Aetna 2013 Annual Report Download - page 70

Annual Report- Page 64
Extreme events, or the threat of extreme events, could materially increase our health care (including behavioral
health), life insurance and disability costs and impact our business continuity. We cannot predict whether or
when any such events will occur.
Nuclear, biological or other attacks, whether as a result of war or terrorism, other man-made disasters, natural
disasters, epidemics, pandemics and other extreme events can affect the U.S. economy in general, our industry and
us specifically. In particular, such extreme events or the threat of such extreme events could result in significant
health care (including behavioral health), life insurance and disability costs, which would also be affected by the
government's actions and the responsiveness of public health agencies and other insurers. In addition, our life
insurance members and our employees and those of our vendors are concentrated in certain large, metropolitan
areas which may be particularly exposed to these events. Such events could adversely affect our business, cash
flows, and operating results, and, in the event of extreme circumstances, our financial condition or viability.
Our business could also be adversely affected if we do not maintain adequate procedures to ensure disaster recovery
and business continuity during and after such events. Other than obtaining insurance coverage for our facilities and
limited reinsurance of our Health Care and/or Group Insurance liabilities, there are few, if any, commercial options
through which to transfer the exposure from terrorism or other extreme events away from us.
Risks Related to Our Operations
Unless we are able to develop alternative sources of revenue and earnings and achieve transformational change
in our business model, our ability to profitably grow our business could be adversely affected.
We operate in a highly competitive environment and in an industry that is subject to significant ongoing changes
from marketplace pressures brought about by Health Care Reform, Insurance Exchanges, customer demands,
business consolidations, strategic alliances, new market entrants, legislative and regulatory changes and marketing
practices. As a result of Health Care Reform, the declining number of commercially insured people and other
factors, our ability to grow profitably through the sale of traditional Insured health care and related benefits
products in the U.S. may be limited. In order to profitably grow our business in the future, we need to diversify the
sources of our revenue and earnings and transform our business model, including through investments in consumer
engagement capabilities, technology and other services for health systems and provider organizations, including
ACOs and collaborative provider networks, optimizing our business platforms, HIT and international expansion.
Achieving these goals will require us to devote significant senior management and other resources to acquisitions or
other transactions and to develop new products, solutions and technology internally before any significant revenues
or earnings are generated from such initiatives. If we are not able to acquire and/or develop and launch new
products and solutions, including internationally, our ability to profitably grow our business could be adversely
affected.
We may not be able to effectively manage our general and administrative expenses to competitive levels, which
may reduce our membership or profitability, or we may need to implement expense reduction measures that
adversely affect our future growth potential.
Our operating results depend in part on our ability to manage our general and administrative expenses to
competitive levels while expanding our marketplace presence. Controlling general and administrative expenses is
particularly important in our Health Care businesses that are subject to regulatory changes that may restrict our
underwriting margins, such as minimum MLR requirements. We have significant fixed costs, and our ability to
reduce variable costs in the short term is limited. We attempt to manage general and administrative expenses by,
among other things, reducing the number of products we offer and controlling costs for salaries and related benefits,
information technology and other general and administrative costs. However, we may not be successful in
achieving the intended benefits of the cost-cutting initiatives we undertake. In addition, these cost saving measures
may adversely affect our ability to implement Health Care Reform and other regulatory requirements, attract and
retain key employees, maintain robust management practices and controls, implement improvements in technology
and achieve our strategic goals, including profitable membership growth. Further, integration costs related to the