Health Net 2001 Annual Report Download - page 27

all, or initiate and complete a public debt offering or otherwise obtain financing on acceptable terms or
within an acceptable time, if at all. Failure to renew the existing 364-day credit facility prior to its
expiration or to otherwise obtain financing on terms and within a time acceptable to us could, in
addition to other negative effects, have a material adverse effect on our operations, financial condition,
ability to compete or ability to comply with regulatory requirements.
MARKETING. We market our products and services both through sales people employed by us
and through independent sales agents. Although we have a number of sales employees and agents, if
key sales employees or agents or a large subset of these individuals were to leave us, our ability to
retain existing customers and members could be impaired. In addition, certain of our customers or
potential customers consider necessary or important the rating, accreditation or certification of us and
our subsidiaries by various private or governmental bodies or rating agencies. Certain of our health
plans or other business units may not have obtained or may not desire or be able to obtain or maintain
the rating, accreditation or certification these customers or potential customers desire, which could
adversely affect our ability to obtain or retain business.
Our marketing efforts may be affected by the significant amount of negative publicity to which the
managed care industry has been subject, as well as by speculation and uncertainty relating to merger
and acquisition activity among companies in our industry. Negative publicity about our industry, or any
negative publicity regarding us in particular, could adversely affect our ability to sell our products or
services, could require changes to our products or services, or could stimulate additional regulation that
adversely affects us. In this regard, some of our subsidiaries have experienced significant negative
enrollment trends in certain lines of business. The managed care industry recently has experienced
significant merger and acquisition activity, giving rise to speculation and uncertainty regarding the
status of companies in our industry. Speculation, uncertainty or negative publicity about us, our industry
or our lines of business could adversely affect our ability to market our products.
POTENTIAL DIVESTITURES. In 1999, we substantially completed a program to divest certain
non-core assets. There can be no assurance that, having divested such non-core operations, we will be
able to achieve greater (or any) profitability, strengthen our core operations or compete more
effectively in our existing markets. In 2001, we sold our Florida health plan. In addition, we continue to
evaluate the profitability realized or likely to be realized by our existing businesses and operations, and
we are reviewing from a strategic standpoint which, if any, of our businesses or operations should be
divested. Entering into, evaluating or consummating divestiture transactions may entail risks and
uncertainties in addition to those which may result from the divestiture-related change in our business
operations, including but not limited to extraordinary transaction costs, unknown indemnification
liabilities and unforeseen administrative complications, any of which could result in reduced revenues,
increased charges, or post-transaction administrative costs or could otherwise have a material adverse
effect on our business, financial condition or results of operations. See ‘‘Divestitures and Other
Investments.’’
MANAGEMENT OF GROWTH. We have made large acquisitions from time to time, including
our acquisition of Health Net of the Northeast, Inc. (formerly Physicians Health Services, Inc.), and
continue to explore acquisition opportunities. Failure to effectively integrate acquired operations could
result in increased administrative costs or customer confusion or dissatisfaction. We also may not be
able to manage acquisition-related growth effectively if, among other potential difficulties, we are
unable to continue to develop processes and systems to support growing operations.
STOCK MARKET. Recently, the market prices of the securities of certain of the publicly-held
companies in the industry in which we operate have shown volatility and sensitivity in response to many
factors, including public communications regarding managed care, legislative or regulatory actions,
litigation or threatened litigation, health care cost trends, pricing trends, competition, earning or
membership reports of particular industry participants, and acquisition activity. There can be no
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