Health Net 2009 Annual Report Download - page 44

The market price of our common stock is volatile.
The market price of our common stock is subject to volatility. In 2009, the Morgan Stanley Healthcare
Payor Index (the “HMO Index”), an index comprised of 11 managed care organizations, including Health Net,
recorded an approximate 53.4% increase in its value, while the per-share value of our common stock increased
by 113.9%. There can be no assurance that the trading price of our common stock will vary in a manner
consistent with the variation in the HMO Index or the Standard & Poor’s 400 Mid-Cap Index of which our
common stock is also a component. The market prices of our common stock and the securities of certain other
publicly-traded companies in our industry have shown significant volatility and sensitivity in response to many
factors, including public communications regarding managed care, legislative or regulatory actions, health care
reform, litigation or threatened litigation, health care cost trends, pricing trends, competition, earnings, receivable
collections or membership reports of particular industry participants, and market speculation about or actual
acquisition activity. Additionally, adverse developments affecting any one of the companies in our sector could
cause the price of our common stock to weaken, even if those adverse developments do not otherwise affect us.
There can be no assurances regarding the level or stability of our share price at any time or the impact of these or
any other factors on our stock price.
Negative publicity regarding the managed health care industry could adversely affect our ability to market
and sell our products and services.
Managed health care companies have received and continue to receive negative publicity reflecting the
public perception of the industry. For example, the Company and the managed health care industry have been
subject to negative publicity surrounding practices in connection with the rescission of individual health
insurance policies. In addition, health care and related health care reform proposals have been and are expected
to continue to be the subject of intense media attention and political debate. Such political discourse can often
generate publicity that portrays managed care in a negative light. Our marketing efforts may be affected by the
amount of negative publicity to which the industry has been subject, as well as by speculation and uncertainty
relating to merger and acquisition activity among companies in our industry. Speculation, uncertainty or negative
publicity about us, our industry or our lines of business could adversely affect our ability to market and sell our
products or services, require changes to our products or services, or stimulate additional legislation, regulation,
review of industry practices or litigation that could adversely affect us.
Large-scale public health epidemics and/or terrorist activity could cause us to incur unexpected health care
and other costs and could materially and adversely affect our business, financial condition and results of
operations.
An outbreak of a pandemic disease and/or future terrorist activities, including bio-terrorism, could
materially and adversely affect the U.S. economy in general and the health care industry specifically. Depending
on the government’s actions and the responsiveness of public health agencies and insurance companies, a large-
scale public health epidemic or future acts of bio-terrorism could lead to, among other things, increased use of
health care services, disruption of information and payment systems, increased health care costs due to increased
in-patient and out-patient hospital costs and the cost of any anti-viral medication used to treat affected people.
Natural disasters, including earthquakes, fires and floods, could severely damage or interrupt our systems
and operations and result in an adverse effect on our business, financial condition or results of operations.
Natural disasters such as fire, flood, earthquake, tornado, power loss, virus, telecommunications failure,
break-in or similar event could severely damage or interrupt our systems and operations, result in loss of data,
and/or delay or impair our ability to service our members and providers. We have in place a disaster recovery
plan which is intended to provide us with the ability to maintain fully redundant systems for our operations in the
event of a natural disaster utilizing various alternate sites provided by a national disaster recovery vendor.
However, there can be no assurance that such adverse effects will not occur in the event of a disaster. Any such
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