Exhibit 99.1

Health Net, Inc. 21650 Oxnard Street Woodland Hills, CA 91367 818.676.6000 800.291.6911 www.healthnet.com

News Release

Contacts: David Olson

818.676.6978

david.w.olson@healthnet.com

Michael Engelhard

818.676.7620

michael.engelhard@healthnet.com

HEALTH NET’S CHARGES CAUSE

FOURTH QUARTER 2004 NET LOSS

OF $86 MILLION OR $.77 PER DILUTED SHARE

Settlement of Provider Claims Issues, Prior Period Reserve Increases

and Other Costs Result in $252 Million in Pretax Charges

Company Issues Guidance of Between $2.30 to $2.50 Earnings

Per Diluted Share for 2005

LOS ANGELES, February 8, 2005 – Health Net, Inc. (NYSE: HNT) today announced 2004 fourth quarter net loss per diluted share of $.77 compared with earnings of $.77 per diluted share in the fourth quarter of 2003 and earnings of $.64 per diluted share in the third quarter of 2004.

Included in the results for the fourth quarter of 2004 is the full effect of a $252 million pretax charge comprised of the following:

• $169 million of expenses associated with provider settlements relating to claims processing and payment issues that have been or are being resolved;

• $65 million of expenses for prior period reserve developments;

• $18 million in asset impairment and restructuring charges and other expenses.

A table outlining the allocation of the $252 million in fourth quarter 2004 pretax charges to the fourth quarter 2004 income statement line items is attached to this release.

The provider settlement expenses, which reflect the majority of the charge, were recorded following a thorough review and management’s decision in the fourth quarter of 2004 to settle a large number of provider claims in the company’s California and Northeast health plans relating to claims issues from 2001 to 2004.

“In completing our review, we decided to address issues that restrained our performance in 2004 and put them in the past. We believe that pursuing resolution of the provider matters, including the completion of contract revisions, will assure ongoing network stability. We believe that our higher reserve levels reflect a higher cost trend related to changed payment practices seen in 2004 than was previously expected. As a result of our ongoing pricing discipline, we believe Health Net will be in a better position to achieve consistent and predictable performance in 2005,” said Jay Gellert, president and chief executive officer of Health Net.

Revenues

Health Net’s total revenues increased 3.2 percent in the fourth quarter of 2004 to $2,867,593,000 from $2,779,632,000 in the fourth quarter of 2003. Health plan services revenue climbed 3.0 percent to $2,363,786,000 in the fourth quarter of 2004 compared to $2,295,217,000 in the fourth quarter of 2003.

2

The gains in Health plan services revenue resulted from higher commercial and Medicare premium yields across the company’s health plans. In the fourth quarter of 2004, the overall health plan revenue per member per month (PMPM), including commercial, Medicare and Medicaid enrollment, rose 9.0 percent compared to the same period in 2003. Commercial premium yields climbed 10.7 percent compared to the fourth quarter of 2003.

“We continue to achieve our pricing goals,” said Buddy Piszel, executive vice president and chief financial officer of Health Net. “The pricing we achieved in the second half of 2004 positions us well for 2005 when we expect to complete the repricing of the entire commercial book in the first half of this year.”

Commercial enrollment, including both at-risk and Administrative Services Only (ASO) membership, was down 3.3 percent in the fourth quarter of 2004 compared with the third quarter of 2004.

“As expected, our disciplined pricing continues to result in lower commercial enrollment. In the fourth quarter of 2004, enrollment in California declined somewhat more than earlier expectations. The decline, however, was the result of our ongoing adherence to premium pricing that accurately reflects cost trends,” Piszel added.

Countering the overall enrollment trend, Oregon commercial enrollment increased by more than 5,400 members in the fourth quarter of 2004 over the third quarter of 2004, a 4.1 percent gain.

In the fourth quarter of 2004, Health Net’s Government contracts revenue rose 5.1 percent from the fourth quarter of 2003, reaching $487,823,000. This increase was due in

3

part to the overlap of the new TRICARE North region contract being fully implemented and the continued provision of services under the old TRICARE Region 6 contract for one month in the fourth quarter of 2004.

