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Health Net Reports Fourth Quarter 2012 GAAP Net Income Of $5.1 Million, Or $0.06 Per Diluted Share

CASH FLOW FROM OPERATIONS

Operating cash flow was approximately $33.4 million in the fourth quarter of 2012. For the full year 2012, operating cash flow was $32.5 million.

“Operating cash flow in the quarter was greater than net income plus depreciation and amortization,” said Joseph Capezza, Health Net’s chief financial officer. “Full year 2012 operating cash flow would have been greater than net income plus depreciation and amortization if we excluded the impact of the sale of our Medicare PDP business. The cash benefit of the transaction is reflected in Cash Flows from Investing Activities on the Statement of Cash Flows.

“We expect full year 2013 operating cash flow to be at least equal to our expectations for net income plus depreciation and amortization,” said Capezza. “Cash at the parent at December 31, 2012 was approximately $106 million.”

DIVESTED OPERATIONS AND SERVICES SEGMENT

The company’s Divested Operations and Services segment includes items related to the run-out of the Northeast business and transition-related revenues and expenses related to the Medicare PDP business that was sold on April 1, 2012. Health Net continues to provide run-out support services for the Northeast business pursuant to claims servicing agreements in place with UnitedHealthcare and its affiliates.

SHARE REPURCHASE UPDATE

For the full year 2012, Health Net repurchased approximately 2.1 million shares of its common stock for approximately $50.0 million at an average price of $24.05 per share. At December 31, 2012, approximately $350 million of authorization under the company’s existing $400 million share repurchase program remained.

2013 GUIDANCE

The following table has specific 2013 guidance metrics. This guidance includes the impact of approximately $30 million of operating expenses related to the implementation of health care reform, but excludes any impact from the company’s expected participation in the state of California’s duals demonstration.

Metric
         

2013 Guidance

Year-end membership (a)(c)
         

Commercial: -8% to -9%

Medicaid: +4% to +6%

Medicare Advantage: +1% to +2%

Total health plan membership: -1% to -2%

Consolidated revenues (b)
         

~$10.7 billion to $11.2 billion

Commercial premium yields PMPM (a)(c)
         

~ +3.6%

Commercial health care costs PMPM (a)(c)
         

~350 basis points < premium yields PMPM

Selling cost ratio (a)

 

G&A expense ratio (a)
         

~2.3% to 2.4%

 

~9.0% to 9.4%

Tax rate (b)
         

38.0% to 39.0%

Weighted-average fullydiluted shares outstanding
         

 

~80 million

Earnings per share
         

$2.00 to $2.10
(a)   For the company’s Western Region Operations segment
(b) For the combined Western Region Operations and Government Contracts segments
(c) These estimates are in comparison to reported 2012 amounts.

CONFERENCE CALL

As previously announced, Health Net will discuss the company’s fourth quarter and year-end 2012 earnings results during a conference call on Wednesday, January 30, 2013, beginning at approximately 11:00 a.m. Eastern time. The conference call should be accessed at least 15 minutes prior to its start with the following numbers:
(866) 393-1637 (Domestic toll-free)         (855) 859-2056 (Replay – Domestic toll-free)
(706) 643-5711 (International) (404) 537-3406 (Replay – International)

The access code for the live conference call and replay is 89643769. A replay of the conference call will be available through February 4, 2013. A live webcast and replay of the conference call also will be available at www.healthnet.com under “Investor Relations.” The conference call webcast is open to all interested parties. Anyone listening to the company’s conference call will be presumed to have read Health Net’s Annual Report on Form 10-K for the year ended December 31, 2011, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012, June 30, 2012, and September 30, 2012, and other reports filed by the company from time to time with the Securities and Exchange Commission.

ABOUT HEALTH NET

Health Net, Inc. is a publicly traded managed care organization that delivers managed health care services through health plans and government-sponsored managed care plans. Its mission is to help people be healthy, secure and comfortable. Health Net provides and administers health benefits to approximately 5.4 million individuals across the country through group, individual, Medicare (including the Medicare prescription drug benefit commonly referred to as “Part D”), Medicaid, Department of Defense, including TRICARE, and Veterans Affairs programs. Through its subsidiaries, Health Net also offers behavioral health, substance abuse and employee assistance programs, managed health care products related to prescription drugs, managed health care product coordination for multi-region employers, and administrative services for medical groups and self-funded benefits programs.

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