Published: July 30, 2010
Amerigroup Reports Second Quarter 2010 Results
VIRGINIA BEACH, Va., July 30, 2010 /PRNewswire-FirstCall/ -- Amerigroup Corporation (NYSE: AGP) today announced that net income for the second quarter of 2010 was $67.2 million, or $1.31 per diluted share, versus net income of $49.6 million, or $0.94 per diluted share, for the second quarter of 2009. Second quarter of 2009 results were positively impacted by a tax adjustment of $0.43 per diluted share related to litigation settled in 2008. Excluding the tax adjustment, second quarter of 2009 net income would have been $27.2 million, or $0.51 per diluted share. A reconciliation of this non-GAAP financial measure to GAAP is included on page 9 of this release.
Highlights include:
-- Membership increased 41,000 members, or 2.2%, to approximately 1.9
million at the end of the second quarter compared to the first quarter
of 2010, and a 10.5% increase over the second quarter of 2009.
-- Second quarter total revenues were $1.4 billion, a 4.8% increase over
the first quarter of 2010, and an 11.3% increase over the second quarter
of 2009.
-- Health benefits expense was 82.3% of premium revenues for the second
quarter of 2010.
-- Selling, general and administrative expenses were 7.5% of total revenues
for the second quarter of 2010.
-- Cash provided by operations was $116.4 million for the three months
ended June 30, 2010.
-- Unregulated cash and investments were $239.5 million as of June 30,
2010.
-- Medical claims payable, as of June 30, 2010, totaled $525.6 million
compared to $549.2 million, as of March 31, 2010.
-- Days in claims payable was 41, compared to 43 days in the previous
quarter.
-- The Company repurchased approximately 1.05 million shares of its common
stock during the second quarter for approximately $36.7 million.
-- In May of 2010, the Texas Health and Human Services Commission announced
that Amerigroup's Texas health plan was selected through a competitive
procurement to expand health care coverage to seniors and people with
disabilities in the six county service area surrounding Fort Worth.
Pending final contract negotiations, the Company anticipates beginning
operations in early 2011.
"We are pleased with our performance in the second quarter and first-half of the year. More than any other time in our history, our state partners need the value we offer - expanded access to care, better coordination of services and clinical outcomes, as well as cost containment for their Medicaid-dependant populations," said James G. Carlson, Amerigroup's chairman and chief executive officer. "In particular, we are excited about our expansion of coverage to seniors and people with disabilities in Fort Worth, Texas, which is expected to begin in early 2011. The STAR+PLUS program is a national model for how to enable people to live independently, improve the quality of their lives and save taxpayer dollars."
Premium Revenues
Premium revenues for the second quarter of 2010 increased 11.2% to $1.4 billion compared to $1.3 billion in the second quarter of 2009. Sequentially, premium revenues increased $62.1 million, or 4.5%, compared with the first quarter of 2010.
The sequential increase in premium revenues primarily reflects the impact of the previously announced New Jersey acquisition and launch of the Tennessee long-term care program, both of which occurred on March 1, 2010. In addition, revenues benefited from continued membership increases across many of the Company's markets due to the macroeconomic environment driving expanded Medicaid participation.
Investment Income and Other Revenues
Second quarter investment income and other revenues were $8.6 million versus $6.5 million in the second quarter of 2009, and compared to $4.9 million in the first quarter of 2010. Investment income and other revenue increased on a sequential basis due to the sale of a trademark for $4.0 million.
Health Benefits
Health benefits expenses, as a percent of premium revenues, were 82.3% for the second quarter of 2010 versus 85.9% in the second quarter of 2009, and compared to 83.5% in the first quarter of 2010. The sequential decrease in the health benefits ratio was primarily due to continued moderate medical trends and normal seasonal declines in medical costs from the first to the second quarter.
Continuing what began most significantly in the fourth quarter of 2009, medical cost trends remained at moderate levels during the quarter. Costs remained in line with or better than expectations in most markets, with all major categories of service exhibiting lower trends in recent periods.
