EXHIBIT 99.1
AMERIGROUP CORPORATION REPORTS $37,278,000 NET INCOME OR
$0.71 PER DILUTED SHARE INCLUDING FAVORABLE PRIOR PERIOD DEVELOPMENT
2006 Full-Year EPS Estimate Increased to $1.45 - $1.55
VIRGINIA BEACH, Va., April 27 /PRNewswire-FirstCall/ -- AMERIGROUP
Corporation (NYSE: AGP) today announced that net income for the first quarter of
2006 increased 82.4 percent to $37,278,000, or $0.71 per diluted share, compared
with net income of $20,443,000, or $0.39 per diluted share, for the first
quarter of 2005. The first quarter of 2006 includes the reversal of a prior
period revenue accrual of $6,316,000 and favorable prior period medical claims
development of $34,467,000. Excluding the impact of these favorable prior period
amounts, first quarter net income would have been approximately $12,881,000, or
$0.24 per diluted share.
Total revenues for the first quarter of 2006 increased 20.9 percent to
$673,876,000 compared with $557,512,000 for the first quarter of 2005, resulting
from 20.3 percent organic premium revenue growth primarily due to new products
and markets. Revenues were positively affected by the reversal of a $6,316,000
accrual, or $0.07 per diluted share, which was established in the third quarter
of 2005 with respect to potential premium recoupments in two markets.
Membership increased approximately 5.0 percent, or 52,000 members, to
1,099,000 at quarter end, as compared with 1,047,000 members at March 31, 2005.
Sequentially, membership decreased by 30,000 members, or 2.7 percent, from the
fourth quarter of 2005, due primarily to the continuing state issues with
enrollment in Florida and Texas.
Highlights for the first quarter include:
* Organic premium revenue increased 20.3 percent compared with the prior
year;
* Entered into the Medicare Special Needs Plan, or SNP, in our Houston
market;
* Awarded two urban regions in Ohio;
* Health benefits ratio of 84.9 percent before the impact of the
favorable prior period amounts;
* Days in claims payable of 60 or 56 without the prior period claims
development, both of which were in line with our expected range of 55
to 65 days;
* Unregulated cash and investments of $187,816,000; and
* Cash flow from operations of $155,894,000.
Commenting on the quarter, Jeffrey L. McWaters, Chairman and CEO of
AMERIGROUP Corporation, said, "Our top-to-bottom analysis of 2005 has provided a
better understanding of what happened to medical costs and trend and confirmed
that the integrity of our business strategy remains strong. We have learned a
great deal from this experience and are committed to using that knowledge to
become a stronger company. Looking beyond the quarter, our increased estimates
for 2006 earnings reflect a number of positive developments in our business and
how we are managing our growth."
Health Benefits
Health benefits as a percent of premium revenues were 78.9 percent for the
first quarter of 2006 versus 82.0 percent for the first quarter of 2005. Health
benefits reflect favorable prior period development of $34,467,000, or $0.39 per
diluted share. Excluding the impact of the favorable prior period amounts, the
health benefits ratio would have been 84.9 percent compared to a recast first
quarter 2005 of 84.7 percent, which reflects changes in estimates relating to
2005.
Selling, General and Administrative Expenses
The selling, general and administrative expense ratio was 11.8 percent of
total revenues for the first quarter of 2006 versus 11.1 percent in the first
quarter of 2005. The increase is primarily due to several components: salary and
benefits including the effect of the adoption of SFAS 123(R); an increase in
premium tax in certain states; legal fees; development costs in Georgia and
elsewhere; as well as actuarial and consulting services associated with key
operational initiatives.
Balance Sheet and Cash Flow Highlights
Cash and investments at March 31, 2006, totaled $794,514,000, of which
$187,816,000 was unregulated. Medical claims liabilities totaled $349,587,000,
representing 60 days in claims payable or 56 days without the prior period
claims development versus 62 days in the previous quarter. Cash flow from
operations for the quarter ended March 31, 2006, totaled $155,894,000, compared
to $43,683,000 for the same period in the prior year. The key drivers of the
change between the two periods relate to the impact of the change in net income,
together with the changes in unearned revenue, premium receivables and income
tax payable.
Outlook
The Company is revising its 2006 annual estimates for earnings per diluted
share to be $1.45 to $1.55, which reflect the prior period amounts and a
favorable moderation in estimated medical cost trend from approximately 7.0
percent down to approximately 6.0 percent. This compares to previously issued
earnings per diluted share estimates of $0.70 to $0.85.
