AMERIGROUP CORPORATION 
By VIRGINIA BEACH, Va., Aug. 1, 2012 /PRNewswire/ -- Amerigroup Corporation (NYSE: AGP) today announced that net income for the second quarter of 2012 was $32.0 million, or $0.63 per diluted share, versus $44.3 million, or $0.83 per diluted share, for the second quarter of 2011 and compared to $33.1 million, or $0.64 per diluted share, for the first quarter of 2012. Total revenues for the second quarter of 2012 increased 45.8% to $2.23 billion compared with $1.53 billion in the second quarter of 2011. Sequentially, total revenues increased $459 million, or 26.0%, from the first quarter of 2012.
In July, the Company received approval of its rate increase in New York, which is retroactive to April 1, 2012. The Company expects to recognize premium revenue of approximately $5.4 million, or $0.06 earnings per diluted share including the impact of premium tax, in the third quarter of 2012 for the retroactive portion of the rate increase associated with the second quarter.
On July 9, 2012, Amerigroup announced the execution of a definitive agreement pursuant to which WellPoint, Inc. will acquire Amerigroup. As previously announced, the transaction is expected to close in the first quarter of 2013.
Highlights include:
-- Membership increased 512,000 members, or 23.6%, to approximately 2.7
million at the end of the second quarter of 2012 compared to the first
quarter of 2012.
-- Health benefits expense was 86.9% of premium revenue for the second
quarter of 2012.
-- Selling, general and administrative expenses were 7.7% of total revenues
for the second quarter of 2012.
-- Cash flow from operations was $72.1 million for the three months ended
June 30, 2012 and $103 million for the six months ended June 30, 2012.
-- Unregulated cash and investments were $427 million as of June 30, 2012
compared to $824 million as of March 31, 2012.
-- Medical claims payable as of June 30, 2012 totaled $686 million compared
to $618 million as of March 31, 2012.
-- On May 1, 2012, Amerigroup closed the previously announced acquisition
of Health Plus in New York.
-- On June 1, 2012, Amerigroup began serving members in the third of three
regions in Louisiana.
-- In June 2012, Amerigroup announced that it expects to begin operations
in the state of Kansas during the first quarter of 2013 following a
successful competitive bid.
-- On July 1, 2012, Amerigroup began serving members in its 13(th) state,
Washington.
"We are pleased with our growth in the quarter as a result of closing the Health Plus transaction and going live in the last of the three regions in Louisiana," said( )James G. Carlson, Amerigroup's chairman and chief executive officer.
Premium Revenue
Premium revenue for the second quarter of 2012 increased 45.7% to $2.22 billion versus $1.52 billion in the second quarter of 2011. Sequentially, premium revenue increased $458 million, or 26.0%.
The sequential increase in premium revenue primarily reflects increased membership due to the May 1 closing of the Health Plus acquisition in New York, a full quarter of premiums related to the expanded benefits and geographic presence in Texas, and the entry into the second and third of three regions in Louisiana.
Investment Income and Other Revenues
Second quarter investment income and other revenues were $8.0 million versus $4.0 million in the second quarter of 2011, and compared to $7.4 million in the first quarter of 2012.
Health Benefits
Health benefits expense, as a percent of premium revenue, was 86.9% for the second quarter of 2012 versus 84.1% in the second quarter of 2011, and compared to 85.3% in the first quarter of 2012.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were 7.7% of total revenues for the second quarter of 2012 versus 8.0% in the second quarter of 2011, and compared to 8.4% for the first quarter of 2012.
Premium Taxes
Second quarter 2012 premium taxes were $51.8 million versus $40.4 million for the second quarter of 2011, and compared to $43.4 million in the first quarter of 2012.
Balance Sheet Highlights
Cash and investments at June 30, 2012 totaled $2.02 billion of which $427 million was unregulated compared to $824 million of unregulated cash and investments at March 31, 2012. The sequential decrease in unregulated cash and investments was primarily due to the $260 million paid in satisfaction of the Company's 2.0% convertible notes in May 2012 and payment of the $85 million transaction price for the Health Plus acquisition.
