Health Net 2009 Annual Report Download - page 36

• increase our vulnerability to general adverse economic and industry conditions or a downturn in our
business; and
• place us at a competitive disadvantage compared to our competitors that have less debt.
We continually evaluate options to refinance our outstanding indebtedness. Our ability to obtain any
financing, whether through the issuance of new debt securities or otherwise, and the terms of any such financing
are dependent on, among other things, our financial condition, financial market conditions within our industry
and generally, credit ratings and numerous other factors. Recently, credit markets have experienced unusual
uncertainty, and liquidity and access to capital markets have tightened. See “—Adverse conditions in the credit
markets may materially affect our ability to obtain credit.” Consequently, in the event we need to access the
credit markets to refinance our debt, there can be no assurance that we will be able to obtain financing on
acceptable terms or within an acceptable time, if at all. If we are unable to obtain financing on terms and within a
time acceptable to us it could, in addition to other negative effects, have a material adverse effect on our
operations, financial condition, ability to compete or ability to comply with regulatory requirements.
Concern about the stability of the markets generally has lead many lenders to reduce and in some cases
cease to provide funding to borrowers. If markets remain tight, they may materially and adversely affect our
ability to access additional capital to meet liquidity needs, which could have an adverse effect on our financial
condition and results of operations.
The current economic environment and uncertainty in the financial markets could have an adverse impact
on the value of our investment portfolio and our goodwill which could, in turn, have a negative effect on our
results of operations and stockholders’ equity.
Our investment portfolio is comprised primarily of available-for-sale investment securities such as interest-
yielding debt securities of varying maturities. As of December 31, 2009, our available-for-sale investment
securities were $1.4 billion. The value of fixed-income securities is highly sensitive to fluctuations in short-and
long-term interest rates, with the value decreasing as such rates increase and increasing as such rates decrease.
These securities may also be negatively impacted by illiquidity in the market. We closely monitor the fair values
of our investment securities and regularly evaluate them for any other-than-temporary impairments. We have the
intent and ability to hold our investments for a sufficient period of time to allow for recovery of the principal
amount invested.
The current economic environment and uncertainty in the U.S. and global capital markets have negatively
impacted the liquidity of investments, such as our debt securities, and a worsening in these markets could have
additional negative effects on the liquidity and value of our investment assets. In addition, such uncertainty has
increased the difficulty of assessing investment impairment and the same influences tend to increase the risk of
potential impairment of these assets.
Over time, the economic and capital market environment may further deteriorate or provide additional
insight regarding the fair value of certain securities, which could change our judgment regarding the impairment
of certain investments. This could result in realized losses relating to other-than-temporary declines being
charged against future income. Given the current market conditions and the significant judgments involved, there
is continuing risk that further declines in fair value may occur and material other-than-temporary impairments
may result in realized losses in future periods, which could have an adverse effect on our results of operations,
liquidity and financial condition. See “Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations—Liquidity and Capital Resources” for additional information regarding our
investment portfolio.
In addition, our regulated subsidiaries are also subject to state laws and regulations that govern the types of
investments that are allowable and admissible in those subsidiaries’ portfolios. There can be no assurance that
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