Cigna 2010 Annual Report Download - page 48

CIGNA CORPORATION  2010 Form 10K
28
PARTI
ITEM 1A Risk Factors
competitive position of insurance companies and health benefi ts
companies. Ratings information by nationally recognized ratings
agencies is broadly disseminated and generally used throughout the
industry. CIGNA believes the claims paying ability and fi nancial
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
diffi cult to raise capital and to support business growth at CIGNA’s
insurance subsidiaries.
Insurance ratings represent the opinions of the rating agencies on the
fi nancial strength of a company and its capacity to meet the obligations
of insurance policies.  e principal agencies that rate CIGNA’s insurance
subsidiaries characterize their insurance rating scales as follows:
•A.M. Best Company, Inc. (“A.M. Best”), A++ to S (“Superior” to
“Suspended”);
•Moody’s Investors Service (“Moody’s”), Aaa to C (“Exceptional” to
“Lowest”);
•Standard & Poor’s Corp. (“S&P”), AAA to R (“Extremely Strong”
to “Regulatory Action”); and
•Fitch, Inc. (“Fitch”), AAA to D (“Exceptionally Strong” to “Order
of Liquidation”).
As of February 25, 2011, the insurance fi nancial strength ratings for
CIGNA subsidiaries, CGLIC and Life Insurance Company of North
America (“LINA”) were as follows:
CGLIC
Insurance Ratings
(1)
LINA
Insurance Ratings
(1)
A.M. Best A (“Excellent”, 3rd of 16) A (“Excellent”, 3rd of 16)
Moody’s A2 (“Good”, 6th of 21) A2
(“Good”, 6th of 21)
S&P A (“Strong”, 6th of 21) (Not Rated)
Fitch A (“Strong”, 6th of 24) A
(“Strong”, 6th of 24)
(1) Includes the rating assigned, the agency’s characterization of the rating and the position of the rating in the agency’s rating scale (e.g., CGLIC’s rating by A.M. Best is the 3rd highest
rating awarded in its scale of 16).
Global market, economic and geopolitical conditions
may cause fl uctuations in equity market prices, interest
rates and credit spreads which could impact the
Company’s ability to raise or deploy capital as well as
aff ect the Company’s overall liquidity.
If the capital markets and credit market experience extreme volatility
and disruption, there could be downward pressure on stock prices
and credit capacity for certain issuers without regard to those issuers’
underlying fi nancial strength. Extreme disruption in the credit
markets could adversely impact the Company’s availability and cost
of credit in the future. In addition, unpredictable or unstable market
conditions could result in reduced opportunities to fi nd suitable
opportunities to raise capital.
Operational and Other Risks
CIGNA’s business depends on the uninterrupted
operation of its systems and business functions, including
information technology and other business systems.
CIGNA’s business is highly dependent upon its ability to perform, in
an effi cient and uninterrupted fashion, its necessary business functions,
such as: claims processing and payment; internet support and customer
call centers; and the processing of new and renewal business. A power
outage, pandemic, or failure of one or more of information technology,
telecommunications or other systems could cause slower system
response times resulting in claims not being processed as quickly as
clients desire, decreased levels of client service and client satisfaction,
and harm to CIGNA’s reputation. In addition, because CIGNA’s
information technology and telecommunications systems interface with
and depend on third-party systems, CIGNA could experience service
denials if demand for such service exceeds capacity or a third-party
system fails or experiences an interruption. If sustained or repeated, such
a business interruption, systems failure or service denial could result in
a deterioration of CIGNA’s ability to pay claims in a timely manner,
provide customer service, write and process new and renewal business,
or perform other necessary corporate functions.  is could result in a
materially adverse eff ect on CIGNA’s business results and liquidity.
A security breach of CIGNA’s computer systems could also interrupt or
damage CIGNA’s operations or harm CIGNA’s reputation. In addition,
CIGNA could be subject to liability if sensitive customer information is
misappropriated from CIGNA’s computer systems.  ese systems may be
vulnerable to physical break-ins, computer viruses, programming errors,
attacks by third parties or similar disruptive problems. Any publicized
compromise of security could result in a loss of customers or a reduction
in the growth of customers, increased operating expenses, fi nancial losses,
additional litigation or other claims, which could have a material adverse
eff ect on CIGNA’s business.
CIGNA is focused on further developing its business continuity
program to address the continuation of core business operations.
While CIGNA continues to test and assess its business continuity
program to satisfy the needs of CIGNA’s core business operations
and addresses multiple business interruption events, there is no
assurance that core business operations could be performed upon the
occurrence of such an event.