The debt-to-total capital ratio decreased to 25.7% as of June 30, 2012 from 35.5% at March 31, 2012 as a result of the satisfaction of the Company's obligations with respect to its 2.0% convertible senior notes.
Medical claims payable as of June 30, 2012 totaled $686 million compared to $618 million as of March 31, 2012.
Included on page 10 is a table presenting the components of the change in medical claims payable for each of the six-month periods ended June 30, 2012 and 2011.
Cash Flow Highlights
Cash flow from operations totaled $72.1 million for the three months ended June 30, 2012, compared to $31.1 million in the second quarter of 2011. Cash flow in the quarter was positively impacted by a net favorable change in working capital accounts.
Proposed Merger
On July 9, 2012, Amerigroup and WellPoint announced that they entered into a definitive agreement through which WellPoint will acquire Amerigroup. Under the terms of the agreement, WellPoint will pay $92.00 per share in cash to acquire all of the outstanding shares of Amerigroup for a transaction value of approximately $4.9 billion.
The transaction is subject to certain state regulatory approvals and standard closing conditions and customary approvals required under the Hart-Scott-Rodino Antitrust Improvements Act and the approval of Amerigroup's stockholders.
The transaction is expected to close in the first quarter of 2013.
Second Quarter Earnings Call and Outlook
Due to the definitive agreement with WellPoint, the Company will no longer be hosting a conference call regarding second quarter results. In addition, the Company will not be revising or updating previously issued full-year 2012 outlook parameters.
About Amerigroup Corporation
Amerigroup, a Fortune 500 company, coordinates services for individuals in publicly funded health care programs. Currently serving approximately 2.7 million members in 13 states nationwide, Amerigroup expects to expand operations to Kansas as a result of a previously awarded state contract. Amerigroup is dedicated to offering real solutions that improve health care access and quality for its members, while proactively working to reduce the overall cost of care to taxpayers. Amerigroup accepts all eligible people regardless of age, sex, race or disability.
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, including those with respect to our growth plans, the pending transaction with WellPoint and expansion into the state of Kansas, which 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: the failure to receive, on a timely basis or otherwise, the required approvals by Amerigroup's stockholders and government or regulatory agencies; the risk that a condition to closing of the proposed transaction may not be satisfied; Amerigroup's and WellPoint's ability to consummate the Merger; the failure by WellPoint to obtain the necessary debt financing arrangements set forth in the commitment letter received in connection with the Merger; operating costs and business disruption may be greater than expected; the ability of Amerigroup to retain and hire key personnel and maintain relationships with providers or other business partners pending the consummation of the transaction; our inability to manage medical costs; our inability to operate new products and markets at expected levels, including, but not limited to, profitability, membership and targeted service standards; local, state and national economic conditions, including their effect on the periodic premium rate change process and timing of payments; the effect of laws and regulations governing the health care industry, including the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act of 2010, and any regulations enacted there under; changes in Medicaid and Medicare payment levels and methodologies; increased use of services, increased cost of individual services, pandemics, epidemics, the introduction of new or costly treatments and technology, new mandated benefits, insured population characteristics and seasonal changes in the level of health care use; our ability to maintain and increase membership levels; our ability to enter into new markets or remain in existing markets; changes in market interest rates or any disruptions in the credit markets; our ability to maintain compliance with all minimum capital requirements; liabilities and other claims asserted against us; demographic changes; the competitive environment in which we operate; the availability and terms of capital to fund acquisitions, capital improvements and maintain capitalization levels required by regulatory agencies; our ability to attract and retain qualified personnel; the unfavorable resolution of new or pending litigation; and catastrophes, including acts of terrorism or severe weather.