“We completed the transition from the last of the old TRICARE contracts on October 31, 2004, and now solely operate in the TRICARE North region. We are proud to be providing support for the families of our troops in these 23 states and the District of Columbia,” Piszel noted.

Other income decreased by $4,383,000 in the fourth quarter of 2004 compared with the fourth quarter of 2003, due to lower revenue resulting from the sale of the company’s Employer Services division in the fourth quarter of 2003.

Health Care Costs

The health plan Medical Care Ratio (MCR) increased from 81.7 percent in the fourth quarter of 2003 to 94.0 percent in the fourth quarter of 2004. This rise in the health plan MCR reflects the impact of approximately $229 million, the portion of the fourth quarter charges attributable to health care costs.

“When we look at health care costs without the charges, we believe overall commercial health care costs PMPM rose in line with industry cost trends year-over-year,” Piszel commented.

The Government contracts cost ratio improved by 90 basis points to 95.6 percent for the fourth quarter of 2004 compared to the fourth quarter of 2003. This improvement is due in part to bid price adjustment and change order activity in the fourth quarter of 2004 associated with the old TRICARE contracts.

4

Administrative Expenses

In the fourth quarter of 2004, total general, administrative and depreciation expenses increased by $1,404,000 to $246,096,000 compared to expenses of $244,692,000 in the fourth quarter of 2003. Compared to the third quarter of 2004, total general, administrative and depreciation expenses in the fourth quarter of 2004 increased by $28,422,000. The increase was driven by approximately $12 million of fourth quarter charges related to provider settlement legal costs and by higher consulting and open enrollment-related expenses.

The $10,319,000 in asset impairment and restructuring charges in the fourth quarter of 2004 compare to asset impairment and restructuring charges of $16,409,000 in the fourth quarter of 2003. Impairment expenses associated with investments and fixed assets totaled $5,900,000 in the fourth quarter of 2004. The company also recorded $2,700,000 in the fourth quarter of 2004 related to severance and related benefits expenses. Lastly, the company recorded $1,700,000 for lease termination expenses associated with the exit of certain properties as part of the TRICARE contract transition.

Health Net’s selling expenses decreased by $2,884,000 to $56,137,000 in the fourth quarter of 2004 compared with $59,021,000 in the same period in 2003, consistent with the decline in Small Group and Individual enrollment in 2004. The selling costs ratio was 2.4 percent for the fourth quarter of 2004, compared with 2.6 percent in the same period last year.

The company noted that its comprehensive systems consolidation project, known as Health Net One, continues to achieve key milestones. The company has decided to accelerate medical management system enhancements in 2005 and to defer the claims conversion in California and Oregon until 2006.

5

“In order to ensure a full year of claims payment stability in California, we have decided to postpone until 2006 the conversion of the California and Oregon claims systems,” Piszel explained.

Balance Sheet Highlights

Cash and investments as of December 31, 2004 were $1,782,102,000 compared with $1,705,872,000 as of September 30, 2004.

The TRICARE receivable decreased by $18,168,000 from the end of the third quarter of 2004 to $118,167,000 as of December 31, 2004, consistent with expectations surrounding the contract transitions and seasonal patterns.

Debt decreased by $3,990,000 from September 30, 2004 to $397,760,000 as of December 31, 2004, primarily due to the mark-to-market adjustment of the interest rate swap contracts the company uses to hedge against interest rate risk associated with the company’s outstanding fixed rate senior notes.

The company’s debt-to-total capital ratio was 23.8 percent as of December 31, 2004 compared to 22.9 percent as of September 30, 2004. The increase of the ratio was a result of the net loss recorded in the fourth quarter of 2004, which reduced stockholders’ equity.

The provider settlement expenses and the expenses recorded for prior period reserve developments resulted in an increase of $179,057,000, or 18 percent, to the balance sheet account, “Reserves for claims and other settlements,” compared with the amount recorded at September 30, 2004.

Interest expense was $1,303,000 higher in the fourth quarter of 2004 compared to the third quarter of 2004. This was due to higher floating interest rates and additional interest expense incurred on the senior notes following the downgrade of the company’s senior unsecured debt rating in September 2004.

