4th Annual Investor Conference

1. 4th Annual Investor Conference “DYNAMIC MARKETS, COMPELLING OPPORTUNITIES” May 16, 2001

2. Cautionary Statement The 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 risks and uncertainties. All statements other than statements of historical information provided herein may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements. 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” and “Cautionary Statements” sections 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 filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis, judgment, belief or expectation only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

3. 4th Annual Investor Conference FINANCE Steven P. Erwin EVP and Chief Financial Officer May 16, 2001

4. Looking Back to 2000 • Q1 2001 Highlights • Expectations for 2001 • 2002 Operating Performance Goals • Hot Topics

5. Looking Back to 2000 • Q1 2001 Highlights • Expectations for 2001 • 2002 Operating Performance Goals • Hot Topics

6. Q1 2001 - Positioned for Growth • Improved Health Plan Operations • Health Plan Enrollment Up 8.7% • Commercial Revenue PMPMs Up Over 10% • MCR Stable • Efficient Operating Cost Management • SG&A Ratio Declined 90 Basis Points to 14.5% • Expense Increases Focused on Infrastructure-Related Initiatives and Membership Growth

7. Q1 2001 - Positioned for Growth • Resolution of the Government Receivable • Collected $284 Million Net; Receivable Down to $65 Million From $334 Million at Year-End 2000 • Stronger Balance Sheet • Debt to Total Capital At 36.8% in Q1 2001 • Investment Grade Ratings From S&P and Moody’s • Issued $400 Million of 10-Year Notes on April 12, 2001

8. Looking Back to 2000 • Q1 2001 Highlights • Expectations for 2001 • 2002 Operating Performance Goals • Hot Topics

9. Expectations for 2001 • EPS Between $1.55 - $1.58 (17% - 19% Growth Over 2000) • Enrollment Growth • Stable Health Plan MCR • Improving SG&A Ratio • Strengthening Capital Structure • Record Cash Flow From Operations • Capital Expenditure Spending Focused on Efficiency Initiatives

10. EPS Growth - New GAAP $1.74 - $1.77 $1.53 $1.29 + 17% - 19% + 22% * • * Excluding One-Time Charges/Gains • Shaded Area: Impact of Goodwill Amortization

11. Same Store Health Plan Enrollment Growth Membership Growth Will Slow as Increases in California and Northeast Will Offset Expected Decreases in Arizona 4,0XX

12. Stable Total Health Plan MCR Expected to Continue in 2001

13. SG&A % Decline to Continue in 2001

14. New 10-Year Notes • Issued $400 Million on April 12 • Bullet Maturity Due in April 2011 • Offering Upsized From $300 Million • Coupon Rate of 8.375% (All-in Cost of 8.54%) • 100% of Proceeds Reduced Revolver Outstandings • Investment Grade Rating From Moody’s (Baa3) and from S&P (BBB-)

15. Bank Revolver • New $700 Million Facility Being Negotiated One Year Ahead of Maturity • Down From Current $1.356 Billion Facility Size • New Maturity: May 2006 (Expected) • Pricing at Libor + 112.5 bps (vs. Current 125 bps) • Purpose: • Funding General Corporate Activities (Working Capital, etc.) • Provides Liquidity Cushion of $400 - $500 Million

16. Strengthening Capital Structure in 2001 • Total Debt Level Below $600 Million by Year End 2001 • Long-Term Debt to Capital Ratio Expected to Be In The Low 30% Range by Year-end; at or Below 30% in 2002 and Beyond • New 10-Year Notes Provide Stable Funding Source • Bank Revolver Expected to Be Renewed One Year Ahead of Maturity

17. Debt to Total Capital Total Debt Has Decreased Over $610 Million, or Nearly 50%, and Debt to Capital Ratio Has Dropped from 63.0% in Q4 1998 to 36.8% in Q1 2000 63.0% (In Thousands) 36.8%

18. Cash Flow from Operations 2001 Will Nearly Equal 1999 And 2000 Combined $663 (in millions) $(25)

19. Capital Expenditure Process • Capital Expenditure Process Review Rigor Implemented in 1999 • Business Cases Developed and Submitted for Review • Includes Internal Rates of Return on Cash Flow Analysis • Screening Process at Division Management Level • All Cases Greater than $500K Submitted to Executive Management Committee for Review and Approval

20. Capital Expenditure Spending Targeted CapEx Spending Will Increase in 2001 for Information Technology and New Ventures Group Initiatives ($ Millions)

21. Looking Back to 2000 • Q1 2001 Highlights • Expectations for 2001 • 2002 Operating Performance Goals • Hot Topics

22. 2002 Operating Performance Goals • $1.80-$1.85 EPS in 2002; New GAAP of $1.99 - $2.04 in 2002 (Consensus Average is $1.83; $2.02 Under New GAAP) • Revenue Growth With Focus on Improving Margins • Stable MCR • Declining SG&A Ratio

23. Ongoing Performance Expectations • Profitable Enrollment Growth Based on Optimum Price / Product Profile • Stable MCR and Efficient SG&A Management • Increasing Positive Cash Flow from Operations • Continued Debt Reductions

24. Looking Back to 2000 • Q1 2001 Highlights • Expectations for 2001 • 2002 Operating Performance Goals • Hot Topics

25. Hot Topics • “Excess” Cash and Cash Flow • Days Claims Payable • Share Repurchase Viewpoint • ROE Growth

26. Hot Topics • “Excess” Cash Determinants • Excess Cash: Cash Above Required Statutory Capital Levels and Cash at Non-Regulated Entities • Risk-Based Capital: National Association of Insurance Commissioners (NAIC) Approved Model for Assessing the Appropriate Capital Levels for Regulated Entities and is Based on Business Risk and Other Risk Factors • 150% - 200% of RBC = Prompts Regulatory Action; Health Plan Required to Submit Corrective Action Plan • 200% of RBC = Required Company RBC Statutory Surplus • 300% of RBC = Health Net Target Operating Levels That Includes a Margin

27. Cash - Where Is It?

28. Excess Cash • At 12/31/00, Health Net Has Approximately $160 Million of Surplus in Excess of Statutory Requirements • Health Net Typically Carries Additional $100 Million of Cash in the Non-Regulated Entities Therefore, Total “Excess” Cash is Approximately $260 Million

29. Cash Flow - Where Does It Go? • Enterprise Free Cash Flow is Consolidated Cash Flow From Operations Less CapEx Spending • Parent Company Free Cash Flow is Dividend-Based and Includes Other Sources and Uses

30. Claims Payable Review • Claims Payable Has Three Key Components • Medical Claims Inventory or Backlog • Incurred But Not Reported (IBNR) Reserves • Adjudicated But Unpaid Claims • Business Reasons for a Decline in Days Claims Payable (DCP) • Paydown of Medical Claims Backlog • Change in Product, Geographical or Provider Mix • Timing of Medical Payments (Quarterly, Monthly, Weekly)

31. ROE Growth Quarterly / Annual ROE Consistent Improvement In ROE From Profitable Top Line Growth, Stable MCR, Improving SG&A Ratio, and Debt Paydowns