 UBS Global Healthcare UBS Global Healthcare Services Conference Services Conference Jay Gellert President & Chief Executive Officer February 9, 2009 Exhibit 99.1 |
 2 Cautionary Statement Cautionary Statement All statements in this presentation, other than statements of historical information, may be deemed to be forward-looking statements and as such are subject to a number of risks and uncertainties. These statements are based on management’s analysis, judgment, belief and expectation only as of the date of this presentation, and are subject to uncertainty and changes in circumstances. Without limiting the foregoing, statements including the words “believes,” “anticipates,” “plans,” “expects,” “may,” “should,” “could,” “estimate,” “intend” and other similar expressions are intended to identify forward-looking statements. Actual results could differ materially due to, among other things, rising health care costs, negative prior period claims reserve developments, additional investment portfolio impairment charges, changes in the economy, volatility in the financial markets, trends in medical care ratios, unexpected utilization patterns or unexpectedly severe or widespread illnesses, membership declines, rate cuts affecting our Medicare or Medicaid business, issues relating to provider contracts, litigation costs, regulatory issues, operational issues, health care reform 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 Quarterly Reports on Form 10-Q for the first, second and third quarters of 2008 filed with the SEC. Audience participants are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to publicly revise any of its forward-looking statements to reflect events or circumstances that arise after the date of this presentation. |
 3 Non-GAAP Measures Non-GAAP Measures • This presentation includes quarterly and full year income statement measurements that are not calculated and presented in accordance with Generally Accepted Accounting Principles. Audience participants should refer to the reconciliation table available in the company’s fourth quarter and full year 2008 earnings press release, available on the company’s Web site at www.healthnet.com, which reconciles certain non-GAAP financial information to GAAP financial information. • Management believes that the non-GAAP financial information discussed in this presentation is useful as it provides the audience a basis to better understand the company’s results by excluding items that are not indicative of our core operating results for the periods presented. |
 4 Investment Thesis Investment Thesis • Significant value creation opportunities in Northeast and Arizona • Commercial health plan performance positioned to improve in California and Oregon • Medicare improvement in 2009 • Confidence in TRICARE contract bid • Ongoing G&A savings • Tangible book value of $8.76 per share* *As of December 31, 2008 |
 5 Northeast and Arizona: Scale Issues Northeast and Arizona: Scale Issues • 2009 combined revenues expected to be between $3.7 billion to $3.8 billion • Currently operating at high G&A expense ratio • Higher health care unit costs compared to competitors • Projected to operate on a breakeven basis in 2009 due to Medicare improvements • Approximately $500 million of regulatory capital and surplus in these entities to meet regulatory requirements |
 6 Commercial Business Commercial Business • Solid commercial franchises in California and Oregon • Sustained pricing discipline for margin expansion • Health care cost management focus on inpatient unit cost and utilization |
 7 7 7 California Business California Business • 37 million people • Membership concentrated around high population density areas • Highest managed care penetration in the U.S. • Slowing economy California Market Dynamics • $7.4 billion health plan • #2 HMO market share in the state based on membership with 2.2 million members • Dominant network HMO • Strong relationships with integrated physician groups Health Net’s Market Position Source: Health Leaders, January 2008 2008 Health Plan Market Share (All Lines of Business) Network HMO |
 8 California Commercial Strategy California Commercial Strategy Stabilize Membership Stabilize Membership Expand Margins Expand Margins • Pricing discipline • Shift business mix to more profitable segments • Focus on medical management Leverage network advantage through capitated medical groups Inpatient utilization management and risk-sharing Network contracting • Improve retention Price stability Account service • Selectively grow in cost- competitive geographies and segments Leverage cost-effective HMO offering Offer a diverse HMO portfolio |
 9 Medicare: A Plan for Profitable Growth Medicare: A Plan for Profitable Growth 2009 Expectations • 2009 Medicare bid – Improve gross margin through adjusted premiums and benefit design and health care cost management initiatives – Expected MA MCR improvement of 150 basis points – Expected PDP MCR improvement of 500 basis points • Grow network-model MA plans and products in core markets • Reduce focus on Private Fee-for-Service • Position the business to be responsive to potential reimbursement changes Membership (as of 12/31/08) Medicare Advantage 272,000 Private-Fee-for-Service 23,000 Medicare Part D 545,000 |
 10 Medicaid: A Consistent Performer Medicaid: A Consistent Performer • Opportunities for growth through geographic expansion and reform • 812,000 members • New Jersey: – 47,000 members in 14 counties • California: – 765,000 members – Medicaid in 10 counties – Healthy Families Program in 44 counties As of December 31, 2008 |
 11 Government & Specialty Services Government & Specialty Services • TRICARE North Managed Care contract • Partnering with MHN to provide behavioral health services to military beneficiaries • TRICARE reprocurement – Formal proposal discussions held in early December 2008 – Final proposal revision submitted in early January – TRICARE Management Activity currently evaluating all resubmitted bids – Current contract extended to March 31, 2010 – Well-prepared for further extension or new contract transition which could be as early as June 1, 2009 • Opportunities for growth – TRICARE Overseas (submitted December 19, 2008) – Expansion of Military Family Life Counseling – Veterans Affairs support for PTSD and traumatic brain injury |
 12 Achieving Operational Excellence Achieving Operational Excellence 2009 to 2011 2009 to 2011 Harvesting Benefits Harvesting Benefits 2008 to 2009 2008 to 2009 Year of Investment Year of Investment 2007 to 2008 2007 to 2008 Recognize Opportunity Recognize Opportunity • Multiple systems • Manual processes and workarounds • System consolidation planning • Sequencing of highest benefit projects • Aging and inefficient systems and technology • Application and infrastructure outsourcing • Best-in-class outsourcing partners to extend capabilities • High cost locations and functions • Consolidate processes, management and footprint • Reduced headcount • Business process outsourcing • Strategic sourcing • Multiple data warehouses • Inconsistent operational metrics • Redundant analytical functions • Consolidate operations • Consistent metrics and analytics • Performance-focused operations |
 Solid Balance Sheet • Total cash and investments of $2.2 billion with an average credit quality of AA+ • Investment portfolio with market value of $1.5 billion • Net unrealized losses of $12 million (less than 1% of total cash and invested assets) • Total debt of $680 million • Excellent liquidity and financial strength – Current ratio of 1.6x – Working capital of $1.3 billion – Total debt-to-capital ratio of 27.9% – Tangible net equity of $909 million or $8.76 per share As of December 31, 2008 13 |
 14 2009 and Beyond 2009 and Beyond • Value creation opportunities from Northeast and Arizona • Core assets are solid – Solid commercial franchises with strong market share in California and Northwest – Opportunities for margin expansion – Government & Specialty Services division is a stable performer with earnings visibility and growth opportunities • Medicare provides earnings growth in 2009 – 2009 bid addresses issues in 2008 – Positioned to respond to potential changes by new administration |