The revised estimate is based on the following:
* Estimates continue to be predicated on the timing of our expansion
into the State of Georgia and the assumption that Georgia and other
new products and markets operate at underwritten levels. We expect
Georgia to be operational in June 2006;
* Organic premium revenue growth remains unchanged in the range of 20.0
to 25.0 percent, which includes weighted-average rate increases of
approximately 4.5 percent versus the previous estimate of 4.0 percent;
* Health benefits of less than 85.0 percent of premium revenues for the
full year versus the previous estimate of 86.0 percent, excluding the
impact from the favorable prior period amounts and including the
impact of new products and markets;
* Selling, general and administrative expenses of less than 12.0 percent
of total revenues versus the previous estimate of 11.0 percent, which
include expenses to build our infrastructure to complete operational
improvement efforts and support future growth. Excluding premium
taxes, selling, general and administrative expenses are estimated to
be just over 10.0 percent;
* Compensation expense due to the adoption of SFAS 123(R) continues to
be estimated at $0.09 per diluted share for the year, slightly
weighted towards the first half of the year;
* Income tax rate of approximately 40.0 percent; and
* Fully diluted shares outstanding of approximately 52,800,000.
AMERIGROUP senior management will discuss the Company's first quarter
results on a conference call, Friday, April 28th at 9:30 a.m. Eastern Time. The
conference call can be accessed by dialing 888-202-2422 (domestic) or 913-
981-5592 (international) and providing passcode 4265009 approximately ten
minutes prior to the start time of the call. A recording of the call may be
accessed by dialing 888-203-1112 (domestic) or 719-457-0820 (international)
and providing passcode 4265009. The replay will be available beginning Friday,
April 28th at 12:30 p.m. Eastern Time until Friday, May 5th at 11:59 p.m.
Eastern Time. The conference call will also be available through the investors'
page of the Company's Web site, http://www.amerigroupcorp.com, or through
http://www.earnings.com. A 30-day replay of this webcast will be available on
these Web sites approximately two hours following the conclusion of the live
broadcast.
AMERIGROUP Corporation, headquartered in Virginia Beach, Virginia, improves
healthcare access and quality for low-income Americans by developing innovative
managed health services for the public sector. Through its subsidiaries,
AMERIGROUP serves 1.1 million people in New York, New Jersey, Maryland, the
District of Columbia, Virginia, Georgia, Florida, Texas, Ohio and Illinois. For
more information, visit http://www.amerigroupcorp.com.
This release is intended to be disclosure through methods reasonably
designed to provide broad, non-exclusionary distribution to the public in
compliance with the Securities and Exchange Commission's Fair Disclosure
Regulation. This release contains certain "forward-looking" statements,
including statements related to expected 2006 performance such as membership,
revenues, organic premium revenues, rate increases, operating cash flows, health
benefits expenses, 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, as well as expectations of our successful
implementation of operational improvements and expectations on the effective
date and successful integration of any pending acquisition as well as expansions
and debt levels, 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 the Company's 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, timing of payments, as well
as the availability and cost of labor, utilities and materials; the effect of
government regulations and changes in regulations governing the healthcare
industry, including our compliance with such regulations and their effect on our
ability to manage our medical costs; changes in Medicaid payment levels,
membership eligibility and methodologies and the application of such
methodologies by the government; liabilities and other claims asserted against
the Company; 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; and demographic changes.
Investors should also refer to our Annual Report on Form 10-K for the year ended
December 31, 2005, filed with the Securities and Exchange Commission on March 1,
2006, for a discussion of risk factors. 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.
Investors: Julie Loftus Trudell News Media: Kent Jenkins Jr.
Senior Vice President, Senior Vice President,
Investor Relations Communications
AMERIGROUP Corporation AMERIGROUP Corporation
(757) 321-3597 (757) 518-3671
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(dollars in thousands, except for per share data)
Three months ended
March 31,
--------------------------
2006 2005
------------ ------------
Revenues:
Premium $ 666,158 $ 553,888
Investment income and other 7,718 3,624
Total revenues 673,876 557,512
Expenses:
Health benefits 525,466 454,404
Selling, general and administrative 79,224 62,041
Depreciation and amortization 6,752 7,091
Interest 116 160
Total expenses 611,558 523,696
Income before income taxes 62,318 33,816
Income tax expense 25,040 13,373
Net income $ 37,278 $ 20,443
Weighted average number of common
shares and dilutive potential common
shares outstanding 52,591,485 52,961,652
Diluted net income per share $ 0.71 $ 0.39
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,
-------------------------
2006 2005
----------- -----------
Premium revenue 98.9% 99.3%
Investment income and other 1.1 0.7
Total revenues 100.0% 100.0%
Health benefits (1) 78.9% 82.0%
Selling, general and administrative expenses 11.8% 11.1%
Income before income taxes 9.2% 6.1%
Net income 5.5% 3.7%
(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, 2006 and 2005.
