Amerigroup reports 36% jump in profit in 2nd quarter

Jul 31, 2010 — The Virginian-Pilot

Tom Shean

Jul. 31, 2010 (McClatchy-Tribune Regional News delivered by Newstex) -- VIRGINIA BEACH -- Amerigroup Corp. (NYSE:AGP) reported Friday that its second-quarter net income jumped almost 36 percent because of more favorable trends in medical costs and membership growth in its health plans.

"Costs have moderated across the vast majority of areas," including pharmacy and outpatient services, James W. Truess, Amerigroup's chief financial officer, told securities analysts during a conference call.

Shares of the Virginia Beach-based health insurer climbed $2.81, or 8.5 percent, in especially heavy trading to close at $35.76.

Amerigroup, whose managed-care plans serve beneficiaries of Medicaid and other government-funded programs, earned $67.2 million, or $1.31 a diluted share, for the April-through-June quarter. That was up from $49.6 million, or 94 cents a diluted share, for the comparable period last year.

Its net income for the 2009 second quarter would have been only $27.2 million, or 51 cents a diluted share, if a favorable tax adjustment from litigation had been excluded, the company noted.

Amerigroup's health benefits ratio, a key measure for health insurers, dropped to a more favorable 82.3 percent in the recent quarter from 85.9 percent for the year-earlier period.

Its second-quarter revenues, the combination of premiums and investment income, totaled $1.44 billion, an 11 percent increase from $1.29 billion in the year-earlier period. The company attributed part of the revenue growth to an acquisition in New Jersey and its launch of a long-term care program in Tennessee.

Amerigroup said membership in its health plans at the end of June stood at 1.9 million, an increase of 2 percent from March and 10 percent higher than a year earlier. The company does business in 11 states, including Virginia.

Truess and Amerigroup chairman and CEO James G. Carlson declined provide analysts with any guidance as to the company's earnings outlook for 2010.

Carlson said during the conference call that Amerigroup probably will respond to some of the expansion opportunities emerging in more than a dozen states, including Maine, Washington, Louisiana, Missouri and Arizona.

"We think the pipeline of activity is the most active we've seen since 2005," he said. That activity, he said, is in addition to state preparations for developments from the health care reform package signed into law in March.

Amerigroup said it used part of the increase in its cash to buy back slightly more than a million common shares during the recent quarter for $36.7 million.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com

Newstex ID: KRTB-0212-47489007