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AMERIGROUP Reports Q2 Net Income of $49.6 Million or $0.94 per Diluted Share, Including $0.43 per Diluted Share Positive Impact from Tax Adjustment
Date:7/31/2009

VIRGINIA BEACH, Va., July 31, 2009 /PRNewswire-FirstCall/ -- AMERIGROUP Corporation (NYSE: AGP) today announced that net income for the second quarter of 2009 was $49.6 million, or $0.94 per diluted share, versus a loss of $164.0 million, or $3.10 per diluted share, for the second quarter of 2008.

Second quarter 2009 results were positively impacted by a tax adjustment of $0.43 per diluted share related to litigation settled in 2008, partially offset by elevated health benefits expenses. Excluding the tax adjustment, second quarter 2009 net income would have been $27.2 million, or $0.51 per diluted share, versus second quarter 2008 net income of $35.2 million, or $0.65 per diluted share, excluding the impact of the litigation settlement recorded in that period.

The Company is updating its guidance for the full-year 2009 to $2.90 to $3.05 per diluted share from the previously announced range of $2.70 to $2.85. The revision to guidance includes the tax adjustment, as well as the impact of elevated outpatient medical costs.

Second Quarter Highlights include:

  • Membership increased 66,000 members, or 4.0%, to approximately 1.7 million at the end of the quarter from the first quarter of 2009. Risk membership increased 10.0% or 156,000 from the second quarter of 2008.
  • Total revenues were $1.3 billion, a 5.0% increase over the first quarter of 2009 and a 15.6% increase over the second quarter of 2008.
  • Health benefits expenses were 85.9% of premium revenues.
  • Selling, general and administrative expenses were 7.5% of total revenues.
  • The second quarter income tax expense reflects the impact of the tax adjustment of $0.43 per diluted share.
  • Cash used in operations was $2.1 million for the three months ended June 30, 2009.
  • Unregulated cash and investments were $253.8 million, as of June 30, 2009.
  • Medical claims payable, as of June 30, 2009, totaled $563.0 million compared to $570.4 million, as of March 31, 2009.
  • The Company is updating its 2009 annual guidance to $2.90 to $3.05 per diluted share.
  • The Company repaid approximately $26.2 million of debt during the quarter and the debt to total capital ratio decreased to 20.8%, as of June 30, 2009, from 23.0%, as of March 31, 2009.
  • The Company repurchased approximately 745,000 shares of its common stock during the second quarter for approximately $22.2 million.

"In the quarter, we experienced membership gains in most markets, a continuation of a trend that we saw in the first quarter. Significant increases in the states' Medicaid enrollment are being driven by macroeconomic conditions," said James G. Carlson, AMERIGROUP Chairman and Chief Executive Officer. "We also experienced higher medical costs, which we believe started in the latter part of the first quarter of 2009 and continued into the second quarter.

"While we believe that new members are contributing to this increase, our most recent information indicates that costs have risen for both new and existing members, notably in outpatient services. In response, we are adapting initiatives to address the specific drivers of these costs," Carlson continued. "I am confident in the ability of our management team to respond appropriately to this challenge, as we have done successfully in the past."

Premium Revenues

Premium revenues for the second quarter of 2009 increased 17.0% to $1.3 billion compared to $1.1 billion in the second quarter of 2008. Sequentially, premium revenues increased $67.4 million, or 5.5%, compared with the first quarter of 2009. The sequential increase primarily reflected membership gains in the TANF population across all markets.

Investment Income and Other Revenues

Second quarter investment income and other revenues were $6.5 million versus $18.5 million in the second quarter of 2008 and compared to $12.3 million in the first quarter of 2009. Investment income in the quarter declined slightly on a sequential basis. Other income declined sequentially as the first quarter of 2009 included a $5.8 million gain from the sale of the Company's South Carolina health plan assets.

Health Benefits

Health benefits expenses, as a percent of premium revenues, were 85.9% for the second quarter of 2009 versus 83.0% in the second quarter of 2008, and compared to 83.7% in the first quarter of 2009. The sequential increase in the health benefits ratio was primarily due to elevated outpatient costs.

As noted in the Company's Form 8-K filing on June 23, 2009, the Company believes that the substantial increase in membership during the last two quarters contributed to an increase in outpatient costs since experience indicates that the Company's new members generally utilize more services during the first two quarters of enrollment. In addition to this impact, further analysis of the most recent paid claims information indicates that outpatient costs are elevated across the existing membership base as well and this factor represents the larger impact on the health benefits ratio in the quarter.