March 31,
-------------------------
2006 2005
----------- -----------
Texas 386,000 392,000
Florida 206,000 219,000
Maryland 142,000 131,000
New York 134,000 119,000
New Jersey 105,000 107,000
Illinois 40,000 38,000
District of Columbia 41,000 41,000
Ohio 24,000 -
Virginia 21,000 -
Total 1,099,000 1,047,000
The following table sets forth the approximate number of our members in
each of our products as of March 31, 2006 and 2005. SNP members are counted in
both the AMERIVANTAGE and AMERIPLUS products as we received two premiums for
those members.
March 31,
-------------------------
Product 2006 2005
- --------------------------------------------------- ----------- -----------
AMERICAID (Medicaid-TANF) 768,000 735,000
AMERIKIDS (SCHIP) 192,000 194,000
AMERIPLUS (Medicaid-SSI) 87,000 82,000
AMERIFAM (FamilyCare) 45,000 36,000
AMERIVANTAGE (SNP) 7,000 -
Total 1,099,000 1,047,000
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2006 2005
----------- -----------
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 260,394 $ 272,169
Short-term investments 264,684 130,054
Premium receivables 50,653 76,142
Deferred income taxes 17,411 11,972
Prepaid expenses, provider receivables
and other current assets 41,609 37,792
Total current assets 634,751 528,129
Property, equipment and software, net 62,049 61,664
Goodwill and other intangible assets, net 253,669 255,115
Long-term investments, including investments
on deposit for licensure 269,436 241,540
Other long-term assets 7,300 7,140
$ 1,227,205 $ 1,093,588
Liabilities and Stockholders' Equity
Current liabilities:
Claims payable $ 349,587 $ 348,679
Unearned revenue 93,432 32,598
Accounts payable 5,914 7,243
Accrued expenses, capital leases
and other current liabilities 80,902 46,350
Total current liabilities 529,835 434,870
Deferred income taxes, capital leases and
other long-term liabilities 15,612 17,164
Total liabilities 545,447 452,034
Stockholders' equity:
Common stock, $.01 par value 516 516
Additional paid-in capital 374,587 371,744
Retained earnings 306,655 269,294
Total stockholders' equity 681,758 641,554
$ 1,227,205 $ 1,093,588
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31,
-------------------------
2006 2005
----------- -----------
(in thousands)
Cash flows from operating activities:
Net income $ 37,278 $ 20,443
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 6,752 7,091
Deferred tax benefit (5,850) (1,480)
Stock compensation expense 2,009 -
Tax benefit related to exercise of
stock options - 6,210
Changes in assets and liabilities
increasing (decreasing) cash flows
from operations:
Premium receivables 25,489 10,561
Prepaid expenses, provider
receivables and other current assets (3,817) 1,118
Other assets (287) (608)
Claims payable 908 (14,373)
Unearned revenue 60,834 28,110
Accounts payable, accrued expenses
and other current liabilities, net 33,552 (12,666)
Other long-term liabilities (974) (723)
Net cash provided by operating
activities 155,894 43,683
Cash flows from investing activities:
(Purchase of) proceeds from sale of
investments, net (157,470) 123,294
Purchase of investments on deposit for
licensure, net (4,973) (5,596)
Purchase of property, equipment and
software (5,564) (4,894)
Stock acquisition, net of cash acquired - (99,030)
Net cash (used in) provided by
investing activities (168,007) 13,774
Cash flows from financing activities:
Payment of capital lease obligations (496) (933)
Proceeds from exercise of stock options 674 5,913
Tax benefit related to exercise of stock
options 160 -
Net cash provided by financing
activities 338 4,980
Net (decrease) increase in cash and
cash equivalents (11,775) 62,437
Cash and cash equivalents at
beginning of period 272,169 227,130
Cash and cash equivalents at end of period $ 260,394 $ 289,567
SOURCE AMERIGROUP Corporation
-0- 04/27/2006
/CONTACT: Investors: Julie Loftus Trudell, Senior Vice President,
Investor Relations, +1-757-321-3597 or News Media: Kent Jenkins Jr., Senior
Vice President, Communications, +1-757-518-3671, both of AMERIGROUP
Corporation/
/Web site: http://www.amerigroupcorp.com/
(AGP)