AMERIGROUP Reports Q1 Net Income of $36.9 Million or $0.69 per Diluted Share
Full-Year 2009 Guidance Range Increased to
First Quarter Highlights include:
- Membership increased 4.9% to approximately 1.7 million at the end of the quarter versus the fourth quarter of 2008.
- Total revenues were
$1.2 billion ; a 6.9% increase over the fourth quarter of 2008. - Health benefits ratio was 83.7% of premium revenues.
- Selling, general and administrative expense ratio was 9.0% of total revenues.
- Cash flow from operations was
$36.1 million for the three months endedMarch 31, 2009 . - Unregulated cash and investments of
$279.7 million as ofMarch 31, 2009 . - Medical claims payable as of
March 31, 2009 totaled$570.4 million compared to$536.1 million as ofDecember 31, 2008 . - The Company increased its 2009 annual guidance to
$2.70 – $2.85 per diluted share, from the previous range of$2.50 – $2.65 . - On
February 1, 2009 , the Company began serving approximately 49,000 Medicaid and Children’s Health Insurance Program (CHIP) members inNevada . - On
March 1, 2009 , the Company closed the sale of the assets of itsSouth Carolina health plan. - On
April 1, 2009 , the Company began the final phase of New Mexico’s Coordinated Long-Term Services (CoLTS) program rollout. - The Company repurchased approximately 258,000 shares of its common stock during the first quarter for approximately
$6.4 million .
“AMERIGROUP performed well in the first quarter and we again demonstrated our ability to manage our business in a difficult economic environment. The economy continues to affect AMERIGROUP in several ways. We have seen an increase in the number of people enrolled in Medicaid, but at the same time our State government customers face significant budget shortfalls which have resulted in a difficult premium rate environment,” said
Premium Revenues
Premium revenues for the first quarter of 2009 increased 15.9% to
Investment Income and Other Revenues
First quarter investment income and other revenues were
Health Benefits
Health benefits as a percent of premium revenues were 83.7% for the first quarter of 2009 versus 83.3% in the first quarter of 2008, and compared to 83.2% in the fourth quarter of 2008. While expected seasonality and trend would normally drive a more substantial increase in the health benefits ratio in the first quarter, favorable reserve development and a change in pharmacy rebate accounting favorably impacted the ratio.
Similar to recent quarters, the health benefits ratio was lower due to favorable reserve development. Excluding the reserve development, underlying health benefits expense for the quarter was largely consistent with the Company’s expectations with certain markets showing particularly good results.
In the first quarter of 2009, the Company established an estimate for pharmacy rebates which the Company expects to receive, associated with pharmaceuticals that have been dispensed to members. Previously, the Company recognized pharmacy rebates when payment was received. The receipt of rebate payments generally lags the quarter in which the pharmaceuticals were actually dispensed. With the more recent availability of stable historical information, the Company now believes that a reliable basis for estimation of the rebates exists. This change resulted in a one-time benefit to health benefits expense of
Selling, General and Administrative Expenses
Selling, general and administrative expenses were 9.0% of total revenues for the first quarter of 2009, versus 10.0% in the first quarter of 2008, and unchanged from the fourth quarter of 2008. Selling, general and administrative expenses increased sequentially as anticipated due to new market expansions and normal seasonality in employee benefits. Further, variable compensation accruals were elevated due to strong performance in the quarter.
2009 Income Statement Adjustments and Reclassifications
In 2009, the Company made certain reclassifications to its income statement presentation. Beginning in the first quarter of 2009 and for prior comparative periods, the
For comparability purposes the Company is providing the 2008 quarterly and full-year results and related ratios under this reclassification on page 10 of this release. These statements also reflect the impact of 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 requires retrospective application.
Premium Taxes
First quarter premium taxes were
Balance Sheet and Cash Flow Highlights
Cash and investments at
Medical claims payable as of
Cash flow provided by operations totaled
2009 Outlook
AMERIGROUP increased its 2009 annual earnings guidance range to
“Given our strong results in the first quarter, we are raising our earnings guidance for the year,” said
AMERIGROUP’s 2009 earnings guidance is predicated on the following assumptions among others:
2009 Guidance
---------------
Total revenues $5.0 - $5.1 billion
Investment income and other (1) Approximately $33 million
Health benefits ratio 84.1% - 84.5%
Selling, general & administrative ratio 8.1% - 8.5%
Fully diluted shares outstanding Approximately 54 million
(1) Investment income and other includes the gain on the sale of South
Carolina health plan assets recorded in the first quarter of 2009.