The primary drivers of the outpatient cost increase were emergency room services, ambulatory surgery and physician services. In contrast, inpatient hospital costs remained stable and within the Company's expected range.

The Company has raised its estimates for incurred medical costs related to the first quarter of 2009 in recognition of higher outpatient costs and recorded estimates for the second quarter at an elevated level. The Company's previous medical cost estimates for the periods prior to 2009 have developed favorably. In total, the Company recorded approximately $1 million in favorable prior period reserve development in the second quarter. This was comprised of favorable reserve development of approximately $21 million for all periods prior to 2009, offset by unfavorable reserve development of approximately $20 million for the first quarter of 2009.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were 7.5% of total revenues for the second quarter of 2009, versus 10.1% in the second quarter of 2008, and compared to 9.0% for the first quarter of 2009. The selling, general and administrative expense ratio decreased sequentially because the Company served increased membership with limited increases in administrative costs and variable compensation accruals were reduced in concert with lower projected operating results for the full year.

Premium Taxes

Second quarter premium taxes were $34.6 million versus $22.1 million for the second quarter of 2008, and compared to $28.1 million in the first quarter of 2009. The sequential increase in premium taxes was primarily due to growth in premium revenues in states where premium tax is levied and the implementation of a premium tax in New York retroactive to the beginning of 2009.

Income Tax Expense

During the second quarter, the Company reached an agreement in principle with the Internal Revenue Service on the tax deductible portion of the previous litigation settlement in 2008. The increased deduction resulted in a $22.4 million tax benefit in the quarter or $0.43 per diluted share. Excluding the non-recurring tax adjustment, the second quarter tax rate was 37.4% versus 37.9% in the first quarter of 2009. This rate decrease was primarily attributable to the elimination of New York's state income tax that was part of the retroactive implementation of a premium tax.

Balance Sheet and Cash Flow Highlights

Cash and investments at June 30, 2009 totaled $1.4 billion of which $253.8 million was unregulated. Unregulated cash declined sequentially due to the repurchase of approximately 745,000 shares of common stock for approximately $22.2 million under the Company's ongoing stock repurchase program, and repayment of $26.2 million of the Company's outstanding debt. The debt to total capital ratio decreased to 20.8%, as of June 30, 2009, from 23.0%, as of March 31, 2009.

Medical claims payable as of June 30, 2009 totaled $563.0 million compared to $570.4 million as of March 31, 2009. Days in claims payable represented 46 days of health benefits expense, which is within the expected range of 45 to 55 days, compared to 50 days in the previous quarter. The predominant factor that drove the decline in days in claims payable was an increase in claims processing speed. Production during the quarter increased almost 10%. On a per member basis, claims inventory on hand declined by approximately one-third from the first quarter to the second quarter and claims processing throughput speed increased by more than 10%.

Included on page 11 is a table presenting the components of the change in medical claims payable for the six months ended June 30, 2009 and the year ended December 31, 2008.

Cash flow provided by operations totaled $34.0 million for the six months ended June 30, 2009 and cash used in operations for the three months ended June 30, 2009 totaled $2.1 million. Cash flow in the quarter was impacted most significantly by the timing of estimated tax payments. As of June 30, 2009, prepaid income taxes were $19.5 million compared to income taxes payable of $22.1 million at March 31, 2009, which negatively impacted cash flow in the quarter by $41.6 million.

Premium receivables also increased $17.8 million due to the timing of premium receipts in several states. A decline in the medical claims payable liability and a reduction of variable compensation accruals also suppressed cash flow in the quarter.

2009 Outlook

AMERIGROUP is updating its 2009 annual earnings guidance range to $2.90 to $3.05 per diluted share from the previously announced range of $2.70 to $2.85. The revision to guidance includes the $0.43 impact of the tax adjustment related to previous litigation as well as the impact of elevated outpatient medical costs.

"The elevated outpatient costs observed in the first half of the year have led to a revision in our outlook for the health benefits ratio," said James W. Truess, AMERIGROUP Chief Financial Officer. "While we are performing well in our management of administrative costs and expect the benefits of selling, general and administrative expense leverage to continue in the third and fourth quarters, our guidance assumes that outpatient costs will remain elevated for the remainder of the year."

