Health Net 2014 Annual Report Download - page 74

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Summary of Operating Results
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
In the year ended December 31, 2014, we reported net income of $145.6 million or $1.80 per diluted share as
compared to net income of $170.1 million or $2.12 per diluted share for the same period in 2013. Pretax margin was 1.4
percent for 2014 compared to 2.4 percent for 2013.
Our total revenues increased 26.7 percent in the year ended December 31, 2014 to $14.0 billion from $11.1
billion in the same period in 2013.
Health plan services premiums revenues increased to $13.4 billion in the year ended December 31, 2014,
compared with $10.4 billion in the year ended December 31, 2013. Health plan services expenses increased by 27.2
percent from $8.9 billion in the year ended December 31, 2013 to $11.3 billion in the year ended December 31, 2014.
Net investment income decreased to $45.2 million in the year ended December 31, 2014 compared with $69.6 million
in the year ended December 31, 2013.
Our government contracts revenues increased by 5.5 percent in 2014 to $604.0 million from $572.3 million in
2013. Our government contracts costs increased by 6.7 percent in 2014 to $536.6 million from $502.9 million in 2013.
The increases in our government contracts revenues and costs were primarily due to services provided for the PC3
Program. For additional information see “—Government Contracts Reportable Segment".
Our general and administrative (G&A) expenses increased by $468.7 million, or 43 percent, in the year ended
December 31, 2014, primarily due to ACA related fees of $97.6 million and the $141.4 million health insurer fee. Our
G&A expenses in 2014 also included $96.8 million of expenses primarily related to the Cognizant Transaction (see "—
Cognizant Transaction" and Note 3 to our consolidated financial statements).
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
On April 1, 2012, we completed the sale of our Medicare PDP business to CVS Caremark. See Note 3 to our
consolidated financial statements for more information. As a result of the sale, our results of operations for the year
ended December 31, 2012 included loss from discontinued operation of $(18.5) million related to our Medicare PDP
business. Additionally, as a result of this sale, we recorded a gain on sale of discontinued operation in the amount of
$132.8 million pretax, or $114.8 million after-tax, in the year ended December 31, 2012. As of December 31, 2013 and
2012, respectively, we had no Medicare stand-alone prescription drug plan members.
In the year ended December 31, 2013, we reported net income of $170.1 million or $2.12 per diluted share as
compared to net income of $122.1 million or $1.47 per diluted share for the same period in 2012. For the year ended
December 31, 2013, we reported net income from continuing operations of $170.1 million or $2.12 per diluted share as
compared to net income from continuing operations of $25.7 million or $0.31 per diluted share for the same period in
2012. Pretax margin from continuing operations was 2.4 percent for 2013 compared to 0.3 percent for 2012.
Our total revenues decreased 2.1 percent in the year ended December 31, 2013 to $11.1 billion from $11.3 billion
in the same period in 2012. Health plan services premiums revenues decreased to $10.4 billion in the year ended
December 31, 2013, compared with $10.5 billion in the year ended December 31, 2012. Health plan services expenses
decreased by 4.6 percent from $9.3 billion in the year ended December 31, 2012 to $8.9 billion in the year ended
December 31, 2013. Investment income decreased to $69.6 million in the year ended December 31, 2013 compared
with $82.4 million in the year ended December 31, 2012.
Our government contracts revenues decreased by 17.0 percent in 2013 to $0.6 billion from $0.7 billion in 2012.
Our government contracts costs decreased by 16.9 percent in 2013 to $0.5 billion from $0.6 billion in 2012. The
declines in our government contracts revenues and costs were primarily due to the terms and structure of the MFLC
contract we entered into in August 2012, as compared to the prior MFLC contract.
Our operating results for the year ended December 31, 2012 were impacted by approximately $34.5 million of
negative prior period reserve development. This negative prior period reserve development was recorded as part of
health care costs. For the year ended December 31, 2013, we had approximately $56.2 million in favorable reserve
developments related to prior years. The reserve developments related to prior years when considered together with the
provision for adverse deviation recorded as of December 31, 2013, did not have a material impact on our operating
results or financial condition. Our operating results for the year ended December 31, 2013 were impacted by $12.0
million in pretax costs primarily related to our continuing efforts to address scale issues. Our operating results for the
year ended December 31, 2012 were impacted by pretax costs of $35.6 million related to our G&A cost reduction