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Health Net Inc HNT
Q2 2010 Earnings Call Transcript

Transcript Call Date 08/03/2010

Operator: Good morning, everyone, and welcome to this Health Net Incorporated Second Quarter 2010 Conference Call. Today's call is being recorded.

At this time, I would like to turn the call over to Ms. Angie McCabe, Vice President of Investor Relations. Please go ahead, ma'am.

Angie McCabe - VP, IR: Thank you, Janisha. Good morning and thank you for joining us for a discussion of Health Net's second quarter 2010 results. During this call, we will make forward-looking statements that are subject to certain risks and uncertainties. Risk factors that may impact those statements and could cause actual future results to differ materially from currently expected results are described in our filings with SEC as well as the cautionary statements in our press release issued in advance of this call.

In today's call, we will refer to adjusted days claims payable, which excludes reserves and health plan services expenses for the Company's divested Northeast businesses, capitation payable, provider and other claim settlements and Medicare Part D. This adjusted metric is not being presented in accordance with GAAP. Please refer to today's press release, which is available on the Company's website, for a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure of days claims payable.

We will begin our call today with formal remarks by Jay Gellert, Health Net's CEO. Jim Woys, our Chief Operating Officer; and Joe Capezza, Health Net's Chief Financial Officer, will be available during Q&A.

I will now turn the call over Jay Gellert. Jay?

Jay M. Gellert - President and CEO: Thank you, Angie. In my remarks this morning I want to review our second quarter results and link this performance to the key strategic efforts we've embarked on over the past couple of years. We believe that these strategic initiatives, such as the sale of the Northeast, G&A reductions and new product introductions, position Health Net to address the challenges of 2011 and Health Care Reform.

We also remain focused on steady and consistent near-term performance that is in line with our long-term strategy. With this in mind, we are pleased to report on a strong second quarter that exceeded expectations. As a result of this performance and based on our confidence about the second half of 2010, we are raising our full year diluted EPS guidance to a range of $2.07 to $2.17 on a GAAP basis and $2.50 to $2.55 for the combined Western Region and Government Contracts segment.

Driving better than expected second quarter results are a number of factors. We continue to produce ahead of expectations yield cost spreads in commercial. We continue to see Medicare and Medicaid on track, we continue to keep TRICARE consistent and predictable and we continue to drive significant G&A reductions. In line with this focused approach, overall margins expanded in the second quarter, a direct result of our sale of the Northeast and our ongoing operational focus.

Let me turn to enrollment to start. In the quarter, health plan enrollment reflected the economic times in our Western markets. Medi-Cal enrollment was up, while commercial was down, both trends being impacted by the high unemployment. However, there's good news in the commercial markets. We believe the second quarter represents the end of our commercial enrollment declines. We expect to grow commercial enrollment in the second half.

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