First Quarter Earnings Call
AMERIGROUP senior management will discuss the Company’s first quarter results on a conference call
About AMERIGROUP Corporation
AMERIGROUP Corporation, headquartered in
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; and the unfavorable resolution of new or 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
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(dollars in thousands, except per share data)
(unaudited)
Three months ended
March 31,
---------
2009 2008
---- ----
Revenues:
Premium $1,217,447 $1,050,004
Investment income and other 12,347 22,609
------ ------
Total revenues 1,229,794 1,072,613
--------- ---------
Expenses:
Health benefits 1,019,303 874,921
Selling, general and administrative 110,375 106,742
Premium taxes 28,118 22,026
Depreciation and amortization 8,326 8,777
Interest 4,238 5,790
----- -----
Total expenses 1,170,360 1,018,256
--------- ---------
Income before income taxes 59,434 54,357
Income tax expense 22,525 20,720
------ ------
Net income $36,909 $33,637
======= =======
Diluted net income per share $0.69 $0.62
===== =====
Weighted average number of common
shares and dilutive potential common
shares outstanding 53,424,802 54,403,315
========== ==========
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
March 31,
---------
2009 2008
---- ----
Premium revenue 99.0% 97.9%
Investment income and other 1.0 2.1
--- ---
Total revenues 100.0% 100.0%
===== =====
Health benefits (1) 83.7% 83.3%
Selling, general and administrative expenses 9.0% 10.0%
Income before income taxes 4.8% 5.1%
Net income 3.0% 3.1%
(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 March 31, 2009 and 2008. 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.
March 31,
---------
2009 2008
---- ----
Texas 453,000 441,000
Florida 253,000 210,000
Georgia 213,000 198,000
Tennessee(1) 189,000 355,000
Maryland 179,000 154,000
New York 111,000 112,000
New Jersey 109,000 99,000
Ohio 60,000 56,000
Nevada 49,000 -
Virginia 26,000 24,000
New Mexico 15,000 -
District of Columbia - 38,000
South Carolina - 1,000
--- -----
Total 1,657,000 1,688,000
========= =========
(1) Membership includes approximately 168,000 under an ASO contract in
2008 terminated on October 31, 2008.
The following table sets forth the approximate number of our members in
each of our products as of March 31, 2009 and 2008. 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.
March 31,
---------
Product 2009 2008
------- ---- ----
TANF (Medicaid)(1)(3) 1,147,000 1,203,000
CHIP(3) 258,000 230,000
ABD (Medicaid)(2) 187,000 205,000
FamilyCare (Medicaid) 53,000 43,000
Medicare Advantage 12,000 7,000
------ -----
Total 1,657,000 1,688,000
========= =========
(1) Membership includes approximately 127,000 members under an ASO
contract in 2008 terminated on October 31, 2008.
