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AMERIGROUP Reports Q4 Net Income of $37.3 Million or $0.70 Per Diluted Share
Date:2/19/2009

Reiterates Full-Year 2009 Outlook

VIRGINIA BEACH, Va., Feb. 19, 2009 /PRNewswire-FirstCall/ -- AMERIGROUP Corporation (NYSE: AGP) today announced that its net income for the fourth quarter of 2008 increased 20.0% to $37.3 million, or $0.70 per diluted share, versus net income of $31.1 million, or $0.57 per diluted share, for the fourth quarter of 2007.

For the year ended December 31, 2008, the Company's net loss was $50.7 million, or $0.96 per diluted share, including the impact of a one-time litigation charge of $234.2 million, or $199.6 million net of the related tax benefit. Excluding the impact of this charge, full-year 2008 net income would have been $149.0 million, or $2.77 per diluted share. For the full-year 2007, the Company reported net income of $116.5 million, or $2.16 per diluted share. A reconciliation of this non-GAAP financial measure to GAAP is included on page 11 of this release.

The Company also reiterated its previously issued 2009 annual guidance of $2.50 to $2.65 per diluted share, which includes the impact of the change in the accounting treatment for convertible debt and a decline in investment income due to lower yields on fixed income investments.

Fourth Quarter and Other Highlights include:

  • Fourth quarter total revenues were $1.2 billion; a 9.1% increase over the fourth quarter of 2007 and a 4.6% increase sequentially.
  • Health benefits ratio was 81.4% of premium revenues.
  • Selling, general and administrative expense ratio was 13.1% of total revenue.
  • Cash flow from operations was $103.7 million for the three months ended December 31, 2008.
  • Medical claims payable as of December 31, 2008 totaled $536.1 million compared to $528.0 million as of September 30, 2008.
  • Days in claims payable was 52, compared to 55 days in the previous quarter.
  • The Company reiterated 2009 annual earnings guidance of $2.50 to $2.65 per diluted share.
  • The AMERIGROUP Public Policy Institute, an initiative jointly sponsored by AMERIGROUP Corporation and the AMERIGROUP Foundation, was established in January 2009 to increase awareness of issues relating to public healthcare programs that serve people who are financially vulnerable, who have disabilities or who are elderly and frail.
  • On February 1, 2009, the Company began serving approximately 50,000 members in Nevada's Medicaid and Children's Health Insurance (CHIP) programs.
  • The Company's stock repurchase program was increased by three million shares.

"At a time of considerable change and uncertainty for our Nation's economy and our healthcare system, AMERIGROUP continues to operate effectively and efficiently," said James G. Carlson, AMERIGROUP Chairman and Chief Executive Officer. "During the fourth quarter, our innovative new program in New Mexico for people with extensive healthcare needs continued to grow. And throughout our Company, we acted carefully and prudently to help our government partners conserve scarce resources and manage their programs wisely.

"Medicaid plays an especially important role in our healthcare system in tough economic times, and we are pleased that the President and Congress are acting to ensure that adequate funds are available to support the program. AMERIGROUP has been addressing the needs of financially vulnerable citizens enrolled in Medicaid for 15 years, and we believe that our knowledge and experience have never been more valuable. We look forward to helping our State partners meet the healthcare and financial challenges they face in 2009."

Premium Revenues

Premium revenues for the fourth quarter of 2008 increased 10.3% to $1.2 billion compared to $1.1 billion in the fourth quarter of 2007. Sequentially, premium revenues increased $56.2 million, or 5.1%, compared with the third quarter of 2008. The sequential increase primarily reflects the first full quarter of operations in New Mexico and the impact of rate increases in Georgia and Texas.

For the year ended December 31, 2008, premium revenues increased 14.8% to $4.4 billion from $3.9 billion for the year ended December 31, 2007.

Investment Income and Other Revenues

Fourth quarter investment income and other revenues were $12.7 million compared to $23.7 million in the fourth quarter of 2007. Sequentially, investment income and other revenues decreased $4.9 million, or 28.0%, from the third quarter of 2008, due to the conclusion of the West Tennessee Administrative Services Only business on October 31, 2008 and a decrease in investment yields.

