead to a restatement of our financial results and/or a deterioration in the soundness
and accuracy of our reported financial results;
• Financial loss from inadequate insurance coverage due to self-insurance levels or unavailability of
insurance and reinsurance coverage for credit or other reasons; and
• Failure to protect our proprietary information.
Risks Related to Customer Perceptions of our Products and Services
In order to be competitive in the growing marketplace for direct-to-consumer sales and on public and private
health insurance exchanges, we will need to make investments in consumer engagement, reduce our cost
structure and face new competitors. If we are unsuccessful, our future growth and profitability may be adversely
impacted.
Historically, employers have been our most significant customers. Our direct-to-consumer sales have been limited,
and our individual Health Care business has been small relative to the other businesses in our Health Care segment.
We are now competing for sales on Insurance Exchanges, which are projected to increase as a percentage of our
Health Care business over time. To compete effectively on Insurance Exchanges, we will be required to develop or
acquire the tools necessary to interact with Insurance Exchanges and engage individual consumers using Insurance
Exchanges and social media, increase our focus on individual consumers and expand and improve our consumer-
focused sales and marketing channels, customer interfaces and product offerings.
We also will have to respond to pricing and other actions taken by existing competitors and potentially disruptive
new entrants. Due to the price transparency provided by Insurance Exchanges, in the market for individual health
insurance we face competitive pressures from existing and new competitors (including our vendors) who have
lower cost structures. Other competitors may have greater experience marketing to consumers and/or may be
targeting the higher margin portions of our business. These risks may be enhanced if employers shift to defined
contribution health care benefits plans and make greater utilization of Private Exchanges or encourage their
employees to purchase health insurance on the Public Exchanges. We can provide no assurance that we will be able