Investors should also refer to our annual report on Form 10-K for the year ended December 31, 2011 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 INCOME STATEMENTS
(dollars in thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----
Revenues:
Premium $2,219,238 $1,523,433 $3,980,043 $3,059,228
Investment income and other 7,955 4,001 15,346 8,121
----- ----- ------ -----
Total revenues 2,227,193 1,527,434 3,995,389 3,067,349
--------- --------- --------- ---------
Expenses:
Health benefits 1,929,098 1,281,760 3,430,251 2,538,722
Selling, general and administrative 171,412 122,289 319,365 238,748
Premium taxes 51,818 40,439 95,207 80,887
Depreciation and amortization 12,290 9,332 23,190 18,422
Interest 10,651 4,170 22,716 8,349
------ ----- ------ -----
Total expenses 2,175,269 1,457,990 3,890,729 2,885,128
--------- --------- --------- ---------
Income before income taxes 51,924 69,444 104,660 182,221
Income tax expense 19,900 25,150 39,550 67,450
------ ------ ------ ------
Net income $32,024 $44,294 $65,110 $114,771
======= ======= ======= ========
Diluted net income per share $0.63 $0.83 $1.27 $2.18
===== ===== ===== =====
Weighted average number of common shares and dilutive potential common shares outstanding 50,439,487 53,541,368 51,170,927 52,658,303
========== ========== ========== ==========
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 Six months ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----
Premium revenue 99.6% 99.7% 99.6% 99.7%
Investment income and other 0.4% 0.3% 0.4% 0.3%
--- --- ---
Total revenues 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Health benefits [1] 86.9% 84.1% 86.2% 83.0%
Selling, general and administrative expenses 7.7% 8.0% 8.0% 7.8%
Income before income taxes 2.3% 4.5% 2.6% 5.9%
Net income 1.4% 2.9% 1.6% 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 members the Company served in each state as of June 30, 2012 and 2011. Because the Company receives two premiums for members that are both in the Medicare Advantage and Medicaid
products, these members have been counted twice in the states where we offer both plans.
June 30,
--------
2012 2011
---- ----
Texas 769,000 593,000
New York 434,000 109,000
Georgia 287,000 270,000
Florida 266,000 262,000
Maryland 213,000 207,000
Tennessee 205,000 205,000
New Jersey 154,000 133,000
Louisiana 143,000 N/A
Nevada 85,000 86,000
Ohio 57,000 55,000
Virginia 48,000 40,000
New Mexico 24,000 22,000
Total 2,685,000 1,982,000
========= =========
The following table sets forth the approximate number of members in each of the Company's products as of June 30, 2012 and 2011. Because the Company receives two premiums for members that are in both the Medicare Advantage and Medicaid
products, these members have been counted in each product.
June 30,
--------
Product 2012 2011
------- ---- ----
TANF (Medicaid) 1,888,000 1,405,000
Aged, Blind and Disabled and Long-Term Care (Medicaid) 317,000 216,000
CHIP 316,000 266,000
FamilyCare (Medicaid) 128,000 74,000
Medicare Advantage 36,000 21,000
Total 2,685,000 1,982,000
========= =========
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
June 30, December 31,
2012 2011
---- ----
Assets
Current assets:
Cash and cash equivalents $624,330 $546,811
-------------------------
Short-term investments 157,657 394,346
----------------------
Premium receivables 312,183 106,510
-------------------
Deferred income taxes 28,253 24,720
---------------------
Prepaid expenses, provider and
other receivables and other 99,208 93,373
------------------------------ ------ ------
Total current assets 1,221,631 1,165,760
--------------------
Long-term investments,
including investments on
deposit for licensure 1,242,404 1,246,190
Property, equipment and
software, net 121,939 110,602
-----------------------
Goodwill 316,747 260,496
Other long-term assets 44,580 18,300
------ ------
$2,947,301 $2,801,348
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Claims payable $686,498 $573,448
--------------
Unearned revenue 93,043 780
----------------
Contractual refunds payable 44,241 40,123
---------------------------
Accounts payable, accrued
expenses and other 233,006 212,828
