Health Net 2003 Annual Report Download - page 41

Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Our income from
operations before income taxes for the year ended December 31, 2001 include a pretax loss of $72.4 million for the sales
of our Florida health plan and related corporate facility building and costs of $79.7 million related to our 2001
restructuring plan. See Notes 3 and 14 to the consolidated financial statements for a discussion on asset impairments and
restructuring charges and loss on assets held for sale.
The table below and the discussion that follows summarize our performance in the last three fiscal years.
Year Ended December 31,
2003 2002 2001
(Amounts in thousands, except ratio and per
member per month data)
Revenues
Health plan services premiums ................................. $ 9,093,219 $ 8,581,658 $ 8,575,012
Government contracts ........................................ 1,865,773 1,498,689 1,339,066
Net investment income ....................................... 59,332 65,210 78,785
Otherincome ............................................... 46,378 49,201 70,282
Totalrevenues .......................................... 11,064,702 10,194,758 10,063,145
Expenses
Health plan services .......................................... 7,516,838 7,161,520 7,243,645
Government contracts ........................................ 1,789,523 1,452,968 1,324,648
General and administrative .................................... 912,531 856,169 874,504
Selling .................................................... 233,519 197,751 186,143
Depreciation ................................................ 55,903 61,832 61,073
Amortization ............................................... 2,774 7,060 37,622
Interest .................................................... 39,135 40,226 54,940
Asset impairments and restructuring charges ...................... 16,409 60,337 79,667
Net (gain) loss on sales of businesses and properties and assets held for
sale ..................................................... (18,901) 5,000 72,422
Totalexpenses .......................................... 10,547,731 9,842,863 9,934,664
Income from continuing operations before income taxes and cumulative
effect of a change in accounting principle ........................... 516,971 351,895 128,481
Income tax provision ............................................. 193,891 117,374 47,539
Income from continuing operations before cumulative effect of a change in
accountingprinciple ........................................... $ 323,080 $ 234,521 $ 80,942
Health plan services medical care ratio ............................... 82.7% 83.5% 84.5%
Government contracts cost ratio .................................... 95.9% 96.9% 98.9%
Administrative ratio (1) ........................................... 10.6% 10.6% 10.8%
Selling costs ratio (2) ............................................. 2.6% 2.3% 2.2%
Netmargin(3) .................................................. 2.1% 2.2% 0.8%
Returnonequity(4).............................................. 18.0% 18.3% 7.3%
Health plan services premiums per member per month (PMPM) (5) ........ $ 201.97 $ 186.92 $ 176.55
Health plan services PMPM (5) ..................................... $ 166.96 $ 155.99 $ 149.17
(1) The administrative ratio is computed as the sum of general and administrative (“G&A”) and depreciation expenses
divided by the sum of health plan services premium revenues and other income.
(2) The selling costs ratio is computed as selling expenses divided by health plan premium revenues.
(3) Net margin is computed as net income divided by total revenues.
(4) Return on equity is computed as net income divided by average equity (sum of equity at the beginning and end of the
year divided by 2).
(5) PMPM is calculated based on total at-risk member months and excludes ASO member months.
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