AMERIGROUP's 2009 earnings guidance is predicated on the following assumptions among others:

  • Total revenues are expected to be approximately $5.15 billion, versus the previous estimate of approximately $5.0 - $5.1 billion, which reflects the expectation that premium revenues will be higher due to higher membership;
  • Investment income and other revenue is expected to be approximately $32.0 million, versus the previous estimate of approximately $33.0 million, which reflects slightly moderated investment income assumptions based on current market rates;
  • Health benefits ratio in the range of 84.9% - 85.5% of premium revenues for the full year, versus the previous estimate of 84.1% - 84.5%, which reflects elevated outpatient medical costs relative to previous guidance;
  • Selling, general and administrative expenses in the 7.5% - 7.8% range, versus the previous estimate of 8.1% - 8.5%, which reflects further administrative efficiencies leveraged on a higher membership base; and
  • Fully diluted shares outstanding of approximately 52.7 million, versus the previous estimate of approximately 54 million, reflecting year-to-date and anticipated share buyback activity during the remainder of the year.

                                                            2009 Guidance
                                                            --------------
                Earnings per diluted share                   $2.90 - $3.05
                Total revenues                 Approximately $5.15 billion
                Investment income and other    Approximately $32.0 million
                Health benefits ratio                        84.9% - 85.5%
                Selling, general &
                 administrative ratio                          7.5% - 7.8%
                Fully diluted shares
                 outstanding                    Approximately 52.7 million

Second Quarter Earnings Call

AMERIGROUP senior management will discuss the Company's second quarter results on a conference call Friday, July 31, 2009 at 8:30 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 16913886. The replay will be available shortly after the conclusion of the call until Friday, August 7, at 11:59 p.m. Eastern Time. 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 Corporation, headquartered in Virginia Beach, Virginia, improves healthcare access and quality for the financially vulnerable, seniors and people with disabilities by developing innovative managed health services for the public sector. Through its subsidiaries, AMERIGROUP Corporation serves approximately 1.7 million people in Florida, Georgia, Maryland, Nevada, New Jersey, New Mexico, New York, Ohio, Tennessee, Texas and Virginia. For more information, 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 related to expected 2009 earnings which are subject to numerous factors, many of which are outside of our control, including our cash balances, the levels and amounts of membership, revenues, organic premium revenues, rate increases, operating cash flows, health benefits expenses, medical expense trend levels, our ability to manage our medical costs generally, seasonality of health benefits expenses, selling, general and administrative expenses, days in claims payable, income tax rates, earnings per share and net income growth. 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, national, state and local 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 healthcare industry; changes in Medicaid and Medicare payment levels and methodologies; liabilities and other claims asserted against us; our ability to attract and retain qualified personnel; our ability to maintain compliance with all minimum capital requirements; the availability and terms of capital to fund acquisitions and capital improvements; the competitive environment in which we operate; our ability to maintain and increase membership levels; demographic changes; increased use of services, increased cost of individual services, epidemics, the introduction of new or costly treatments and technology, new mandated benefits, insured population characteristics and seasonal changes in the level of healthcare use; our ability to enter into new markets or remain in existing markets, our inability to operate new products and markets at expected levels, including, but not limited to, profitability, membership and targeted service standards; changes in market interest rates or any disruptions in the credit markets; catastrophes, including epidemics, pandemics, acts of terrorism or severe weather; the unfavorable resolution of new or pending litigation; and our ability to finalize the tax adjustment with the Internal Revenue Service. There can also be no assurance that we will achieve the estimated earnings discussed in this release or that our actual results for 2009 will not differ materially from our current estimates. Our ability to achieve the earnings described is subject to a variety of factors, including those described above, many of which are out of our control.

Investors should also refer to our annual report on Form 10-K for the year ended December 31, 2008 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 STATEMENTS OF OPERATIONS
                   (dollars in thousands, except per share data)
                                    (unaudited)

                              Three months ended          Six months ended
                                   June 30,                   June 30,
                                   --------                   --------
                                2009      2008(1)         2009      2008(1)
                                ----      -------         ----      -------