6

Days claims payable decreased to 44.7 days for the fourth quarter of 2004 compared with 46.2 days for the third quarter of 2004, and declined by 4.7 days compared to the fourth quarter of 2003, a direct result of the substantially higher level of paid claims in 2004 compared to 2003.

Cash Flow

Cash flow provided by operations in the fourth quarter of 2004 amounted to $2,597,000 compared to cash flow provided by operations of $179,986,000 in the fourth quarter of 2003. The company did not receive its December Medicare payment until January 2005. This caused cash flow to be lower by approximately $72 million in the fourth quarter of 2004.

On September 13, 2004, the company announced that it would not repurchase shares of common stock under its share repurchase program through the end of 2004. The share repurchase program remains on hold. The company will continue to reevaluate its position on share repurchase as 2005 progresses.

Medicare

The company noted that it is engaged in a comprehensive review of its Medicare strategies to prepare for implementation of the Medicare Modernization Act of 2003 and its Part D Drug Benefit in January of next year.

“We have a team examining all potential Medicare opportunities for Health Net. With more than 170,000 members, we have been and we intend to continue to be a major Medicare participant,” Piszel added.

7

Outlook

Health Net believes its earnings per diluted share for the full year 2005 will be between $2.30 and $2.50. The company believes that its earnings per diluted share in the first quarter of 2005 will be between $.50 and $.55.

“Our initial commercial pricing and enrollment results for 2005 are encouraging. We believe yields will increase by more than 11 percent for customers renewing in the first quarter. Enrollment is coming in somewhat better than we had planned,” Piszel commented.

“For the full year, we now believe that commercial enrollment will be down modestly overall; however, we expect to gain membership in several markets in the second half of the year,” he added.

Conference Call

As previously announced, Health Net will discuss the company’s fourth quarter and year-end 2004 results during a conference call with investors on Tuesday, February 8, 2005, at approximately 11:00 a.m. EST. To listen to the call, please dial 719.457.2658, code 5594984. A live webcast and replay of the conference call also will be available at www.healthnet.com. The conference call webcast is open to all interested parties. The replay of the conference call will be available following the call on Tuesday, February 8, 2005 through February 12, 2005, by dialing 719.457.0820, code 5594984. Anyone listening to the company’s conference call will be presumed to have read Health Net’s Annual Report on Form 10-K for the year ended December 31, 2003, Quarterly Reports on Form 10-Q for the first, second and third quarters ended March 31, 2004, June 30, 2004 and September 30, 2004, respectively, and other reports filed by the company from time to time with the Securities and Exchange Commission.

8

About Health Net

Health Net, Inc. is among the nation’s largest publicly traded managed health care companies. Its mission is to help people be healthy, secure and comfortable. The company’s HMO, POS, insured PPO and government contracts subsidiaries provide health benefits to approximately 6.5 million individuals in 27 states and the District of Columbia through group, individual, Medicare, Medicaid and TRICARE programs. Health Net’s subsidiaries also offer managed health care products related to behavioral health and prescription drugs, and offer managed health care product coordination for multi-region employers and administrative services for medical groups and self-funded benefits programs.

For more information on Health Net, Inc., please visit the company’s Web site at www.healthnet.com.

Cautionary Statements

Certain matters discussed in this release contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, that involve a number of risks and uncertainties. All statements, other than statements of historical information provided herein, may be deemed to be forward-looking statements. These statements are based on management’s analysis, judgment, belief and expectation only as of the date hereof, and are subject to uncertainty and changes in circumstances. Without limiting the foregoing, 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, trends in medical care ratios, issues relating to provider contracts, operational issues, health care

9

reform and general business 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 filed with the SEC and the risks discussed in the company’s other periodic filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements. The company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this release.

#    #    #

[Eight pages of tables follow]

10

Health Net, Inc.

