Board Increases Share Repurchase Authorization to $400 Million
Company Website:
http://www.healthnet.com
LOS ANGELES -- (Business Wire)
Health Net, Inc. (NYSE:HNT) today announced 2015 annual guidance of at
least $2.55 for GAAP earnings per diluted share (EPS) and at least $3.15
per diluted share for the combined Western Region Operations (Western
Region) and Government Contracts segments. The EPS guidance for the
combined segments would represent a 40 percent increase compared with
the company’s existing guidance for the full year of 2014.
The difference between GAAP EPS guidance and EPS guidance for the
combined segments is due to the expected impact of 2015 expenses related
to the company’s previously announced master services agreement with a
subsidiary of Cognizant Technology Solutions Corporation (Cognizant).
This is consistent with the commentary regarding these expenses the
company gave on its second quarter and third quarter 2014 earnings
conference calls.
Compared with existing 2014 guidance metrics as reported on November 3,
2014, the company also expects the following with regard to 2015
guidance:
-
A total health plan membership increase of approximately 8.2 percent
to approximately 3.5 million members. Because of the timing of the
2014 enrollment gains, health plan member months are expected to
increase by approximately 17 percent;
-
Total consolidated revenue of approximately $17.4 billion, an increase
of approximately 22.5 percent;
-
Stable medical care ratios in its commercial, Medicare, Medicaid and
dual eligibles lines of business. The overall health plan MCR is
expected to improve by 20 basis points year-over-year;
-
An approximately 50 basis point decline in the company’s
administrative expense ratio in 2015 compared with the existing
guidance for 2014. The calculation of the administrative expense ratio
excludes the impact of the health insurer fee and other related ACA
fees and premium taxes. This expected decline is due to increased
volume and reduced administrative expenses as a result of the
Cognizant transaction;
-
The company’s overall G&A expense ratio is expected to increase
10 basis points in 2015, primarily due to a higher health insurer fee
and premium taxes compared with 2014;
-
The tax rate for the combined segments is expected to increase by
390 basis points, primarily due to the higher, non-deductible health
insurer fee; and
-
A 2.8 million reduction in the weighted average fully-diluted share
count.
Following is a table with specific 2015 guidance metrics.
Health Net, Inc. GAAP Guidance (1) |
|
| FY14 (as of 11/3/14) |
| FY15 (as of 12/17/14) |
Total Health Plan Membership (2) |
|
3,233,000
|
|
3,500,000
|
Total Consolidated Revenues |
|
$14.2 billion
|
|
$17.4 billion
|
Health Plan MCR (2) |
|
84.8%
|
|
84.6%
|
G&A Expense Ratio (2) |
|
10.8%
|
|
10.9%
|
Admin Expense Ratio (2) |
|
7.7%
|
|
7.2%
|
GAAP Tax Rate (3) |
|
28.0%
|
|
57.4%
|
Western Region and Government Contracts Tax Rate (4) |
|
51.1%
|
|
55.0%
|
Weighted-average fully diluted shares outstanding |
|
80.8 million
|
|
~78 million
|
GAAP Earnings per Diluted Share (EPS) (3) |
|
At least $1.95
|
|
At least $2.55
|
Western Region and Government Contracts EPS (4) |
|
At least $2.25
|
|
At least $3.15
|
(1) All guidance metrics are approximations.
(2) For the company’s
Western Region Operations segment
(3) Includes a $72.6 million tax
benefit for 2014
(4) Excludes the $72.6 million tax benefit for 2014
The company intends to provide more detailed 2015 guidance no later than
February 10, 2015, when Health Net is scheduled to report its fourth
quarter and full year 2014 earnings results. The company expects to
receive updated enrollment data related to its exchange members,
Medicaid members and dual eligible members some time in January 2015.
Share Repurchase Program
Health Net today also announced that, on December 16, 2014, its board of
directors approved a $258 million increase to the company’s existing
share repurchase program.
Prior to December 16, 2014, Health Net had approximately $142 million of
authorization remaining under the company’s existing share repurchase
program. Including the newly authorized repurchase authority, Health Net
currently has $400 million in repurchase authority.
Subject to board approval, Health Net may repurchase its common stock
under its share repurchase program from time to time in privately
negotiated transactions, through accelerated share repurchase programs
or open market transactions, including pursuant to a trading plan in
accordance with Rules 10b5-1 and 10b-18 of the Securities Exchange Act
of 1934, as amended, or by any combination of such methods. The timing
of any repurchases and the actual number of shares repurchased will
depend on a variety of factors, including the company’s stock price,
corporate and regulatory requirements, restrictions under the company’s
debt obligations, and other market and economic conditions. The share
repurchase program may be suspended or discontinued at any time. The
company intends to report on its repurchase activity in its quarterly
financial disclosures.