Health Benefits

Health benefits as a percent of premium revenues were 81.4% for the fourth quarter of 2008 versus 82.9% in the fourth quarter of 2007, and compared to 80.1% in the third quarter of 2008. The fourth quarter 2008 health benefits ratio reflects favorable medical cost performance during the quarter, with the majority of health plans, including Tennessee, exceeding expectations. The health benefits ratio was also impacted by favorable reserve development, primarily in Texas.

For the full-year 2008, the health benefits ratio was 81.4% compared to 83.1% for the full-year 2007.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were 13.1% of total revenues for the fourth quarter of 2008, unchanged from the fourth quarter of 2007, and compared to 14.4% of total revenues in the third quarter of 2008. Selling, general and administrative expenses for the fourth quarter of 2008 remained elevated due to an increased accrual for experience rebate in Texas associated with favorable results in that market.

For the full-year 2008, the selling, general and administrative expense ratio was 13.5% compared with 12.6% for the full-year 2007.

Balance Sheet and Cash Flow Highlights

Cash and investments at December 31, 2008 totaled $1.4 billion. Unregulated and unrestricted cash and investments were $309.8 million, an increase of $26.9 million when compared to September 30, 2008.

Medical claims payable as of December 31, 2008 totaled $536.1 million compared to $528.0 million as of September 30, 2008. Days in claims payable represented 52 days of health benefits expense, which is in-line with the expected range of 45 to 55 days. Days in claims payable was 55 days as of September 30, 2008.

Cash flow provided by operations totaled $103.7 million for the three months ended December 31, 2008, representing 2.8 times quarterly net income, and was $74.3 million for the full year compared to $350.7 million in the prior year. Excluding the litigation settlement, cash flow provided by operations was $273.9 million for the full year, representing 1.8 times adjusted net income. A reconciliation of this non-GAAP financial measure to GAAP is included on page 12 of this release.

Share Repurchase

On February 11, 2009, the Company's Board of Directors approved a three million share increase to the ongoing stock repurchase program, which was initially authorized on February 12, 2008. During the fourth quarter, the Company repurchased approximately 320,000 shares of its common stock for approximately $7.8 million. For the year ended December 31, 2008, the Company repurchased approximately 1.2 million shares of its common stock under the program for approximately $30.6 million.

Stock repurchases have been made, and may continue to be made, from time to time in the open market or in privately negotiated transactions, and have been and will continue to be funded from unrestricted cash. The Company has adopted and may adopt additional written plans pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934 to affect the repurchase of a portion of shares authorized. The number of shares to be repurchased and the timing of the repurchases will be based on the level of available cash, limitations imposed by the Company's credit agreement and other factors, including market conditions, the terms of any applicable Rule 10b5-1 plans and self-imposed blackout periods. There can be no assurances as to the exact number or aggregate value of shares repurchased. The repurchase program may be suspended or discontinued at any time or from time to time without prior notice.

2009 Income Statement Reclassifications

In 2009, the Company will make certain reclassifications to its income statement format. Beginning in the first quarter of 2009, the Company will remove the Texas experience rebate from selling, general and administrative expenses and include the amount as a reduction to premium revenue, as this amount is effectively a premium rebate to the State. In addition, premium tax will be reported on a separate line following selling, general and administrative expenses and before depreciation and amortization.

"The reclassifications to our income statement in 2009 will serve to reduce variability on the selling, general and administrative expenses that we experience due to variation in the Texas experience rebate," said James W. Truess, AMERIGROUP Chief Financial Officer. "Additionally, by isolating premium tax, the remaining selling, general and administrative expenses are more reflective of core operating expenses and the ratio is not as significantly impacted by changing business volumes in states with high premium tax rates. The change will have the effect of increasing the health benefits expense ratio and reducing the selling, general and administrative expense ratio. We believe this presentation will be more useful to investors."

For comparability purposes the Company is providing the 2008 quarterly and full-year results and related ratios under this reclassification on page 13 of this release.

2009 Outlook

AMERIGROUP is reiterating its 2009 annual earnings guidance of $2.50 to $2.65 per diluted share.