Consolidated Statements of Operations

(Amounts in thousands, except per share and ratio data)

	Year Ended December 31,
	2003			2004
REVENUES:
Health plan services premiums	$	9,093,219		$	9,560,244
Government contracts		1,865,773			2,021,871
Net investment income		59,332			58,147
Other income		46,378			6,131
Total revenues		11,064,702			11,646,393
EXPENSES:
Health plan services		7,516,838			8,413,638
Government contracts		1,789,523			1,927,598
General and administrative		912,531			888,480
Selling		233,519			240,117
Depreciation		55,903			41,426
Amortization		2,774			2,862
Interest		39,135			33,133
		10,550,223			11,547,254
Asset impairments and restructuring charges		16,409			32,893
Gain on sale of businesses		(18,901	)		(1,170	)
Total expenses		10,547,731			11,578,977
Income from continuing operations before income taxes		516,971			67,416
Income tax provision		193,891			24,812
Income from continuing operations		323,080			42,604
Discontinued operations:
Loss on settlement from disposition, net of tax		(89,050	)		—
Net income	$	234,030		$	42,604
Basic earnings per share	$	2.02		$	0.38
Diluted earnings per share	$	1.98		$	0.38
Basic		115,999			111,859
Diluted		118,278			113,038
Ratios:
Health plan services MCR		82.7	%		88.0	%
Government contracts cost ratio		95.9	%		95.3	%
Administrative ratio ((G&A+Dep) / (HP serv rev + Other income))		10.6	%		9.7	%
Selling costs ratio (Selling costs / HP serv rev)		2.6	%		2.5	%
Days claims payable		49.8			47.7

11

Health Net, Inc.

Consolidated Statements of Cash Flows

(Amounts in thousands)

	Year Ended December 31,
	2003			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	234,030		$	42,604
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization and depreciation		58,677			44,288
Gain on sale of businesses		(18,901	)		(1,170	)
Asset impairments		16,409			5,916
Other changes		5,138			3,969
Changes in assets and liabilities, net of the effects of dispositions:
Premiums receivable and unearned premiums		20,163			(29,718	)
Other assets		35,915			(86,499	)
Amounts receivable/payable under government contracts		23,596			(164,029	)
Reserves for claims and other settlements		2,737			143,012
Accounts payable and other liabilities		2,008			(13,285	)
Net cash provided by (used in) operating activities		379,772			(54,912	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of investments		294,976			282,524
Maturities of investments		572,245			274,250
Purchases of investments		(977,266	)		(498,355	)
Purchases of property and equipment		(54,915	)		(37,946	)
Cash received from the sale of businesses		90,316			11,112
Sales and purchases of restricted investments and other		(30,878	)		(45,827	)
Net cash used in investing activities		(105,522	)		(14,242	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and employee stock purchases		42,330			19,091
Proceeds from the issuance of notes payable and other financing arrangements		5,680			—
Repayment of debt and other noncurrent liabilities		(5,864	)		—
Repurchases of common stock		(288,318	)		(88,706	)
Net cash used in financing activities		(246,172	)		(69,615	)
Net increase (decrease) in cash and cash equivalents		28,078			(138,769	)
Cash and cash equivalents, beginning of period		832,793			860,871
Cash and cash equivalents, end of period	$	860,871		$	722,102

12

Health Net, Inc.

Consolidated Statements of Operations

(Amounts in thousands, except per share and ratio data)