Favorable reserve development (net of associated accruals for experience rebate in Texas, applicable medical loss ratio floors, and other gain sharing arrangements with state customers) positively impacted the health benefits ratio in the second quarter by approximately 200 basis points compared to 250 basis points of favorable reserve development reported in the first quarter of 2010.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were 7.5% of total revenues for the second quarter of 2010, unchanged from the second quarter of 2009, and compared to 8.6% for the first quarter of 2010. Selling, general and administrative expenses remained stable and at expected levels in the second quarter. The selling, general and administrative expense ratio was elevated in the first quarter of 2010 due to variable compensation accruals.
Premium Taxes
Second quarter premium taxes were $33.2 million versus $34.6 million for the second quarter of 2009, and compared to $31.5 million in the first quarter of 2010. The composite premium tax rate was essentially unchanged from the first to the second quarter of 2010.
Balance Sheet Highlights
Cash and investments at June 30, 2010 totaled $1.5 billion of which $239.5 million was unregulated, compared to $257.4 million of unregulated cash and investments at the end of the first quarter of 2010. Unregulated cash declined during the quarter primarily due to $36.7 million in share repurchase activity under the Company's ongoing stock repurchase program.
The debt to total capital ratio decreased to 18.4%, as of June 30, 2010, from 18.8%, as of March 31, 2010.
Medical claims payable as of June 30, 2010 totaled $525.6 million compared to $549.2 million as of March 31, 2010. Days in claims payable represented 41 days of health benefits expense, compared to 43 days in the previous quarter. The primary factor that drove the decline in days in claims payable was an increase in claims processing speed.
Included on page 9 is a table presenting the components of the change in medical claims payable for the six months ended June 30, 2010 and the year ended December 31, 2009.
Cash Flow Highlights
Cash flow from operations totaled $109.6 million for the six months ended June 30, 2010 and $116.4 million for the three months ended June 30, 2010. The key drivers of cash flow in the quarter were solid earnings and a net favorable change in working capital accounts.
Second Quarter Earnings Call
Amerigroup senior management will discuss the Company's second quarter results on a conference call Friday, July 30, 2010 at 8:00 a.m. Eastern Daylight Time (EDT). The conference can be accessed by dialing 866-260-3161 (domestic) or 706-679-7245 (international) approximately ten minutes prior to the start time of the call. A recording of the call may be accessed by dialing 800-642-1687 (domestic) or 706-645-9291 (international) and providing passcode 84750550. The replay will be available shortly after the conclusion of the call until Friday, August 6, at 11:59 p.m. EDT. The conference call will also be available through the investors' page of the Company's web site, www.amerigroupcorp.com, or through www.earnings.com. A 30-day replay of this webcast will be available on these web sites beginning approximately two hours following the conclusion of the live broadcast earnings conference call.
About Amerigroup Corporation
Amerigroup, a Fortune 500 Company, coordinates services for individuals in publicly funded health care programs. Serving approximately 1.9 million members in 11 states nationwide, Amerigroup accepts all eligible people regardless of age, sex, race or disability. The Company's product offerings do not utilize any individual underwriting nor deny coverage due to pre-existing medical conditions. Amerigroup is dedicated to offering real solutions that improve health care access and quality for its members, while proactively working to reduce the overall cost of care to taxpayers. For more information and real story examples of these solutions, please visit www.amerigroupcorp.com.
