Cigna 2009 Annual Report Download - page 57

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Sustained or significant deterioration in economic conditions could significantly impact the Company’s customers.
The Company is exposed to risks associated with the potential financial instability of its customers, many of which could be adversely
affected by volatile conditions in the financial markets. Customers could experience cash flow problems and other financial
difficulties in times of a sustained or significant deterioration in the economy. As a result, they may modify, delay or cancel plans to
purchase the Company’s products, may make changes in the mix of products purchased that are unfavorable to the Company, or may
be forced to reduce their workforces. Specifically, higher unemployment rates as a result of a prolonged economic downturn has lead
and may continue to lead to lower enrollment in the Company’s employer group plans, lower enrollment in our non-employer
individual plans and a higher number of employees opting out of CIGNA’s employer group plans. The adverse economic conditions
could also cause employers to stop offering certain health care coverage as an employee benefit or elect to offer this coverage on a
voluntary, employee-funded basis as a means to reduce their operating costs. In addition, the economic downturn could negatively
impact the Company’s employer group renewal prospects and our ability to increase premiums and could result in cancellation of
products and services by customers. This could also result in increased unemployment and an increase in the number of claims
submitted. All of these developments could lead to a decrease in CIGNA’s membership levels and premium and fee revenues.
Further, if customers are not successful in generating sufficient revenue or are precluded from securing financing, they may not be
able to pay, or may delay payment of, accounts receivable that are owed to the Company.
A downgrade in the financial strength ratings of CIGNA’s insurance subsidiaries could adversely affect new sales and retention of
current business, and a downgrade in CIGNA's debt ratings would increase the cost of borrowed funds and affect ability to access
capital.
Financial strength, claims paying ability and debt ratings by recognized rating organizations are an important factor in establishing the
competitive position of insurance companies and health benefits companies. Ratings information by nationally recognized ratings
agencies is broadly disseminated and generally used throughout the industry. CIGNA believes the claims paying ability and financial
strength ratings of its principal insurance subsidiaries are an important factor in marketing its products to certain of CIGNA’s
customers. In addition, CIGNA Corporation’s debt ratings impact both the cost and availability of future borrowings, and
accordingly, its cost of capital. Each of the rating agencies reviews CIGNA’s ratings periodically and there can be no assurance that
current ratings will be maintained in the future. In addition, a downgrade of these ratings could make it more difficult to raise capital
and to support business growth at CIGNA’s insurance subsidiaries.
A description of CIGNA Corporation ratings, other subsidiary ratings, as well as more information on these ratings, is included in
“Ratings” in Section K beginning on page 32 of this Form 10-K.
Unfavorable claims experience related to workers’ compensation and personal accident insurance exposures in CIGNA’s Run-off
Reinsurance business could result in losses.
Unfavorable claims experience related to workers’ compensation and personal accident insurance exposures in CIGNA’s Run-off
Reinsurance business is possible and could result in future losses. Further, CIGNA could have losses attributable to its inability to
recover amounts from retrocessionaires or ceding companies either due to disputes with the retrocessionaires or ceding companies or
their financial condition. If CIGNA’s reserves for amounts recoverable from retrocessionaires or ceding companies, as well as
reserves associated with underlying reinsurance exposures are insufficient, it could result in losses.