	Fourth Quarter Ended December 31, 2003			First Quarter Ended March 31, 2004			Second Quarter Ended June 30, 2004			Third Quarter Ended September 30, 2004			Fourth Quarter Ended December 31, 2004
REVENUES:
Health plan services premiums	$	2,295,217		$	2,404,355		$	2,398,943		$	2,393,160		$	2,363,786
Government contracts		464,214			503,948			504,317			525,783			487,823
Net investment income		14,212			15,201			13,818			14,750			14,378
Other income		5,989			1,248			1,737			1,540			1,606
Total revenues		2,779,632			2,924,752			2,918,815			2,935,233			2,867,593
EXPENSES:
Health plan services		1,876,274			2,107,087			2,062,277			2,022,870			2,221,404
Government contracts		448,162			480,905			478,927			501,628			466,138
General and administrative		231,814			231,485			214,244			207,187			235,564
Selling		59,021			63,577			59,993			60,410			56,137
Depreciation		12,878			9,983			10,424			10,487			10,532
Amortization		767			606			606			789			861
Interest		9,841			8,438			7,304			8,044			9,347
		2,638,757			2,902,081			2,833,775			2,811,415			2,999,983
Asset impairments and restructuring charges		16,409	(a)		—			17,402	(d)		5,172	(d)		10,319	(g)
(Gain) loss on sale of businesses		(18,901	)(b)		(1,875	)(c)		—			400	(e)		305	(f)
Total expenses		2,636,265			2,900,206			2,851,177			2,816,987			3,010,607
Income (loss) from continuing operations before income taxes		143,367			24,546			67,638			118,246			(143,014	)
Income tax provision (benefit)		54,018			9,534			26,272			46,391			(57,385	)
Net income (loss)	$	89,349		$	15,012		$	41,366		$	71,855		$	(85,629	)
Basic earnings (loss) per share	$	0.79		$	0.13		$	0.37		$	0.64		$	(0.77	)
Diluted earnings (loss) per share	$	0.77		$	0.13		$	0.36		$	0.64		$	(0.77	)
Weighted average shares outstanding:
Basic		113,515			112,600			112,574			111,440			110,844
Diluted		115,943			114,342			113,460			112,397			110,844
Ratios:
Health plan services MCR		81.7	%		87.6	%		86.0	%		84.5	%		94.0	%
Government contracts cost ratio		96.5	%		95.4	%		95.0	%		95.4	%		95.6	%
Administrative ratio ((G&A+Dep) / (HP serv rev + Other income))		10.6	%		10.0	%		9.4	%		9.1	%		10.4	%
Selling costs ratio (Selling costs / HP serv rev)		2.6	%		2.6	%		2.5	%		2.5	%		2.4	%
Days claims payable		49.4			45.2			46.6			46.2			44.7

13

Health Net, Inc.

Consolidated Balance Sheets

(Amounts in thousands, except ratio data)

	December 31, 2003			March 31, 2004			June 30, 2004			September 30, 2004			December 31, 2004
ASSETS
Current Assets
Cash and cash equivalents	$	860,871		$	684,782		$	467,565		$	622,903		$	722,102
Investments - available for sale		1,082,789			1,042,021			1,153,222			1,082,969			1,060,000
Premiums receivable, net		144,968			186,178			151,619			118,201			118,521
Amounts receivable under government contracts		90,928			121,037			128,960			136,335			118,167
Incurred but not reported (IBNR) health care costs receivable under TRICARE North contract		—			—			—			114,618			173,951
Reinsurance and other receivables		105,074			94,469			93,920			102,494			92,435
Deferred taxes		43,008			40,827			40,652			41,162			98,659
Other assets		84,842			92,404			103,907			99,578			97,163
Total current assets		2,412,480			2,261,718			2,139,845			2,318,260			2,480,998
Property and equipment, net		190,900			186,700			186,570			185,291			184,643
Goodwill, net		729,506			723,595			723,595			723,595			723,595
Other intangible assets, net		19,918			19,313			21,505			22,716			21,855
Deferred taxes		44,769			41,409			41,868			18,327			23,737
Other noncurrent assets		151,703			214,894			282,258			249,912			207,050
Total Assets	$	3,549,276		$	3,447,629		$	3,395,641		$	3,518,101		$	3,641,878
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Reserves for claims and other settlements	$	1,024,550		$	1,069,247		$	1,042,831		$	990,240		$	1,169,297
Health care and other costs payable under government contracts		256,009			233,331			216,816			201,494			119,219
IBNR health care costs payable under TRICARE North contract		—			—			—			114,618			173,951
Unearned premiums		178,115			95,614			85,894			78,832			128,450
Accounts payable and other liabilities		315,031			272,000			254,453			296,782			258,923
Total current liabilities		1,773,705			1,670,192			1,599,994			1,681,966			1,849,840
Senior notes payable		398,963			406,603			384,220			401,750			397,760
Other noncurrent liabilities		82,383			78,958			95,243			81,657			121,398
Total Liabilities		2,255,051			2,155,753			2,079,457			2,165,373			2,368,998
Stockholders’ Equity
Common stock and additional paid-in capital		789,392			794,602			798,432			805,426			811,426
Restricted common stock		5,885			6,027			5,855			6,483			7,188
Unearned compensation		(3,995	)		(3,624	)		(3,121	)		(3,999	)		(4,110	)
Treasury common stock, at cost		(549,102	)		(577,484	)		(580,634	)		(632,926	)		(632,926	)
Retained earnings		1,051,776			1,066,788			1,108,154			1,180,009			1,094,380
Accumulated other comprehensive income (loss)		269			5,567			(12,502	)		(2,265	)		(3,078	)
Total Stockholders’ Equity		1,294,225			1,291,876			1,316,184			1,352,728			1,272,880
Total Liabilities and Stockholders’ Equity	$	3,549,276		$	3,447,629		$	3,395,641		$	3,518,101		$	3,641,878
Debt-to-Total Capital Ratio		23.6	%		23.9	%		22.6	%		22.9	%		23.8	%