Forward-Looking Statements
This release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the Securities and Exchange Commission's Fair Disclosure Regulation. This release contains certain ''forward-looking'' statements, including statements related to moderating medical cost trends and the timing and expansion of our services in Texas. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements. These risks and uncertainties include, but are not limited to: our inability to manage medical costs; our inability to operate new products and markets at expected levels, including, but not limited to, profitability, membership and targeted service standards; local, state and national economic conditions, including their effect on the rate-setting process and timing of payments; the effect of government regulations and changes in regulations governing the health care industry including the impact of recently enacted health care reform legislation; changes in Medicaid and Medicare payment levels and methodologies; increased use of services, increased cost of individual services, epidemics, pandemics, the introduction of new or costly treatments and technology, new mandated benefits, insured population characteristics and seasonal changes in the level of health care use; our ability to maintain and increase membership levels; our ability to enter into new markets or remain in existing markets; changes in market interest rates or any disruptions in the credit markets; our ability to maintain compliance with all minimum capital requirements; liabilities and other claims asserted against us; demographic changes; the competitive environment in which we operate; the availability and terms of capital to fund acquisitions, capital improvements and maintain capitalization levels required by state agencies; our ability to attract and retain qualified personnel; the unfavorable resolution of new or pending litigation; and catastrophes, including acts of terrorism or severe weather.
Investors should also refer to our annual report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission ("SEC") and subsequent quarterly reports on Form 10-Q and current reports on Form 8-K filed with or furnished to the SEC, for a discussion of certain known risk factors that could cause our actual results to differ materially from our current estimates. Given these risks and uncertainties, we can give no assurances that any forward-looking statements will, in fact, transpire and, therefore, caution investors not to place undue reliance on them. We specifically disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(dollars in thousands, except per share data)
(unaudited)
Three months ended
June 30,
--------
2010 2009
---- ----
Revenues:
Premium $1,428,879 $1,284,890
Investment
income and
other 8,634 6,517
----- -----
Total
revenues 1,437,513 1,291,407
--------- ---------
Expenses:
Health
benefits 1,176,445 1,103,213
Selling,
general
and
administrative 108,189 96,285
Premium
taxes 33,172 34,623
Depreciation
and
amortization 8,905 9,680
Interest 4,019 4,232
----- -----
Total
expenses 1,330,730 1,248,033
--------- ---------
Income
before
income
taxes 106,783 43,374
Income tax
expense
(benefit) 39,570 (6,225)
------ ------
Net income $67,213 $49,599
======= =======
Diluted net
income per
share $1.31 $0.94
===== =====
Weighted
average
number of
common
shares and
dilutive
potential
common
shares
outstanding 51,318,044 53,029,943
========== ==========
Six months ended
June 30,
--------
2010 2009
---- ----
Revenues:
Premium $2,795,646 $2,502,337
Investment
income and
other 13,516 18,864
------ ------
Total
revenues 2,809,162 2,521,201
--------- ---------
Expenses:
Health
benefits 2,318,017 2,122,516
Selling,
general
and
administrative 225,612 206,660
Premium
taxes 64,644 62,741
Depreciation
and
amortization 17,615 18,006
Interest 8,009 8,470
----- -----
Total
expenses 2,633,897 2,418,393
--------- ---------
Income
before
income
taxes 175,265 102,808
Income tax
expense
(benefit) 65,870 16,300
------ ------
Net income $109,395 $86,508
======== =======
Diluted net
income per
share $2.14 $1.63
===== =====
Weighted
average
number of
common
shares and
dilutive
potential
common
shares
outstanding 51,235,939 53,224,753
========== ==========
The following table sets forth selected operating ratios. All
ratios, with the exception of the health benefits ratio,
are shown as a percentage of total revenues.
Three months ended
June 30,
--------
2010 2009
---- ----
Premium revenue 99.4% 99.5%
Investment
income and
other 0.6 0.5
--- ---
Total revenues 100.0% 100.0%
===== =====
Health benefits
([1]) 82.3% 85.9%
Selling,
general and
administrative
expenses 7.5% 7.5%
Income before
income taxes 7.4% 3.4%
Net income 4.7% 3.8%
Six months ended
June 30,
--------
2010 2009
---- ----
Premium revenue 99.5% 99.3%
Investment
income and
other 0.5 0.7
--- ---
Total revenues 100.0% 100.0%
===== =====
Health benefits
([1]) 82.9% 84.8%
Selling,
general and
administrative
expenses 8.0% 8.2%
Income before
income taxes 6.2% 4.1%
Net income 3.9% 3.4%
([1])The health benefits ratio is shown as a percentage of premium
revenue because there is a direct relationship
between the premium received and the health benefits provided.
