HNT » Topics » Investments

This excerpt taken from the HNT 10-K filed Feb 27, 2009.

Investments

Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We periodically assess our available-for-sale investments for other-than-temporary impairment. Any such other-than-temporary impairment loss is recognized as a realized loss and measured as the excess of carrying value over fair value at the time the assessment is made. During the year ended December 31, 2008, we recognized a $14.6 million loss from other-than-temporary impairments. During the years ended December 31, 2007 and 2006, we had no other-than-temporary impairment loss (see Note 4 for additional information regarding our loss from other-than-temporary impairments).

 

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HEALTH NET, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

These excerpts taken from the HNT 10-K filed Feb 28, 2008.

Investments

Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We periodically assess our available-for-sale investments for other-than-temporary impairment. Any such other-than-temporary impairment loss is recognized as a realized loss and measured as the excess of carrying value over fair value at the time the assessment is made.

Investments

FACE="Times New Roman" SIZE="2">Investments classified as available-for-sale, which consist primarily of debt securities, are stated at fair value. Unrealized gains and losses are excluded from earnings and reported as other comprehensive income,
net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We periodically assess our available-for-sale
investments for other-than-temporary impairment. Any such other-than-temporary impairment loss is recognized as a realized loss and measured as the excess of carrying value over fair value at the time the assessment is made.

STYLE="margin-top:18px;margin-bottom:0px">Fair Value of Financial Instruments

The estimated
fair value amounts of cash equivalents, investments available for sale, trade accounts and notes receivable and notes payable have been determined by us using available market information and appropriate valuation methodologies. The carrying amounts
of cash equivalents approximate fair value due to the short maturity of those instruments. Fair values for debt and equity securities are generally based upon quoted market prices. Where quoted market prices were not readily available, fair values
were estimated using valuation methodologies based on available and observable market information. Such valuation methodologies include reviewing the value ascribed to the most recent financing, comparing the security with securities of publicly
traded companies in a similar line of business, and reviewing the underlying financial performance including estimating discounted cash flows. The carrying value of trade receivables, long-term notes receivable and nonmarketable securities
approximate the fair value of such financial instruments. The fair value of notes payable is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt with the same remaining
maturities. The fair value of our fixed rate borrowings, including our Senior Notes and financing facility was $541.4 million as of December 31, 2007. The fair value of our variable rate borrowings, our bridge and term loans, as of
December 31, 2006 was approximately $500 million, which was equal to the carrying value because the interest rates paid on these borrowings were based on prevailing market rates. See Note 6 for our financing arrangements.

STYLE="margin-top:18px;margin-bottom:0px">Restricted Assets

We and our consolidated
subsidiaries are required to set aside certain funds which may only be used for certain purposes pursuant to state regulatory requirements. We have discretion as to whether we invest such funds in cash and cash equivalents or other investments. As
of December 31, 2007 and December 31, 2006, the restricted cash and cash equivalents balances totaled $30.5 million and $6.7 million, respectively, and are included in other noncurrent assets. Investment securities held by trustees or
agencies were $79.3 million and $111.6 million as of December 31, 2007 and 2006, respectively, and are included in investments available-for-sale.

FACE="Times New Roman" SIZE="2">On May 31, 2007 we entered into an agreement with The Guardian Life Insurance Company of America (Guardian) to, in substance, purchase Guardian’s 50% interest in the HealthCare Solutions (HCS) business (see
Note 3). In connection with this transaction, we agreed to establish escrowed funds to secure the payment of projected claims for former Guardian liabilities under the HCS arrangement during the claims run-out period. This restricted cash balance
amounted to $37 million and is included in other noncurrent assets on the accompanying consolidated balance sheet as of December 31, 2007.

SIZE="2">Interest Rate Swap Contracts

On December 19, 2007, we entered into a five-year, $175 million amortizing financing
facility with a non-U.S. lender (see Note 6). In connection with the financing facility, we entered into an interest rate swap

 


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HEALTH NET, INC.

FACE="Times New Roman" SIZE="2">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 



agreement under which we pay an amount equal to LIBOR times a notional principal amount and receive in return an amount equal to 4.3% times the same notional
principal amount. The interest rate swap does not qualify for hedge accounting. Accordingly, the interest rate swap is reflected at positive fair value of $1.1 million in our consolidated balance sheet with an offset to net investment income in our
consolidated statement of operations for the year ended December 31, 2007.

On September 26, 2006, we terminated the interest
rate swap contracts (Swap Contracts) that we had used as a part of our hedging strategy to manage certain exposures related to the effect of changes in interest rates on our 8.375% senior notes due 2011 (Senior Notes), when we redeemed the entire
$400 million in aggregate principal amount of the Senior Notes on August 14, 2006. We recognized a pretax loss of $11.1 million in connection with the termination and settlement of the Swap Contracts. See Note 6 for additional information
regarding our Swap Contracts and the redemption of our Senior Notes.

This excerpt taken from the HNT 10-K filed Mar 1, 2007.

Investments

Investments classified as available-for-sale are reported at fair value based on quoted market prices, with unrealized gains and losses excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We periodically assess our available-for-sale investments for other-than-temporary impairment. Any such other-than-temporary impairment loss is recognized as a realized loss and measured as the excess of carrying value over fair value at the time the assessment is made.

This excerpt taken from the HNT 10-K filed Feb 13, 2006.

Investments

 

Investments classified as available-for-sale are reported at fair value based on quoted market prices, with unrealized gains and losses excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in net investment income. We periodically assess our available-for-sale investments for other-than-temporary impairment. Any such other-than-temporary impairment loss is recognized as a realized loss and measured as the excess of carrying value over fair value at the time the assessment is made.

 

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HEALTH NET, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

This excerpt taken from the HNT 10-K filed Mar 15, 2005.

Investments

 

Investments classified as available-for-sale are reported at fair value based on quoted market prices, with unrealized gains and losses excluded from earnings and reported as other comprehensive income, net of income tax effects. The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in investment income. We periodically assess our available-for-sale investments for other-than-temporary impairment. Any such other-than-temporary impairment loss is recognized and measured as the excess of carrying value over fair value at the time the assessment is made.

 

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