Health Net 1999 Annual Report Download - page 6

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the year. Financial analysts look at days claims
payable, a measure of the relationship between
reserves and health care costs incurred. Here too,
FHS had a banner 1999, with days claims payable
rising 21 percent to 58 days, compared with 48
days at the end of 1998.
One item that epitomizes our financial turn-
around is the relationship between stockholders’
equity and goodwill. At the end of 1998, goodwill
and other intangibles exceeded stockholders’
equity by more than $230 million. At the end
of 1999, the gap had narrowed to less than $20
million and we anticipate the lines will cross this
year. As equity exceeds goodwill we know the
quality of our balance sheet and the assets of
this company are improving and, we believe,
stockholder value is enhanced.
Selling, General and Administrative (SG&A)
expenses fell by nearly 8 percent in 1999 to
$1,301,743,000, or 16.0 percent of Health Plan
and Government Contracts/ Specialty Services
revenues including the costs of depreciation.
The comparable SG&A percentage in 1998
was 17.5 percent.
Divestiture Program
In last year’s Annual R eport, we pledged to
complete our divestiture program of non-core
operations in 1999. During the year, we
completed nine transactions and several real
estate dispositions, meeting our goal.
We sold health plans or health plan assets in
seven states including Colorado, Louisiana, New
Mexico, Oklahoma,Texas, Utah and Washington.
In each case, these plans did not possess the size
or market scope to compete effectively.
We believe the new owners possess adequate
market strength, which will better serve our
former members.
In addition, in 1999 we sold other non-core
operations. Advance Paradigm, a leading pharmacy
benefit management company, purchased certain
4 FOUNDATION HEALTH SYSTEMS, INC.
One item that epitomizes our financial turnaround is
the relationship between stockholders’ equity and goodwill.