Exhibit 99.1
AMERIGROUP REPORTS Q4 NET INCOME OF $29.9 MILLION OR $0.56 PER DILUTED SHARE
FULL-YEAR NET INCOME OF $107.1 MILLION
INCREASES FULL-YEAR 2007 OUTLOOK
VIRGINIA BEACH, Va., Feb. 14 /PRNewswire-FirstCall/ -- AMERIGROUP
Corporation (NYSE: AGP) today announced that its net income for the fourth
quarter of 2006 was $29,944,000, or $0.56 per diluted share, compared with net
income of $12,920,000, or $0.25 per diluted share, for the fourth quarter of
2005. Fourth quarter 2006 was favorably impacted by net prior period amounts
of $13,752,000 pre-tax, or $0.16 per diluted share. Excluding the impact of
the prior period amounts, fourth quarter net income would have been
$21,431,000, or $0.40 per diluted share.
For the year ended December 31, 2006, net income was $107,106,000, or
$2.02 per diluted share, compared with $53,651,000, or $1.02 per diluted share
for the year ended December 31, 2005. During the year, results were favorably
impacted by net prior year amounts of $30,374,000 pre-tax, or $0.35 per
diluted share. Excluding the impact of the prior year amounts, full-year net
income would have been $88,487,000, or $1.67 per diluted share.
Highlights for the fourth quarter and full-year 2006 include:
-- Membership increased 16.6 percent, or 187,000 members, to 1,316,000 at
year end. Sequentially, membership increased 7.5 percent, or 92,000
members, from the third quarter of 2006.
-- Full-year organic premium revenue increased 20.9 percent compared with
the prior year.
-- The health benefits ratio for the quarter was 82.1 percent of premium
revenues excluding the positive impact from the prior period amounts.
-- Unregulated cash and investments were $153,586,000.
-- Cash flow from operations was $235,651,000 for the full year ended
December 31, 2006.
-- Days in claims payable was 55, compared to 58 days in the previous
quarter.
-- Awarded the Medicaid procurement in Tennessee's middle region serving
TANF, SCHIP and SSI recipients.
-- Began serving Medicaid mothers and children in Ohio and secured the
opportunity to serve people with long-term disabilities in Cincinnati
in 2007.
-- Won approval to offer Medicare Special Needs Plan (SNP) in Maryland
effective January 1, 2007.
-- Successfully launched into four regions in Georgia during 2006,
including Atlanta, North, East and Southeast regions.
"By any measure, our results for the fourth quarter and for the year were
a tremendous improvement for our Company," said Jeffrey L. McWaters, Chairman
and Chief Executive Officer. "Equally important, we laid the foundation for
significant growth in 2007 and developed an organization that can manage our
growth effectively.
"Credit goes to the outstanding leadership of James G. Carlson, President
and Chief Operating Officer, who headed up our transformation efforts along
with the operational and health plan teams. AMERIGROUP enters 2007 with a
significant new market already secured, additional growth opportunities in the
pipeline and exceptionally strong interest in addressing the needs of the
uninsured and underinsured in several states," McWaters continued. "We
believe that AMERIGROUP is particularly well positioned to capitalize on these
opportunities and to create improved access to care, and value for our
government partners and our shareholders."
Revenue
Total revenues for the fourth quarter of 2006 increased 30.5 percent to
$809,687,000 compared with $620,282,000 for the fourth quarter of 2005,
reflecting 29.9 percent organic premium revenue growth. Revenues were
positively affected by $2,746,000 pre-tax, or $0.03 per diluted share, due to
Florida's decision to curtail a previously announced SSI premium recoupment.
For the year ended December 31, 2006, total revenues increased 21.7 percent to
$2,835,089,000 from $2,329,909,000 for the year ended December 31, 2005,
reflecting 20.9 percent organic premium revenue growth.
Fourth quarter investment income was $11,882,000. Sequentially,
investment income increased $1,305,000, or 12.3 percent, due to a higher
average yield on the portfolio and higher investable asset balances.
Membership
Membership increased approximately 16.6 percent, or 187,000 members, to
1,316,000 at December 31, 2006, as compared with 1,129,000 members at December
31, 2005. Sequentially, membership increased approximately 7.5 percent, or
92,000 members, from the third quarter of 2006.
Health Benefits
Health benefits as a percent of premium revenues were 80.4 percent for the
fourth quarter of 2006. Current quarter health benefits reflect favorable
prior period development of $11,006,000 pre-tax, or $0.13 per diluted share.
The majority of the favorable prior period development was related to the
first three quarters of 2006. Across product lines, the revisions are
comprised of:
-- $6,100,000 pre-tax, or $0.07 per diluted share relating primarily to
2006 in our core products.
-- $4,906,000 pre-tax, or $0.06 per diluted share, in the first three
quarters of the year for our AMERIVANTAGE SNP product.
