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Health Net Inc. Reports Operating Results (10-K)

February 27, 2012 | About:
10qk

10qk

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Health Net Inc. (HNT) filed Annual Report for the period ended 2011-12-31.

Health Net Inc has a market cap of $3.19 billion; its shares were traded at around $38.48 with a P/E ratio of 12.14 and P/S ratio of 0.27.

Highlight of Business Operations:

The federal government is the primary customer of our Government Contracts segment, with premiums and fees accounting for approximately 99% of our Government Contracts revenue and 12% of our total revenues in 2011. Premiums and fees from the federal government in connection with our TRICARE North Region contracts accounted for 78%, 91% and 92% of our Government Contracts revenue in 2011, 2010 and 2009, respectively, and 9%, 22% and 18% of total revenues in 2011, 2010 and 2009, respectively. In addition, the federal government and the state of California are significant customers of our Western Region Operations segment as a result of our contract with CMS for coverage of Medicare-eligible individuals, including PDPs, and our contracts with California state agencies for federally-subsidized Medicaid and CHIP programs. Medicare premiums accounted for 28%, 30% and 31% of our Western Region Operations segment revenues in 2011, 2010 and 2009, respectively, and 25%, 22% and 19% of our total revenues in 2011, 2010 and 2009, respectively. Medicaid premiums, including CHIP, accounted for 14%, 12% and 11% of our Western Region Operations segment revenues in 2011, 2010 and 2009, respectively, and 13%, 9% and 7% of our total revenues in 2011, 2010 and 2009, respectively. See Item 1A. Risk FactorsA significant reduction in revenues from the government programs in which we participate could have an adverse effect on our business, financial condition or results of operations.

On July 1, 2011, the United Administrative Services Agreements terminated following the completion of the membership transition. At that time we entered into Claims Servicing Agreements pursuant to which we adjudicate run out claims and provide limited other administrative services to United and its affiliates. The revenues and expenses associated with providing services under the United Administrative Services Agreements and the Claims Servicing Agreements were $34.5 million and $145.9 million for the year ended December 31, 2011, respectively, and the revenues and expenses associated with providing services under the United Administrative Services Agreements were $186.2 million and $279.4 million for the year ended December 31, 2010, respectively. These revenues and expenses are shown separately in the accompanying consolidated statements of operations.

The Northeast Operations had approximately $258.3 million and $2,651.5 million in total revenues in the years ended December 31, 2010 and 2009, respectively, which represent 2 percent and 17 percent of our total revenues for the years ended December 31, 2010 and 2009, respectively. The Northeast Operations had a pretax loss of $68.7 million for the year ended December 31, 2010 compared to a pretax loss of $165.6 million for the year ended December 31, 2009. Our operating results for the year ended December 31, 2010 were impacted by a $6.0 million goodwill impairment, reduced by a $42.0 million adjustment to loss on sale of our Northeast health plan subsidiaries. Our operating results for the year ended December 31, 2009 were impacted by a $105.9 million loss on the sale of our Northeast health plan subsidiaries.

The Northeast Operations had $71.2 million of health plan services premiums and $64.5 million of health plan services costs for the year ended December 31, 2010. The revenues and expenses associated with providing services under the United Administrative Services Agreements were $186.2 million and $279.4 million for the year ended December 31, 2010, respectively.

Net cash provided by investing activities increased by $422.8 million compared to the year ended December 31, 2010. This increase is primarily due to a $366.3 million increase in net sales and maturities of investments in available-for-sale securities and by an $86.0 million increase in cash received from United for additional consideration related to the Northeast Sale, partially offset by a $29.5 million increase in purchases of property and equipment.

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