Aetna 2014 Annual Report Download - page 77

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Our international operations increase our exposure to, and require us to devote significant management resources to
implement controls and systems to comply with, the privacy laws of non-U.S. jurisdictions and the anti-bribery,
anti-corruption and anti-money laundering laws of the United States (including the FCPA) and the United Kingdom
(including the Bribery Act 2010) and similar laws in other jurisdictions. Implementing our compliance policies,
internal controls and other systems upon our expansion into new countries and geographies may require the
investment of considerable management time and management, financial and other resources over a number of
years before any significant revenues or profits are generated. Violations of these laws and regulations could result
in fines, criminal sanctions against us, our officers or employees, restrictions or outright prohibitions on the conduct
of our business, and significant reputational harm. We must regularly reassess the size, capability and location of
our global infrastructure and make appropriate changes, and must have effective change management processes and
internal controls in place to address changes in our business and operations. Our success depends, in part, on our
ability to anticipate these risks and manage these difficulties, and the failure to do so could have a material adverse
effect on our business, operating results, financial condition, reputation and/or long-term growth.
Our international operations require us to overcome logistical and other challenges based on differing languages,
cultures, legal and regulatory schemes and time zones. Our international operations encounter labor laws, customs
and employee relationships that can be difficult, less flexible than in our domestic operations and expensive to
modify or terminate. In some countries we are required to, or choose to, operate with local business partners, which
requires us to manage our partner relationships and may reduce our operational flexibility and ability to quickly
respond to business challenges.
In some countries we may be exposed to currency exchange controls or other restrictions that prevent us from
transferring funds internationally or converting local currencies into U.S. dollars or other currencies. Fluctuations in
foreign currency exchange rates may have an impact on our revenues, operating results and cash flows from our
international operations. Some of our operations are, and are increasingly likely to be, in emerging markets where
these risks are heightened. Any measures we may implement to reduce the effect of volatile currencies and other
risks on our international operations may not be effective.
Our exposure to all of the above risks is expected to increase as we seek to grow our foreign operations over the
next several years.
Financial Risks
We would be adversely affected if we do not effectively deploy our capital. Downgrades or potential downgrades
in our credit ratings, should they occur, could adversely affect our reputation, business, cash flows, financial
condition and operating results.
Our operations generate significant capital, and we have the ability to raise additional capital. The manner in which
we deploy our capital, including investments in our businesses, our operations (such as information technology and
other strategic and capital projects), dividends, acquisitions, share and/or debt repurchases, reinsurance or other
capital uses, impacts our financial strength, claims paying ability and credit ratings issued by recognized rating
organizations. Credit ratings issued by nationally-recognized organizations are broadly distributed and generally
used throughout our industry. Our ratings reflect each rating organization’s opinion of our financial strength,
operating performance and ability to meet our debt obligations or obligations to our insureds. We believe our credit
ratings and the financial strength and claims paying ability of our principal insurance and HMO subsidiaries are
important factors in marketing our products to certain of our customers. In addition, our credit ratings impact the
cost and availability of future borrowings, and accordingly our cost of capital.
Each of the ratings organizations reviews our ratings periodically, and there can be no assurance that our current
ratings will be maintained in the future. Among other things, our ratings may be affected by the assumption of debt
in connection with an acquisition. For example, one of the nationally-recognized rating agencies reduced its rating
of our long-term senior debt upon the closing of the Coventry acquisition. Downgrades or potential downgrades in