Attached files
file | filename |
---|---|
EXCEL - IDEA: XBRL DOCUMENT - AMERIGROUP CORP | Financial_Report.xls |
EX-31.2 - EXHIBIT 31.2 - AMERIGROUP CORP | w82120exv31w2.htm |
EX-31.1 - EXHIBIT 31.1 - AMERIGROUP CORP | w82120exv31w1.htm |
EX-32 - EXHIBIT 32 - AMERIGROUP CORP | w82120exv32.htm |
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
Form 10-Q
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended March 31, 2011 | ||
OR
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Commission File Number
001-31574
AMERIGROUP
Corporation
(Exact name of registrant as
specified in its charter)
Delaware (State or Other Jurisdiction of Incorporation or Organization) |
54-1739323 (I.R.S. Employer Identification No.) |
|
4425 Corporation Lane, Virginia Beach, VA (Address of principal executive offices) |
23462 (Zip Code) |
Registrants telephone number, including area code:
(757) 490-6900
Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
As of April 29, 2011, there were 49,603,017 shares
outstanding of the Companys common stock, par value $0.01
per share.
AMERIGROUP
Corporation and Subsidiaries
Table of
Contents
2
Table of Contents
Part I.
Financial Information
Item 1. | Financial Statements |
AMERIGROUP
Corporation and Subsidiaries
(Dollars in thousands, except per share data)
(Unaudited)
March 31, |
December 31, |
|||||||
2011 | 2010 | |||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 601,950 | $ | 763,946 | ||||
Short-term investments
|
307,072 | 230,007 | ||||||
Premium receivables
|
110,315 | 83,203 | ||||||
Deferred income taxes
|
27,952 | 28,063 | ||||||
Provider and other receivables
|
27,109 | 32,861 | ||||||
Prepaid expenses
|
25,198 | 13,538 | ||||||
Other current assets
|
9,227 | 7,083 | ||||||
Total current assets
|
1,108,823 | 1,158,701 | ||||||
Long-term investments
|
807,260 | 639,165 | ||||||
Investments on deposit for licensure
|
119,158 | 114,839 | ||||||
Property, equipment and software, net of accumulated
depreciation of $182,713 and $174,683 at March 31, 2011 and
December 31, 2010, respectively
|
99,074 | 96,967 | ||||||
Other long-term assets
|
14,050 | 13,220 | ||||||
Goodwill
|
260,496 | 260,496 | ||||||
Total assets
|
$ | 2,408,861 | $ | 2,283,388 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY | ||||||||
Current liabilities:
|
||||||||
Claims payable
|
$ | 539,767 | $ | 510,675 | ||||
Bank overdrafts
|
64,404 | 40,890 | ||||||
Unearned revenue
|
100,231 | 103,067 | ||||||
Accrued payroll and related liabilities
|
46,871 | 71,253 | ||||||
Contractual refunds payable
|
51,645 | 44,563 | ||||||
Accounts payable, accrued expenses and other
|
105,310 | 80,393 | ||||||
Total current liabilities
|
908,228 | 850,841 | ||||||
Long-term convertible debt
|
248,591 | 245,750 | ||||||
Deferred income taxes
|
7,146 | 7,393 | ||||||
Other long-term liabilities
|
12,296 | 13,767 | ||||||
Total liabilities
|
1,176,261 | 1,117,751 | ||||||
Stockholders equity:
|
||||||||
Common stock, $0.01 par value. Authorized
100,000,000 shares; outstanding 48,272,578 and 48,167,229
at March 31, 2011 and December 31, 2010, respectively
|
560 | 554 | ||||||
Additional paid-in capital
|
566,361 | 543,611 | ||||||
Accumulated other comprehensive income
|
27 | 627 | ||||||
Retained earnings
|
934,480 | 864,003 | ||||||
1,501,428 | 1,408,795 | |||||||
Less treasury stock at cost (8,214,445 and 7,759,234 shares
at March 31, 2011 and December 31, 2010, respectively)
|
(268,828 | ) | (243,158 | ) | ||||
Total stockholders equity
|
1,232,600 | 1,165,637 | ||||||
Total liabilities and stockholders equity
|
$ | 2,408,861 | $ | 2,283,388 | ||||
See accompanying notes to condensed consolidated financial
statements.
3
Table of Contents
AMERIGROUP
Corporation and Subsidiaries
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended |
||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Revenues:
|
||||||||
Premium
|
$ | 1,535,795 | $ | 1,366,767 | ||||
Investment income and other
|
4,120 | 4,882 | ||||||
Total revenues
|
1,539,915 | 1,371,649 | ||||||
Expenses:
|
||||||||
Health benefits
|
1,256,962 | 1,141,572 | ||||||
Selling, general and administrative
|
116,459 | 117,423 | ||||||
Premium tax
|
40,448 | 31,472 | ||||||
Depreciation and amortization
|
9,090 | 8,710 | ||||||
Interest
|
4,179 | 3,990 | ||||||
Total expenses
|
1,427,138 | 1,303,167 | ||||||
Income before income taxes
|
112,777 | 68,482 | ||||||
Income tax expense
|
42,300 | 26,300 | ||||||
Net income
|
$ | 70,477 | $ | 42,182 | ||||
Net income per share:
|
||||||||
Basic net income per share
|
$ | 1.46 | $ | 0.83 | ||||
Weighted average number of common shares outstanding
|
48,265,104 | 50,550,754 | ||||||
Diluted net income per share
|
$ | 1.37 | $ | 0.82 | ||||
Weighted average number of common shares and dilutive potential
common shares outstanding
|
51,534,794 | 51,226,435 | ||||||
See accompanying notes to condensed consolidated financial
statements.
4
Table of Contents
AMERIGROUP
Corporation and Subsidiaries
Three
Months Ended March 31, 2011
(Dollars in thousands)
(Unaudited)
Accumulated |
||||||||||||||||||||||||||||||||
Additional |
Other |
Total |
||||||||||||||||||||||||||||||
Common Stock |
Paid-in |
Comprehensive |
Retained |
Treasury Stock |
Stockholders |
|||||||||||||||||||||||||||
Shares | Amount | Capital | Income | Earnings | Shares | Amount | Equity | |||||||||||||||||||||||||
Balances at January 1, 2011
|
48,167,229 | $ | 554 | $ | 543,611 | $ | 627 | $ | 864,003 | 7,759,234 | $ | (243,158 | ) | $ | 1,165,637 | |||||||||||||||||
Common stock issued upon exercise of stock options and vesting
of restricted stock grants
|
560,560 | 6 | 15,169 | | | | | 15,175 | ||||||||||||||||||||||||
Compensation expense related to share-based payments
|
| | 4,856 | | | | | 4,856 | ||||||||||||||||||||||||
Tax benefit related to share-based payments
|
| | 2,725 | | | | | 2,725 | ||||||||||||||||||||||||
Employee stock relinquished for payment of taxes
|
(14,883 | ) | | | | | 14,883 | (878 | ) | (878 | ) | |||||||||||||||||||||
Common stock repurchases
|
(440,328 | ) | | | | | 440,328 | (24,792 | ) | (24,792 | ) | |||||||||||||||||||||
Unrealized loss on
available-for-sale
securities, net of tax
|
| | | (600 | ) | | | | (600 | ) | ||||||||||||||||||||||
Net income
|
| | | | 70,477 | | | 70,477 | ||||||||||||||||||||||||
Balances at March 31, 2011
|
48,272,578 | $ | 560 | $ | 566,361 | $ | 27 | $ | 934,480 | 8,214,445 | $ | (268,828 | ) | $ | 1,232,600 | |||||||||||||||||
See accompanying notes to condensed consolidated financial
statements.
5
Table of Contents
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 70,477 | $ | 42,182 | ||||
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
|
||||||||
Depreciation and amortization
|
9,090 | 8,710 | ||||||
Loss on disposal or abandonment of property, equipment and
software
|
159 | 8 | ||||||
Deferred tax expense (benefit)
|
227 | (821 | ) | |||||
Compensation expense related to share-based payments
|
4,856 | 4,427 | ||||||
Convertible debt non-cash interest
|
2,841 | 2,661 | ||||||
Other
|
3,451 | 1,903 | ||||||
Changes in assets and liabilities (decreasing) increasing cash
flows from operations:
|
||||||||
Premium receivables
|
(27,112 | ) | (44,041 | ) | ||||
Prepaid expenses, provider and other receivables and other
current assets
|
(9,873 | ) | (15,567 | ) | ||||
Other assets
|
(1,296 | ) | (783 | ) | ||||
Claims payable
|
29,092 | 20,184 | ||||||
Accounts payable, accrued expenses, contractual refunds payable
and other current liabilities
|
5,917 | 28,949 | ||||||
Unearned revenue
|
(2,836 | ) | (51,172 | ) | ||||
Other long-term liabilities
|
(1,471 | ) | (3,489 | ) | ||||
Net cash provided by (used in) operating activities
|
83,522 | (6,849 | ) | |||||
Cash flows from investing activities:
|
||||||||
Proceeds from sale of trading securities
|
| 2,950 | ||||||
Proceeds from sale of
available-for-sale
securities
|
199,843 | 213,793 | ||||||
Purchase of
available-for-sale
securities
|
(449,244 | ) | (248,224 | ) | ||||
Proceeds from redemption of investments on deposit for licensure
|
22,685 | 18,315 | ||||||
Purchase of investments on deposit for licensure
|
(27,177 | ) | (21,481 | ) | ||||
Purchase of property, equipment and software
|
(10,890 | ) | (6,435 | ) | ||||
Purchase of contract rights and related assets
|
| (13,420 | ) | |||||
Net cash used in investing activities
|
(264,783 | ) | (54,502 | ) | ||||
Cash flows from financing activities:
|
||||||||
Net increase in bank overdrafts
|
23,514 | | ||||||
Customer funds administered
|
2,643 | 1,611 | ||||||
Proceeds from exercise of stock options
|
15,175 | 1,852 | ||||||
Repurchase of common stock shares
|
(24,792 | ) | (6,982 | ) | ||||
Tax benefit related to share-based payments
|
2,725 | 139 | ||||||
Net cash provided by (used in) financing activities
|
19,265 | (3,380 | ) | |||||
Net decrease in cash and cash equivalents
|
(161,996 | ) | (64,731 | ) | ||||
Cash and cash equivalents at beginning of period
|
763,946 | 505,915 | ||||||
Cash and cash equivalents at end of period
|
$ | 601,950 | $ | 441,184 | ||||
Supplemental disclosures of non-cash information:
|
||||||||
Employee stock relinquished for payment of taxes
|
$ | (878 | ) | $ | (700 | ) | ||
Unrealized (loss) gain on
available-for-sale
securities, net of tax
|
$ | (600 | ) | $ | 242 | |||
See accompanying notes to condensed consolidated financial
statements.
6
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share data)
(Unaudited)
Notes to Condensed Consolidated Financial Statements
(Dollars in thousands, except per share data)
(Unaudited)
1. | Interim Financial Reporting |
Basis
of Presentation
The accompanying Condensed Consolidated Financial Statements as
of March 31, 2011 and for the three months ended
March 31, 2011 and 2010 of AMERIGROUP Corporation and its
subsidiaries (the Company), are unaudited and
reflect all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management, necessary
for a fair presentation of the Companys financial position
at March 31, 2011 and operating results for the interim
periods ended March 31, 2011 and 2010. The
December 31, 2010 Condensed Consolidated Balance Sheet was
derived from the audited consolidated financial statements as of
that date. Certain reclassifications have been made to prior
year amounts to conform to the current year presentation.
