Health Net 2011 Annual Report Download - page 71

Region to our T-3 contract that commenced on April 1, 2011. 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 3.7 percent to $10.4 billion in the year ended
December 31, 2011, compared with $10.0 billion in the year ended December 31, 2010. Health plan services
expenses increased from $8.6 billion in the year ended December 31 2010 to $8.9 billion in the year ended
December 31, 2011. Investment income increased to $74.2 million in the year ended December 31, 2011
compared with $71.2 million in the year ended December 31, 2010.
We were previously a defendant in two related litigation matters (the “AmCareco litigation”) related to
claims asserted by three separate state receivers overseeing the liquidation of three health plans previously owned
by one of our former subsidiaries which merged into Health Net, Inc. in January 2001. During the year ended
December 31, 2011, we fully satisfied the entirety of a judgment relating to the AmCareco litigation, paying a
total of $181 million to the three receivers, inclusive of all accrued interest and court costs. Our operating results
for the year ended December 31, 2011 were impacted by a $181 million pretax expense incurred in connection
with the AmCareco litigation. This expense was recorded as part of our G&A expenses. In addition, our
operating results for the year ended December 31, 2011 were impacted by a $40.8 million favorable adjustment
to loss on sale of Northeast health plan subsidiaries and a $6.8 million benefit from litigation reserve true-ups,
partially offset by pretax costs of $25.2 million related to our G&A cost reduction efforts. Our operating results
for the year ended December 31, 2010 were impacted by pretax expenses of $61.2 million related to our
operations strategy and other cost management initiatives, and $9.0 million in early debt extinguishment and
related interest rate swap termination costs, partially reduced by a $46.5 million benefit from litigation reserve
true-ups and a $42.0 million favorable adjustment to loss on sale of Northeast health plan subsidiaries.
Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
In the year ended December 31, 2010, we reported net income of $204.2 million or $2.06 per diluted share
as compared to a net loss of $(49.0) million or $(0.47) per share for the same period in 2009. Pretax margin was
2.4 percent for 2010 compared to (0.2) percent for 2009. Our consolidated results of operations for the years
ended December 31, 2010 and 2009 were impacted by the Northeast Sale. See Notes 1 and 3 to our consolidated
financial statements for more information on the Northeast Sale. The Northeast Operations had a combined
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, reflecting the ongoing run-out and wind-down of the Northeast
Operations.
Our total revenues decreased 13.3 percent in the year ended December 31, 2010 to $13.6 billion from $15.7
billion in the same period in 2009. Health plan services premium revenues decreased by approximately 20.0
percent to $10.0 billion in the year ended December 31, 2010, compared with $12.4 billion in the year ended
December 31, 2009. Health plan services expenses decreased from $10.7 billion in the year ended December 31
2009 to $8.6 billion in the year ended December 31, 2010. Investment income decreased to $71.2 million in the
year ended December 31, 2010 compared with $105.9 million in the year ended December 31, 2009. All of these
decreases were primarily due to the Northeast Sale.
Our Government contracts revenues increased 7.7 percent in 2010 to $3.3 billion from $3.1 billion in 2009.
The Government contracts costs increased 7.8 percent in 2010 to $3.2 billion from 2.9 billion in 2009.
Our operating results for the year ended December 31, 2010 were impacted by pretax charges of $61.2
million related to our operations strategy and other cost management initiatives, and $9.0 million in early debt
extinguishment and related interest rate swap termination costs, partially reduced by a $46.5 million benefit from
litigation reserve true-ups and a $42.0 million adjustment to loss on sale of Northeast health plan subsidiaries.
Our operating results for the year ended December 31, 2009 were impacted by pretax charges of $105.9 million
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