The following table sets forth the approximate number of members the
Company served in
each state as of June 30, 2010 and 2009. Because the Company
receives two premiums for
members that are both in the Medicare Advantage and Medicaid
products, these members have
been counted twice in the states where we offer both plans.
June 30,
--------
2010 2009
---- ----
Texas([1]) 539,000 476,000
Florida 259,000 264,000
Georgia 259,000 220,000
Maryland 202,000 183,000
Tennessee 199,000 195,000
New Jersey 145,000 112,000
New York 111,000 111,000
Nevada 72,000 53,000
Ohio 58,000 60,000
Virginia 39,000 29,000
New Mexico 21,000 20,000
Total 1,904,000 1,723,000
========= =========
([1]) Membership includes approximately 14,000 members under an ASO
contract in 2010 and 13,000 in 2009.
The following table sets forth the approximate number of members in
each of the Company's
products as of June 30, 2010 and 2009. Because the Company receives
two premiums for
members that are in both the Medicare Advantage and Medicaid
products, these members
have been counted in each product.
June 30,
--------
Product 2010 2009
------- ---- ----
TANF (Medicaid) 1,337,000 1,189,000
CHIP 274,000 262,000
ABD (Medicaid)([1]) 204,000 205,000
FamilyCare (Medicaid) 71,000 54,000
Medicare Advantage 18,000 13,000
Total 1,904,000 1,723,000
========= =========
(1) Membership includes approximately 14,000 members under an ASO
contract in 2010 and
13,000 in 2009.
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
June 30, December 31,
2010 2009
---- ----
Assets
Current assets:
Cash and cash equivalents $409,833 $505,915
Short-term investments 221,007 137,523
Premium receivables 115,007 104,867
Deferred income taxes 26,779 26,361
Prepaid expenses, provider
and other receivables and
other 55,058 47,316
------ ------
Total current assets 827,684 821,982
Property, equipment and
software, net 97,809 101,002
Goodwill 260,496 249,276
Long-term investments,
including investments on
deposit for licensure 889,324 813,976
Other long-term assets 13,550 13,398
------ ------
$2,088,863 $1,999,634
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Claims payable $525,603 $529,036
Unearned revenue 47,824 98,298
Accounts payable 4,844 4,685
Accrued expenses and other 183,565 127,278
------- -------
Total current liabilities 761,836 759,297
Long-term debt 240,427 235,104
Other long-term liabilities 18,017 20,789
Total liabilities 1,020,280 1,015,190
--------- ---------
Stockholders' equity:
Common stock, $.01 par value 552 546
Additional paid-in capital,
net of treasury stock 365,706 391,912
Accumulated other
comprehensive income 2,298 1,354
Retained earnings 700,027 590,632
Total stockholders' equity 1,068,583 984,444
--------- -------
$2,088,863 $1,999,634
========== ==========
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended
June 30,
--------
2010 2009
---- ----
(dollars in thousands)
Cash flows from
operating
activities:
Net income $109,395 $86,508
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation and
amortization 17,615 18,006
Loss on disposal of
property,
equipment and
software 24 412
Deferred tax
(benefit) expense (1,972) 4,630
Compensation
expense related to
share-based
payments 9,571 8,022
Convertible debt
non-cash interest
expense 5,323 4,987
Gain on sale of
intangible assets (4,000) -
Gain on sale of
contract rights - (5,810)
Other 4,189 (201)
Changes in assets
and liabilities
(decreasing)
increasing cash
flows
from operations:
Premium receivables (10,140) (15,683)
Prepaid expenses,
provider and other
receivables and
other
current assets (6,138) (35,928)
Other assets (55) (439)
Claims payable (3,433) 26,883
Unearned revenue (50,474) (18,161)
Accounts payable,
accrued expenses
and other current