The Condensed Consolidated Financial Statements should be read
in conjunction with the audited consolidated financial
statements and accompanying notes thereto and managements
discussion and analysis of financial condition and results of
operations for the year ended December 31, 2010 contained
in the Companys Annual Report on
Form 10-K
filed with the Securities and Exchange Commission
(SEC) on February 23, 2011. The results of
operations for the three months ended March 31, 2011 are
not necessarily indicative of the results to be expected for the
entire year ending December 31, 2011.
2. | Earnings per Share |
Basic net income per common share is computed by dividing net
income by the weighted average number of shares of common stock
outstanding. Diluted net income per common share is computed by
dividing net income by the weighted average number of shares of
common stock outstanding plus other potentially dilutive
securities. Restricted shares and restricted share units subject
to performance
and/or
market conditions are only included in the calculation of
diluted net income per common share calculations if all of the
necessary performance
and/or
market conditions have been satisfied and the impact is not
anti-dilutive. All potential dilutive securities are determined
by applying the treasury stock method. The following table sets
forth the calculations of basic and diluted net income per share:
Three Months Ended |
||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Basic net income per share:
|
||||||||
Net income
|
$ | 70,477 | $ | 42,182 | ||||
Weighted average number of common shares outstanding
|
48,265,104 | 50,550,754 | ||||||
Basic net income per share
|
$ | 1.46 | $ | 0.83 | ||||
Diluted net income per share:
|
||||||||
Net income
|
$ | 70,477 | $ | 42,182 | ||||
Weighted average number of common shares outstanding
|
48,265,104 | 50,550,754 | ||||||
Dilutive effect of stock options and non-vested stock awards
|
1,823,865 | 675,681 | ||||||
Dilutive effect of assumed conversion of the
2.0% Convertible Senior Notes
|
1,351,908 | | ||||||
Dilutive effect of warrants
|
93,917 | | ||||||
Weighted average number of common shares and dilutive potential
common shares outstanding
|
51,534,794 | 51,226,435 | ||||||
Diluted net income per share
|
$ | 1.37 | $ | 0.82 | ||||
7
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
Potential common stock equivalents representing
13,682 shares and 2,801,645 shares for the three
months ended March 31, 2011 and 2010, respectively, were
not included in the computation of diluted net income per share
because to do so would have been anti-dilutive.
The shares issuable upon conversion of the Companys
2.0% Convertible Senior Notes (the
2.0% Convertible Senior Notes) due May 15,
2012 which were issued effective March 28, 2007 in the
aggregate principal amount of $260,000 (See
Note 8) were not included in the computation of
diluted net income per share for the three months ended
March 31, 2010 because to do so would have been
anti-dilutive.
The Companys warrants to purchase shares of its common
stock sold on March 28, 2007 and April 9, 2007 (See
Note 8) were not included in the computation of
diluted net income per share for the three months ended
March 31, 2010 because to do so would have been
anti-dilutive.
3. | Fair Value Measurements |
The fair value of a financial instrument is the amount that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date. The following methods and assumptions
were used to estimate the fair value of each class of financial
instruments:
Cash, premium receivables, provider and other receivables,
prepaid expenses, other current assets, claims payable, bank
overdrafts, unearned revenue, accrued payroll and related
liabilities, contractual refunds payable and accounts payable,
accrued expenses and other current liabilities: The fair
value of these financial instruments approximates the historical
cost because of the short maturity of these items.
Cash equivalents, short-term investments, long-term
investments (other than auction rate securities), investments on
deposit for licensure, cash surrender value of life insurance
policies (included in other long-term assets), long-term
convertible debt, deferred compensation (included in other
long-term liabilities): Fair value for these items is
determined based upon quoted market prices.
Auction rate securities (included in long-term investments)
and the forward contract related to certain auction rate
securities (included in other long-term assets at March 31,
2010): Fair value for these items is determined based upon
discounted cash flow analyses.
Assets and liabilities recorded at fair value in the Condensed
Consolidated Balance Sheets are categorized based upon a
three-tier fair value hierarchy, which prioritizes the inputs
used in measuring fair value. These tiers include:
Level 1 Observable inputs such as quoted
prices in active markets: The Companys
Level 1 securities consist of money market funds, debt
securities of government sponsored entities, Federally insured
corporate bonds and U.S. Treasury securities. Level 1
securities are classified as short-term investments, long-term
investments and investments on deposit for licensure in the
accompanying Condensed Consolidated Balance Sheets. These
securities are actively traded and therefore the fair value for
these securities is based on quoted market prices on one or more
securities exchanges.
Level 2 Inputs other than quoted prices in
active markets that are either directly or indirectly
observable: The Companys Level 2
securities consist of certificates of deposit, commercial paper,
corporate bonds and municipal bonds and are classified as
short-term investments, long-term investments and investments on
deposit for licensure in the accompanying Condensed Consolidated
Balance Sheets. The Companys investments in securities
classified as Level 2 are traded frequently though not
necessarily daily. Fair value for these securities is determined
using a market approach based on quoted prices for similar
securities in active markets or quoted prices for identical
securities in inactive markets.
Level 3 Unobservable inputs in which little
or no market data exists, therefore requiring an entity to
develop its own assumptions: The Companys
Level 3 securities consist of auction rate securities
issued by
8
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
student loan corporations established by various state
governments. The auction events for these securities failed
during early 2008 and have not resumed. Therefore, the estimated
fair values of these securities have been determined utilizing
an income approach, specifically discounted cash flow analyses.
These analyses consider among other items, the creditworthiness
of the issuer, the timing of the expected future cash flows,
including the final maturity associated with the securities, and
an assumption of when the next time the security is expected to
have a successful auction. These securities were also compared,
when possible, to other observable and relevant market data. As
the timing of future successful auctions, if any, cannot be
predicted,
available-for-sale
auction rate securities are classified as long-term investments
in the accompanying Condensed Consolidated Balance Sheets.
Transfers between levels, as a result of changes in the inputs
used to determine fair value, are recognized as of the beginning
of the reporting period in which the transfer occurs. There were
no transfers between levels for the periods ended March 31,
2011 and December 31, 2010.
Assets
The Companys assets measured at fair value on a recurring
basis at March 31, 2011 were as follows:
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices in |
Significant |
|||||||||||||||
Active Markets for |
Significant Other |
Unobservable |
||||||||||||||
Identical Assets |
Observable Inputs |
Inputs |
||||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Cash equivalents:
|
||||||||||||||||
Certificates of deposit
|
$ | 140,313 | $ | | $ | 140,313 | $ | | ||||||||
Commercial paper
|
23,302 | | 23,302 | | ||||||||||||
Debt securities of government sponsored entities
|
82,996 | 82,996 | | | ||||||||||||
Money market funds
|
364,087 | 364,087 | | | ||||||||||||
Available-for-sale
securities:
|
||||||||||||||||
Auction rate securities
|
17,394 | | | 17,394 | ||||||||||||
Certificates of deposit
|
13,153 | | 13,153 | | ||||||||||||
Commercial paper
|
4,494 | | 4,494 | | ||||||||||||
Corporate bonds
|
300,704 | | 300,704 | | ||||||||||||
Debt securities of government sponsored entities
|
434,896 | 434,896 | | | ||||||||||||
Federally insured corporate bonds
|
21,350 | 21,350 | | | ||||||||||||
Municipal bonds
|
387,322 | | 387,322 | | ||||||||||||
U.S. Treasury securities
|
31,638 | 31,638 | | | ||||||||||||
Total assets measured at fair value
|
$ | 1,821,649 | $ | 934,967 | $ | 869,288 | $ | 17,394 | ||||||||
9
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
The Companys assets measured at fair value on a recurring
basis at December 31, 2010 were as follows:
Fair Value Measurements at Reporting Date Using | ||||||||||||||||
Quoted Prices in |
Significant |
|||||||||||||||
Active Markets for |
Significant Other |
Unobservable |
||||||||||||||
Identical Assets |
Observable Inputs |
Inputs |
||||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Cash equivalents:
|
||||||||||||||||
Certificates of deposit
|
$ | 137,215 | $ | | $ | 137,215 | $ | | ||||||||
Commercial paper
|
34,742 | | 34,742 | | ||||||||||||
Corporate bonds
|
1,002 | | 1,002 | | ||||||||||||
Money market funds
|
584,427 | 584,427 | | | ||||||||||||
Municipal bonds
|
3,764 | | 3,764 | | ||||||||||||
U.S. Treasury securities
|
1,000 | 1,000 | | | ||||||||||||
Available-for-sale
securities:
|
||||||||||||||||
Auction rate securities
|
21,293 | | | 21,293 | ||||||||||||
Certificates of deposit
|
13,651 | | 13,651 | | ||||||||||||
Commercial paper
|
14,793 | | 14,793 | | ||||||||||||
Corporate bonds
|
237,916 | | 237,916 | | ||||||||||||
Debt securities of government sponsored entities
|
332,051 | 332,051 | | | ||||||||||||
Federally insured corporate bonds
|
21,454 | 21,454 | | | ||||||||||||
Municipal bonds
|
300,817 | | 300,817 | | ||||||||||||
U.S. Treasury securities
|
21,721 | 21,721 | | | ||||||||||||
Total assets measured at fair value
|
$ | 1,725,846 | $ | 960,653 | $ | 743,900 | $ | 21,293 | ||||||||
The following table presents the changes in the Companys
assets measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) for the
periods ended March 31, 2011 and December 31, 2010:
Three Months Ended |
Twelve Months Ended |
|||||||
March 31, 2011 | December 31, 2010 | |||||||
Balance at beginning of period
|
$ | 21,293 | $ | 58,003 | ||||
Total net realized loss included in earnings
|
| (290 | ) | |||||
Total net unrealized gain included in other comprehensive income
|
326 | 2,790 | ||||||
Sales
|
| (12,000 | ) | |||||
Calls by issuers
|
(4,225 | ) | (27,210 | ) | ||||
Balance at end of period
|
$ | 17,394 | $ | 21,293 | ||||
At March 31, 2011 and December 31, 2010, the Company
did not elect the fair value option available under current
guidance for any financial assets and liabilities that were not
required to be measured at fair value.
10
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
During the three months ended March 31, 2011 and 2010,
proceeds from the sale or call of certain investments in auction
rate securities, the net realized gains and the amount of prior
period net unrealized losses reclassified from accumulated other
comprehensive income on a specific-identification basis were as
follows (excludes the impact of the forward contract discussed
below):
Three Months Ended |
||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Proceeds from sale or call of auction rate securities
|
$ | 4,225 | $ | 7,870 | ||||
Net realized gain recorded in earnings
|
| 201 | ||||||
Net unrealized loss reclassified from accumulated other
comprehensive income, included in realized gain above
|
| (80 | ) |
During the fourth quarter of 2008, the Company entered into a
forward contract with a registered broker-dealer, at no cost,
which provided the Company with the ability to sell certain
auction rate securities to the registered broker-dealer at par
within a defined timeframe, beginning June 30, 2010. These
securities were classified as trading securities because the
Company did not intend to hold these securities until final
maturity. Trading securities are carried at fair value with
changes in fair value recorded in earnings. The value of the
forward contract was estimated using a discounted cash flow
analysis taking into consideration the creditworthiness of the
counterparty to the agreement. The forward contract was included
in other long-term assets. As of June 30, 2010, all of the
remaining trading securities under the terms of this forward
contract were repurchased by the broker-dealer; therefore, the
forward contract expired. For the three months ended
March 31, 2010, a gross realized gain of $281 was recorded
to earnings relating to these trading securities. As the trading
securities increased in value for the three months ended
March 31, 2010, a corresponding decrease in fair value of
$280 for the forward contract was recorded to earnings.
Liabilities
The 2.0% Convertible Senior Notes are carried at cost plus
the value of the accrued discount in the accompanying Condensed
Consolidated Balance Sheets, or $248,591 and $245,750 as of
March 31, 2011 and December 31, 2010, respectively.