"We are pleased with the performance that our business delivered during 2008 in this particularly challenging environment. Our results reflect a net income margin of 3.3%, excluding the one-time litigation charge, which is toward the high end of our long-term margin expectation of 2.5% to 3.5%," said Truess.

"In 2009, our guidance implies that the net income margin will moderate to the middle of our range. We believe the moderation of expectations in 2009 is appropriate as 2008 was impacted by a range of one-time items that, on balance, favorably impacted EPS by approximately $0.11. Additionally, our guidance reflects an expected reduction in investment income compared to 2008 as interest rates for the foreseeable future are anticipated to be below that of 2008, and we are planning for an increase in non-cash interest expense due to the change in accounting for our convertible notes. Adjusted for these items, our EPS guidance implies underlying earnings growth in the upper single to low double-digit range. We believe this is prudent as it is still early in the year, with important premium rate renewals yet to come."

AMERIGROUP's 2009 earnings guidance incorporates the income statement reclassifications discussed previously in this release and are predicated on the following assumptions among others:



                         2009         2008 Actual
                       Guidance      Reclassified(1)   2009 vs. 2008
                       ---------     ------------     --------------
    Total
     revenues      $4,900M - $5,000M   $4,437.7M   Total revenues in 2009
                                                   reflect organic premium
                                                   revenue growth in the
                                                   10-13% range.

    Investment
     Income and
     Other             Below $29M        $71.4M    Decrease in investment
                                                   income and other reflects
                                                   the loss of the West
                                                   Tennessee ASO revenue of
                                                   approximately $20 million
                                                   as well as a decrease in
                                                   the yield on investments.

    Health benefits
     expense ratio    Low 84% range       82.9%     Increase in HBR reflects
                                                   the full-year impact of new
                                                   market entries.
                                                   Additionally, the
                                                   sequential comparison is
                                                   impacted by the favorable
                                                   prior period development
                                                   experienced and retroactive
                                                   premium rates received in
                                                   2008.

    Selling, general
     & administrative
     expense ratio    Low-to-mid 8%        9.8%    Decrease is attributable to
                                                   enhanced economies of scale
                                                   and the loss of the West
                                                   Tennessee ASO business;
                                                   also 2008 was elevated due
                                                   to market exit costs and
                                                   variable compensation.

    Fully diluted
     shares
     outstanding    Approximately 54M     53.7M

    (1)  Reflects 2008 actual reclassified.  See description of
         reclassification on page 3.


Lower yields on the fixed income portfolio are expected to decrease 2009 earnings by approximately $0.26 -$0.28 per diluted share compared to 2008. In addition, the impact of the FASB Staff Position (FSP) APB 14-a, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), is expected to decrease earnings by approximately $0.12 per diluted share in 2009. This increase in non-cash interest expense associated with the accounting change is expected to be partially offset by lower outstanding debt and lower interest rates in 2009, bringing the net impact down to approximately $0.07 per diluted share.

Fourth Quarter Earnings Call

AMERIGROUP senior management will discuss the Company's fourth quarter results on a conference call Thursday, February 19, 2009 at 8:30 a.m. Eastern Standard Time (EST). 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 79795659. The replay will be available shortly after the conclusion of the call until Thursday, February 26, 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 1.6 million people in Florida, Georgia, Maryland, Nevada, New Jersey, New Mexico, New York, Ohio, South Carolina, 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 acts of terrorism or severe weather; and the unfavorable resolution of pending litigation. 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, 2007 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   Twelve months ended
                                     December 31,          December 31,
                                     ------------          ------------
                                    2008       2007     2008(2)       2007
                                    ----       ----     -------       ----

    Revenues:
        Premium                 $1,161,917 $1,053,044 $4,444,623  $3,872,210
        Investment income and
         other                      12,687     23,686     71,383      73,320
                                    ------     ------     ------      ------
            Total revenues       1,174,604  1,076,730  4,516,006   3,945,530
                                 ---------  ---------  ---------   ---------
    Expenses:
        Health benefits            946,095    873,165  3,618,261   3,216,070
        Selling, general and
         administrative(1)         153,763    141,541    607,897     499,000
        Litigation settlement            -          -    234,205           -
        Depreciation and
         amortization               10,926      8,008     37,385      31,604
        Interest                     2,071      3,959     11,170      12,291
                                     -----      -----     ------      ------
            Total expenses       1,112,855  1,026,673  4,508,918   3,758,965
                                 ---------  ---------  ---------   ---------
            Income before
             income taxes           61,749     50,057      7,088     186,565
    Income tax expense              24,400     18,935     57,750      70,115
                                    ------     ------     ------      ------
            Net income (loss)      $37,349    $31,122   ($50,662)   $116,450
                                   =======    =======   ========    ========


