Health Net Inc. shares dipped Friday after the company reported earnings below analyst expectations.

AFter the markets closed Thursday, the Woodland Hills health insurer reported net income of $33.5 million (42 cents a share) for the quarter ended June 30, compared with $125 million ($1.48) for the same quarter a year ago. Revenue fell 3.6 percent to $2.74 billion.

Analysts on average expected earnings of 51 cents a share, according to Thomson Reuters.

The company explained the sharp decline in earnings as a return to normal after a 2012 second-quarter windfall from the sale of a Medicare prescription drug business for $119 million. Also, the company noted that costs have risen as it prepares for national health reform next year.

“Costs were higher than our expectations primarily due to the reinstated Medicaid premium tax expenses and increased spending to prepare for health care reform,” Jay Gellert, Health Net’s chief executive officer, said in a statement.

The company announced its quarterly results after the market closed Thursday. On Friday shares of Health Net fell $1.10 or 3.4 percent to $31.05 in trading on the New York Stock Exchange.