Health insurance firm Health Net, Inc. (HNT) Tuesday reported a loss for the third quarter that reflected hefty asset impairment charges. Adjusted earnings increased from the prior year, as revenues rose nearly 4%, and surpassed analysts' estimate. The company also revised its earnings guidance for the full year, lowering the top end of the prior range.
Net loss for the quarter was $66.0 million or $0.64 per share, compared to a net income of $18.5 million or $0.17 per share in the year-ago quarter.
Latest quarter results included $170.6 million in noncash charges for the impairment of goodwill and other assets related to the pending sale of the company's Northeast division, and $19.5 million related to the company's operations strategy that is designed to reduce general and administrative expenses.
Prior-year quarter's results included a $17.1 million pretax charge related to the company's operations strategy and a $14.6 million pretax charge for impairment of the company's investments.
Excluding items, net income was $69.6 million, or $0.67 per share, much higher than $37.8 million or $0.35 per share in the previous year. On an average, 13 analysts polled by Thomson Reuters expected the company to report earnings of $0.61 per share for the quarter. Analysts' estimates typically exclude special items.
The Woodland Hills, California-based company's total revenues increased 3.9% to $4.01 billion from $3.81 billion in the third quarter of 2008. Six analysts estimated revenues of $3.99 billion for the quarter.
Health plan services premiums for the quarter increased to $3.17 billion from $3.07 billion last year. Revenues from government contracts were $758.51 million, higher than $724.32 million last year. Net investment income increased to $27.69 million from $10.20 million a year ago. Administrative services fees and other income for the quarter were $15.58 million, up from $11.61 million in the comparable period.
Total health plan enrollment as of September 30, declined 3.8% to about 3.6 million members from a year ago. As of September 30, total commercial risk enrollment decreased by 166 thousand, or 8%, to around 1.9 million members from last year.
Commercial premium yields per member per month, or PMPM, increased 7.6% from a year ago. Total commercial health care costs PMPM increased 8% compared with the third quarter of 2008.
Looking ahead, Health Net said including the impact of $100 million to $110 million in expected operations strategy-related pretax charges and additional charges related to the pending sale of the Northeast business the company expects to take in 2009, it expects full-year earnings of $0.51 to $0.56 per share, down from the previous range of $1.85 to $2.10 per share.
The company lowered the top end of its full year adjusted earnings guidance range by $0.05 per share due to anticipated health care cost pressures in the fourth quarter of 2009 from higher utilization due to the H1N1 flu virus and continued expansion of its COBRA membership. The company now expects full year adjusted earnings in a range of $2.25 to $2.30 per share, on revenues of $15.5 billion to $16.0 billion.
Analysts currently expect full-year earnings of $2.17 per share on revenues of $15.95 billion.
HNT is currently trading at $15.65 per share, up 2.76%, on the New York Stock Exchange.
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