        Diluted net income
         (loss) per share            $0.70      $0.57     ($0.96)      $2.16
                                     =====      =====     ======       =====

        Weighted average number
          of common shares and
          dilutive potential
          common shares
          outstanding           53,345,226 54,299,050 52,816,674  53,845,829
                                ========== ========== ==========  ==========


    (1) Includes premium tax of:   $25,706    $22,595    $93,757     $85,218

    (2) Page 11 provides non-GAAP year-end results excluding the litigation
        settlement.


    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      Twelve months
                                             ended             ended
                                          December 31,      December 31,
                                          ------------      ------------
                                         2008     2007     2008      2007
                                         ----     ----     ----      ----
    Premium revenue                      98.9%    97.8%    98.4%     98.1%
    Investment income and other           1.1      2.2      1.6       1.9
                                          ---      ---      ---       ---
    Total revenues                      100.0%   100.0%   100.0%    100.0%
                                        =====    =====    =====     =====
    Health benefits (1)                  81.4%    82.9%    81.4%     83.1%
    Selling, general and
     administrative expenses             13.1%    13.1%    13.5%     12.6%
    Income before income taxes            5.3%     4.6%     0.2%      4.7%
    Net income (loss)                     3.2%     2.9%    (1.1)%     3.0%

    (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 our members we
    served in each state as of December 31, 2008 and 2007.  Because we
    receive two premiums for members that are in both the Medicare Advantage
    and Medicaid products, these members have been counted twice in the
    states where we offer both plans.
                                          December 31,
                                          ------------
                                           2008      2007
                                           ----      ----
        Texas(1)                        455,000   460,000
        Florida                         237,000   206,000
        Georgia                         206,000   211,000
        Tennessee(2)                    187,000   356,000
        Maryland                        169,000   152,000
        New York                        110,000   112,000
        New Jersey                      105,000    98,000
        Ohio                             58,000    54,000
        Virginia                         25,000    24,000
        South Carolina                   16,000      -
        New Mexico                       11,000      -
        District of Columbia               -       38,000
                                           ----    ------
              Total                   1,579,000 1,711,000
                                      ========= =========

    (1) Membership includes approximately 13,000 members under an
        Administrative Services Only (ASO) contract in 2007.
    (2) Membership includes approximately 170,000 under an ASO contract
        in 2007.  This contract was terminated on October 31, 2008.



    The following table sets forth the approximate number of our members
    in each of our products as of December 31, 2008 and 2007.  Because we
    receive two premiums for members that are in both the Medicare Advantage
    and Medicaid products, these members have been counted in each product.

                                           December 31,
                                           ------------
        Product                            2008      2007
        -------                            ----      ----
        TANF (Medicaid)(1)            1,057,000 1,179,000
        SCHIP                           291,000   268,000
        ABD (Medicaid)(2)               182,000   216,000
        FamilyCare (Medicaid)            40,000    43,000
        Medicare Advantage                9,000     5,000
                                          -----     -----
            Total                     1,579,000 1,711,000
                                      ========= =========


    (1)  Membership includes 129,000 members under an ASO contract in
         Tennessee in 2007.  This contract was terminated on October 31, 2008.
    (2)  Membership includes 41,000 members under ASO contracts in Tennessee
         and 13,000 ASO contract members in Texas in 2007.