The estimated fair value of the 2.0% Convertible Senior
Notes is determined based upon a quoted market price. As of
March 31, 2011 and December 31, 2010, the fair value
of the borrowings under the 2.0% Convertible Senior Notes
was $389,025 and $303,550, respectively, compared to the face
value of $260,000.
11
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
4. | Short- and Long-Term Investments and Investments on Deposit for Licensure |
The amortized cost, gross unrealized holding gains, gross
unrealized holding losses and fair value for
available-for-sale
short- and long-term investments and investments on deposit for
licensure held at March 31, 2011 were as follows:
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||||||
Cost | Holding Gains | Holding Losses | Value | |||||||||||||
Auction rate securities, maturing in greater than ten years
|
$ | 18,425 | $ | | $ | 1,031 | $ | 17,394 | ||||||||
Cash equivalents, maturing within one year
|
346 | | | 346 | ||||||||||||
Certificates of deposit, maturing within one year
|
13,153 | | | 13,153 | ||||||||||||
Commercial paper, maturing within one year
|
4,495 | | 1 | 4,494 | ||||||||||||
Corporate bonds, maturing within one year
|
102,024 | 511 | 14 | 102,521 | ||||||||||||
Corporate bonds, maturing between one year and five years
|
196,965 | 1,558 | 340 | 198,183 | ||||||||||||
Debt securities of government sponsored entities, maturing
within one year
|
221,039 | 280 | 11 | 221,308 | ||||||||||||
Debt securities of government sponsored entities, maturing
between one year and five years
|
206,788 | 131 | 711 | 206,208 | ||||||||||||
Debt securities of government sponsored entities, maturing
between five years and ten years
|
7,388 | | 8 | 7,380 | ||||||||||||
Federally insured corporate bonds, maturing within one year
|
21,072 | 279 | 1 | 21,350 | ||||||||||||
Money market funds, maturing within one year
|
22,193 | | | 22,193 | ||||||||||||
Municipal bonds, maturing within one year
|
137,802 | 57 | 1 | 137,858 | ||||||||||||
Municipal bonds, maturing between one year and five years
|
22,572 | 202 | 9 | 22,765 | ||||||||||||
Municipal bonds, maturing between five years and ten years
|
159,166 | 902 | 1,852 | 158,216 | ||||||||||||
Municipal bonds, maturing in greater than ten years
|
68,472 | 291 | 280 | 68,483 | ||||||||||||
U.S. Treasury securities, maturing within one year
|
30,625 | 6 | | 30,631 | ||||||||||||
U.S. Treasury securities, maturing between one year and five
years
|
921 | 86 | | 1,007 | ||||||||||||
Total
|
$ | 1,233,446 | $ | 4,303 | $ | 4,259 | $ | 1,233,490 | ||||||||
12
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
The amortized cost, gross unrealized holding gains, gross
unrealized holding losses and fair value for
available-for-sale
short- and long-term investments and investments on deposit for
licensure held at December 31, 2010 were as follows:
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||||||
Cost | Holding Gains | Holding Losses | Value | |||||||||||||
Auction rate securities, maturing in greater than ten years
|
$ | 22,650 | $ | | $ | 1,357 | $ | 21,293 | ||||||||
Cash equivalents, maturing within one year
|
306 | | | 306 | ||||||||||||
Certificates of deposit, maturing within one year
|
13,651 | | | 13,651 | ||||||||||||
Commercial paper, maturing within one year
|
14,797 | | 4 | 14,793 | ||||||||||||
Corporate bonds, maturing within one year
|
105,826 | 555 | 10 | 106,371 | ||||||||||||
Corporate bonds, maturing between one year and five years
|
129,949 | 1,772 | 176 | 131,545 | ||||||||||||
Debt securities of government sponsored entities, maturing
within one year
|
170,209 | 416 | | 170,625 | ||||||||||||
Debt securities of government sponsored entities, maturing
between one year and five years
|
161,684 | 207 | 465 | 161,426 | ||||||||||||
Federally insured corporate bonds, maturing within one year
|
21,097 | 360 | 3 | 21,454 | ||||||||||||
Money market funds, maturing within one year
|
20,009 | | | 20,009 | ||||||||||||
Municipal bonds, maturing within one year
|
101,572 | 40 | 13 | 101,599 | ||||||||||||
Municipal bonds, maturing between one year and five years
|
29,539 | 129 | 24 | 29,644 | ||||||||||||
Municipal bonds, maturing between five years and ten years
|
121,547 | 964 | 1,171 | 121,340 | ||||||||||||
Municipal bonds, maturing in greater than ten years
|
48,576 | 12 | 354 | 48,234 | ||||||||||||
U.S. Treasury securities, maturing within one year
|
18,113 | 52 | | 18,165 | ||||||||||||
U.S. Treasury securities, maturing between one year and five
years
|
3,479 | 78 | 1 | 3,556 | ||||||||||||
Total
|
$ | 983,004 | $ | 4,585 | $ | 3,578 | $ | 984,011 | ||||||||
For the three months ended March 31, 2011 and 2010, a net
unrealized loss of $963 and a net unrealized gain of $472,
respectively, was recorded to accumulated other comprehensive
income as a result of changes in fair value for investments
classified as
available-for-sale.
13
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
The following table shows the fair value of the Companys
available-for-sale
investments with unrealized losses that are not deemed to be
other-than-temporarily
impaired at March 31, 2011. Investments are aggregated by
investment category and length of time that individual
securities have been in a continuous unrealized loss position:
Less than 12 Months | 12 Months or Greater | |||||||||||||||||||||||
Gross |
Gross |
|||||||||||||||||||||||
Unrealized |
Total |
Unrealized |
Total |
|||||||||||||||||||||
Fair |
Holding |
Number of |
Fair |
Holding |
Number of |
|||||||||||||||||||
Value | Losses | Securities | Value | Losses | Securities | |||||||||||||||||||
March 31, 2011:
|
||||||||||||||||||||||||
Auction rate securities
|
$ | | $ | | | $ | 17,394 | $ | 1,031 | 5 | ||||||||||||||
Commercial paper
|
1,995 | 1 | 1 | | | | ||||||||||||||||||
Corporate bonds
|
137,639 | 354 | 53 | | | | ||||||||||||||||||
Debt securities of government sponsored entities
|
204,254 | 730 | 50 | | | | ||||||||||||||||||
Federally insured corporate bond
|
4,028 | 1 | 1 | | | | ||||||||||||||||||
Municipal bonds
|
135,592 | 2,142 | 53 | | | | ||||||||||||||||||
Total temporarily impaired securities
|
$ | 483,508 | $ | 3,228 | 158 | $ | 17,394 | $ | 1,031 | 5 | ||||||||||||||
The temporary declines in value at March 31, 2011 are
primarily due to fluctuations in short-term market interest
rates and the lack of liquidity of auction rate securities.
Auction rate securities that have been in an unrealized loss
position for greater than 12 months have experienced losses
due to the lack of liquidity for these instruments, not as a
result of impairment of the underlying debt securities.
Additionally, the Company does not intend to sell these
securities prior to maturity or recovery and it is not likely
that the Company will be required to sell these securities prior
to maturity; therefore, there is no indication of
other-than-temporary
impairment for these securities.
5. | Market Updates |
Pending
Contractual Revisions
Texas
In April 2011, the Texas Health and Human Services Commission
(HHSC) issued a request for proposal for the re-bid
of the Medicaid and Childrens Health Insurance Program
(CHIP) Managed Care Services Contract. Proposals are
due in May 2011 and the Company anticipates a contract award
date during the latter half of the year with an operational
start date in early 2012. If the Company is not awarded this
contract or if the level of the Companys business in Texas
is reduced through the re-bidding process, the Companys
results of operations, financial position or cash flows in
future periods could be materially and adversely affected.
Georgia
The Companys Temporary Assistance for Needy Families and
CHIP contract between its Georgia health plan and the State of
Georgia expires June 30, 2011 with the States option
to renew the contract for one additional one-year term. The
State has notified the Company of its intent to renew its
contract effective July 1, 2011 and to amend the
Companys existing contract to include one additional year
and one additional option to renew for a one-year term for an
ultimate potential contract term ending on June 30, 2014 at
the outermost. Additionally, the State has indicated its intent
to reprocure the contract through a competitive bidding process
sometime prior to this contract termination.
14
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
Other
Market Updates
Texas
In February 2011, the Companys Texas health plan began
serving aged, blind and disabled (ABD) members in
the six-county service area surrounding Forth Worth, Texas
through an expansion contract awarded by HHSC. As of
March 31, 2011, approximately 29,000 members were served by
the Companys Texas health plan under this contract.
Previously, the Company served approximately 14,000 ABD members
in the Dallas and Fort Worth areas under an administrative
services only contract that terminated on January 31, 2011.
6. | Summary of Goodwill and Acquired Intangible Assets |
On March 1, 2010, the Companys New Jersey health plan
acquired the Medicaid contract rights and rights under certain
provider agreements of University Health Plans, Inc. for
strategic reasons. The purchase price of $13,420 was financed
through available cash. The entire purchase price was allocated
to goodwill and other intangibles, which includes $2,200 of
specifically identifiable intangibles allocated to the rights to
the Medicaid service contract and the assumed provider contracts.
Other acquired intangible assets, included in other long-term
assets in the accompanying Condensed Consolidated Balance
Sheets, at March 31, 2011 and December 31, 2010 are as
follows:
March 31, 2011 | December 31, 2010 | |||||||||||||||
Gross Carrying |
Accumulated |
Gross Carrying |
Accumulated |
|||||||||||||
Amount | Amortization | Amount | Amortization | |||||||||||||
Membership rights and provider contracts
|
$ | 28,171 | $ | (26,243 | ) | $ | 28,171 | $ | (26,106 | ) | ||||||
Non-compete agreements and trademarks
|
946 | (946 | ) | 946 | (946 | ) | ||||||||||
$ | 29,117 | $ | (27,189 | ) | $ | 29,117 | $ | (27,052 | ) | |||||||
7. | Claims Payable |
The following table presents the components of the change in
claims payable for the periods presented:
Three Months Ended |
Twelve Months Ended |
|||||||
March 31, 2011 | December 31, 2010 | |||||||
Claims payable, beginning of period
|
$ | 510,675 | $ | 529,036 | ||||
Health benefits expense incurred during the period:
|
||||||||
Related to current year
|
1,307,566 | 4,828,321 | ||||||
Related to prior years
|
(50,604 | ) | (106,215 | ) | ||||
Total incurred
|
1,256,962 | 4,722,106 | ||||||
Health benefits payments during the period:
|
||||||||
Related to current year
|
900,625 | 4,359,216 | ||||||
Related to prior years
|
327,245 | 381,251 | ||||||
Total payments
|
1,227,870 | 4,740,467 | ||||||
Claims payable, end of period
|
$ | 539,767 | $ | 510,675 | ||||
Health benefits expense incurred during both periods was 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
15
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
level sufficient under moderately adverse conditions that were
not needed and the reduction in health benefits expense due to
revisions to prior estimates.
8. | Convertible Senior Notes |
As of March 31, 2011, the Company had $260,000 outstanding
in aggregate principal amount of 2.0% Convertible Senior
Notes issued March 28, 2007 and due May 15, 2012, the
carrying amount of which was $248,591 and $245,750 as of
March 31, 2011 and December 31, 2010, respectively.
The unamortized discount of $11,409 at March 31, 2011, will
continue to be amortized over the remaining fourteen months
until maturity.
