Health Net Inc.'s fourth-quarter profit sank more than 91 percent compared to the final quarter of 2011, when the health insurer recorded a $17.1 million gain from a business it has since discontinued.
The Woodland Hills, Calif., company also said Wednesday a loss tied to its divested Northeast business and severance and litigation costs hurt its performance in the most recent quarter.
Even so, Health Net reaffirmed a forecast it made last month for 2013 earnings.
Health Net earned $5.1 million, or 6 cents per share, in the three months that ended Dec. 31. That compares with earnings of $60.2 million, or 71 cents per share, in 2011's fourth quarter. Earnings from its core Western region and government contracts business totaled 36 cents per share.
Total revenue climbed 4.4 percent to $2.83 billion.
Analysts surveyed by FactSet expected, on average, earnings of 38 cents per share on $2.78 billion in revenue.
Goldman Sachs analyst Matthew Borsch said in a research note the insurer turned in a "mostly solid" performance in the fourth quarter, considering that it reported weak earnings in the first half of the year.
"We are encouraged that (Health Net) is entering 2013 with stronger reserves on a reaffirmed outlook for the year," the analyst wrote.
Health Net provides commercial health insurance in California, Arizona and Oregon and privately run versions of the government's Medicare program, which covers the elderly and disabled people. It also administers the state-federal Medicaid program for poor and disabled people and works with TriCare, which provides health insurance for active and retired military members and their families.
Health Net also offers behavioral health, substance abuse and employee assistance programs.
The insurer said its performance in the quarter was hurt in part by a rise in health care use from members of some large, employer-sponsored group insurance accounts that ended Dec. 31.
The company treated its Medicare prescription drug coverage business, which it sold last April, as a discontinued operation in both quarters. It recorded a $2.2 million loss from the discontinued operation in the 2012 fourth quarter, compared with a gain in the 2011 quarter.
The 2012 quarter also included about $7.1 million in litigation-related expenses, $5.2 million in severance costs and $5 million for the early end of a medical management contract.
Health Net said it also booked a $13.8 million pre-tax loss in the quarter due to a lease impairment connected to its divested Northeast business.
For the full year, Health Net earned $121.2 million, or $1.46 per share, on $11.28 billion in revenue.
The insurer expects earnings ranging from $2 to $2.10 per share in 2013. It said that forecast includes about $30 million in expenses to prepare for the health care overhaul, which will expand coverage to millions of people starting next year.
The company expects 2013 revenue to fall between $10.7 billion and $11.2 billion.
Analysts forecast, on average, earnings of $2.01 per share, on revenue of $11.82 billion.
The company's stock climbed 2.4 percent, or 64 cents, to $27.10 in Wednesday morning trading as the broader markets dipped.