Health Net Inc.
) revealed its financial guidance for 2013. The company expects
reported net income in the range of $2.00-$2.10 per share in
2013, increasing substantially from $1.45-$1.55 expected in
Additionally, consolidated revenues for the combined Western
Region Operations and Government Contracts segments, which are
the main operating segments of the company, are expected between
$10.7 billion and $11.2 billion. This is marginally below
$11.0−$11.5 billion expected in 2012.
The projected year-over-year decline in consolidated revenues
is likely due to the expected fall in membership in the Western
Region Operations segment. Health Net estimates its total health
plan membership in 2013 to dip 1%−2% over 2012. The expected
decline is primarily due to an 8%−9% estimated downturn in
commercial enrollment, partially offset by a 1%−2% anticipated
improvement in the Medicare Advantage enrollment and a 4%−6% rise
predicted in Medicaid enrollment.
Moreover, the commercial premium yields per member per month
(PMPM) for the Western Region Operations segment in 2013 is
projected to witness a 3.6% hike over 2012, driven by the shifts
occurring in the product and geographic mix. The commercial
membership is expected to be skewed toward the smaller accounts
and tailored network products having premiums PMPM below the
Additionally, the pre-tax contribution from the Government
Contracts segment is estimated to be in the range of $75−$84
million. Further, the general and administrative (G&A)
expense ratio for the Western Region Operations segment is
projected to be in the 9.0%−9.4% range, compared with 8.5%−8.7%
in 2012. None of the abovementioned guidance has been adjusted
for the impact of Health Net's participation in California's dual
eligible demonstration pilot programs on its membership,
revenues, costs or earnings.
Health Net did not disclose its guidance for operating
earnings per share and total revenue. The Zacks Consensus
Estimate for the company's 2013 revenue is $11.99 billion, while
the same for operating earnings is $2.10 per share.
Health Net currently carries a Zacks #2 Rank (Buy). We
maintain a long term 'Neutral' recommendation. Peer
) also carries a Zacks #2 Rank.
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