Upon conversion of the 2.0% Convertible Senior Notes, the
Company will pay cash up to the principal amount of the
2.0% Convertible Senior Notes converted. With respect to
any conversion value in excess of the principal amount, the
Company has the option to settle the excess with cash, shares of
its common stock, or a combination thereof based on a daily
conversion value, as defined in the Indenture. The initial
conversion rate for the 2.0% Convertible Senior Notes is
23.5114 shares of common stock per one thousand dollars of
principal amount of 2.0% Convertible Senior Notes, which
represents a 32.5% conversion premium based on the closing price
of $32.10 per share of the Companys common stock on
March 22, 2007 and is equivalent to a conversion price of
approximately $42.53 per share of common stock. Consequently,
under the provisions of the 2.0% Convertible Senior Notes,
if the market price of the Companys common stock exceeds
$42.53, the Company will be obligated to settle, in cash or
shares of its common stock at its option, an amount equal to
approximately $6,100 for each dollar in share price that the
market price of the Companys common stock exceeds $42.53,
or the conversion value in excess of the principal amount of the
2.0% Convertible Senior Notes. In periods prior to
conversion, the 2.0% Convertible Senior Notes would also
have a dilutive impact to earnings if the average market price
of the Companys common stock exceeds $42.53 for the period
reported. As of March 31, 2011, the 2.0% Convertible
Senior Notes had a dilutive impact to earnings per share as the
average market price of the Companys common stock for the
three months ended March 31, 2011 of $54.61 exceeded the
conversion price of $42.53.
Concurrent with the issuance of the 2.0% Convertible Senior
Notes, the Company purchased convertible note hedges covering,
subject to customary anti-dilution adjustments,
6,112,964 shares of its common stock. The convertible note
hedges allow the Company to receive shares of its common stock
and/or cash
equal to the amounts of common stock
and/or cash
related to the excess conversion value that the Company would
pay to the holders of the 2.0% Convertible Senior Notes
upon conversion. The convertible note hedges are expected to
reduce the potential dilution upon conversion of the
2.0% Convertible Senior Notes in the event that the market
value per share of the Companys common stock, as measured
under the convertible note hedges, at the time of exercise is
greater than the strike price of the convertible note hedges,
which corresponds to the initial conversion price of the
2.0% Convertible Senior Notes and is subject to certain
customary adjustments. If, however, the market value per share
of the Companys common stock exceeds the strike price of
the warrants (discussed below) when such warrants are exercised,
the Company will be required to issue common stock. Both the
convertible note hedges and warrants provide for net-share
settlement at the time of any exercise for the amount that the
market value of the common stock exceeds the applicable strike
price.
Also concurrent with the issuance of the 2.0% Convertible
Senior Notes, the Company sold warrants to acquire, subject to
customary anti-dilution adjustments, 6,112,964 shares of
its common stock at an exercise price of $53.77 per share. If
the average market price of the Companys common stock
during a defined period ending on or about the settlement date
exceeds the exercise price of the warrants, the warrants will be
settled in shares of its common stock. Consequently, under the
provisions of the warrant instruments, if the market price of
the Companys common stock exceeds $53.77 at exercise, the
Company will be obligated to settle in shares of its common
stock an amount equal to approximately $6,100 for each dollar
that the market price of its common stock exceeds $53.77
resulting in a dilutive impact to its earnings. As of
March 31, 2011, the warrant instruments had a dilutive
impact to earnings per share as the average market price of the
Companys common stock for the three months ended
March 31, 2011 of $54.61 exceeded the $53.77 exercise price
of the warrants.
16
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
The convertible note hedges and warrants are separate
transactions which will not affect holders rights under
the 2.0% Convertible Senior Notes.
As of March 31, 2011, the Companys common stock was
last traded at a price of $64.25 per share. Based on this value,
if converted at March 31, 2011, the Company would have been
obligated to pay the principal of the 2.0% Convertible
Senior Notes plus an amount in cash or shares equal to $132,758.
An amount equal to $132,758 would be owed to the Company in cash
or in shares of its common stock through the provisions of the
convertible note hedges resulting in net cash outflow equal to
the principal amount of the 2.0% Convertible Senior Notes.
At this per share value, the Company would be required to
deliver approximately $64,064 in shares of the Companys
common stock under the warrant instruments or approximately
997,000 shares of its common stock at that price per share.
9. | Commitments and Contingencies |
Florida
Premium Recoupment
On March 14, 2011, AMERIGROUP Florida, Inc. received
written notices (the Notices) from the Florida
Agency for Health Care Administration (AHCA)
regarding an audit, conducted by a third party, of Medicaid
claims paid under contracts between AHCA and Florida Medicaid
managed care organizations for the period October 1, 2008
through December 31, 2010. The Notices claim that AHCA paid
premium to AMERIGROUP Florida, Inc. for members who were not
eligible to be enrolled in the Medicaid program at the time AHCA
and other State agencies enrolled these purportedly ineligible
members. The Notices also seek recoupment of premium payments to
AMERIGROUP Florida, Inc. attributable to the purportedly
ineligible members in the amount of $2,900. The Notices relate
to two Florida counties and the Company believes that it may
receive similar notices for other counties in which it operates
or has operated in Florida.
The Company is evaluating its appeal rights and believes that it
has substantial defenses to the claims asserted in the Notices
for premium recoupment. The accompanying Condensed Consolidated
Financial Statements reflect the Companys best estimate of
its liability for the claims set forth in the Notices as of
March 31, 2011. However, the Company is unable to estimate
the amount or nature of any potential claims for premium
recoupment in the other Florida counties in which it operates or
has operated because the Company has not received a notice from
AHCA or the third party audit firm for such claims. As a result,
there can be no assurances that the ultimate outcome of this
matter will not have a material adverse effect on the
Companys financial position, results of operations or cash
flows.
Letter
of Credit
Effective July 1, 2010, the Company renewed a
collateralized irrevocable standby letter of credit, initially
issued on July 1, 2009, in an aggregate principal amount of
approximately $17,400, to meet certain obligations under its
Medicaid contract in the State of Georgia through its Georgia
subsidiary, AMGP Georgia Managed Care Company, Inc. The letter
of credit is collateralized through investments held by AMGP
Georgia Managed Care Company, Inc.
Legal
Proceedings
Employment
Litigation
On November 22, 2010, a former AMERIGROUP New York, LLC
marketing representative filed a putative collective and class
action Complaint against AMERIGROUP Corporation and AMERIGROUP
New York, LLC in the United States District Court, Eastern
District of New York styled as Hamel Toure, Individually and
on Behalf of All Other Persons Similarly Situated v.
AMERIGROUP CORPORATION and AMERIGROUP NEW YORK, L.L.C. f/k/a
CAREPLUS, L.L.C. (Case No.: CV10-5391). The Complaint
alleges, inter alia, that the plaintiff and certain other
employees should have been classified as non-exempt employees
under the Fair Labor Standards Act (FLSA) and during
the course of their employment should have received overtime and
other compensation under
17
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
the FLSA from October 22, 2007 until the entry of judgment
and under the New York Labor Law from October 22, 2004
until the entry of judgment. The Complaint requests
certification of the action as a class action, designation of
the action as a collective action, a declaratory judgment,
injunctive relief, an award of unpaid overtime compensation, an
award of liquidated
and/or
punitive damages, pre-judgment and post-judgment interest, as
well as costs and attorneys fees. The plaintiff recently
amended the Complaint to include a nationwide collective/class
action on behalf of other similarly situated former and current
associates who have worked as marketing representatives for any
subsidiary health plan of the Company during the time period
from November 2007 to the present.
In addition, the Company recently learned that a Complaint
making substantially the same allegations as the Toure
case has been filed in the United States District Court,
Eastern District of New York. The case is styled as Andrea
Burch, individually and on behalf of all others similarly
situated v. AMERIGROUP CORP., d/b/a AMERIGROUP; AMERIGROUP
NEW YORK, LLC, d/b/a AMERIGROUP (Case No.: CV11-1895).
At this early stage of the aforementioned cases, the Company is
unable to make a reasonable estimate of the amount or range of
loss that could result from an unfavorable outcome because the
scope and size of the potential class has not been determined,
no discovery has occurred and no specific amount of monetary
damages has been alleged. The Company believes it has
meritorious defenses to the claims against it and intends to
defend itself vigorously.
Other
Litigation
The Company is involved in various other legal proceedings in
the normal course of business. Based upon its evaluation of the
information currently available, the Company believes that the
ultimate resolution of any such proceedings will not have a
material adverse effect, either individually or in the
aggregate, on its financial position, results of operations or
cash flows.
10. | Share Repurchase Program |
The Board of Directors authorized the repurchase of up to
$400,000 of shares of the Companys common stock under the
Companys ongoing share repurchase program on
August 5, 2009. Pursuant to this share repurchase program,
the Company repurchased and placed into treasury
440,328 shares of its common stock at an aggregate cost of
$24,792 during the three months ended March 31, 2011. As of
March 31, 2011, the Company had remaining authorization to
purchase up to an additional $199,515 of shares of its common
stock under the share repurchase program.
11. | Long-Term Incentive Plan |
In March 2011, under the terms of existing compensation plans,
the Company granted performance-based restricted stock units and
performance-based cash awards to certain of its senior
executives. These awards are earned based upon the
Companys performance against pre-established targets,
including return on equity, net income margin and revenue growth
over the three-year performance period. In addition to the
performance conditions, these awards also include a market
condition, which under certain performance conditions, may
ultimately impact the number of restricted stock units and total
cash awarded. The market condition is satisfied if the
Companys total shareholder return is above the median
total shareholder return of the Companys peer group as
determined by the Compensation Committee of the Board of
Directors (See Part II, Item 5. of the Companys
Annual Report on Form 10-K filed with the SEC on
February 23, 2011 for a list of the companies that comprise
the Companys peer group.) Under the terms of the awards,
participants have the ability to earn between 0%
200% of their target award based upon the attainment of
performance
and/or
market conditions as defined.
Performance-based restricted stock units are classified as
equity awards. The fair value of the awards subject to the
market condition is calculated using a Monte Carlo valuation
model. Expense associated with the performance-based restricted
stock units subject to the market condition is recognized
regardless of whether the market condition
18
Table of Contents
AMERIGROUP
Corporation and
Subsidiaries
Notes
to Condensed Consolidated Financial
Statements (Continued)
is met. A target of 77,828 performance-based restricted stock
units were granted with the ability for participants to earn 0
to 155,656 units.
The following details of performance-based restricted stock
units outstanding as of March 31, 2011 are provided based
on current assumptions of future performance:
Weighted - |
||||||||
Average Grant |
||||||||
Shares | Date Fair Value | |||||||
Outstanding units at January 1, 2011
|
| | ||||||
Granted at target level
|
77,828 | $ | 58.83 | |||||
Adjustments above/(below) target level
|
| | ||||||
Expired
|
| | ||||||
Forfeited
|
| | ||||||
Outstanding units at March 31, 2011
|
77,828 | $ | 58.83 | |||||
Vested units at March 31, 2011
|
| |||||||
Unvested units at March 31, 2011
|
77,828 | |||||||
Unrecognized compensation expense
|
$ | 4,943,105 | ||||||
Weighted average remaining period (years)
|
2.92 |
Performance-based cash awards are classified as liability awards
because they are settled in cash. The fair value of the
performance-based cash liability is re-evaluated using the Monte
Carlo valuation model at each reporting date. A target of $4,515
performance-based cash awards were granted with the ability for
participants to earn $0 to $9,030.
Expense for both the performance-based restricted stock units
and the performance-based cash is recognized based on the total
expected award and the period elapsed as of each reporting date.
For the three months ended March 31, 2011, a total of $470
was recognized related to grants of performance-based restricted
stock units and performance-based cash.
12. | Comprehensive Earnings |
Differences between net income and total comprehensive income
resulted from net unrealized (losses) gains on the investment
portfolio as follows:
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Net income
|
$ | 70,477 | $ | 42,182 | ||||
Other comprehensive income:
|
||||||||
Unrealized (loss) gain on
available-for-sale
securities, net of tax
|
(600 | ) | 242 | |||||
Comprehensive income
|
$ | 69,877 | $ | 42,424 | ||||
19
Table of Contents
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Forward-looking
Statements
This Quarterly Report on
Form 10-Q,
and other information we provide from
time-to-time,
contains certain forward-looking statements as that
term is defined by Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act).
