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

August 08, 2012 | About:
Todd N Kenyon

10qk

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Health Net Inc. (HNT) filed Quarterly Report for the period ended 2012-06-30.

Health Net, Inc. has a market cap of $1.53 billion; its shares were traded at around $19.42 with a P/E ratio of 6.7 and P/S ratio of 0.1.

Highlight of Business Operations:

Our total revenues increased 7.1 percent for the three months ended June 30, 2012 to $2.8 billion from $2.7 billion for the same period in 2011 and decreased 5.7 percent for the six months ended June 30, 2012 to $5.7 billion from $6.0 billion in the same period in 2011. The increase for the three months ended June 30, 2012 was primarily due to an increase in health plan services premiums. The decrease for the six months ended June 30, 2012 was primarily driven by the decline in our Government Contracts revenue due to the impact of the change to the T-3 contract as described below.

Our Government Contracts revenues increased by 3.1 percent for the three months ended June 30, 2012 to $176.2 million from $171.0 million in the same period in 2011, and decreased by 65.8 percent for the six months ended June 30, 2012 to $357.6 million from $1,046.1 million in the same period in 2011. Our Government Contracts costs increased by 17.3 percent for the three months ended June 30, 2012 to $153.4 million from $130.8 million in the same period in 2011, and decreased by 66.9 percent for the six months ended June 30, 2012 to $315.7 million from $953.0 million in the same period in 2011. The declines in our Government Contracts revenues and costs for the six months ended June 30, 2012 were primarily due to the change from our prior contract for the TRICARE North Region, which was a risk-based contract, to the new T-3 contract, which is a cost reimbursement plus fixed fee contract. As a result of this change, health care costs and related reimbursements that were included in our consolidated statements of operations under the prior contract were subsequently excluded under the T-3 contract. For additional information on our T-3 contract, see “—Government Contracts Reportable Segment” and Note 2 to our consolidated financial statements.

Health plan services premium revenues increased by 7.2 percent to $2.6 billion for the three months ended June 30, 2012, compared with $2.4 billion for the same period in 2011, and by 7.1 percent to $5.2 billion for the six months ended June 30, 2012, compared with $4.9 billion for the same period in 2011. Health plan services expenses increased by 11.1 percent from $2.1 billion for the three months ended June 30, 2011 to $2.4 billion for the three months ended June 30, 2012, and increased by 10.9 percent from $4.2 billion for the six months ended June 30, 2011 to $4.7 billion for the six months ended June 30, 2012. Investment income decreased to $24.7 million and $47.0 million for the three and six months ended June 30, 2012, respectively, compared with $25.1 million and $48.9 million for the three and six months ended June 30, 2011, respectively.

Government Contracts revenues increased by $5.2 million, or 3.1 percent, for the three months ended June 30, 2012 and decreased by $688.5 million, or 65.8 percent, for the six months ended June 30, 2012 as compared to the same periods in 2011. Government Contracts costs increased by $21.9 million or 16.7 percent for the three months ended June 30, 2012 and decreased by $636.1 million, or 67.1 percent for the six months ended June 30, 2012 as compared to the same periods in 2011. Increases in revenues for the three months ended June 30, 2012, were primarily due to adjustments and phase-out revenue in 2011 related to our previous TRICARE contract in the North Region and award fee revenue on the T-3 contract offset by a reduction in price on our family counseling business. Increases in costs for the three months ended June 30, 2012, were primarily due to adjustments in 2011 related to our previous TRICARE contract in the North Region. Declines in Government Contracts revenues and costs for the six months ended June 30, 2012 were primarily due to the impact of replacing our previous TRICARE contract in the North Region with the new T-3 contract. This change replaced a risk-based contract with a cost reimbursement plus fixed fee contract, as a result of which, health care costs and related reimbursements that were included in our consolidated statements of operations under the prior contract were subsequently excluded under the T-3 contract.

Net cash provided by investing activities increased by $178.4 million during the six months ended June 30, 2012 as compared to the same period in 2011. This increase is primarily due to $248.2 million received for the sale of our Medicare PDP business, partially offset by a $31.3 million decrease in net sales and maturities of available-for-sale securities and $41.0 million received from United for additional consideration related to the Northeast Sale during the first six months of 2011.

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