Health Net 2007 Annual Report Download - page 111

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
recover the carrying value of these assets for each of our reporting units. Health Plans Services is our only
reporting unit with goodwill as of December 31, 2007 and 2006. The impairment test follows a two-step
approach. The first step determines if the goodwill is potentially impaired, and the second step measures the
amount of the impairment loss, if necessary. Under the first step, goodwill is considered potentially impaired if
the value of the reporting unit is less than the reporting unit’s carrying amount, including goodwill. Under the
second step, the impairment loss is then measured as the excess of recorded goodwill over the fair value of
goodwill, as calculated. The fair value of goodwill is calculated by allocating the fair value of the reporting unit
to all the assets and liabilities of the reporting unit as if the reporting unit was purchased in a business
combination and the purchase price was the fair value of the reporting unit. We also re-assess the useful lives of
our other intangible assets to determine that they properly reflect the estimated useful lives of these assets.
We performed our annual impairment test on our goodwill and other intangible assets as of June 30, 2007
for our health plans reporting unit and also re-evaluated the useful lives of our other intangible assets. No
goodwill impairment was identified in our health plans reporting unit. We also determined that the estimated
useful lives of our other intangible assets properly reflected the current estimated useful lives.
The changes in the carrying amount of goodwill by reporting unit are as follows:
Health Plan
Services Total
(Dollars in millions)
Balance as of January 1, 2006 ....................................... $723.6 $723.6
Goodwill related to Universal Care Transaction (Note 3) .................. 28.4 28.4
Balance as of December 31, 2006 .................................... $752.0 $752.0
Balance as of December 31, 2007 .................................... $752.0 $752.0
The intangible assets that continue to be subject to amortization using the straight-line method over their
estimated lives are as follows:
Gross
Carrying
Amount
Accumulated
Amortization
Net
Balance
Weighted
Average
Life
(in years)
(Dollars in millions)
As of December 31, 2006:
Provider networks ................................... $ 40.5 $ (25.1) $ 15.4 19.4
Employer groups .................................... 92.9 (92.9) — 11.3
Customer relationships and other (Note 3) ................ 29.5 (2.1) 27.4 11.1
$162.9 $(120.1) $ 42.8
As of December 31, 2007:
Provider networks ................................... $ 40.5 $ (27.7) $ 12.8 19.4
Employer groups (Note 3) ............................. 75.0 (6.5) 68.5 6.5
Customer relationships and other (Note 3) ................ 29.5 (4.9) 24.6 11.1
Trade name (Note 3) ................................. 3.1 (1.2) 1.9 1.5
Covenant not–to-compete (Note 3) ...................... 2.2 (0.6) 1.6 2.0
$150.3 $ (40.9) $109.4
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