All statements regarding our expected future financial position,
membership, results of operations or cash flows, our growth
strategy, our competition, our ability to refinance our debt
obligations, our ability to finance growth opportunities, our
ability to respond to changes in government regulations and
similar statements including, without limitation, those
containing words such as believes,
anticipates, expects, may,
will, should, estimates,
intends, plans and other similar
expressions are forward-looking statements.
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 as a result of,
but not limited to, the following factors:
| 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 premium rate increase process and timing of payments; | |
| the effect of laws and regulations governing the healthcare industry, including the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 and any regulations enacted thereunder; | |
| 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 healthcare use; | |
| our ability to maintain and increase membership levels; | |
| our ability to enter into new markets or remain in our 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, 2010, filed with the
Securities and Exchange Commission (SEC) on
February 23, 2011 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.
20
Table of Contents
Overview
We are a multi-state managed healthcare company focused on
serving people who receive healthcare benefits through publicly
funded healthcare programs, including Medicaid, Childrens
Health Insurance Program (CHIP), Medicaid expansion
programs and Medicare Advantage. We believe that we are better
qualified and positioned than many of our competitors to meet
the unique needs of our members and the government agencies with
whom we contract because of our focus solely on recipients of
publicly funded healthcare, medical management programs and
community-based education and outreach programs. We design our
programs to address the particular needs of our members, for
whom we facilitate access to healthcare benefits pursuant to
agreements with applicable state and Federal government
agencies. We combine medical, social and behavioral health
services to help our members obtain quality healthcare in an
efficient manner. Our success in establishing and maintaining
strong relationships with government agencies, healthcare
providers and our members has enabled us to retain existing
contracts, obtain new contracts and establish and maintain a
leading market position in many of the markets we serve. We
continue to believe that managed healthcare remains the only
proven mechanism that improves health outcomes for our members
while helping our government customers manage the fiscal
viability of their healthcare programs. We are dedicated to
offering real solutions that improve healthcare access and
quality for our members, while proactively working to reduce the
overall cost of care to taxpayers.
Summary
highlights of our first quarter of 2011 include:
| Membership increased by 104,000 members, or 5.6%, to 1,967,000 members as of March 31, 2011 compared to 1,863,000 members as of March 31, 2010; | |
| Total revenues of $1.5 billion for the first quarter of 2011, a 12.3% increase over the first quarter of 2010; | |
| Health benefits ratio (HBR) of 81.8% of premium revenues for the first quarter of 2011 compared to 83.5% in the first quarter of 2010; | |
| Selling, general and administrative expense (SG&A) ratio of 7.6% of total revenues for the first quarter of 2011 compared to 8.6% in the first quarter of 2010; | |
| Cash provided by operations was $83.5 million for the three months ended March 31, 2011; | |
| Unregulated cash and investments of $268.9 million as of March 31, 2011; | |
| We repurchased 440,328 shares of common stock for approximately $24.8 million during the first quarter of 2011; and | |
| On February 1, 2011 we began providing managed healthcare services to STAR+PLUS members under an expansion contract in the six-county service area surrounding Forth Worth, Texas. |
Our results for the three months ended March 31, 2011
reflect the impact of modest membership growth. Additionally,
increases in premium revenue reflect the impact of a full period
of a benefit expansion to provide long-term care services to
eligible members in Tennessee which began in March 2010, the net
effect of premium rate changes from the prior year and the
impact of a contract award through competitive procurement to
expand healthcare coverage to seniors and people with
disabilities in the six-county service area surrounding Forth
Worth, Texas. Health benefits expense for the three months ended
March 31, 2011 reflects moderating cost trends for current
and prior periods, the latter of which generated favorable
development related to prior periods.
Health
Care Reform
On March 23, 2010, the Patient Protection and Affordable
Care Act was signed into law and on March 30, 2010, the
Health Care and Education Reconciliation Act of 2010 was signed
into law (collectively, the Acts). The Acts provide
comprehensive changes to the U.S. healthcare system, which
will be phased in at various stages over the next several years.
Among other things, the Acts are intended to provide health
insurance to approximately 32 million uninsured individuals
of whom approximately 20 million are expected to obtain
health insurance through the expansion of the Medicaid program
beginning in 2014. Funding for the expanded coverage will
initially come largely from the Federal government.
21
Table of Contents
To date, the Acts have not had a material effect on our results
of operations, liquidity or cash flows; however, we continue to
evaluate the provisions of the Acts and believe that the Acts
may provide us with significant opportunities for membership
growth in our existing markets and, potentially, in new markets
in the future. There can be no assurance that we will realize
this growth, or that this growth will be profitable. Further,
there are several pending lawsuits challenging the
constitutionality of the Acts so there can be no assurance that
the Acts will take effect as originally enacted or at all.
There are numerous steps required to implement the Acts,
including promulgating a substantial number of new and
potentially more onerous regulations that may affect our
business. Further, there has been resistance to expansion at the
state level, largely due to budgetary pressure. Because of the
unsettled nature of these reforms and numerous steps required to
implement them, we cannot predict what additional health
insurance requirements will be implemented at the Federal or
state level, or the effect that any future legislation or
regulation, or the pending litigation challenging the Acts, will
have on our business or our growth opportunities. Although we
believe the Acts will provide us with significant opportunity,
the enacted reforms, as well as future regulations, legislative
changes and judicial decisions may in fact have a material
adverse effect on our results of operations, financial position
or liquidity.
The Acts also include the imposition of a significant new
non-deductible Federal premium-based assessment and other
assessments on health insurers. If this Federal premium-based
assessment is imposed as enacted, and if the cost of the Federal
premium-based assessment is not included in the calculation of
our premium rates, or if we are unable to otherwise adjust our
business model to address this new assessment, our results of
operations, financial position or liquidity may be materially
adversely affected.
Pending
Contractual Revisions
Texas
In April 2011, the Texas Health and Human Services Commission
(HHSC) issued a request for proposal for the re-bid
of the Medicaid and CHIP Managed Care Services Contract.
Proposals are due in May 2011 and we anticipate a contract award
date during the latter half of the year with an operational
start date in early 2012. If we are not awarded this contract or
if the level of our business in Texas is reduced through the
re-bidding process, our results of operations, financial
position or cash flows in future periods could be materially and
adversely affected.
Georgia
Our Temporary Assistance for Needy Families (TANF)
and CHIP contract with the State of Georgia expires
June 30, 2011, with the States option to renew the
contract for one additional one-year term. The State has
notified us of its intent to renew our contract effective
July 1, 2011 and to amend our existing contract to include
one additional year and one additional option to renew for a
one-year term for an ultimate potential contract term ending on
June 30, 2014 at the outermost. Additionally, the State has
indicated its intent to reprocure the contract through a
competitive bidding process sometime prior to this contract
termination. If we are not awarded this contract through the
re-bidding process, our results of operations, financial
position or cash flows in future periods could be materially and
adversely affected.
Other
Market Updates
Texas
In February 2011, we began serving aged, blind and disabled
(ABD) members in the six-county service area
surrounding Forth Worth, Texas through an expansion contract
awarded by HHSC. As of March 31, 2011, approximately 29,000
members were served by our Texas health plan under this
contract. Previously, we served approximately 14,000 ABD members
in the Dallas and Fort Worth areas under an administrative
services only (ASO) contract that terminated on
January 31, 2011.
22
Table of Contents
Contingencies
Florida
Premium Recoupment
On March 14, 2011, AMERIGROUP Florida, Inc. received
written notices (the Notices) from the Florida
Agency for Health Care Administration (AHCA)
regarding an audit, conducted by a third party, of Medicaid
claims paid under contracts between AHCA and Florida Medicaid
managed care organizations for the period October 1, 2008
through December 31, 2010. The Notices claim that AHCA paid
premium to AMERIGROUP Florida, Inc. for members who were not
eligible to be enrolled in the Medicaid program at the time AHCA
and other State agencies enrolled these purportedly ineligible
members. The Notices also seek recoupment of premium payments to
AMERIGROUP Florida, Inc. attributable to the purportedly
ineligible members in the amount of $2.9 million. The
Notices relate to two Florida counties and we believe that we
may receive similar notices for other counties in which we
operate or have operated in Florida. Further, we believe that
the other Florida Medicaid managed care organizations have
received similar notices for this time period.
We are evaluating our appeal rights and believe that we have
substantial defenses to the claims asserted in the Notices for
premium recoupment. The accompanying Condensed Consolidated
Financial Statements reflect our best estimate of our liability
for the claims set forth in the Notices as of March 31,
2011. However, we are unable to estimate the amount or nature of
any potential claims for premium recoupment in the other Florida
counties in which we operate or have operated because we have
not received a notice from AHCA or the third party audit firm
for such claims. As a result, there can be no assurances that
the ultimate outcome of this matter will not have a material
adverse effect on our financial position, results of operations
or cash flows.
Georgia
Letter of Credit
Effective July 1, 2010, we renewed a collateralized
irrevocable standby letter of credit, initially issued on
July 1, 2009, in an aggregate principal amount of
approximately $17.4 million, to meet certain obligations
under our Medicaid contract in the State of Georgia through our
Georgia subsidiary, AMGP Georgia Managed Care Company, Inc. The
letter of credit is collateralized through cash held by AMGP
Georgia Managed Care Company, Inc.
Employment
Litigation
On November 22, 2010, a former AMERIGROUP New York, LLC
marketing representative filed a putative collective and class
action Complaint against AMERIGROUP Corporation and AMERIGROUP
New York, LLC in the United States District Court, Eastern
District of New York styled as Hamel Toure, Individually and
on Behalf of All Other Persons Similarly Situated v.
AMERIGROUP CORPORATION and AMERIGROUP NEW YORK, L.L.C. f/k/a
CAREPLUS, L.L.C. (Case No.: CV10-5391). The Complaint
alleges, inter alia, that the plaintiff and certain other
employees should have been classified as non-exempt employees
under the Fair Labor Standards Act (FLSA) and during
the course of their employment should have received overtime and
other compensation under the FLSA from October 22, 2007
until the entry of judgment and under the New York Labor Law
from October 22, 2004 until the entry of judgment. The
Complaint requests certification of the action as a class
action, designation of the action as a collective action, a
declaratory judgment, injunctive relief, an award of unpaid
overtime compensation, an award of liquidated
and/or
punitive damages, pre-judgment and post-judgment interest, as
well as costs and attorneys fees. The plaintiff recently
amended the Complaint to include a nationwide collective/class
action on behalf of other similarly situated former and current
associates who have worked as marketing representatives for any
of our subsidiary health plans during the time period from
November 2007 to the present.
In addition, we recently learned that a Complaint making
substantially the same allegations as the Toure case has
been filed in the United States District Court, Eastern District
of New York. The case is styled as Andrea Burch, individually
and on behalf of all others similarly situated v.
AMERIGROUP CORP., d/b/a AMERIGROUP; AMERIGROUP NEW YORK, LLC,
d/b/a AMERIGROUP (Case No.: CV11-1895).
At this early stage of the aforementioned cases, we are unable
to make a reasonable estimate of the amount or range of loss
that could result from an unfavorable outcome because the scope
and size of the potential class has not been determined, no
discovery has occurred and no specific amount of monetary
damages has been alleged. We believe we have meritorious
defenses to the claims against us and intend to defend ourselves
vigorously.
