AMERIGROUP announces financial results for the third quarter of 2009

AMERIGROUP Corporation (NYSE: AGP) today announced that net income for the third quarter of 2009 was $22.5 million, or $0.43 per diluted share, versus $37.9 million, or $0.71 per diluted share, for the third quarter of 2008. Third quarter earnings are in line with the preliminary earnings range that the Company issued on October 26, 2009, and reflect elevated medical costs associated with the onset of what appears to be a severe flu season due to the H1N1 virus.

Highlights include:

• Membership increased 55,000 members, or 3.2%, to approximately 1.8 million from the second quarter of 2009.
• Total revenues were $1.3 billion, a 1.0% increase over the second quarter of 2009.
• Health benefits expenses were 87.5% of premium revenues.
• Selling, general and administrative expenses were 6.3% of total revenues.
• Cash flow provided by operations was $72.6 million for the three months ended September 30, 2009.
• Unregulated cash and investments were $277.2 million as of September 30, 2009.
• Medical claims payable as of September 30, 2009 totaled $550.1 million compared to $563.0 million, as of June 30, 2009.
• The Company repaid the remaining $18.0 million of outstanding debt under its Credit Agreement and the debt to total capital ratio decreased to 19.8%, as of September 30, 2009, from 20.8%, as of June 30, 2009.
• The Company repurchased approximately 1.4 million shares of its common stock during the third quarter for $34.3 million.
• On August 28, 2009, the Company notified the Florida Agency for Health Care Administration of its intent to exit Broward County, effective December 1, 2009, for the Temporary Aid to Needy Families (TANF) Medicaid population.
• On October 15, 2009, the Company notified the State of Ohio of its intent to exit the Aged, Blind and Disabled (ABD) program in the Southwest Region, effective in the first quarter of 2010. The Company will continue to provide services in the Southwest and West Central regions of Ohio for the TANF Medicaid population.
• On October 23, 2009, the Company settled litigation regarding the purchase of certain assets related to the New Jersey Medicaid business of University Health Plans, Inc. (UHP). Under the terms of the settlement, the parties dismissed the litigation and the Company's New Jersey subsidiary will purchase certain UHP assets. The Company expects the purchase, which is subject to regulatory approval, to close during the first quarter of 2010.

"At our investor day in September, we discussed how outpatient services continued to be the primary factor driving our higher than expected costs in the third quarter, and said that we expected this trend to continue at least through the end of 2009," said James G. Carlson, AMERIGROUP Chairman and Chief Executive Officer. "More recently, we are seeing a significant spike in flu-related activity which is most prevalent in our southern states. The onset of what appears to be a severe flu season due to the H1N1 virus is the single most important driver of the increase in medical costs over the last 30 days."

Carlson continued, "We believe the H1N1 flu, like the recession, will eventually fade. Over the longer term, we believe that there are a number of reasons to feel good about our future, including the sizable expansion plans in healthcare reform and the ability to improve the delivery of long-term care services. We believe that AMERIGROUP is very well-positioned to capitalize on these opportunities."

Premium Revenues

Premium revenues for the third quarter of 2009 increased 20.2% to $1.3 billion compared to $1.1 billion in the third quarter of 2008. Sequentially, premium revenues increased $14.1 million, or 1.1%, compared with the second quarter of 2009. The sequential increase primarily reflects membership gains in the TANF population across most markets partially offset by increased accruals for the experience rebate in Texas.

In October, the Company received final confirmation of its rate increase in Georgia, which is retroactive to July 1, 2009. The retroactive value of approximately $3.0 million was not booked in the third quarter of 2009. The Company expects to recognize the retroactive portion of the rate increase associated with the third quarter in the fourth quarter of 2009.