    Revenues:
        Premium           $1,284,890   $1,098,356    $2,502,337  $2,148,360
        Investment
         income and other
                               6,517       18,463        18,864      41,072
                               -----       ------        ------      ------
            Total
             revenues      1,291,407    1,116,819     2,521,201   2,189,432
                           ---------    ---------     ---------   ---------
    Expenses:
        Health benefits    1,103,213      911,471     2,122,516   1,786,392
        Selling, general
         and administrative   96,285      113,140       206,660     219,882
        Premium taxes         34,623       22,119        62,741      44,145
        Litigation
         settlement                -      234,205             -     234,205
        Depreciation and
         amortization          9,680        8,871        18,006      17,648
        Interest               4,232        5,235         8,470      11,025
                               -----        -----         -----      ------
            Total
             expenses      1,248,033    1,295,041     2,418,393   2,313,297
                           ---------    ---------     ---------   ---------
            Income (loss)
             before income
             taxes            43,374     (178,222)      102,808    (123,865)
    Income tax (benefit)
     expense                  (6,225)     (14,190)       16,300       6,530
                              ------      -------        ------       -----
            Net income
             (loss)          $49,599    ($164,032)      $86,508   ($130,395)
                             =======    =========       =======   =========


        Diluted net
         income (loss)
         per share             $0.94       ($3.10)        $1.63      ($2.46)
                               =====       ======         =====      ======

        Weighted average
         number of common
         shares and dilutive
         potential common
         shares
         outstanding      53,029,943   52,953,851(2) 53,224,753  53,064,818(2)
                          ==========   ============  ==========  ============

    (1) 2008 results reflect the previously disclosed reclassification of
        premium taxes and experience rebate.  Additionally, results include
        the impact from the adoption of FASB Staff Position (FSP) APB 14-1,
        Accounting for Convertible Debt Instruments That May Be Settled in
        Cash Upon Conversion (Including Partial Cash Settlement), which
        increased interest expense in each of the periods presented.
    (2) Weighted shares in the three and six months ended June 30, 2008
        exclude potentially dilutive common stock equivalents due to the net
        loss in those periods in accordance with generally accepted accounting
        principles.


    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    Six months
                                                ended          ended
                                              June 30,       June 30,
                                              --------       --------
                                            2009   2008    2009   2008
                                            ----   ----    ----   ----
    Premium revenue                         99.5%  98.3%   99.3%  98.1%
    Investment income and other              0.5    1.7     0.7    1.9
                                             ---    ---     ---    ---
    Total revenues                         100.0% 100.0%  100.0% 100.0%
                                           =====  =====   =====  =====
    Health benefits (1)                     85.9%  83.0%   84.8%  83.2%
    Selling, general and administrative
     expenses                                7.5%  10.1%    8.2%  10.0%
    Income (loss) before income taxes        3.4% (16.0)%   4.1%  (5.7)%
    Net income (loss)                        3.8% (14.7)%   3.4%  (6.0)%

    (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, 2009 and 2008.  Because the
    Company receives two premiums for members that are in both the Medicare
    Advantage and Medicaid products, these members have been counted twice
    in the states where the Company offers both plans.

                                                June 30,
                                                --------
                                              2009      2008
                                              ----      ----
        Texas(1)                           476,000   458,000
        Florida                            264,000   221,000
        Georgia                            220,000   197,000
        Tennessee(2)                       195,000   353,000
        Maryland                           183,000   158,000
        New Jersey                         112,000   101,000
        New York                           111,000   112,000
        Ohio                                60,000    57,000
        Nevada                              53,000         -
        Virginia                            29,000    25,000
        New Mexico                          20,000         -
        District of Columbia(3)                  -    34,000
        South Carolina(4)                        -     4,000
                                               ---     -----
              Total                      1,723,000 1,720,000
                                         ========= =========

    (1) Membership includes approximately 13,000 under an ASO contract in
        2009.
    (2) Membership includes approximately 166,000 under an ASO contract in
        2008 terminated on October 31, 2008.
    (3) AMERIGROUP exited the District of Columbia on June 30, 2008.
    (4) AMERIGROUP exited the State of South Carolina on March 1, 2009.



    The following table sets forth the approximate number of members in each
    of the Company's products as of June 30, 2009 and 2008.  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                            2009      2008
        -------                            ----      ----
        TANF (Medicaid)(1)(3)         1,194,000 1,219,000
        CHIP(3)                         257,000   243,000
        ABD (Medicaid)(2)               205,000   206,000
        FamilyCare (Medicaid)            54,000    44,000
        Medicare Advantage               13,000     8,000
                                         ------     -----
            Total                     1,723,000 1,720,000
                                      ========= =========


    (1) Membership includes approximately 125,000 members under an ASO
        contract in 2008 terminated on October 31, 2008.
    (2) Membership includes approximately 13,000 ASO members in 2009 and
        41,000 members under an ASO contract in 2008 terminated on
        October 31, 2008.
    (3) 2008 reflects a reclassification from CHIP to TANF to coincide
        with State classifications.

