Cigna 2012 Annual Report Download - page 84

PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
risks associated with the Company’s information technology pharmacy costs and mortality experience to rise significantly, and
strategy, including that the failure to make effective investments cause operational disruption, depending on the severity of the
or execute improvements may impede the Company’s ability to event and number of individuals affected.
deliver services efficiently; This list of important factors is not intended to be exhaustive. Other
the failure to maintain effective prevention, detection and sections of the Form 10-K, including the ‘‘Risk Factors’’ section, and
control systems for regulatory compliance and detection of fraud other documents filed with the Securities and Exchange Commission
and abuse; include both expanded discussion of these factors and additional risk
factors and uncertainties that could preclude the Company from
risks associated with the Company’s mail order pharmacy realizing the forward-looking statements. The Company does not
business that, among other things, includes any potential assume any obligation to update any forward-looking statements,
operational deficiencies or service issues as well as loss or whether as a result of new information, future events or otherwise,
suspension of state pharmacy licenses; except as required by law.
liability associated with the Company’s operations of onsite
clinics and medical facilities, including the health care centers
Management’s Annual Report on Internal
operated by the HealthSpring business;
Control over Financial Reporting
heightened competition, particularly price competition, that
Management of Cigna Corporation is responsible for establishing and
could reduce product margins and constrain growth in the
maintaining adequate internal controls over financial reporting. The
Company’s businesses, primarily the Global Health Care
Company’s internal controls were designed to provide reasonable
business;
assurance to the Company’s management and Board of Directors that
significant stock market declines, that could, among other the Company’s consolidated published financial statements for
things, impact the Company’s pension plans in future periods as external purposes were prepared in accordance with generally accepted
well as the recognition of additional pension obligations; accounting principles. The Company’s internal control over financial
reporting include those policies and procedures that:
significant changes in market interest rates or sustained
deterioration in the commercial real estate markets that could pertain to the maintenance of records that, in reasonable detail,
reduce the value of the Company’s investment assets; accurately and fairly reflect the transactions and dispositions of
the assets and liabilities of the Company;
downgrades in the financial strength ratings of the Company’s
insurance subsidiaries, that could, among other things, adversely provide reasonable assurance that transactions are recorded as
affect new sales and retention of current business or limit the necessary to permit preparation of financial statements in
subsidiaries’ ability to dividend capital to the parent company, accordance with generally accepted accounting principles, and
resulting in changes in statutory reserve or capital requirements that receipts and expenditures of the Company are being made
or other financial constraints; only in accordance with authorization of management and
directors of the Company; and
significant deterioration in global market economic conditions
and market volatility, that could have an adverse effect on the provide reasonable assurance regarding prevention or timely
Company’s investments, liquidity and access to capital markets; detection of unauthorized acquisitions, use or disposition of the
Company’s assets that could have a material effect on the
unfavorable developments in economic conditions, that could, financial statements.
among other things, have an adverse effect on the impact on the
businesses of our customers (including the amount and type of Because of its inherent limitations, internal control over financial
health care services provided to their workforce, loss in workforce reporting may not prevent or detect misstatements.
and ability to pay their obligations), the businesses of hospitals
Management assessed the effectiveness of the Company’s internal
and other providers (including increased medical costs) or state
controls over financial reporting as of December 31, 2012. In making
and federal budgets for programs, such as Medicare or social
this assessment, Management used the criteria set forth by the
security, resulting in a negative impact to the Company’s
Committee of Sponsoring Organizations of the Treadway
revenues or results of operations;
Commission (‘‘COSO’’) in Internal Control-Integrated Framework.
risks associated with the Company’s reinsurance arrangements Based on management’s assessment and the criteria set forth by
for the run-off retirement benefits business, individual life COSO, it was determined that the Company’s internal controls over
insurance and annuity business, variable annuity death benefits financial reporting are effective as of December 31, 2012.
and guaranteed minimum income benefits businesses, including
Our evaluation of the effectiveness of internal control over financial
but not limited to, failure by reinsurers to meet their reinsurance
reporting as of December 31, 2012 did not include an evaluation of
obligations or that the reinsurance arrangements do not
the internal control over financial reporting of the Great American
otherwise provide adequate protection; or
Supplemental Benefits Group. We excluded the Great American
potential public health epidemics, pandemics, natural disasters Supplemental Benefits Group from our assessment of internal control
and bio-terrorist activity, that could, among other things, cause over financial reporting as of December 31, 2012 because it was
the Company’s covered medical and disability expenses,
62 CIGNA CORPORATION - 2012 Form 10-K
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