14

Health Net, Inc.

Consolidated Statements of Cash Flows

(Amounts in thousands)

	Fourth Quarter Ended December 31, 2003			First Quarter Ended March 31, 2004			Second Quarter Ended June 30, 2004			Third Quarter Ended September 30, 2004			Fourth Quarter Ended December 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	89,349		$	15,012		$	41,366		$	71,855		$	(85,629	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization and depreciation		13,645			10,589			11,030			11,276			11,393
(Gain) loss on sale of businesses		(18,901	)		(1,875	)		—			400			305
Asset impairments		16,409			—			—			—			5,916
Other changes		270			(898	)		1,518			546			2,803
Changes in assets and liabilities, net of the effects of dispositions:
Premiums receivable and unearned premiums		87,769			(130,211	)		24,839			26,356			49,298
Other assets		27,944			4,718			515			5,140			(96,872	)
Amounts receivable/payable under government contracts		43,603			(52,787	)		(24,438	)		(22,697	)		(64,107	)
Reserves for claims and other settlements		37,154			42,962			(26,416	)		(52,591	)		179,057
Accounts payable and other liabilities		(117,256	)		(42,085	)		(15,900	)		44,267			433
Net cash provided by (used in) operating activities		179,986			(154,575	)		12,514			84,552			2,597
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of investments		32,243			125,015			65,320			79,438			12,751
Maturities of investments		121,944			112,345			84,102			30,632			47,171
Purchases of investments		(259,912	)		(186,289	)		(284,446	)		(22,774	)		(4,846	)
Purchases of property and equipment		(12,435	)		(5,853	)		(10,045	)		(9,178	)		(12,870	)
Cash received (paid) from the sale of businesses		90,316			11,026			—			(400	)		486
Sales and purchases of restricted investments and other		(4,685	)		(49,279	)		(84,552	)		39,307			48,697
Net cash (used in) provided by investing activities		(32,529	)		6,965			(229,621	)		117,025			91,389
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and employee stock purchases		12,798			4,785			3,040			6,053			5,213
Repurchases of common stock		(26,761	)		(33,264	)		(3,150	)		(52,292	)		—
Net cash (used in) provided by financing activities		(13,963	)		(28,479	)		(110	)		(46,239	)		5,213
Net increase (decrease) in cash and cash equivalents		133,494			(176,089	)		(217,217	)		155,338			99,199
Cash and cash equivalents, beginning of period		727,377			860,871			684,782			467,565			622,903
Cash and cash equivalents, end of period	$	860,871		$	684,782		$	467,565		$	622,903		$	722,102

15

Health Net, Inc.

Notes to Consolidated Statements of Operations

Notes:

(a) Pretax impairment charges for buildings held for sale of $2.6 million and our investment in a connectivity services company of $13.8 million.

(b) Pretax $18.9 million gain on the sales of our Employers Services, Dental and Vision subsidiaries.

(c) Pretax $1.9 million gain on the sales of our Subacute subsidiaries.

(d) Pretax severance and related benefit costs related to our workforce reduction announced in May 2004.

(e) Pretax $0.4 million additional loss on the sale of our Florida health plan resulting from the stock purchase and reinsurance settlement agreements dated September 30, 2004.

