Health Net 2009 Annual Report Download - page 116

HEALTH NET, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Effective upon the closing date of the Northeast Sale, we have deconsolidated the Acquired Companies
since we do not hold a controlling financial interest in those companies. We have not classified the operating
results of the Acquired Companies as discontinued operations due to our significant continuing involvement
created by our obligation to provide and be financially impacted by our performance under the United
Administrative Services Agreements, as well as our financial incentive based on members renewing with legacy
United entities.
Upon signing the Stock Purchase Agreement, we assessed the recoverability during the third quarter of 2009 of
goodwill and our long-lived assets, including other intangible assets, property and equipment and other long-term
assets related to our Northeast Operations reporting unit. As a result, in the three months ended September 30, 2009,
we recorded $174.9 million in total asset impairments, including goodwill impairment of $137.0 million,
impairments of other intangible assets of $6.3 million and property and equipment of $31.6 million.
The Northeast Operations had approximately $2,575.4 million, $2,739.3 million and $2,727.6 million of
premium revenues in the years ended December 31, 2009, 2008 and 2007, respectively, which represent 21%,
22% and 24% of our health plan services premiums for the years ended December 31, 2009, 2008 and 2007,
respectively. The Northeast Operations had a combined pretax (loss) income of $(53.9) million, $16.9 million
and $5.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. As of December 31, 2008,
we had approximately 565,000 total health plan members in the Northeast Operations. On December 11, 2009,
the closing date of the Northeast Sale, we had approximately 462,000 total health plan members in the Northeast
Operations.
Purchase of The Guardian Life Insurance Company of America’s (The Guardian) Interest in HealthCare
Solutions (HCS)
In 2007, we entered into an agreement with The Guardian to, in substance, purchase The Guardian’s 50%
interest in HCS (the Guardian Transaction). The Guardian Transaction included termination of all pre-existing
marketing and risk sharing arrangements and acquisition of certain intangible rights from The Guardian. As a
result, we recognize 100% of the HCS revenues, claims and administrative and marketing expenses. In
connection with the Guardian Transaction, we paid The Guardian $80.3 million in cash, which was all allocated
to acquired intangible assets with definite useful lives and was based on the future profits we expect to generate
by owning 100% of the employer group contract relationships associated with the HCS business.
Note 4—Investments
We are required to evaluate whether we have the intent to sell any of our debt securities or more likely than
not will be required to sell any such debt security before its anticipated recovery. Additional disclosures are
required for interim and annual periods about securities in unrealized loss positions for which an other-than-
temporary impairment has or has not been recognized.
Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair
value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net
of income tax effects. The cost of investments sold is determined in accordance with the specific identification
method, and realized gains and losses are included in net investment income. We periodically assess our
available-for-sale investments for other-than-temporary impairment. Any such other-than-temporary impairment
loss is recognized as a realized loss, which is recorded through earnings, if related to credit losses.
After performing our impairment analysis, we noted that one of our prime residential mortgage-backed
securities may suffer losses under certain stressed scenarios. As a result, we recognized an impairment related to
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