Amerigroup Corporation (
Q2 2011 Earnings Call
July 29, 2011, 08:00 a.m. ET
Julie Loftus Trudell - SVP, IR
Jim Carlson - Chairman and CEO
Jim Truess - EVP and CFO
John Littel - EVP, Government Relations
Dick Zoretic - EVP and COO
Scott Fidel - Deutsche Bank
Tom Carroll - Stifel Nicolaus
Carl McDonald - Citigroup
Joshua Raskin - Barclays Capital
Ken Levine - UBS
Peter Costa - Wells Fargo Securities
Chris Rigg - Susquehanna Financial
Sarah James - Wedbush
John Rex - JPMorgan
Scott Green - Bank of America
Sam Wass - Goldman Sachs
Brian Wright - Citadel
Welcome to Amerigroup Corporation’s second quarter earnings conference call. (Operator Instructions)
I will now turn the conference call over to Julie Loftus Trudell, Senior Vice President, of Investor Relations at Amerigroup.
Julie Loftus Trudell
Good morning and thank you for joining Amerigroup second quarter 2011 conference call and webcast.
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With me this morning are Amerigroup’s Chairman and CEO, Jim Carlson, and Chief Financial Officer Jim Truess. In addition, Dick Zoretic, our Chief Operating Officer, and John Littel, our Executive Vice President of External relations, will be available for questions.
The press release announcing our second quarter earnings was distributed this morning. A replay of this call will be available shortly after the conclusion of this call through Friday, August 5th, 2011. The numbers to access this replay are in the earnings press release. The conference call will also be available through the Investors page of the company's website, approximately two hours following the conclusion of this live broadcast for 30 days. For those who listen to the re-broadcast of this presentation we remind you that the remarks made herein are as of today July 29th, 2011 and has not been updated subsequent to the initial earnings call.
During this call we will make forward-looking statements including statements relating to our growth prospects, rate, medical cost trends and our 2011 outlook. Listeners are cautioned that these statements are subject to certain risks and uncertainties many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations and we advise listeners to review the risk factors discussed in our press release this morning and our filings with the SEC.
I’d now like to turn the call over to our Chairman and Chief Executive Officer, Jim Carlson. Jim?
Thank you, Julie and good morning. Let me start this morning with some highlights and perspective on the quarter. We reported second quarter earnings per share of $0.83, results in the quarter were negatively impacted by a retroactive premium adjustment in Georgia. Jim will walk you through the details of this in a few minutes.
We are pleased with the underlying results of the quarter, excluding prior period items, the second quarter performance was in line with our expectations, where revenues not adversely impacted by the Georgia adjustment for second quarter margin would have been at the high end of our targeted range. We went into this year believing that 2011 will be pivotal in setting the stage for future growth and we are seeing that (inaudible) with an existing markets as well as new markets, like Louisiana.
We are devoting considerable attention to making sure that we are disciplined in pursuing new business opportunities even as we fortified our capabilities. We want to make sure the growth we take on is likely to become profitable growth. On Monday, the Louisiana Department of Health and Hospitals now the Amerigroup was one of five managed care organizations selected through a competitive procurement to offer healthcare coverage to almost 900,000 low income Louisiana citizens. Of the five selected we will be one of the three providers that will offer services on a full risk basis beginning in the first quarter of next year.
Currently Louisiana has approximately 1.2 million Medicaid beneficiaries in a largely unmanaged program with potentially 400,000 more with the implementation of the affordable care at. Louisiana has consistently ranked in the top states in Medicaid spending but far lower in terms of quality of care. Consequently we view this is a tremendous opportunity to provide solutions to Louisiana’s formidable Medicaid challenges. The Governor and the Department of Health and Hospitals conducted an exhausted process over the past four years to improve Louisiana’s Medicaid program. They took a thoughtful measured approach fully examining the program and assessing their capabilities to make improvements. Studying other state approaches and best practices, engaging a broad array of stakeholder including providers, advocates and other health policy makers and designing the program [in the open], allowing input of each stage and communicating clearly throughout the process.
As for long-term prospects of the state there remain many opportunities to grow, (inaudible) health, dental and pharmacy are currently carved out. There are also additional populations such as do eligible’s and who take a Medicaid redesign efforts.
New York has moved both pharmacy and personal care services into managed care. New Jersey is carving an additional benefits in population in 2011, benefit changes include carving communicating based services and therapies for all populations effective July 1st. In addition, pharmacy and home health services will be carve into the ABD non-dual population. Duals and non-duals currently (inaudible) for service will be mandated into managed care throughout 2011. In Virginia we expect to go live in the Winchester area in September and then to eventually expand into the Southwest region.
Finally and most significantly, we anticipate (inaudible) Texas re-procurement in expansion will be made in early August. As we plan for 2011, we remind though that medical cost trends were stable and we had enjoyed results of our targeted level of profitability for several quarters. We knew that medical cost trends and margins would inevitably migrate to more typical levels. As many of you will recall in the fourth quarter of 2009, we saw medical cost trend moderate significantly following the abatement of the H1N1 influenza outbreak. Since then we have many others in the industry have been pleasantly surprised that trends have remained quite low.