23
Table of Contents
Results
of Operations
The following table sets forth selected operating ratios for the
three months ended March 31, 2011 and 2010. All ratios,
with the exception of the HBR, are shown as a percentage of
total revenues:
Three Months Ended |
||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Premium revenue
|
99.7 | % | 99.6 | % | ||||
Investment income and other
|
0.3 | 0.4 | ||||||
Total revenues
|
100.0 | % | 100.0 | % | ||||
Health
benefits(1)
|
81.8 | % | 83.5 | % | ||||
Selling, general and administrative expenses
|
7.6 | % | 8.6 | % | ||||
Income before income taxes
|
7.3 | % | 5.0 | % | ||||
Net income
|
4.6 | % | 3.1 | % |
(1) | The HBR is shown as a percentage of premium revenue because there is a direct relationship between the premium received and the health benefits provided. |
Three
Months Ended March 31, 2011 Compared to Three Months Ended
March 31, 2010
Summarized comparative financial information for the three
months ended March 31, 2011 and 2010 is as follows (dollars
in millions, except per share data; totals in the table below
may not equal the sum of individual line items as all line items
have been rounded to the nearest decimal):
Three Months Ended March 31, | ||||||||||||
% Change |
||||||||||||
2011 | 2010 | 2011-2010 | ||||||||||
Revenues:
|
||||||||||||
Premium
|
$ | 1,535.8 | $ | 1,366.8 | 12.4 | |||||||
Investment income and other
|
4.1 | 4.9 | (15.6 | ) | ||||||||
Total revenues
|
1,539.9 | 1,371.6 | 12.3 | |||||||||
Expenses:
|
||||||||||||
Health benefits
|
1,257.0 | 1,141.6 | 10.1 | |||||||||
Selling, general and administrative
|
116.5 | 117.4 | (0.8 | ) | ||||||||
Premium tax
|
40.4 | 31.5 | 28.5 | |||||||||
Depreciation and amortization
|
9.1 | 8.7 | 4.4 | |||||||||
Interest
|
4.2 | 4.0 | 4.7 | |||||||||
Total expenses
|
1,427.1 | 1,303.2 | 9.5 | |||||||||
Income before income taxes
|
112.8 | 68.5 | 64.7 | |||||||||
Income tax expense
|
42.3 | 26.3 | 60.8 | |||||||||
Net income
|
$ | 70.5 | $ | 42.2 | 67.1 | |||||||
Diluted net income per share
|
$ | 1.37 | $ | 0.82 | 67.1 | |||||||
Premium
Revenue
Premium revenue for the three months ended March 31, 2011
increased $169.0 million, or 12.4%, to $1.5 billion
from $1.4 billion for the three months ended March 31,
2010. The increase was due in part to increases in full-risk
membership across the majority of our existing products and
markets, most significantly in the State of Texas. These
membership increases are partially due to continuing high levels
of unemployment and the generally
24
Table of Contents
adverse macroeconomic environment driving increases in the
number of people eligible for publicly funded healthcare
programs. In addition, premium revenue increased as a result of
our entry into the Tennessee TennCare CHOICES program in March
2010, premium rate and mix changes and our Texas expansion into
the Forth Worth STAR+PLUS program on February 1, 2011.
Membership
The following table sets forth the approximate number of members
we served in each state as of March 31, 2011 and 2010.
Because we receive two premiums for members that are in both the
Medicare Advantage and Medicaid products, these members have
been counted twice in the states where we operate Medicare
Advantage plans.
March 31, | ||||||||
2011 | 2010 | |||||||
Texas(1)
|
582,000 | 510,000 | ||||||
Georgia
|
270,000 | 250,000 | ||||||
Florida
|
263,000 | 250,000 | ||||||
Maryland
|
207,000 | 197,000 | ||||||
Tennessee
|
205,000 | 202,000 | ||||||
New Jersey
|
133,000 | 158,000 | ||||||
New York
|
109,000 | 113,000 | ||||||
Nevada
|
82,000 | 69,000 | ||||||
Ohio
|
55,000 | 56,000 | ||||||
Virginia
|
39,000 | 37,000 | ||||||
New Mexico
|
22,000 | 21,000 | ||||||
Total
|
1,967,000 | 1,863,000 | ||||||
(1) | Membership includes approximately 13,000 ABD members under an ASO contract as of March 31, 2010. This contract terminated January 31, 2011. |
As of March 31, 2011, we served approximately 1,967,000
members, reflecting an increase of approximately 104,000
members, or 5.6%, compared to March 31, 2010. The increase
is primarily a result of membership growth in the majority of
our products and markets driven by a surge in Medicaid
eligibility, which we believe was driven by continuing high
levels of unemployment and general adverse economic conditions
in addition to the impact of the expansion in the Forth Worth,
Texas STAR+PLUS program on February 1, 2011. This growth
was partially offset by contraction in our New Jersey health
plan as a result of changes in our provider network causing
member selection of our health plan to decrease.
The following table sets forth the approximate number of our
members who receive benefits under our products as of
March 31, 2011 and 2010. Because we receive two premiums
for members that are in both the Medicare Advantage and Medicaid
products, these members have been counted in each product.
March 31, | ||||||||
Product | 2011 | 2010 | ||||||
TANF (Medicaid)
|
1,394,000 | 1,309,000 | ||||||
CHIP
|
268,000 | 269,000 | ||||||
ABD
(Medicaid)(1)
|
215,000 | 197,000 | ||||||
FamilyCare (Medicaid)
|
72,000 | 72,000 | ||||||
Medicare Advantage
|
18,000 | 16,000 | ||||||
Total
|
1,967,000 | 1,863,000 | ||||||
25
Table of Contents
(1) | Membership includes approximately 13,000 members under an ASO contract in Texas as of March 31, 2010. This contract terminated January 31, 2011. |
Investment
income and other revenue
Investment income and other revenue was $4.1 million and
$4.9 million for the three months ended March 31, 2011
and 2010, respectively.
Our investment portfolio is comprised of fixed income securities
and cash and cash equivalents, which generated investment income
totaling $3.9 million for the three months ended
March 31, 2011 compared to $4.2 million for the three
months ended March 31, 2010. The decrease in investment
income is primarily a result of decreased rates of return on
fixed income securities due to current market interest rates.
Our effective yield could remain at or below the current rate as
of March 31, 2011 for the foreseeable future, which would
result in similar or reduced returns on our investment portfolio
in future periods. The performance of our investment portfolio
is interest rate driven and, consequently, changes in interest
rates affect our returns on, and the fair value of, our
portfolio which can materially affect our results of operations
or liquidity in future periods.
Other revenue decreased from $0.7 million for the three months
ended March 31, 2010 to $0.2 million for the three months ended
March 31, 2011 due to the termination of the ASO contract in the
Dallas and Fort Worth service areas of Texas on January 31, 2011.
Health
benefits expenses
Expenses relating to health benefits for the three months ended
March 31, 2011 increased $115.4 million, or 10.1%, to
$1.3 billion compared to $1.1 billion for the three
months ended March 31, 2010. Our HBR decreased to 81.8% for
the three months ended March 31, 2011 compared to 83.5% for
the same period of the prior year. The decrease in health
benefits expense as it relates to premium revenue resulted
primarily from moderating cost trends for current and prior
periods, the latter of which generated favorable development
related to prior periods. HBR was also favorably impacted by the
net effect of premium rate changes in connection with annual
contract renewals.
The following table presents the components of the change in
claims payable for the periods presented (in thousands):
Three Months Ended |
Twelve Months Ended |
|||||||
March 31, 2011 | December 31, 2010 | |||||||
Claims payable, beginning of period
|
$ | 510,675 | $ | 529,036 | ||||
Health benefits expense incurred during the period:
|
||||||||
Related to current year
|
1,307,566 | 4,828,321 | ||||||
Related to prior years
|
(50,604 | ) | (106,215 | ) | ||||
Total incurred
|
1,256,962 | 4,722,106 | ||||||
Health benefits payments during the period:
|
||||||||
Related to current year
|
900,625 | 4,359,216 | ||||||
Related to prior years
|
327,245 | 381,251 | ||||||
Total payments
|
1,227,870 | 4,740,467 | ||||||
Claims payable, end of period
|
$ | 539,767 | $ | 510,675 | ||||
Health benefits expense 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 expense due to revisions to prior
estimates.
26
Table of Contents
Selling,
general and administrative expenses
SG&A for the three months ended March 31, 2011 and
2010 was $116.5 million and $117.4 million,
respectively. Our SG&A to total revenues ratio was 7.6% for
the three months ended March 31, 2011 compared to 8.6% for
the three months ended March, 31, 2010. The decrease in the
SG&A ratio is primarily the result of leverage gained
through an increase in premium revenue due to existing market
growth, our entry into the Tennessee TennCare CHOICES program in
March 2010, premium rate and mix changes and our Texas expansion
into the Forth Worth STAR+PLUS program on February 1, 2011.
Premium
tax expense
Premium taxes were $40.4 million and $31.5 million for
the three months ended March 31, 2011 and March 31,
2010, respectively. The increase in premium tax expense for the
three months ended March 31, 2011 compared to the three
months ended March 31, 2010 is primarily due to the
termination of premium tax in the State of Georgia in October
2009 which was subsequently reinstated at a lower rate in July
2010 as well as increased premium revenues in the State of
Tennessee primarily as a result of our entry into the TennCare
CHOICES program in March 2010. Additionally, premium revenue
growth in the majority of the other markets where premium tax is
levied contributed to the increase.
Provision
for income taxes
Income tax expense for the three months ended March 31,
2011 was $42.3 million with an effective tax rate of 37.5%
compared to $26.3 million of income tax expense with an
effective tax rate of 38.4% for the three months ended
March 31, 2010. The change in the effective tax rate for
the three months ended March 31, 2011 as compared to the
three months ended March 31, 2010 is primarily attributable
to a decrease in the blended state income tax rate.
Net
income
Net income for the three months ended March 31, 2011 was
$70.5 million, or $1.37 per diluted share, compared to net
income of $42.2 million, or $0.82 per diluted share for the
three months ended March 31, 2010. The increase in net
income is primarily attributable to an increase in premium
revenue as a result of existing market growth, our entry into
the Tennessee TennCare CHOICES program in March 2010, premium
rate and mix changes and our Texas expansion into the Forth
Worth STAR+PLUS program on February 1, 2011. The increase
was also a result of moderating cost trends for current and
prior periods, the latter of which generated favorable
development related to prior periods.
Liquidity
and Capital Resources
We manage our cash, investments and capital structure so we are
able to meet the short- and long-term obligations of our
business while maintaining financial flexibility and liquidity.
We forecast, analyze and monitor our cash flows to enable
prudent investment management and financing within the confines
of our financial strategy.
Our primary sources of liquidity are cash and cash equivalents,
short- and long-term investments, and cash flows from
operations. As of March 31, 2011, we had cash and cash
equivalents of $602.0 million, short- and long-term
investments of $1.1 billion and restricted investments on
deposit for licensure of $119.2 million. Cash, cash
equivalents, and investments which are unregulated totaled
$268.9 million at March 31, 2011.
Universal
Automatic Shelf Registration
On December 15, 2008, we filed a universal automatic shelf
registration statement with the SEC which enables us to sell, in
one or more public offerings, common stock, preferred stock,
debt securities and other securities at prices and on terms to
be determined at the time of the applicable offering. The shelf
registration provides us with the flexibility to publicly offer
and sell securities at times we believe market conditions make
such an offering attractive. Because we are a well-known
seasoned issuer, the shelf registration statement was effective
upon filing. No securities have been issued under the shelf
registration.
27
Table of Contents
Share
Repurchase Program
Under the authorization of our Board of Directors on
August 5, 2009, we maintain a share repurchase program that
allows us to repurchase up to $400.0 million shares of our
common stock. Pursuant to this share repurchase program, we
repurchased and placed into treasury 440,328 shares of our
common stock at an aggregate cost of $24.8 million during
the three months ended March 31, 2011. As of March 31,
2011, we had remaining authorization to purchase up to an
additional $199.5 million of shares of our common stock
under the share repurchase program.