                     AMERIGROUP CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (dollars in thousands, except per share data)
                                   (unaudited)
                                                  June 30,       December 31,
                                                    2009              2008
                                                    ----              ----
                                     Assets
    Current assets:
        Cash and cash equivalents                $654,491          $763,272
        Short-term investments                     24,906            97,466
        Premium receivables                       102,278            86,595
        Deferred income taxes                      23,101            25,347
        Prepaid expenses, provider and other
         receivables and other                     81,973            42,281
                                                   ------            ------
          Total current assets                    886,749         1,014,961

    Property, equipment and software, net         103,187           103,747
    Goodwill and other intangible assets, net     249,968           250,205
    Long-term investments, including
     investments on deposit for licensure         721,800           571,663
    Other long-term assets                         13,564            15,091
                                                   ------            ------
                                               $1,975,268        $1,955,667
                                               ==========        ==========

          Liabilities and Stockholders' Equity
    Current liabilities:
        Claims payable                           $562,990          $536,107
        Unearned revenue                           64,427            82,588
        Accounts payable                            2,347             6,810
        Accrued expenses and other                136,746           170,811
        Current portion of long-term debt             211               506
                                                      ---               ---
          Total current liabilities               766,721           796,822

    Long-term debt                                247,906           268,956
    Other long-term liabilities                    17,633            17,230
                                                   ------            ------
          Total liabilities                     1,032,260         1,083,008
                                                ---------         ---------

    Stockholders' equity:
        Common stock, $.01 par value                  542               539
        Additional paid-in capital, net of
         treasury stock                           418,331           434,789
        Accumulated other comprehensive loss       (3,726)           (4,022)
        Retained earnings                         527,861           441,353
                                                  -------           -------
          Total stockholders' equity              943,008           872,659
                                                  -------           -------
                                               $1,975,268        $1,955,667
                                               ==========        ==========



                    AMERIGROUP CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (unaudited)
                                                         Six months ended
                                                              June 30,
                                                              --------
                                                          2009       2008
                                                          ----       ----
                                                           (dollars in
                                                            thousands)
    Cash flows from operating activities:
        Net income (loss)                               $86,508  ($130,395)
        Adjustments to reconcile net income (loss)
         to net cash provided by operating activities:
            Depreciation and amortization                18,006     17,648
            Loss on disposal of property, equipment
             and software                                   412        259
            Deferred tax expense (benefit)                4,630     (6,808)
            Compensation expense related to share-
             based payments                               8,022      5,411
            Convertible debt non-cash interest expense    4,987      4,672
            Other                                          (201)     8,808
            Gain on sale of contract rights              (5,810)         -
            Changes in assets and liabilities
             increasing (decreasing) cash flows
             from operations:
              Premium receivables                       (15,683)   (28,821)
              Prepaid expenses, provider and other
               receivables and other current assets     (35,928)     5,220
              Other assets                                 (439)    (2,198)
              Claims payable                             26,883        571
              Litigation settlement                           -    234,205
              Unearned revenue                          (18,161)    18,771
              Accounts payable, accrued expenses and
               other current liabilities                (36,605)   (31,481)
              Other long-term liabilities                (2,583)       (22)
                                                         ------        ---
                          Net cash provided by operating
                           activities                    34,038     95,840
                                                         ------     ------

    Cash flows from investing activities:
        (Purchase of) proceeds from sale of
         investments, net                               (72,369)    15,867
        Purchase of investments on deposit for
         licensure, net                                  (3,913)    (2,173)
        Purchase of property, equipment and software    (15,865)   (17,514)
        Proceeds from sale of contract rights             5,810          -
                                                          -----        ---
                          Net cash used in investing
                           activities                   (86,337)    (3,820)
                                                        -------     ------

    Cash flows from financing activities:
        Repayments of borrowings under credit
         facility                                       (26,318)   (26,786)
        Payment of capital lease obligations                  -       (293)
        Proceeds and tax benefits from exercise of
         stock options and change in bank overdrafts
         and other, net                                  (1,609)     4,233
        Treasury stock repurchases                      (28,555)   (19,260)
                                                        -------    -------
                          Net cash used in financing
                           activities                   (56,482)   (42,106)
                                                        -------    -------
    Net (decrease) increase in cash and cash
     equivalents                                       (108,781)    49,914
    Cash and cash equivalents at beginning of period    763,272    487,614
                                                        -------    -------
    Cash and cash equivalents at end of period         $654,491   $537,528
                                                       ========   ========



