Aetna 2013 Annual Report Download - page 51

Annual Report- Page 45
administrative service agreements and patient care programs that are attributable to members' drug utilization; and
registration or licensing of PBMs. Failure by us or one of our PBM services suppliers to comply with these laws or
regulations could result in material fines and/or sanctions and could have a material adverse effect on our operating
results.
Life and Disability Insurance
Our life and disability insurance operations are subject to extensive regulation. Changes in these regulations, such
as expanding the definition of disability or mandating changes to claim payment, determination and/or settlement
practices, could have a material adverse impact on our life insurance and/or disability insurance operations and/or
operating results. Since 2011, legislation has been enacted or introduced in a number of states requiring life
insurers to take additional steps to identify unreported deceased policy holders, and make other changes to their
claim payment and related escheat practices, including consultation of certain databases. Over 35 states are
investigating life insurers' claims payment and related escheat practices, and these investigations have resulted in
significant charges to earnings by other life insurers in connection with related settlement agreements. We have
received requests for information from a number of states, and certain of our subsidiaries are being audited, with
respect to our life insurance claim payment and related escheat practices. In the fourth quarter of 2013, we made
changes to our life insurance claim payment practices (including related escheatment practices) based on evolving
industry practices and regulatory expectations and interpretations, including expanding our existing use of the
Social Security Administration's Death Master File to identify additional potentially unclaimed death benefits and
locate applicable beneficiaries. As a result of these changes, in the fourth quarter of 2013, we increased our
estimated liability for unpaid life insurance claims with respect to insureds who passed away on or before
December 31, 2013, and recorded in current and future benefits a charge of $35.7 million ($55.0 million pretax).
Given the legal and regulatory uncertainty with respect to life insurance claim payment and related escheat
practices, it is reasonably possible that we may incur additional liability related to those practices, whether as a
result of further changes in our business practices, litigation, government actions or otherwise, which could
adversely affect our operating results and cash flows.
Consumer Protection Laws
Certain of our businesses participate in direct-to-consumer activities and are subject to emerging regulations
applicable to on-line communications and other general consumer protection laws and regulations.
International Regulation
We continue to expand our Health Care operations that are conducted in foreign countries, including through the
proposed acquisition of the Interglobal group. We currently have insurance licenses in several countries and do
business in over thirty countries. These international operations are subject to different, and sometimes more
stringent, legal and regulatory requirements, which vary widely by jurisdiction, including anti-corruption
laws; economic sanctions laws; various privacy, insurance, tax, tariff and trade laws and regulations; corporate
governance, privacy, data protection, data mining, data transfer, labor and employment, intellectual property,
consumer protection and investment laws and regulations; discriminatory licensing procedures; compulsory
cessions of reinsurance; required localization of records and funds; higher premium and income taxes; and
requirements for local participation in an insurer's ownership. In addition, the expansion of our operations into
foreign countries increases our exposure to the anti-bribery, anti-corruption and anti-money laundering provisions
of U.S. law, including the FCPA, and foreign laws, including the U.K. Bribery Act 2010 (the “UK Bribery Act”).
The FCPA prohibits offering, promising or authorizing others to give anything of value to a foreign government
official to obtain or retain business or otherwise secure a business advantage. We also are subject to applicable anti-
corruption laws of the jurisdictions in which we operate. In many countries outside the U.S., health care
professionals are employed by the government. Therefore, our dealings with them are subject to regulation under
the FCPA. Violations of the FCPA and other anti-corruptions laws may result in severe criminal and civil sanctions
as well as other penalties, and the SEC and the DOJ have increased their enforcement activities with respect to the
FCPA. The UK Bribery Act is an anti-corruption law that is broader in scope than the FCPA and applies to all
companies with a nexus to the United Kingdom. It is yet to be seen how the UK Bribery Act will be enforced, but
disclosures of FCPA violations may be shared with the UK authorities, thus potentially exposing companies to
liability and potential penalties in multiple jurisdictions. We have internal control policies and procedures and have