-------------------------
Current portion of long-term
convertible debt - 256,995
---------------------------- --- -------
Total current liabilities 1,056,788 1,084,174
-------------------------
Long-term debt 477,648 400,000
Other long-term liabilities 34,764 32,655
Total liabilities 1,569,200 1,516,829
----------------- --------- ---------
Stockholders' equity:
Common stock, $.01 par value 598 573
----------------------------
Additional paid-in capital,
net of treasury stock 238,823 212,380
---------------------------
Accumulated other
comprehensive income 13,946 11,942
---------------------
Retained earnings 1,124,734 1,059,624
-----------------
Total stockholders' equity 1,378,101 1,284,519
-------------------------- --------- ---------
$2,947,301 $2,801,348
========== ==========
AMERIGROUP CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Six months ended
June 30,
--------
2012 2011
---- ----
Cash flows from operating activities:
Net income $65,110 $114,771
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and amortization 23,190 18,422
Loss on disposal of property,
equipment and software 79 320
Deferred tax benefit (1,566) (144)
Compensation expense related to share-
based payments 13,685 10,757
Non-cash interest expense 3,164 5,682
Other 5,825 7,263
Changes in assets and liabilities
(decreasing) increasing cash
flows from operations:
Premium receivables (205,673) (31,616)
Prepaid expenses, provider and other
receivables and other
current assets (4,354) (28,722)
Other long-term assets (1,737) (2,106)
Claims payable 113,050 8,833
Accounts payable, accrued expenses,
contractual refund payable
and other current liabilities 1,625 10,653
Unearned revenue 92,263 1,146
Other long-term liabilities (1,545) (606)
Net cash provided by operating
activities 103,116 114,653
------- -------
Cash flows from investing activities:
Proceeds from (purchase of)
investments, net 296,238 (257,487)
Purchase of property, equipment and
software (28,862) (20,170)
Purchase of investments on deposit for
licensure, net (54,458) (10,232)
Purchase of contract rights and other
related assets (85,168) -
Net cash provided by (used in)
investing activities 127,750 (287,889)
------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 77,813 -
Issuance costs of long-term debt (1,061) -
Repayment of convertible notes
principal (259,880) -
Change in bank overdrafts 12,553 16,262
Proceeds and tax benefits from
exercise of stock options
and other, net 17,228 55,796
Repurchase of common stock shares - (79,997)
Net cash used in financing activities (153,347) (7,939)
-------- ------
Net increase (decrease) in cash and
cash equivalents 77,519 (181,175)
Cash and cash equivalents at beginning
of period 546,811 763,946
Cash and cash equivalents at end of
period $624,330 $582,771
======== ========
AMERIGROUP CORPORATION AND SUBSIDIARIES
Components of the Change in Medical Claims Payable
(dollars in thousands)
Six months ended
June 30,
2012 2011
---- ----
Medical claims payable,
beginning of period $573,448 $510,675
Health benefits expenses incurred during period:
Related to current year 3,528,233 2,613,310
Related to prior years (97,982) (74,588)
Total incurred 3,430,251 2,538,722
--------- ---------
Health benefits payments during period:
Related to current year 2,880,028 2,168,850
Related to prior years 437,173 361,039
Total payments 3,317,201 2,529,889
--------- ---------
Medical claims payable, end
of period $686,498 $519,508
======== ========
Health benefits expenses incurred during both periods were reduced for amounts related to prior
years. The amounts related to prior years include the impact of amounts previously included in
the liability to establish it at a level sufficient under moderately adverse conditions that were
not needed and the reduction in health benefits expenses due to revisions to prior estimates.
CONTACTS:
Investors: Julie Loftus Trudell News Media: Maureen C. McDonnell
Amerigroup Corporation Amerigroup Corporation
Senior Vice President, Investor Relations Vice President, External Communications
(757) 321-3597 (757) 473-2731
Julie.Trudell@amerigroup.com Maureen.McDonnell@amerigroup.com
SOURCE Amerigroup Corporation
