Health Net 2009 Annual Report Download - page 67

Administrative Services Fees and Other Income
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
Administrative services fees and other income increased by $13.7 million, or 28%, for the year ended
December 31, 2009 as compared to the same period in 2008. The increase was primarily due to $15.1 million in
administrative services revenues earned pursuant to the United Administrative Services Agreements in
connection with the Northeast Sale and a $10.0 million payment received from the California Department of
Health Services for interest on a premium rate settlement, partially offset by a $11.3 million decrease in ASO
revenues primarily due to ASO membership declines due to the sale of our Northeast health plan subsidiaries.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Administrative services fees and other income decreased by $2.8 million, or 6%, for the year ended
December 31, 2008 as compared to the same period in 2007. The decrease was primarily due to a decline in ASO
fees primarily due to membership losses in our Northeast plans.
Net Investment Income
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
Net investment income increased by $14.9 million, or 16%, for the year ended December 31, 2009 as
compared to the same period in 2008. This increase was primarily due to realized gains taken in the portfolio in
connection with the Northeast Sale. In 2008, our investment income was lowered by $14.6 million due to a loss
recorded in the third quarter from other-than-temporary impairments in our available-for-sale investments and
money market fund.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Net investment income decreased by $29.1 million, or 24%, for the year ended December 31, 2008 as
compared to the same period in 2007. This decrease was primarily due to lower short-term interest rates along
with a slight decrease in cash balances and a $14.6 million recognized loss from other-than temporary
impairments in our available-for-sale investments and money market funds. This decrease was partially offset by
a $7 million increase in our interest rate swap value (see Note 2—Summary of Significant Accounting Policies to
our consolidated financial statements).
General, Administrative and Other Costs
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
G&A costs increased by $71.0 million, or 6%, for the year ended December 31, 2009 as compared to the
same period in 2008. The increases in G&A costs in the year ended December 31, 2009 were primarily due to
increases in regulatory and assessment fees, premium taxes and in our operations strategy-related charges as
compared to the same period in 2008. Our G&A expense ratio increased to 10.9% for the year ended
December 31, 2009, compared to 10.4% for the same period in 2008. The charges recorded in 2009 and 2008
impacted the G&A expense ratio by 100 basis points and 100 basis points, respectively.
The selling costs ratio was 2.7% and 2.9% for the years ended December 31, 2009 and 2008, respectively,
and was primarily driven by declines in our commercial membership as well as the growth of our Medicaid
business, which generally has lower broker and sales commissions.
Amortization and depreciation expense decreased by $6.8 million for the year ended December 31, 2009 as
compared to the same period in 2008. The decrease was due to impairment of property and equipment and other
65