Excluding the impact of the prior period development and the out-of-period
revenue amount noted above, the health benefits ratio for the fourth quarter
2006 was 82.1 percent. For the full-year 2006, the health benefits ratio was
81.1 percent. Excluding the impact of the net prior year amounts, the full-
year health benefits ratio was 82.1 percent.
Fourth Quarter Prior Period Amounts
Three months ended December 31, 2006
--------------------------------------
Prior period
Reported amount Recast
---------- ------------ ----------
Premium revenue $ 797,805 $ (2,746) $ 795,059
Health benefits $ 641,678 $ 11,006 $ 652,684
Health benefits ratio 80.4% 82.1%
Net income $ 29,944 $ 21,431
Diluted net income per share $ 0.56 $ 0.40
Selling, General and Administrative Expenses
The selling, general and administrative expense ratio was 14.2 percent of
total revenues for the fourth quarter of 2006 versus 12.1 percent in the
fourth quarter of 2005 and compares to 13.0 percent in the third quarter of
2006. The sequential increase in expense reflects expenditures for increased
salary and benefits, premium taxes, experience rebate expense and the start-up
of new markets. For full-year 2006, the selling, general and administrative
expense ratio was 13.0 percent versus 11.1 percent for full-year 2005.
Balance Sheet and Cash Flow Highlights
Cash and investments at December 31, 2006, totaled $844,784,000, of which
$153,586,000 was unregulated. Medical claims liabilities totaled
$385,204,000, representing 55 days of claims expense, which is in-line with
our expectations of 55 to 65 days, and compares to 58 days in the previous
quarter.
Cash flow from operations totaled $235,651,000 for the year ended December
31, 2006, compared to $113,105,000 for the year ended December 31, 2005. The
key drivers of change between the two periods relate to the increase in net
income, together with increases in cash flows resulting from the changes in
premium receivables, unearned revenue and accrued liabilities offset by
changes in claims payable and deferred taxes.
Increased 2007 Outlook
The Company has increased its 2007 annual estimates for earnings per
diluted share to $1.85 to $2.00, which compares to previously issued earnings
per diluted share estimates of $1.80 to $1.95.
Estimates are predicated on the timing of the launch into new products and
markets and the assumption that they operate at underwritten levels.
Additionally, these estimates include the following assumptions, among others:
-- Organic revenue growth in the range of 25.0 to 30.0 percent, which
includes weighted-average rate increases of approximately 3.0 to 4.0
percent;
-- Health benefits ratio of slightly above 83.0 percent of premium
revenues for the full year;
-- Selling, general and administrative expenses of approximately 12.5
percent of total revenues;
-- Income tax rate of approximately 39.0 percent; and
-- Fully diluted shares outstanding of approximately 54,200,000.
Potential Impact of Qui Tam Litigation
The 2007 annual earnings estimates of $1.85 to $2.00 include costs
associated with the existing $50,400,000 bond posted by AMERIGROUP with the
Illinois court for the Qui Tam litigation, but do not include any costs
associated with posting a bond in excess of that amount or funding a judgment,
if either are required.
Fourth Quarter Earnings Call
AMERIGROUP senior management will discuss the Company's fourth quarter and
year ended December 31, 2006, results on a conference call Thursday, February
15, at 8:30 a.m. Eastern Time. The conference can be accessed by dialing
800-289-0572 (domestic) or 913-981-5543 (international) and providing passcode
4232215 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 4232215. The replay will
be available beginning Thursday, February 15, at 11:30 a.m. Eastern Time until
Thursday, February 22, 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.
About AMERIGROUP
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 more than 1.3 million people in the District
of Columbia, Florida, Georgia, Maryland, New Jersey, New York, Ohio,
Tennessee, Texas and Virginia. 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 2007 performance such as 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, as well as expectations of our
successful implementation of operational improvements and expectations on the
effective date and successful integration of any new markets or products 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
("SEC") on March 1, 2006, and our Quarterly Report or Form 10-Q filed with the
SEC on November 14, 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.
CONTACTS:
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 per share data)
(unaudited)
Three months ended Twelve months ended
December 31, December 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenues:
Premium $ 797,805 $ 614,196 $ 2,795,810 $ 2,311,599
Investment income and
other 11,882 6,086 39,279 18,310
Total revenues 809,687 620,282 2,835,089 2,329,909
Expenses:
Health benefits 641,678 519,478 2,266,017 1,957,196
Selling, general and
administrative 114,842 75,064 369,896 258,446
Depreciation and
amortization 6,229 6,688 25,486 26,948
Interest 260 132 608 608
Total expenses 763,009 601,362 2,662,007 2,243,198
Income before
income taxes 46,678 18,920 173,082 86,711
Income tax expense 16,734 6,000 65,976 33,060
Net income $ 29,944 $ 12,920 $ 107,106 $ 53,651
Diluted net income per
share $ 0.56 $ 0.25 $ 2.02 $ 1.02
Weighted average
number of common
shares and dilutive
potential common
shares outstanding 53,525,958 52,148,265 53,082,933 52,857,682
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 Twelve months ended
December 31, December 31,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Premium revenue 98.5% 99.0% 98.6% 99.2%
Investment income and other 1.5 1.0 1.4 0.8
Total revenues 100.0% 100.0% 100.0% 100.0%
Health benefits(1) 80.4% 84.6% 81.1% 84.7%
Selling, general and
administrative expenses 14.2% 12.1% 13.0% 11.1%
Income before income taxes 5.8% 3.1% 6.1% 3.7%
Net income 3.7% 2.1% 3.8% 2.3%
(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 for the approximate number of our members we
served in each state as of December 31, 2006 and 2005. Since we receive two
premiums for members that are in both the AMERIVANTAGE and AMERIPLUS products,
these members have been counted twice in the State of Texas.
