Health Net 2009 Annual Report Download - page 59

Net cash provided by operating activities totaled $247.5 million for the year ended December 31, 2009
compared to net cash used in operating activities of $159.0 million for the same period in 2008. This increase in
cash was primarily due to lower payments made for operations strategy and litigation and regulatory matters. The
increase in operating cash flow was partially offset by increase in net cash used in investing activities of $67
million.
December 31, 2008 Compared to December 31, 2007
Net income for 2008 decreased to $95.0 million from $193.7 million in 2007. Earnings per share fell to
$0.89 per basic share and $0.88 per diluted share for 2008 compared with $1.74 per basic share and $1.70 per
diluted share for 2007. Pretax margin was 1.0% for 2008 compared to 2.5% for 2007. The 2008 Charges are
included in the 2008 operating results.
Total health plan enrollment, including Medicare Part D, decreased to 3,720,000 members at December 31,
2008 from 3,754,000 members at December 31, 2007, primarily due to a decline of 225,000 commercial and
ASO members and 34,000 Medicaid members, partially offset by an increase of 166,000 Medicare Part D
members and 59,000 Medicare Advantage members. Our TRICARE membership increased to approximately
3.0 million beneficiaries at December 31, 2008 from 2.9 million beneficiaries at December 31, 2007.
Health Net’s total revenues increased 9% in 2008 to $15.4 billion from $14.1 billion in 2007. Health plan
services premium revenues increased 8% to $12.4 billion in 2008 compared to $11.4 billion in 2007. Our total
premium revenue yield on a PMPM basis was 5% in 2008 compared to 8% in 2007. The health plan services
MCR was 86.9% in 2008 compared to 85.4% in 2007. The MCR for 2008 and 2007 included 40 and 180 basis
points, respectively, impact from the charges taken during those periods.
In 2007, we recorded a $306.8 million pretax charge incurred as a result of us reaching an agreement to
settle class action lawsuits and other regulatory-related matters. This charge is included in the 2007 operating
results.
Our Government contracts revenues increased 13% in 2008 to $2.8 billion from $2.5 billion in 2007. The
Government contracts cost ratio increased to 95.3% in 2008 compared to 92.2% in 2007.
Our G&A expense ratio improved by 70 basis points to 10.4% in 2008 compared to 11.1% in 2007. The
G&A expense ratio for 2008 and 2007 included the impact of 100 basis points and 90 basis points, respectively,
of G&A expenses related to the operations strategy and litigation and regulatory-related charges. Our selling
costs ratio remained stable at 2.9% in 2008 and in 2007.
Net cash used in operating activities totaled $159.0 million for the year ended December 31, 2008 compared
to net cash provided by operating activities of $605.5 million for the same period in 2007. This decrease in cash
was driven by payments made in 2008 related to operations strategy and regulatory related matters and an
increase in our CMS receivables relating to catastrophic and low-income subsidies.
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