Cash and
Investments
Cash provided by operations was $83.5 million for the three
months ended March 31, 2011 compared to cash used in
operations of $6.8 million for the three months ended
March 31, 2010. The increase in cash flows was primarily a
result of an increase in cash flows generated from working
capital changes of $56.8 million and an increase in net
income of $28.3 million. Cash used in operating activities
for working capital changes was $4.8 million for the three
months ended March 31, 2011 compared to $61.6 million
for the three months ended March 31, 2010. The decrease in
cash used in operating activities for working capital changes
primarily resulted from increased cash flows from routine
changes in the timing of receipts of premium from government
agencies of $65.3 million and variability in claims
payable, which is impacted by growth in our markets offset by
increased claims processing speeds, of $8.9 million. These
increases were partially offset by a net decrease in cash
provided through changes in accounts payable, accrued expenses,
contractual refunds payable and other current liabilities of
$23.0 million due primarily to fluctuations in variable
compensation accruals, which are directly related to our
attainment of financial performance goals, offset by an increase
in cash provided through changes in income tax accruals.
Cash used in investing activities was $264.8 million for
the three months ended March 31, 2011 compared to
$54.5 million for the three months ended March 31,
2010. The increase in cash used in investing activities of
$210.3 million is due primarily to an increase in the net
purchases of investments of $219.2 million during the three
months ended March 31, 2011 compared to the three months
ended March 31, 2010, partially offset by the impact of our
New Jersey health plans acquisition of the Medicaid
contracts rights from University Health Plans, Inc. for
$13.4 million in March 2010 not recurring. We currently
anticipate total capital expenditures for 2011 to be between
approximately $35.0 million and $45.0 million related
primarily to technological infrastructure development and
enhancement of core systems to increase scalability and
efficiency. For the three months ended March 31, 2011,
total capital expenditures were $10.9 million.
Our investment policies are designed to preserve capital,
provide liquidity and maximize total return on invested assets.
As of March 31, 2011, our investment portfolio consisted
primarily of fixed-income securities with a weighted average
maturity of approximately twenty-two months. We utilize
investment vehicles such as auction rate securities,
certificates of deposit, commercial paper, corporate bonds, debt
securities of government sponsored entities, Federally insured
corporate bonds, money market funds, municipal bonds and
U.S. Treasury securities. The states in which we operate
prescribe the types of instruments in which our subsidiaries may
invest their funds. The weighted average taxable equivalent
yield on consolidated investments as of March 31, 2011 was
approximately 1.1%. As of March 31, 2011, we had total cash
and investments of approximately $1.8 billion.
28
Table of Contents
The following table shows the types, percentages and average
Standard and Poors (S&P) ratings of our
holdings within our investment portfolio at March 31, 2011:
Portfolio |
Average S&P |
|||||||
Percentage | Rating | |||||||
Auction rate securities
|
0.9 | % | AAA | |||||
Cash, bank deposits and commercial paper
|
2.3 | % | AAA | |||||
Certificates of deposit
|
8.4 | % | AAA | |||||
Corporate bonds
|
16.4 | % | A+ | |||||
Debt securities of government sponsored entities, Federally
insured corporate bonds and U.S. Treasury securities
|
31.1 | % | AAA | |||||
Money market funds
|
19.8 | % | AAA | |||||
Municipal bonds
|
21.1 | % | AA+ | |||||
100.0 | % | AA+ | ||||||
As of March 31, 2011, $17.4 million of our investments
were comprised of securities with an auction reset feature
(auction rate securities) issued by student loan
corporations established by various state governments. Since
early 2008, auctions for these auction rate securities have
failed, significantly decreasing our ability to liquidate these
securities prior to maturity. As we cannot predict the timing of
future successful auctions, if any, our auction rate securities
are classified as
available-for-sale
and are carried at fair value within long-term investments. The
weighted average life of our auction rate securities portfolio,
based on the final maturity, is approximately twenty-three
years. We currently believe that the $1.0 million net
unrealized loss position that remains at March 31, 2011 on
our auction rate securities portfolio is primarily due to
liquidity concerns and not the creditworthiness of the
underlying issuers. We currently have the intent to hold our
auction rate securities to maturity, if required, or if and when
market stability is restored with respect to these investments.
During the three months ended March 31, 2011, certain
investments in auction rate securities were called at par for
net proceeds of $4.2 million.
Cash provided by financing activities was $19.3 million for
the three months ended March 31, 2011, compared to cash
used in financing activities of $3.4 million for the three
months ended March 31, 2010. The increase in cash flows
from financing activities is due primarily to an increase in the
change in bank overdrafts of $23.5 million and an increase
in proceeds from employee stock option exercises of
$13.3 million offset by an increase in repurchases of our
common stock of $17.8 million.
We believe that existing cash and investment balances and cash
flows from operations will be sufficient to support continuing
operations, capital expenditures and our growth strategy for at
least 12 months. Our
debt-to-total
capital ratio at March 31, 2011 was 16.8%. We utilize the
debt-to-total
capital ratio as a measure, among others, of our leverage and
financial flexibility. We believe our current
debt-to-total
capital ratio allows us flexibility to access debt financing
should the need or opportunity arise; however, the financial
markets have experienced periods of volatility and disruption
from
time-to-time.
Future volatility and disruption is possible and unpredictable.
In the event we need to access additional capital, our ability
to obtain such capital may be limited and the cost of any such
capital will depend on the market condition and our financial
position at the time we pursue additional financing.
Convertible
Senior Notes
As of March 31, 2011, we had $260.0 million
outstanding in aggregate principal amount of
2.0% Convertible Senior Notes (the
2.0% Convertible Senior Notes) due May 15,
2012. The 2.0% Convertible Senior Notes are governed by an
Indenture dated as of March 28, 2007 (the
Indenture). The 2.0% Convertible Senior Notes
are senior unsecured obligations of the Company and rank equal
in right of payment with all of our existing and future senior
debt and senior to all of our subordinated debt. The
2.0% Convertible Senior Notes bear interest at a rate of
2.0% per year, payable semiannually in arrears in cash on May 15
and November 15 of each year and mature on May 15, 2012,
unless earlier repurchased or converted in accordance with the
Indenture.
Upon conversion of the 2.0% Convertible Senior Notes, we
will pay cash up to the principal amount of the
2.0% Convertible Senior Notes converted. With respect to
any conversion value in excess of the principal amount,
29
Table of Contents
we have the option to settle the excess with cash, shares of our
common stock, or a combination thereof based on a daily
conversion value, as defined in the Indenture. The initial
conversion rate for the 2.0% Convertible Senior Notes is
23.5114 shares of common stock per one thousand dollars of
principal amount of 2.0% Convertible Senior Notes, which
represents a 32.5% conversion premium based on the closing price
of $32.10 per share of our common stock on March 22, 2007
and is equivalent to a conversion price of approximately $42.53
per share of common stock. Consequently, under the provisions of
the 2.0% Convertible Senior Notes, if the market price of
our common stock exceeds $42.53 we will be obligated to settle,
in cash or shares of our common stock at our option, an amount
equal to approximately $6.1 million for each dollar in
share price that the market price of our common stock exceeds
$42.53, or the conversion value in excess of the principal
amount of the 2.0% Convertible Senior Notes. In periods
prior to conversion, the 2.0% Convertible Senior Notes
would also have a dilutive impact to earnings if the average
market price of our common stock exceeds $42.53 for the period
reported. At conversion, the dilutive impact would result if the
conversion value in excess of the principal amount of the
2.0% Convertible Senior Notes, if any, is settled in shares
of our common stock. The conversion rate is subject to
adjustment in some events but will not be adjusted for accrued
interest. In addition, if a fundamental change
occurs prior to the maturity date, we will in some cases
increase the conversion rate for a holder of
2.0% Convertible Senior Notes that elects to convert their
2.0% Convertible Senior Notes in connection with such
fundamental change. As of March 31, 2011, the
2.0% Convertible Senior Notes had a dilutive impact to
earnings per share as the average market price of our common
stock for the three months ended March 31, 2011 of $54.61
exceeded the conversion price of $42.53.
Concurrent with the issuance of the 2.0% Convertible Senior
Notes, we purchased convertible note hedges covering, subject to
customary anti-dilution adjustments, 6,112,964 shares of
our common stock. The convertible note hedges are expected to
reduce the potential dilution upon conversion of the
2.0% Convertible Senior Notes in the event that the market
value per share of our common stock, as measured under the
convertible note hedges, at the time of exercise is greater than
the strike price of the convertible note hedges. Consequently,
under the provisions of the convertible note hedges, we are
entitled to receive cash or shares of our common stock in an
amount equal to the conversion value in excess of the principal
amount of the 2.0% Convertible Senior Notes from the
counterparty to the convertible note hedges.
Also concurrent with the issuance of the 2.0% Convertible
Senior Notes, we sold warrants to acquire, subject to customary
anti-dilution adjustments, 6,112,964 shares of our common
stock at an exercise price of $53.77 per share. If the average
market price of our common stock during a defined period ending
on or about the settlement date exceeds the exercise price of
the warrants, the warrants will be settled in shares of our
common stock. Consequently, under the provisions of the warrant
instruments, if the market price of our common stock exceeds
$53.77 at exercise we will be obligated to settle in shares of
our common stock an amount equal to approximately
$6.1 million for each dollar that the market price of our
common stock exceeds $53.77 resulting in a dilutive impact to
our earnings. As of March 31, 2011, the warrant instruments
had a dilutive impact to earnings per share as the average
market price of our common stock for the three months ended
March 31, 2011 of $54.61 exceeded the $53.77 exercise price
of the warrants.
The convertible note hedges and warrants are separate
transactions which do not affect holders rights under the
2.0% Convertible Senior Notes.
As of March 31, 2011, our common stock was last traded at a
price of $64.25 per share. Based on this value, if converted at
March 31, 2011, we would have been obligated to pay the
principal of the 2.0% Convertible Senior Notes plus an
amount in cash or shares equal to $132.8 million. An amount
equal to $132.8 million would be owed to us in cash or in
shares of our common stock through the provisions of the
convertible note hedges resulting in net cash outflow equal to
the principal amount of the 2.0% Convertible Senior Notes.
At this per share value, we would be required to deliver
approximately $64.1 million in shares of our common stock
under the warrant instruments or approximately
997,000 shares of our common stock at that price per share.
The principal of our 2.0% Convertible Senior Notes may be
repaid with proceeds from debt or equity financing, existing
unregulated cash and investments, or a combination thereof. If
we determine that debt or equity financing is appropriate, our
access to these markets may be limited as our results of
operations cannot be predicted. Additionally, any disruptions in
the credit markets similar to that of the recent recession could
further limit our flexibility in planning for, or reacting to,
changes in our business and industry and addressing our future
capital
30
Table of Contents
requirements. Further, to the extent the counterparties to the
convertible note hedges are unwilling or unable to fulfill the
obligations under the convertible note hedges, our financial
condition could be materially adversely affected.
Our access to additional financing will depend on a variety of
factors such as market conditions, the general availability of
credit, the overall availability of credit to our industry, our
credit ratings and credit capacity, as well as lenders
perception of our long- or short-term financial prospects. On
March 30, 2011, as a result of our improved financial
flexibility, growing operational scale and associated strong
cash-flow generation capacity, Standard and Poors Ratings
Services raised its counterparty credit and senior debt ratings
on the Company from BB to BB+.
Similarly, our access to additional financing may be impaired if
regulatory authorities or rating agencies take negative actions
against us or if lenders develop a negative perception of our
long- or short-term financial prospects. If a combination of
these factors were to occur, our internal sources of liquidity
may prove to be insufficient, and in such case, we may not be
able to successfully obtain additional financing on favorable
terms or at all.
