Health Net swings to 1Q loss on legal, restructuring charges

LOS ANGELES—Health insurer Health Net Inc. said Wednesday it swung to a first-quarter loss on hefty legal and restructuring charges, though adjusted profit still fell far short of Wall Street forecasts because of higher costs.

The company lost $35.7 million, or 33 cents per share, compared with profit of $88.6 million, or 77 cents per share, during the same period a year earlier. Excluding about $82.4 million in charges, the company said it earned 16 cents per share.

Revenue rose 12 percent to $3.84 billion from $3.43 billion.

Analysts polled by Thomson Financial expected profit of 62 cents per share on revenue of $3.84 billion.

The legal charges were for the company's estimated liability in lawsuits and regulatory actions against the company in Arizona and California over its policy cancellation practices. The charges also include restructuring costs.

Meanwhile, the company said it has been facing higher costs because of an "unusual" increase in services from physicians and hospitals, a rough flu season and higher costs for its Medicare programs. Overall, expenses jumped 18 percent to $3.89 billion.

Total health plan enrollment rose 5.5 percent to about 3.9 million members, driving health plan service premiums up 12 percent to $3.12 billion.

The company said its health plan medical-care ratio was 89.3 percent and its commercial ratio was 88.5 percent. A health insurer's medical cost ratio measures the percentage of each dollar in premiums health insurers spend on patient care. Higher ratios mean higher costs.

Health Net shares fell 39 cents to $29.33 in morning trading.