Health Net Inc.
) fourth-quarter 2013 operating income, which comprises combined
net earnings from the Western Region Operations and Government
Contracts segments, came in at 24 cents per share. The figure
missed the Zacks Consensus Estimate of 28 cents and declined from
the year-ago quarter's earnings of 35 cents per share.
Including a 1 cent benefit related to a reduction in a legal
settlement reserve, Health Net's net income for the reported
quarter was 25 cents per share, up from 7 cents per share in the
The company's total revenue fell 3.3% year over year to
approximately $2.7 billion in the fourth quarter of 2013.
Revenues missed the Zacks Consensus Estimate of $2.8 billion.
Health plan services premium revenues of Health Net was $2.6
billion, down 3.1% from the fourth quarter of 2012. Meanwhile,
total health plan service expenses declined 4.4% to $2.2 billion
from $2.3 billion in the year-ago quarter. Total expenses for
Health Net fell 4% year over year to $2.7 billion.
Western Region Operations:
This segment of Health Net posted revenues of $2.6 billion in the
quarter, down from approximately $2.7 billion in the year-ago
quarter. Net investment income for the segment declined to $11.6
million from $19.1 million in the year-ago quarter. Health plan
services expenses slid 4.3% year over year to $2.2 billion.
Total enrollment in the segment decreased 4.1% year over year to
2.4 million members as of Dec 31, 2013. Western Region commercial
enrollment dipped to 1.1 million members from 1.2 million as of
Dec 31, 2012, while that under the company's California health
plans declined 2.8% year over year. However, enrollment increased
4.3% to 0.24 million in Medicare Advantage plans. Medicaid
enrollment also increased 3% to 1.1 million as of Dec 31, 2013.
Medical care ratio (MCR) for Health Net's health plan services in
the segment improved to 87.1% from 88.2% in the year-ago quarter.
Commercial MCR fell to 87.4% from 88.6% in the prior-year
quarter, higher than the guidance provided while reporting
third-quarter results. Higher-than-expected physician, outpatient
and pharmacy utilization among individual members whose policies
were called off owing to the Affordable Care Act (ACA) were
responsible for this. Medicare Advantage MCR deteriorated to
90.5% from 87.4% a year ago. Medicaid MCR amounted to 82.7%
compared with 87.9% in the year-ago quarter.
Revenues from this segment declined to $148.5 million from $161.7
million in the fourth quarter of 2012. The segment's expenses
also declined to $124.6 million from $138.5 million in the
prior-year quarter. The new Military and Family Life Counseling
contract that was initiated in the fourth quarter of 2012 led to
decline in both revenues and expenses.
Health Net's full-year 2013 operating income, which comprises
combined net earnings from the Western Region Operations and
Government Contracts segments, came in at $2.21 per share,
missing the Zacks Consensus Estimate of $2.26. The 2013 operating
earnings were at the upper-end of the $2.20-$2.30 per share
guidance. However, the result improved significantly from
the year-ago quarter earnings of $1.01 per share.
Health Net's net income for 2013 came in at $2.12 per share, up
from $1.47 per share in the year-ago period.
Health Net's total revenue declined 2.1% year over year to
approximately $11.1 billion in 2013, which lies within the
company's guided range of $10.7-$11.2 billion.
As of Dec 31, 2013, Health Net had cash and investments of
approximately $2.1 billion, down from $2.2 billion as of Dec 31,
2012. The company's debt-to-total capital ratio improved to 19.7%
as of Dec 31, 2013 from 20.4% as of Dec 31, 2012.
Health Net's operating cash flow stood at $95.8 million in 2013
compared with $32.5 million in 2012.
Total assets of Health Net were worth $3.9 billion as of Dec 31,
2013, almost in line with the year-ago numbers. Stockholder
equity was $1.6 billion as of Dec 31, 2013 compared with $1.56
billion as of Dec 31, 2012.
Share Repurchase Update
Health Net repurchased 2.7 million shares for $70.0 million in
full-year 2013. Currently, the company is left with $280 million
worth of shares to be repurchased under its existing $400 million
Outlook for 2014
In anticipation of a 30% increase in revenues, Health Net expects
its reported net income to be a minimum of $3 for full-year 2014.
As per the company, this increase in revenues is to be driven by
new and extended programs that are expected to contribute around
0.6 million members by 2014-end. Moreover, a decline in medical
care ratios in the commercial and Medicare Advantage businesses
and waning tax rate should also drive revenues in 2014.
Other Healthcare Companies
) reported fourth-quarter 2013 adjusted income of 87 cents per
share, beating the Zacks Consensus Estimate by a penny.
Molina Healthcare Inc.
) failed to meet its fourth-quarter 2013 guidance by reporting an
operating loss per share of 3 cents, wider than the Zacks
Consensus Estimate loss of 1 cent.
) reported fourth-quarter 2013 earnings of $1.34 per share,
missing the Zacks Consensus Estimate by a penny.
Health Net presently carries a Zacks Rank #4 (Sell).
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