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 5.9 million individuals across the
country through group, individual, Medicare (including the Medicare
prescription drug benefit commonly referred to as “Part D”), Medicaid,
U.S. Department of Defense, including TRICARE, and Veterans Affairs
programs. 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.
For more information on Health Net, Inc., please visit Health Net’s
website at www.healthnet.com.
Cautionary Statements
The company and its representatives may from time to time make written
and oral forward-looking statements within the meaning of the Private
Securities Litigation Reform Act (“PSLRA”) of 1995, including statements
in this and other press releases, in presentations, filings with the
Securities and Exchange Commission (“SEC”), reports to stockholders and
in meetings with investors and analysts. All statements in this press
release, other than statements of historical information provided
herein, including the guidance for future periods and the assumptions
underlying such projections, may be deemed to be forward-looking
statements and as such are intended to be covered by the safe harbor for
“forward-looking statements” provided by PSLRA. These statements are
based on management’s analysis, judgment, belief and expectation only as
of the date hereof, and are subject to changes in circumstances and a
number of risks and uncertainties. Without limiting the foregoing, the
guidance as to expected future period results and statements including
the words “believes,” “anticipates,” “plans,” “expects,” “may,”
“should,” “could,” “estimate,” “intend,” “feels,” “will,” “projects” and
other similar expressions are intended to identify forward-looking
statements. Actual results could differ materially from those expressed
in, or implied or projected by the forward-looking information and
statements due to, among other things, health care reform and other
increased government participation in and taxation or regulation of
health benefits and managed care operations, including but not limited
to the implementation of the Patient Protection and Affordable Care Act
and the Health Care and Education Reconciliation Act of 2010
(collectively, the "ACA") and related fees, assessments and taxes; the
company’s ability to successfully participate in California’s
Coordinated Care Initiative, which is subject to a number of risks
inherent in untested health care initiatives and requires the company to
adequately predict the costs of providing benefits to individuals that
are generally among the most chronically ill within each of Medicare and
Medi-Cal and implement delivery systems for benefits with which the
company has limited operating experience; the company’s ability to
successfully participate in the federal and state health insurance
exchanges under the ACA, which in the past have experienced technical
challenges in implementation and which involve uncertainties related to
the mix and volume of business that could negatively impact the adequacy
of the company’s premium rates and may not be sufficiently offset by the
risk apportionment provisions of the ACA; increasing health care costs,
including but not limited to costs associated with the introduction of
new treatments or therapies; the company’s ability to reduce
administrative expenses while maintaining targeted levels of service and
operating performance, including through the company’s master services
agreement with Cognizant; whether the company receives required
regulatory approvals for Cognizant’s provision of services to the
company and any conditions imposed in order to obtain such regulatory
approvals; the company’s ability to recognize the intended cost savings
and other intended benefits of the Cognizant transaction; and the risk
that Cognizant may not perform contracted functions and services in a
timely, satisfactory and compliant manner; negative prior period claims
reserve developments; rate cuts and other risks and uncertainties
affecting the company’s Medicare or Medicaid businesses; trends in
medical care ratios; membership declines or negative changes in the
company’s health care product mix; unexpected utilization patterns or
unexpectedly severe or widespread illnesses; the timing of collections
on amounts receivable from state and federal governments and agencies,
including collections of amounts owed under the T-3 contract; litigation
costs; regulatory issues with federal and state agencies including, but
not limited to, the California Department of Managed Health Care and
Department of Health Care Services, the Centers for Medicare & Medicaid
Services, the Office of Civil Rights of the U.S. Department of Health
and Human Services and state departments of insurance; operational
issues; changes in economic or market conditions; failure to effectively
oversee the company’s third-party vendors; noncompliance by the company
or the company’s business associates with any privacy laws or any
security breach involving the misappropriation, loss or other
unauthorized use or disclosure of confidential information; impairment
of the company’s goodwill or other intangible assets; investment
portfolio impairment charges; volatility in the financial markets; and
general business and market conditions. Additional factors that could
cause actual results to differ materially from those reflected in the
forward-looking statements include, but are not limited to, the risks
discussed in the “Risk Factors” section included within the company’s
most recent Annual Report on Form 10-K and subsequent Quarterly Reports
on Form 10-Q filed with the SEC and the other risks discussed in the
company’s filings with the SEC. Readers are cautioned not to place undue
reliance on these forward-looking statements. Except as may be required
by law, the company undertakes no obligation to address or publicly
update any of its guidance, the assessment of the underlying assumptions
or forward-looking statements to reflect events or circumstances that
arise after the date of this release.
Contacts:
Investor Contact:
The Abernathy MacGregor Group
David
Olson, (818) 917-1469
dwo@abmac.com
or
Media
Contact:
Health Net, Inc.
Brad Kieffer, (818) 676-6833
brad.kieffer@healthnet.com
Source: Health Net, Inc.
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