                     AMERIGROUP CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (dollars in thousands, except per share data)
                                   (unaudited)
                                                               December 31,
                                                             2008        2007
                                                             ----        ----
                                     Assets
    Current assets:
        Cash and cash equivalents                        $763,272    $487,614
        Short-term investments                             97,466     199,947
        Restricted investments held as collateral               -     351,318
        Premium receivables                                86,595      82,940
        Deferred income taxes                              25,347      23,475
        Prepaid expenses, provider and other
         receivables and other                             42,281      82,914
                                                           ------      ------
          Total current assets                          1,014,961   1,228,208

    Property, equipment and software, net                 103,747      97,933
    Goodwill and other intangible assets, net             250,205     263,009
    Long-term investments, including investments on
     deposit for licensure                                571,663     469,218
    Deferred income taxes                                   9,298      12,075
    Other long-term assets                                 15,091      18,178
                                                           ------      ------
                                                       $1,964,965  $2,088,621
                                                       ==========  ==========

                       Liabilities and Stockholders' Equity
    Current liabilities:
        Claims payable                                   $536,107    $541,173
        Unearned revenue                                   82,588      55,937
        Accounts payable                                    6,810       6,775
        Accrued expenses and other                        170,811     167,188
        Current portion of long-term debt and capital
         leases                                               506      27,935
                                                              ---      ------
          Total current liabilities                       796,822     799,008

    Long-term debt and capital leases                     303,826     361,458
    Other long-term liabilities                            13,839      14,248
                                                           ------      ------
          Total liabilities                             1,114,487   1,174,714
                                                        ---------   ---------

    Stockholders' equity:
        Common stock, $.01 par value                          539         532
        Additional paid-in capital, net of treasury
         stock                                            402,441     411,193
        Accumulated other comprehensive loss               (4,022)          -
        Retained earnings                                 451,520     502,182
                                                          -------     -------
          Total stockholders' equity                      850,478     913,907
                                                          -------     -------
                                                       $1,964,965  $2,088,621
                                                       ==========  ==========



                     AMERIGROUP CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                                        Twelve months ended
                                                             December 31,
                                                             ------------
                                                              2008      2007
                                                              ----      ----
                                                            (in thousands)
    Cash flows from operating activities:
        Net (loss) income                                 ($50,662) $116,450
        Adjustments to reconcile net (loss) income
         to net cash provided by operating activities:
            Depreciation and amortization                   37,385    31,604
            Loss on disposal of property, equipment
             and software                                      644        67
            Deferred tax expense (benefit)                   3,112    (2,204)
            Compensation expense related to share-
             based payments                                 10,381    11,879
            Impairment of goodwill                           8,808         -
            Other                                             (441)        -
            Changes in assets and liabilities
             increasing (decreasing) cash flows
             from operations:
              Premium receivables                           (3,655)  (19,346)
              Prepaid expenses, provider and other
               receivables and other current assets         41,183   (18,499)
              Other assets                                     788    (2,577)
              Claims payable                                (5,066)  155,969
              Unearned revenue                              26,651    29,821
              Accounts payable, accrued expenses and
               other current liabilities                     5,557    39,464
              Other long-term liabilities                     (409)    8,112
                                                              ----     -----
                          Net cash provided by operating
                           activities                       74,276   350,740
                                                            ------   -------

    Cash flows from investing activities:
        Release (purchase) of restricted investments
         held as collateral, net                           351,318  (351,318)
        Purchase of convertible note hedge
         instruments                                             -   (52,702)
        Proceeds from sale of warrant instruments                -    25,662
        (Purchase) proceeds from investment
         activity, net                                      (3,081)   19,875
        Acquisition of contract rights and related
         assets                                                  -   (11,733)
        Purchase of investments on deposit for
         licensure, net                                     (5,493)  (20,974)
        Purchase of property, equipment and software       (37,034)  (40,334)
        Purchase price adjustment received                   1,500         -
                                                             -----       ---
                          Net cash provided by (used in)
                           investing activities            307,210  (431,524)
                                                           -------  --------

    Cash flows from financing activities:
        Proceeds from borrowings under credit facility
         and issuance of convertible notes                       -   611,318
        Repayments of borrowings under credit facility     (84,028) (222,293)
        Payment of debt issuance costs                           -   (11,732)
        Payment of capital lease obligations                  (368)     (842)
        Proceeds and tax benefits from exercise of
         stock options and change in bank overdrafts
         and other, net                                      9,215    15,229
        Treasury stock purchases                           (30,647)        -
                                                           -------       ---
                          Net cash (used in) provided
                           by financing activities        (105,828)  391,680
                                                          --------   -------
    Net increase in cash and cash equivalents              275,658   310,896
    Cash and cash equivalents at beginning of year         487,614   176,718
                                                           -------   -------
    Cash and cash equivalents at end of year              $763,272  $487,614
                                                          ========  ========

