Health Net 2007 Annual Report Download - page 59

compared to 95.8% for 2005, reflecting lower medical expenses as a result of our working effectively with
TRICARE beneficiaries and managing to moderate health care cost trends. Partially offsetting the improvements
in the Health Plan Services MCR and the Government Contracts ratio were increases in general, administrative
and selling expenses from our continued investment in new products and marketing support for the new sales
effort.
Our cash flow from operations increased by $86.5 million in 2006 to $277.9 million from $191.4 million in
2005. During the fourth quarter of 2006, we resumed repurchases of our common stock under our stock
repurchase program and repurchased approximately 5.5 million shares for $250 million. We have $200 million
remaining in repurchase authorization as of December 31, 2006.
Consolidated Segment Results
The following table summarizes the operating results of our reportable segments for the last three fiscal
years:
Year Ended December 31,
2007 2006 2005
(Dollars in millions)
Pretax income:
Health plan services segment ......................................... $164.8 $444.5 $363.4
Government contracts segment ....................................... 194.1 141.5 96.2
Total segment pretax income ............................................. $358.9 $586.0 $459.6
Debt refinancing charge ................................................. — (70.1) —
Litigation, severance and related benefit costs ............................... — (37.1) (83.3)
Income from operations before income taxes as reported ....................... $358.9 $478.8 $376.3
Health Plan Services Segment Membership
The following table below summarizes our health plan membership information by program and by state:
Commercial ASO Medicare Medicaid Health Plan Total
2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005
(Membership in thousands)
Arizona ....... 137 125 117 — — — 51 35 31 — — — 188 160 148
California ...... 1,468 1,483 1,457 6 6 7 112 104 93 712 710 698 2,298 2,303 2,255
Connecticut .... 161 183 207 32 67 69 45 34 27 90 84 88 328 368 391
New Jersey ..... 90 103 127 17 19 20 — — — 44 46 44 151 168 191
New York ...... 234 224 218 13 17 20 3 6 7 — — — 250 247 245
Oregon ........ 135 133 138 — — — 21 20 16 — — — 156 153 154
Other States .... — — — — — — 4 ————— 4— —
2,225 2,251 2,264 68 109 116 236 199 174 846 840 830 3,375 3,399 3,384
Stand-alone
PDP ........ — — — — — — 379 300 ———— 379300—
Total ...... 2,225 2,251 2,264 68 109 116 615 499 174 846 840 830 3,754 3,699 3,384
December 31, 2007 Compared to December 31, 2006
Our total health plan membership increased by 55,000 members, or 2%, to 3.8 million members at
December 31, 2007 when compared to December 31, 2006. The increase was primarily driven by the addition of
79,000 stand-alone PDP members and 37,000 Medicare Advantage members, partially offset by a decrease of
67,000 commercial and ASO members.
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