Regulatory
Capital and Dividend Restrictions
Our operations are conducted through our wholly-owned
subsidiaries, which include Health Maintenance Organizations
(HMOs), one health insuring corporation
(HIC) and one Prepaid Health Services Plan
(PHSP). HMOs, HICs and PHSPs are subject to state
regulations that, among other things, require the maintenance of
minimum levels of statutory capital, as defined by each state,
and restrict the timing, payment and amount of dividends and
other distributions that may be paid to their stockholders.
Additionally, certain state regulatory agencies may require
individual regulated entities to maintain statutory capital
levels higher than the state regulations. As of March 31,
2011, we believe our subsidiaries are in compliance with all
minimum statutory capital requirements. The parent company may
be required to fund minimum net worth shortfalls or choose to
increase capital at its subsidiary health plans during the
remainder of 2011 using unregulated cash, cash equivalents,
investments or a combination thereof. We believe, as a result,
that we will continue to be in compliance with these
requirements at least through the end of 2011.
The National Association of Insurance Commissioners
(NAIC) has defined risk-based capital
(RBC) standards for HMOs and other entities bearing
risk for healthcare coverage that are designed to measure
capitalization levels by comparing each companys adjusted
surplus to its required surplus (RBC ratio). The RBC
ratio is designed to reflect the risk profile of HMOs. Within
certain ratio ranges, regulators have increasing authority to
take action as the RBC ratio decreases. There are four levels of
regulatory action, ranging from (a) requiring insurers to
submit a comprehensive plan to the state insurance commissioner,
to (b) requiring the state insurance commissioner to place
the insurer under regulatory control. Eight of our eleven states
have adopted RBC as the measure of required surplus. At
March 31, 2011, our RBC ratio in each of these states
exceeded the requirement thresholds at which regulatory action
would be initiated. Although not all states had adopted these
rules at March 31, 2011, at that date, each of our active
health plans had a surplus that exceeded either the applicable
state net worth requirements or, where adopted, the levels that
would require regulatory action under the NAICs RBC rules.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Our Condensed Consolidated Balance Sheets include a number of
assets whose fair values are subject to market risk. Due to our
significant investment in fixed-income investments, interest
rate risk represents a market risk factor affecting our
consolidated financial position. Increases and decreases in
prevailing interest rates generally translate into decreases and
increases in fair values of those instruments. The financial
markets have experienced periods of volatility and disruption,
which have impacted liquidity and valuations of many financial
instruments. While we do not believe we have experienced
material adverse changes in the value of our cash equivalents
and investments, disruptions could impact the value of these
assets and other financial assets we may hold in the future.
There can be no assurance that future changes in interest rates,
creditworthiness of issuers, prepayment activity, liquidity
available in the market and other general market conditions will
not have a material adverse impact on our results of operations,
liquidity, financial position or cash flows.
31
Table of Contents
As of March 31, 2011, substantially all of our investments
were in high quality securities that have historically exhibited
good liquidity.
The fair value of our fixed-income investment portfolio is
exposed to interest rate risk the risk of loss in
fair value resulting from changes in prevailing market rates of
interest for similar financial instruments. However, we have the
ability to hold fixed-income investments to maturity. We rely on
the experience and judgment of senior management to monitor and
mitigate the effects of market risk. The allocation among
various types of securities is adjusted from
time-to-time
based on market conditions, credit conditions, tax policy,
fluctuations in interest rates and other factors. In addition,
we place the majority of our investments in high-quality, liquid
securities and limit the amount of credit exposure to any one
issuer. As of March 31, 2011, an increase of 1% in interest
rates on securities with maturities greater than one year would
reduce the fair value of our fixed-income investment portfolio
by approximately $22.2 million. Conversely, a reduction of
1% in interest rates on securities with maturities greater than
one year would increase the fair value of our fixed-income
investment portfolio by approximately $19.8 million. The
above changes in fair value are impacted by securities in our
portfolio that have a call provision feature. We believe this
fair value presentation is indicative of our market risk because
it evaluates each investment based on its individual
characteristics. Consequently, the fair value presentation does
not assume that each investment reacts identically based on a 1%
change in interest rates.
Item 4. | Controls and Procedures |
(a) Evaluation of Disclosure Controls and
Procedures. Our management, with the
participation of our Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended) as of the
end of the period covered by this report. Based on such
evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of such period, our
disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis,
information required to be disclosed by us in the reports that
we file or submit under the Exchange Act and are effective in
ensuring that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is
accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure.
(b) Changes in Internal Controls over Financial
Reporting. During the first quarter of 2011, in
connection with our evaluation of internal control over
financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002, we concluded there were no changes
in our internal control procedures that materially affected, or
are reasonably likely to materially affect, our internal control
over financial reporting.
Part II.
Other Information
Item 1. | Legal Proceedings |
The information required under this Item 1 of Part II
is contained in Item 1 of Part I of this Quarterly
Report on
Form 10-Q
in Note 9 to the Condensed Consolidated Financial
Statements, and such information is incorporated herein by
reference in this Item 1 of Part II.
Item 1A. | Risk Factors |
Certain risk factors may have a material adverse effect on our
business, financial condition and results of operations and you
should carefully consider them. There has been no material
change in our risk factors as previously disclosed in
Part I., Item 1.A., Risk Factors, of the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2010 as filed with the SEC
on February 23, 2011.
32
Table of Contents
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Set forth below is information regarding the Companys
stock repurchases during the three months ended March 31,
2011:
Approximate Dollar |
||||||||||||||||
Value of Shares |
||||||||||||||||
Total Number of |
(or Units) |
|||||||||||||||
Average |
Shares (or Units) |
that May Yet Be |
||||||||||||||
Total Number of |
Price Paid |
Purchased as Part of |
Purchased Under |
|||||||||||||
Shares (or Units) |
per Share |
Publicly Announced |
the Plans or |
|||||||||||||
Purchased |
(or Unit) |
Plans or
Programs(1) |
Programs(2) |
|||||||||||||
Period | (#) | ($) | (#) | ($) | ||||||||||||
January 1 January 31, 2011
|
63,541 | 47.20 | 63,541 | 221,308,127 | ||||||||||||
February 1 February 28, 2011
|
122,124 | 57.34 | 122,124 | 214,305,965 | ||||||||||||
March 1 March 31,
2011(3)
|
269,546 | 58.13 | 254,663 | 199,515,246 | ||||||||||||
Total
|
455,211 | 56.39 | 440,328 | 199,515,246 | ||||||||||||
(1) | Shares purchased during the first quarter of 2011 were purchased as part of our existing authorized share repurchase program pursuant to Rule 10b5-1 of the Exchange Act as well as in open market purchases as permitted by Rule 10b5-18 of the Exchange Act. On March 8, 2011, we entered into a trading plan in accordance with Rule 10b5-1 of the Exchange Act, to facilitate repurchases of our common stock pursuant to our ongoing share repurchase program (the Rule 10b5-1 plan). The Rule 10b5-1 plan effectively terminated the previous Rule 10b5-1 plan and became effective on May 3, 2011 and expires on May 1, 2013, unless terminated earlier in accordance with its terms. | |
(2) | The ongoing share repurchase program authorized by the Board of Directors allows us to repurchase up to $400.0 million shares of our common stock from and after August 5, 2009. No duration has been placed on the repurchase program and we reserve the right to discontinue the repurchase program at any time. | |
(3) | Our 2009 Equity Incentive Plan allows, upon approval by the plan administrator, stock option recipients to deliver shares of unrestricted Company common stock held by the participant as payment of the exercise price and applicable withholding taxes upon the exercise of stock options or vesting of restricted stock. During March 2011, certain employees elected to tender 14,883 shares to the Company in payment of related withholding taxes upon vesting of restricted stock. |
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | (Removed and Reserved) |
Item 5. | Other Information |
None.
Item 6. | Exhibits |
The exhibits listed on the accompanying Exhibit Index
immediately following the Signatures page are incorporated by
reference into this report.
33
Table of Contents
Signatures
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
AMERIGROUP Corporation
By: |
/s/ James
G. Carlson
|
James G. Carlson
Chairman, Chief Executive
Officer and President
Date: May 3, 2011
AMERIGROUP Corporation
By: |
/s/ James
W. Truess
|
James W. Truess
Chief Financial Officer and
Executive Vice President
Date: May 3, 2011
34
Table of Contents
EXHIBITS
Exhibits.
The following exhibits, which are furnished with this Quarterly
Report on
Form 10-Q
or incorporated herein by reference, are filed as part of this
Quarterly Report on
Form 10-Q.
The agreements included or incorporated by reference as exhibits
to this Quarterly Report on
Form 10-Q
contain representations and warranties by each of the parties to
the applicable agreement. These representations and warranties
were made solely for the benefit of the other parties to the
applicable agreement and (i) were not intended to be
treated as categorical statements of fact, but rather as a way
of allocating the risk to one of the parties if those statements
prove to be inaccurate; (ii) may have been qualified in
such agreement by disclosures that were made to the other party
in connection with the negotiation of the applicable agreement;
(iii) may apply contract standards of
materiality that are different from
materiality under the applicable securities laws;
and (iv) were made only as of the date of the applicable
agreement or such other date or dates as may be specified in the
agreement.
The Company acknowledges that, notwithstanding the inclusion of
the foregoing cautionary statements, it is responsible for
considering whether additional specific disclosures of material
information regarding material contractual provisions are
required to make the statements in this Quarterly Report on
Form 10-Q
not misleading.
Exhibit |
||||
Number | Description | |||
3 | .1 | Amended and Restated Certificate of Incorporation (incorporated by reference to exhibit 3.1 to our Amendment No. 2 to our Registration Statement on Form S-3 (No. 333-108831) filed on October 9, 2003). | ||
3 | .2 | Amended and Restated By-Laws of the Company (incorporated by reference to exhibit 3.1 to our Current Report on Form 8-K filed on February 14, 2008). | ||
4 | .1 | Form of share certificate for common stock (incorporated by reference to exhibit 3.3 to our Amendment No. 3 to our Registration Statement on Form S-1 (No. 333-347410) filed on July 24, 2000). | ||
4 | .2 | Indenture related to the 2.0% Convertible Senior Notes due 2012 dated March 28, 2007, between AMERIGROUP Corporation and The Bank of New York, as trustee (including the form of 2.0% Convertible Senior Note due 2012) (incorporated by reference to exhibit 4.1 to our Current Report on Form 8-K filed on April 3, 2007). | ||
4 | .3 | Registration Rights Agreement dated March 28, 2007, between AMERIGROUP Corporation, Goldman Sachs, & Co., as representative of the initial purchasers (incorporated by reference to exhibit 4.2 to our Current Report on Form 8-K filed on April 3, 2007). | ||
10 | .1 | Amendment to the AMERIGROUP Corporation Severance Plan (incorporated by reference to exhibit 10.1 to our Current Report on Form 8-K filed on April 1, 2011). | ||
10 | .2 | Amendment No. 3 to Employment Agreement between AMERIGROUP Corporation and James G. Carlson (incorporated by reference to exhibit 10.2 to our Current Report on Form 8-K filed on April 1, 2011). | ||
31 | .1 | Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002, dated May 3, 2011. | ||
31 | .2 | Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002, dated May 3, 2011. | ||
32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002, dated May 3, 2011. | |||
*101 | .INS | XBRL Instance Document | ||
*101 | .SCH | XBRL Taxonomy Extension Schema Document | ||
*101 | .CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
*101 | .DEF | XBRL Taxonomy Extension Definition Linkbase Document |
35
Table of Contents
Exhibit |
||||
Number | Description | |||
*101 | .LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
*101 | .PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* | In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing. |
36