JP Morgan Comments On Health Net Inc Following Recent Court Ruling

This morning, Health Net HNT announced that the Louisiana Supreme Court overturned a lower court of appeals ruling related to the 1999 sale of a former Health Net subsidiary to AmCareco. The company estimates that compensatory and punitive damages and judicial interest total $180mm pre-tax or $135mm after-tax. HNT is currently accessing its legal options. As result of the LA Supreme Court ruling, the company expects that it will reduce its GAAP earnings guidance from at least $2.05 by at least $1.40 per share. The company also indicated that the decision does not affect “core earnings”, this estimated at $2.75. Recall HNT ended 2010 with $200mm of cash at the parent and had prior expected to end 2011 with about $400mm, in short, having sufficient capacity to pay the judgment. JP Morgan has a Neutral rating on HNT HNT is trading lower at $33.16