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Health Net Reports Second Quarter 2012 GAAP Net Income Of $124.6 Million, Or $1.48 Per Diluted Share

Medical Care Ratios (MCR)

The health plan services MCR in the Western Region was 90.1 percent in the second quarter of 2012 compared with 86.9 percent in the second quarter of 2011. The Western Region commercial MCR was 88.7 percent in the second quarter of 2012 compared with 85.7 percent in the second quarter of 2011.

The MA MCR in the Western Region was 92.0 percent in the second quarter of 2012 compared with 90.9 percent in the second quarter of 2011 primarily due to $14.4 million of adverse prior period development in the second quarter of 2012 related to the first quarter of 2012.

“The MA MCR for the first half of 2012 was 89.9 percent compared with 90.0 percent in the first half of 2011. These results are consistent with our goal to reduce the MA MCR in 2012 compared with 2011,” said Woys.

The Medicaid MCR was 91.3 percent in the second quarter of 2012 compared with 85.2 percent in the second quarter of 2011. The increase was due to higher claims experience in the company’s SPD membership.

G&A Expenses

G&A expense in the Western Region was approximately $218.7 million in the second quarter of 2012 compared with $197.4 million in the second quarter of 2011. The G&A expense ratio was 8.3 percent in the second quarter of 2012 compared with 8.1 percent in the second quarter of 2011.

GOVERNMENT CONTRACTS SEGMENT

Government Contracts revenues were $176.2 million in the second quarter of 2012 compared with $171.0 million in the second quarter of 2011.

Government Contracts expenses were $152.7 million in the second quarter of 2012 compared with $130.8 million in the second quarter of 2011.

Pretax income from the Government Contracts segment declined by $16.7 million in the second quarter of 2012 compared with the second quarter of 2011. The decline in pretax income was primarily due to legacy benefits from the company’s previous TRICARE contract that positively impacted pretax income in the second quarter of 2011.

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