(f) Pretax $0.3 million additional loss on the sale of Denticare and Vision.

(g) Pretax $10.3 million asset impairments and restructuring charges due to the following:

$5.9 million asset impairment charge taken on certain investments and fixed assets

$2.7 million for severance and related benefit costs related to our workforce reduction announced in May 2004

$1.7 million for lease termination costs

16

HEALTH NET, INC.

Medical Covered Lives at December 31, 2004

(in Thousands)

	Commercial - Large Group*			Commercial - Small Group & Individual			Commercial Risk Subtotal			ASO			Commercial Subtotal
	12/04	09/04	12/03	12/04	09/04	12/03	12/04	09/04	12/03	12/04	09/04	12/03	12/04	09/04	12/03
Arizona	74	74	67	55	55	52	129	129	119	—	—	—	129	129	119
California	1,101	1,130	1,148	459	489	523	1,560	1,619	1,671	3	3	2	1,564	1,622	1,673
Connecticut	192	194	208	41	43	46	233	238	254	51	51	57	284	289	311
New Jersey	98	109	141	111	123	154	210	232	294	18	18	19	228	250	313
New York	144	153	155	108	110	116	252	262	271	7	7	10	259	269	281
Oregon	105	100	93	33	33	27	138	133	120	1	1	—	139	134	120
Pennsylvania	—	—	4	—	—	—	—	—	4	—	—	—	—	—	4
Total	1,714	1,760	1,816	808	853	917	2,523	2,613	2,733	81	80	88	2,603	2,693	2,821
Year over Year		(6)%			(12)%			(8)%			(8)%			(8)%
Sequential		(3)%			(5)%			(3)%			0%			(3)%

	Medicare Risk			Medicaid			Health Plan Total
	12/04	09/04	12/03	12/04	09/04	12/03	12/04	09/04	12/03
Arizona	35	36	36	—	—	—	164	164	156
California	95	97	99	696	695	702	2,355	2,414	2,475
Connecticut	27	27	27	94	95	98	405	411	436
New Jersey	—	—	—	42	43	45	270	293	358
New York	6	6	6	—	—	—	265	275	287
Oregon	9	6	0	—	—	—	148	140	121
Pennsylvania	—	—	—	—	—	—	—	—	4
Total	171	171	169	831	833	846	3,605	3,696	3,836
Year over Year		1%			(2)%			(6)%
Sequential		0%			(0)%			(2)%

	12/04	09/04	12/03
TRICARE
Previous TRICARE Contracts **	—	642	1,491
North Contract ***	2,929	2,929	—
Total TRICARE	2,929	3,571	1,491

* Commercial Large Group includes Medicare Supplement

** Includes only TRICARE eligible for which we have health care risk

*** Includes TRICARE eligible for which we have health care risk, and those for which we provide Administrative Services Only (ASO), primarily active duty

17

Health Net, Inc. ^(a)

Consolidated Statements of Operations

(Amounts in thousands)

	Fourth Quarter Ended December 31, 2004			Impact of Selected Costs Recorded in the Fourth Quarter Ended December 31, 2004
REVENUES
Health plan services premiums	$	2,363,786
Government contracts		487,823
Investment income		14,378
Other income		1,606
Total revenues		2,867,593		—
EXPENSES
Health plan services		2,221,404		(229,400	)
Government contracts		466,138
General and administrative		235,564		(12,000	)
Selling		56,137
Depreciation		10,532
Amortization		861
Interest		9,347
Asset impairment and restructuring charges		10,319		(10,319	)
Net (gain) loss on sale of businesses and properties		305		(305	)
Total expenses		3,010,607		(252,024	)
Income before income taxes and cumulative effect of a change in accounting principle		(143,014	)	252,024
Income tax provision		(57,385	)
Net income	$	(85,629	)
Basic earnings (loss) per share	$	(0.77	)
Diluted earnings (loss) per share	$	(0.77	)
Weighted average shares outstanding
Basic		110,844
Diluted Shares		110,844

(a) This table presents the company’s consolidated operations for the fourth quarter of 2004 and the allocation of $252 million in pretax charges for the fourth quarter of 2004 to the Consolidated Statement of Operations.

18