                     AMERIGROUP CORPORATION AND SUBSIDIARIES
                Components of the Change in Medical Claims Payable
                              (dollars in thousands)

                                       Six months ended  Twelve months ended
                                         June 30, 2009    December 31, 2008
                                         -------------    -----------------
    Medical claims payable, beginning
     of period                                 $536,107             $541,173

    Health benefits expenses incurred
     during period:
        Related to current year               2,199,135            3,679,107
        Related to prior years                  (76,619)             (60,846)
                                                -------              -------
            Total incurred                    2,122,516            3,618,261
                                              ---------            ---------

    Health benefits payments during period:
        Related to current year               1,722,004            3,197,732
        Related to prior years                  373,629              425,595
                                                -------              -------
            Total payments                    2,095,633            3,623,327
                                              ---------            ---------

    Medical claims payable, end of
     period                                    $562,990             $536,107
                                               ========             ======== 

Health benefits expenses 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. The amount related to the prior year for the period ended June 30, 2009 also included the one-time impact of establishing estimates for pharmacy rebates which began in the first quarter of 2009.

                  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)

                                            GAAP                     Adjusted
                                    Three months  Less: Impact   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
                                      ==========                   ==========



      Second Quarter 2008 Operating Results Excluding Litigation Settlement
                                      Charge
                     AMERIGROUP CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                  (dollars in thousands, except per share data)
                                   (unaudited)

                                     GAAP                           Adjusted
                                  Three months   Less: Impact   Three months
                                         ended  of Litigation          ended
                                 June 30, 2008     Settlement  June 30, 2008
                                 -------------     ----------  -------------
    Revenues:
        Premium                     $1,098,356             $-     $1,098,356
        Investment income and
         other                          18,463              -         18,463
                                        ------            ---         ------
            Total revenues           1,116,819              -      1,116,819
    Expenses:
        Health benefits                911,471              -        911,471
        Selling, general and
         administrative                113,140              -        113,140
        Premium taxes                   22,119              -         22,119
        Litigation settlement          234,205        234,205              -
        Depreciation and
         amortization                    8,871              -          8,871
        Interest                         5,235              -          5,235
                                         -----            ---          -----
            Total expenses           1,295,041        234,205      1,060,836
                                     ---------        -------      ---------
            (Loss) income
             before income
             taxes                    (178,222)      (234,205)        55,983
    Income tax (benefit)
     expense                           (14,190)       (34,995)        20,805
                                       -------        -------         ------
            Net (loss) income        ($164,032)     ($199,210)       $35,178
                                     =========      =========        =======

        Diluted net (loss) income
         per share                      ($3.10)        ($3.75)         $0.65
                                        ======         ======          =====

        Weighted average number of
         common shares and dilutive
         potential common shares
         outstanding                52,953,851                    53,814,812
                                    ==========                    ==========

    CONTACTS:
    Investors:  Julie Loftus Trudell
                Senior Vice President, Investor Relations
                AMERIGROUP Corporation
                (757) 321-3597


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SOURCE AMERIGROUP Corporation
Copyright©2009 PR Newswire.
All rights reserved


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2. AMERIGROUP Corporation to Discuss Second Quarter Earnings on July 31
3. AMERIGROUP Corporation to Present at the 19th Annual Wachovia Mid-Year Equity Conference on June 24
4. Dr. Emily Abrams Massey of Atlanta Honored as Healthy Hero by the AMERIGROUP Foundation
5. AMERIGROUP Corporation to Present at The Deutsche Bank 34th Annual Healthcare Conference on May 18
6. AMERIGROUP Corporation to Webcast Annual Meeting of Stockholders on May 7, 2009
7. AMERIGROUP Reports Q1 Net Income of $36.9 Million or $0.69 per Diluted Share
8. Dr. Yvonne Sanders-Butler of Atlanta Honored as Healthy Hero By the AMERIGROUP Foundation
9. AMERIGROUP Corporation to Discuss First Quarter Earnings on May 1
10. AMERIGROUP Corporation to Present at the Goldman Sachs Leveraged Finance Healthcare Conference on April 8
11. AMERIGROUP Corporation to Present at the Barclays Capital Global Healthcare Conference on March 10
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