Reconciliation of Non-GAAP Financial Measures

Operating Results Excluding Litigation Settlement Charge for the Twelve Months Ended December 31, 2008

The following tables present (i) the Company's Consolidated Operations for the twelve months ended December 31, 2008 and (ii) Condensed Consolidated Cashflows from Operations on a GAAP and non-GAAP basis. Management believes that the presentation of certain financial information in this press release, excluding the litigation settlement charge that was recorded in the twelve months ended December 31, 2008, which is non-GAAP financial information, is useful to investors and improves the comparability of the Company's ongoing operational results between periods. This non-GAAP financial information should be considered in addition to, not as a substitute for, financial information prepared in accordance with GAAP.

                    AMERIGROUP CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                 (dollars in thousands, except per share data)
                                  (unaudited)

                                     GAAP   Less: Impact    Adjusted Twelve
                      Twelve months ended  of Litigation       months ended
                        December 31, 2008     Settlement  December 31, 2008
                        -----------------     ----------  -----------------
    Revenues:
        Premium                $4,444,623             $-         $4,444,623
        Investment income
         and other                 71,383              -             71,383
                                   ------            ---             ------
            Total revenues      4,516,006              -          4,516,006

    Expenses:
        Health benefits         3,618,261              -          3,618,261
        Selling, general
         and administrative       607,897              -            607,897
        Litigation
         settlement               234,205        234,205                  -
        Depreciation and
         amortization              37,385              -             37,385
        Interest                   11,170              -             11,170
                                   ------            ---             ------
            Total expenses      4,508,918        234,205          4,274,713
                                ---------        -------          ---------
            Income (loss)
             before income
             taxes                  7,088       (234,205)           241,293
    Income tax expense (benefit)   57,750        (34,567)            92,317
                                   ------        -------             ------
            Net (loss) income    ($50,662)     ($199,638)          $148,976
                                 ========      =========           ========

        Basic net (loss)
         income per share          ($0.96)        ($3.78)             $2.82
                                   ======         ======              =====
        Diluted net (loss)
         income per share          ($0.96)        ($3.73)             $2.77
                                   ======         ======              =====

    Basic shares
     outstanding               52,816,674                        52,816,674
    Fully diluted
     shares outstanding        52,816,674                        53,726,342



                      AMERIGROUP CORPORATION AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED OPERATING CASH FLOWS
                                    (unaudited)

                                     GAAP   Less: Impact    Adjusted Twelve
                      Twelve months ended  of Litigation       months ended
                        December 31, 2008     Settlement  December 31, 2008
                        -----------------     ----------  -----------------
    Cash flows from
     operating activities:
      Net (loss) income          ($50,662)     ($199,638)          $148,976
      Adjustments to reconcile
       net (loss) income to
       net cash (used in)
       provided by operating
       activities:
        Depreciation and
         amortization              37,385              -             37,385
        Loss on disposal of
         property, equipment
         and software                 644              -                644
        Deferred tax expense        3,112              -              3,112
        Compensation expense
         related to share-based
         payments                  10,381              -             10,381
        Impairment of
         goodwill                   8,808              -              8,808
        Other                        (441)                             (441)
        Changes in assets and
         liabilities increasing
         (decreasing) cash flows
         from operations:
          Premium receivables      (3,655)             -             (3,655)
          Prepaid expenses,
           provider and other
           receivables and
           other current
           assets                  41,183              -             41,183
          Other assets                788              -                788
          Claims payable           (5,066)             -             (5,066)
          Unearned revenue         26,651              -             26,651
          Accounts payable,
           accrued expenses and
           other current
           liabilities              5,557              -              5,557
          Other long-term
           liabilities               (409)             -               (409)
                                     ----            ---               ----

            Net cash (used in)
             provided by
             operating
             activities           $74,276      ($199,638)          $273,914
                                  =======      =========           ========