(2) Membership includes approximately 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)
March 31, December 31,
2009 2008
---- ----
Assets
Current assets:
Cash and cash equivalents $774,254 $763,272
Short-term investments 53,727 97,466
Premium receivables 84,466 86,595
Deferred income taxes 23,594 25,347
Prepaid expenses, provider and other
receivables and other 66,663 42,281
--------- ---------
Total current assets 1,002,704 1,014,961
Property, equipment and software, net 102,302 103,747
Goodwill and other intangible assets, net 250,076 250,205
Long-term investments, including investments on
deposit for licensure 630,951 571,663
Other long-term assets 14,225 15,091
------ ------
$2,000,258 $1,955,667
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Claims payable $570,435 $536,107
Unearned revenue 65,488 82,588
Accounts payable 3,545 6,810
Accrued expenses and other 165,417 170,811
Current portion of long-term debt 506 506
------- -------
Total current liabilities 805,391 796,822
Long-term debt 271,323 268,956
Other long-term liabilities 16,067 17,230
------ ------
Total liabilities 1,092,781 1,083,008
--------- ---------
Stockholders' equity:
Common stock, $.01 par value 541 539
Additional paid-in capital, net of treasury
stock 432,853 434,789
Accumulated other comprehensive loss (4,179) (4,022)
Retained earnings 478,262 441,353
------- -------
Total stockholders' equity 907,477 872,659
------- -------
$2,000,258 $1,955,667
========== ==========
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended
March 31,
---------
2009 2008
---- ----
(in thousands)
Cash flows from operating activities:
Net income $36,909 $33,637
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 8,326 8,777
Loss on disposal of property, equipment and
software 21 166
Deferred tax expense 4,894 1,158
Compensation expense related to share-based
payments 2,924 2,272
Long-term convertible debt interest 2,494 2,336
Other 242 -
Gain on sale of contract rights (5,810) -
Changes in assets and liabilities increasing
(decreasing) cash flows from operations:
Premium receivables 2,129 (3,304)
Prepaid expenses, provider and other
receivables and other current assets (22,830) 28,245
Other assets 522 (2,402)
Claims payable 34,328 (34,326)
Unearned revenue (17,100) (16,992)
Accounts payable, accrued expenses and
other current liabilities (6,739) (26,477)
Other long-term liabilities (4,204) 307
------ ---
Net cash provided by (used in)
operating activities 36,106 (6,603)
------ ------
Cash flows from investing activities:
(Purchase) proceeds from sale of investments, net (2,534) 109,702
Purchase of investments on deposit for
licensure, net (13,604) (7,252)
Purchase of property, equipment and software (6,339) (7,536)
Proceeds from sale of contract rights 5,810 -
----- ---
Net cash (used in) provided by
investing activities (16,667) 94,914
------- ------
Cash flows from financing activities:
Repayments of borrowings under credit facility (127) (26,527)
Payment of capital lease obligations - (146)
Proceeds and tax benefits from exercise of
stock options and change in bank overdrafts
and other, net (1,955) 2,806
Treasury stock repurchases (6,375) (3,589)
------ ------
Net cash used in financing activities (8,457) (27,456)
------ -------
Net increase in cash and cash equivalents 10,982 60,855
Cash and cash equivalents at beginning of period 763,272 487,614
------- -------
Cash and cash equivalents at end of period $774,254 $548,469
======== ========
AMERIGROUP CORPORATION AND SUBSIDIARIES
2008 FULL-YEAR AND QUARTERLY SCHEDULES (1)
2008
----------------------------
Adjusted and
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 20,514
------ ------
Total expenses 4,508,918 4,439,998
--------- ---------
Income (loss) before income taxes 7,088 (2,256)
Income tax expense 57,750 54,350
------ ------
Net loss $(50,662) $(56,606)
======== ========
Diluted net loss per share $(0.96) $(1.07)
====== ======
Diluted net income per share less impact
of litigation settlement $2.77 $2.66
===== =====
Health benefits expense ratio(2) 81.4% 82.9%
Selling, general and administrative
expense ratio 13.5% 9.8%
2008
------------------------------------------------------
Q1 Adjusted Q2 Adjusted Q3 Adjusted Q4 Adjusted
and and and and
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 5,790 5,235 5,082 4,407
----- ----- ----- -----
Total expenses 1,018,256 1,295,041 1,035,795 1,090,906
--------- --------- --------- ---------
Income (loss)
before income
taxes 54,357 (178,222) 62,196 59,413
Income tax expense
(benefit) 20,720 (14,190) 24,270 23,550
------ ------- ------ ------
Net income (loss) $33,637 $(164,032) $37,926 $35,863
======= ========= ======= =======
Diluted net income
(loss) per share $0.62 $(3.10) $0.71 $0.67
===== ====== ===== =====
Diluted net income per
share less impact of
litigation settlement $0.62 $0.65 $0.71 $0.68
===== ===== ===== =====
Health benefits
expense ratio(2) 83.3% 83.0% 82.0% 83.2%
Selling, general and
administrative
expense ratio 10.0% 10.1% 10.2% 9.0%
(1) 2008 results reflect the 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. For an explanation
of the 2008 Income Statement adjustments and reclassifications, see
page 3 of this release.
(2) 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.
SOURCE AMERIGROUP Corporation