Attached files
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| 8-K - FORM 8-K - HEALTH NET INC | d8k.htm |
 Health Net,
Inc. Health Net, Inc. (NYSE: HNT) (NYSE: HNT) November 2009 Investor Presentation Exhibit 99.1 |
 2 Cautionary Statement Cautionary Statement All statements in this presentation, other than statements of historical information provided
herein, may be deemed to be forward-looking statements and as such are subject to a
number of risks and uncertainties. These statements are based on management’s
analysis, judgment, belief and expectation only as of the date hereof, and are subject
to uncertainty and changes in circumstances. Without limiting the foregoing, statements
including the words “believes,” “anticipates,” “plans,” “expects,” “may,” “should,” “could,” “estimate,” “intend” and other similar expressions are intended to identify forward-looking statements. Actual results could differ materially due to,
among other things, any failure to close the pending sale of our Northeast business;
costs, fees and expenses related to the pending sale and proposed post-closing
administrative services; potential termination of our TRICARE North operations; rising health care costs; a continued decline in the economy; negative prior period claims reserve developments;
investment portfolio impairment charges; volatility in the financial markets; trends in
medical care ratios; unexpected utilization patterns or unexpectedly severe or
widespread illnesses; membership declines; rate cuts affecting our Medicare or Medicaid
businesses; litigation costs; regulatory issues; operational issues; health care reform; and general business and market conditions. Additional factors that could cause actual results to differ materially from
those reflected in the forward-looking statements include, but are not limited to,
the risks discussed in the “Risk Factors” section included within the company's most recent Annual Report on Form 10-K, subsequent quarterly reports on Form 10-Q, and the risks discussed in the company’s other filings with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these forward-looking
statements. The company undertakes no obligation to publicly revise any of its
forward-looking statements to reflect events or circumstances that arise after the
date of this presentation. |
 3 Non-GAAP Measures Non-GAAP Measures • This presentation includes quarterly income statement measurements that are not calculated and presented in accordance with Generally Accepted Accounting Principles. Audience participants should refer to the reconciliation table available in the company’s third quarter 2009 earnings press release, available on the company’s Web site at www.healthnet.com, which reconciles certain non-GAAP financial information to GAAP financial information. • Management believes that the non-GAAP financial information discussed in this presentation is useful as it provides the audience a basis to better understand the company’s results by excluding items that are not indicative of our core operating results for the periods presented. |
 4 2009 Focus 2009 Focus • Meet expectations • Resolve Northeast issues • Build commercial differentiation • Improve Medicare • Solidify balance sheet • Complete TRICARE process • Position for the future |
 5 2009 Expectations 2009 Expectations As of Sept. 30, 2009 Metric 2009 Guidance Year-end Membership Commercial Risk: -6% to -7% Medicaid: +10% to +12% Medicare Advantage: -1% to -2% PDP: -13% to -15% Consolidated Revenues $15.5 billion to $16.0 billion Commercial Yields ~8.0% Commercial Health Care Cost Trends ~8.0% Selling Cost Ratio Government Contracts Ratio G&A Expense Ratio (a) ~2.9% ~95.0% to 95.5% ~9.6% to 9.8% Tax Rate (a) 38.3% to 38.5% Weighted-average Fully Diluted Shares Outstanding 104 million to 105 million GAAP EPS (b) Non-GAAP EPS (a) $0.51 to $0.56 $2.25 to $2.30 (a) Excludes the impact of expected operations strategy-related charges of $100 million to $110
million in 2009. (b) The company is currently evaluating the impact of the potential sale of the Northeast business on
its 2009 financial results, including potential loss on sale of the Northeast business,
tax benefits, severance costs, other transaction-related costs and operating costs that will be incurred during the transition period following the close of the transaction. |
 6 Northeast Transaction Northeast Transaction • Announced sale of Northeast subsidiaries on July 20, 2009 • Expected to close by year-end 2009 or early 2010 • Currently valued at approximately $490 million to $610 million based on: Transfer of tangible net equity of $450 million Membership payments ranging from $60 million to
$180 million Net expense of $20 million from run-out, tax benefits and freed capital • Regulatory approvals in process • Business transition planning under way |
 7 Commercial Business Opportunities Commercial Business Opportunities • Product mix aligned with market changes • Lower-cost, narrow network products gaining traction – Interest in narrow networks resulting from economy – Key to small group and mid-market growth • Further margin expansion – Disciplined pricing and stable health care costs – Beneficial product and geographic mix changes • Positioned for growth resulting from ongoing environmental changes |
 8 Medicare Strategy Medicare Strategy • On-track to achieve 2009 goals • Built on network-model MA plans • Exiting Private Fee-for-Service in 2010 • “Staying the course” in Part D • Positioned for margin stability in the event of MA cuts |
 9 Government & Specialty Services Government & Specialty Services • Stable financial performance TRICARE update: GAO sustained protest Anticipating extension of current TRICARE contract • Growth opportunities – MHN (behavioral health subsidiary) – Veterans Affairs |
 10 Repositioning G&A Repositioning G&A • G&A reductions remain an integral part of margin expansion Application and infrastructure repositioning Standardization of processes Consolidation of operations • Achieve significant G&A reductions with Northeast divestiture and TRICARE transition • Eliminate overhead as Northeast and TRICARE businesses wind down ($80 million to $100 million reduction in 2011) • Create leaner, more focused organization |
 11 Strong Balance Sheet Strong Balance Sheet • Total cash and investments of $1.8 billion with an average credit quality of AA+ • Investment portfolio with market value of $1.3 billion • Total debt of $618.3 million • Excellent liquidity and financial strength – Current ratio of 1.6x – Total debt-to-capital ratio of 25.8% • Substantial cash availability expected over next two years from operations and Northeast transaction As of Sept. 30, 2009 |
 12 Investor Day Preview Investor Day Preview • Cash position • Transition Northeast business • Eliminate overhead • Build strong California franchise • Aligned with government and market trends |
 13 Health Net: The Future Health Net: The Future • Positioned to respond to value-driven demand in marketplace • Medicare in relatively secure position
going forward • Positioned for health reform • G&A reductions aligned with TRICARE and Northeast transitions • Expanding margins • Building strong cash position |