                    AMERIGROUP CORPORATION AND SUBSIDIARIES
          2008 FULL-YEAR AND QUARTERLY RECLASSIFICATION SCHEDULES (a)
                                                         2008
                                                         ----
                                               As Reported   Reclassified
      Revenues:
        Premium                                 $4,444,623     $4,366,359
        Investment income and other                 71,383         71,383
                                                    ------         ------
          Total revenues                         4,516,006      4,437,742
      Expenses:
        Health benefits                          3,618,261      3,618,261
        Selling, general and administrative        607,897        435,876
        Premium taxes                                    -         93,757
        Litigation settlement                      234,205        234,205
        Depreciation and amortization               37,385         37,385
        Interest                                    11,170         11,170
                                                    ------         ------
          Total expenses                         4,508,918      4,430,654
                                                 ---------      ---------
          Income before income taxes                 7,088          7,088
      Income tax expense                            57,750         57,750
                                                    ------         ------
          Net loss                                $(50,662)      $(50,662)
                                                  ========       ========

      Diluted net loss per share                    $(0.96)        $(0.96)
                                                    ======         ======
      Diluted net income per share less
       impact of litigation settlement               $2.77          $2.77
                                                     =====          =====

      Health benefits expense ratio                   81.4%          82.9%
      Selling, general and administrative
       expense ratio                                  13.5%           9.8%



                                               2008
                           Q1            Q2            Q3            Q4
                      Reclassified  Reclassified  Reclassified  Reclassified
    Revenues:
      Premium           $1,050,004    $1,098,356    $1,080,367    $1,137,632
      Investment income
       and other            22,609        18,463        17,624        12,687
                            ------        ------        ------        ------
        Total revenues   1,072,613     1,116,819     1,097,991     1,150,319
    Expenses:
      Health benefits      874,921       911,471       885,774       946,095
      Selling, general
       and administrative  106,742       113,140       112,222       103,772
      Premium taxes         22,026        22,119        23,906        25,706
      Litigation
       settlement                -       234,205             -             -
      Depreciation
       and amortization      8,777         8,871         8,811        10,926
      Interest               3,454         2,899         2,746         2,071
                             -----         -----         -----         -----
        Total expenses   1,015,920     1,292,705     1,033,459     1,088,570
                         ---------     ---------     ---------     ---------
        Income (loss)
         before income
         taxes              56,693      (175,886)       64,532        61,749
    Income tax expense
     (benefit)              21,600       (13,347)       25,097        24,400
                            ------       -------        ------        ------
        Net income (loss)  $35,093     $(162,539)      $39,435       $37,349
                           =======     =========       =======       =======

    Diluted net income
     (loss) per share        $0.65        $(3.07)        $0.74         $0.70
                             =====        ======         =====         =====
    Diluted net income
     per share less impact
     of litigation
     settlement              $0.65         $0.68         $0.74         $0.71
                             =====         =====         =====         =====

    Health benefits
     expense ratio            83.3%         83.0%         82.0%         83.2%
    Selling, general
     and administrative
     expense ratio            10.0%         10.1%         10.2%          9.0%


    (a) For an explanation of the 2008 Income Statement reclassifications,
        see page 3 of this release.



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

    News Media: Kent Jenkins Jr.
                Senior Vice President, External Communications
                AMERIGROUP Corporation
                (757) 769-7859


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


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2. AMERIGROUP Names Finley Chief Compliance Officer
3. AMERIGROUP Health Plan in Nevada Begins Serving Medicaid Enrollees
4. AMERIGROUP Corporation to Discuss Fourth Quarter Earnings on February 19
5. Atlanta Educator Kim Bearden Honored as Healthy Hero by AMERIGROUP Foundation
6. AMERIGROUP to Establish Public Policy Institute
7. AMERIGROUP Community Care of Ohio Awarded New Health Plan Accreditation From NCQA
8. AMERIGROUP Corporation to Present at the 27th Annual J.P. Morgan Healthcare Conference on January 14
9. AMERIGROUP Terminates Agreement to Purchase New Jersey Medicaid Plan
10. Fredericka Roper of Atlanta Honored as Healthy Hero By the AMERIGROUP Foundation
11. AMERIGROUP Files Shelf Registration Statement
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