liabilities 41,371 (36,605)
Other long-term
liabilities (1,714) (2,583)
Net cash provided
by operating
activities 109,562 34,038
------- ------
Cash flows from
investing
activities:
Purchase of
investments, net (150,908) (72,369)
Purchase of
investments on
deposit for
licensure, net (12,516) (3,913)
Purchase of
property,
equipment and
software (13,508) (15,865)
Proceeds from sale
of intangible
assets 4,000 -
Proceeds from sale
of contract rights - 5,810
Purchase of
contract rights
and other related
assets (13,420) -
Net cash used in
investing
activities (186,352) (86,337)
-------- -------
Cash flows from
financing
activities:
Repayments of
borrowings under
credit facility - (26,318)
Proceeds and tax
benefits from
exercise of stock
options and change
in bank overdrafts
and other, net 24,384 (1,609)
Treasury stock
repurchases (43,676) (28,555)
-------
Net cash used in
financing
activities (19,292) (56,482)
------- -------
Net decrease in
cash and cash
equivalents (96,082) (108,781)
Cash and cash
equivalents at
beginning of
period 505,915 763,272
Cash and cash
equivalents at end
of period $409,833 $654,491
======== ========
AMERIGROUP CORPORATION AND SUBSIDIARIES
Components of the Change in Medical Claims Payable
(dollars in thousands)
Six months ended Twelve months ended
June 30, 2010 December 31, 2009
------------- -----------------
Medical claims payable,
beginning of period $529,036 $536,107
Health benefits expenses
incurred during period:
Related to current year 2,408,166 4,492,590
Related to prior years (90,149) (85,317)
Total incurred 2,318,017 4,407,273
--------- ---------
Health benefits payments during
period:
Related to current year 1,960,389 4,007,789
Related to prior years 361,061 406,555
Total payments 2,321,450 4,414,344
--------- ---------
Medical claims payable, end of
period $525,603 $529,036
======== ========
Health benefits expense incurred during both periods were reduced for
amounts related to prior years. The amounts related to
prior years include the impact of amounts previously included in the
liability to establish it at a level sufficient under moderately
adverse conditions that were not needed and the reduction in health
benefits expense due to revisions to prior estimates.
Reconciliation of Non-GAAP Financial Measures
Second Quarter 2009 Operating Results Excluding the Favorable Tax
Adjustment
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands, except per share data)
(unaudited)
Less:
GAAP Impact Adjusted
Three months Three months
ended of Tax ended
June 30, 2009 Adjustment June 30, 2009
------------- ---------- -------------
Revenues:
Premium $1,284,890 $- $1,284,890
Investment
income and
other 6,517 - 6,517
----- --- -----
Total revenues 1,291,407 - 1,291,407
Expenses:
Health
benefits 1,103,213 - 1,103,213
Selling,
general and
administrative 96,285 - 96,285
Premium taxes 34,623 - 34,623
Depreciation
and
amortization 9,680 - 9,680
Interest 4,232 - 4,232
----- --- -----
Total expenses 1,248,033 - 1,248,033
--------- --- ---------
Income before
income taxes 43,374 - 43,374
Income tax
(benefit)
expense (6,225) (22,449) 16,224
------ ------- ------
Net income $49,599 $22,449 $27,150
======= ======= =======
Diluted net
income per
share $0.94 $0.43 $0.51
===== ===== =====
Weighted
average
number of
common shares
and
dilutive
potential
common shares
outstanding 53,029,943 53,029,943
========== ==========
CONTACTS:
Investors: Julie Loftus
Trudell Media: Tara J. Wall
Senior Vice President, Senior Vice President,
Investor Relations Communications
Amerigroup Corporation Amerigroup Corporation
(757) 321-3597 (757) 518-3671
Jtrudel@amerigroupcorp.com Twall01@amerigroupcorp.com
SOURCE Amerigroup Corporation
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