December 31,
---------------------------
2006 2005
------------ ------------
Texas 406,000 399,000
Georgia 227,000 -
Florida 202,000 219,000
Maryland 145,000 141,000
New York 126,000 138,000
New Jersey 102,000 109,000
Ohio 46,000 22,000
District of Columbia 40,000 41,000
Virginia 22,000 19,000
Illinois(1) - 41,000
Total 1,316,000 1,129,000
(1) AMERIGROUP exited the State of Illinois on July 31, 2006.
The following table sets forth the approximate number of our members in
each of our products as of December 31, 2006 and 2005. SNP members are
counted in both the AMERIVANTAGE and AMERIPLUS products when we receive two
premiums for those members.
December 31,
---------------------------
Product 2006 2005
- --------------------------------------------- ------------ ------------
AMERICAID (Medicaid -- TANF) 910,000 800,000
AMERIKIDS (SCHIP) 264,000 197,000
AMERIPLUS (Medicaid -- SSI) 94,000 88,000
AMERIFAM (FamilyCare) 43,000 44,000
AMERIVANTAGE (SNP) 5,000 -
Total 1,316,000 1,129,000
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31,
---------------------------
2006 2005
------------ ------------
(in thousands)
Assets
Current assets:
Cash and cash equivalents $ 176,718 $ 272,169
Short-term investments 167,703 130,054
Premium receivables 63,594 76,142
Deferred income taxes 21,550 11,972
Prepaid expenses, provider and other
receivables and other 71,544 37,792
Total current assets 501,109 528,129
Property, equipment and software, net 81,604 61,664
Goodwill and other intangible assets, net 255,340 255,115
Long-term investments, including
investments on deposit for licensure 500,363 241,540
Other long-term assets 7,279 7,140
$ 1,345,695 $ 1,093,588
Liabilities and Stockholders' Equity
Current liabilities:
Claims payable $ 385,204 $ 348,679
Unearned revenue 63,765 32,598
Accounts payable 6,285 7,243
Accrued expenses, capital leases and other 107,668 46,350
Total current liabilities 562,922 434,870
Deferred income taxes, capital leases
and other long-term liabilities 14,188 17,164
Total liabilities 577,110 452,034
Stockholders' equity:
Common stock, $.01 par value 523 516
Additional paid-in capital 391,515 371,744
Retained earnings 376,547 269,294
Total stockholders' equity 768,585 641,554
$ 1,345,695 $ 1,093,588
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Twelve months ended
December 31,
---------------------------
2006 2005
------------ ------------
(in thousands)
Cash flows from operating activities:
Net income $ 107,106 $ 53,651
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 25,486 26,948
Loss (gain) on disposal of property,
equipment and software 725 (61)
Deferred tax benefit (12,214) (1,247)
Compensation expense related to
share-based payments 8,477 -
Tax benefit related to exercise of
stock options - 8,571
Changes in assets and liabilities
increasing (decreasing) cash flows from
operations:
Premium receivables 12,548 (26,234)
Prepaid expenses, provider and other
receivables and other current assets (21,683) (15,919)
Other assets (647) (1,074)
Claims payable 36,525 80,002
Unearned revenue 31,167 (1,723)
Accounts payable, accrued expenses
and other current liabilities 47,741 (9,049)
Other long-term liabilities 420 (760)
Net cash provided by operating
activities 235,651 113,105
Cash flows from investing activities:
(Purchase of) proceeds from sale of
investments, net (284,471) 69,845
Purchase of investments on deposit
for licensure, net (11,854) (10,265)
Purchase of property, equipment and
software (41,102) (25,819)
Stock acquisition, net of cash
acquired - (107,645)
Purchase price adjustment paid (4,766) -
Net cash used in investing
activities (342,193) (73,884)
Cash flows from financing activities:
Payment of capital lease obligations (1,607) (3,323)
Payment of debt issuance costs - (1,626)
Proceeds and tax benefits from exercise
of stock options and change in bank
overdrafts, net 12,698 10,767
Net cash provided by financing
activities 11,091 5,818
Net (decrease) increase in cash and
cash equivalents (95,451) 45,039
Cash and cash equivalents at beginning
of year 272,169 227,130
Cash and cash equivalents at end of
year $ 176,718 $ 272,169
SOURCE AMERIGROUP Corporation
-0- 02/14/2007
/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)