Health Net 2006 Annual Report Download - page 53

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RESULTS OF OPERATIONS
Table of Summary Financial Information
The table below and the discussion that follows summarize our results of operations for the last three fiscal
years:
Year Ended December 31,
2006 2005 2004
(Dollars in thousands, except per share and
PMPM data)
Revenues
Health plan services premiums .............................. $10,364,740 $ 9,506,865 $ 9,517,530
Government contracts ..................................... 2,376,014 2,307,483 2,021,871
Net investment income .................................... 111,042 72,751 58,147
Administrative services fees and other income .................. 56,554 53,434 48,845
Total revenues ....................................... 12,908,350 11,940,533 11,646,393
Expenses
Health plan services (excluding depreciation and amortization) .... 8,600,443 8,013,017 8,413,638
Government contracts ..................................... 2,234,535 2,211,253 1,927,598
General and administrative ................................. 1,165,313 956,840 888,480
Selling ................................................. 245,304 221,555 240,117
Depreciation ............................................ 21,541 30,250 41,426
Amortization ............................................ 4,050 3,444 2,862
Interest ................................................. 51,179 44,631 33,133
Debt refinancing charge ................................... 70,095 — —
Litigation, severance and related benefit costs and asset
impairments ........................................... 37,093 83,279 32,893
Net gain on sales of businesses and properties .................. — — (1,170)
Total expenses ....................................... 12,429,553 11,564,269 11,578,977
Income from operations before income taxes ................... 478,797 376,264 67,416
Income tax provision ...................................... 149,484 146,479 24,812
Net income ............................................. $ 329,313 $ 229,785 $ 42,604
Net income per share:
Basic .............................................. $ 2.86 $ 2.03 $ 0.38
Diluted ............................................. $ 2.78 $ 1.99 $ 0.38
Pretax margin ........................................... 3.7% 3.2% 0.6%
Health plan services medical care ratio (MCR) (a) ............... 83.0% 84.3% 88.4%
Government contracts cost ratio (b) .......................... 94.0% 95.8% 95.3%
Administrative ratio (c) .................................... 11.4% 10.3% 9.7%
Selling costs ratio (d) ..................................... 2.4% 2.3% 2.5%
Health plan services premiums per member per month
(PMPM)(e) ........................................... $ 243.70 $ 235.80 $ 216.34
Health plan services costs PMPM (e) ......................... $ 202.22 $ 198.75 $ 191.24
(a) MCR is calculated as health plan services cost divided by health plan services premiums revenue.
(b) Government contracts cost ratio is calculated as government contracts cost divided by government contracts
revenue.
(c) The administrative ratio is computed as the sum of G&A and depreciation expenses divided by the sum of
health plan services premiums and administrative services fees and other income.
(d) The selling costs ratio is computed as selling expenses divided by health plan services premium revenues.
(e) PMPM is calculated based on total at-risk member months and excludes ASO member months.
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