Amerigroup's CEO Discusses Q4 2011 Results - Earnings Call Transcript
Amerigroup Corporation (
)
Q4 2011 Earnings Conference Call
February 17, 2012, 08:00 a.m. ET
Executi
ve
s
Julie Loftus Trudell - SVP, IR
Jim Carlson - Chairman and CEO
Jim Truess - EVP and CFO
Dick Zoretic - EVP and COO
John Littel - EVP, Government Relations
Analysts
Scott Fidel - Deutsche Bank
Charles Boorady - Credit Suisse
Melissa McGinnis - Morgan Stanley
Josh Raskin - Barclays
Tom Carroll - Stifel Nicolaus
Chris Rigg - Susquehanna Financial
Matt Borsch - Goldman Sachs
Michael Baker - Raymond James
Peter Costa - Wells Fargo Securities
Carl McDonald - Citigroup
Sarah James - Wedbush Securities
Ken Levine - UBS
Scott Green - Bank of America/Merrill Lynch
Presentation
Operator
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Welcome to Amerigroup Corporation’s Fourth Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. After management’s presentation, you will be invited to participate in a question-and-answer session. (Operator Instructions) As a reminder, this conference call is being recorded today, Friday, February 17, 2012.
I’d now turn the conference call over to Julie Loftus Trudell, Senior Vice President of Investor Relations at Amerigroup. Please go ahead.
Julie Loftus Trudell
Good morning, and thank you for joining Amerigroup’s fourth quarter 2011 conference call and webcast. 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 fourth quarter earnings was distributed this morning. A replay of this call will be available shortly after the conclusion of the call through Thursday, February 23, 2012. 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 rebroadcast of this presentation, we remind you that the remarks made herein are as of today, February 17, 2012, and have 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 including the State of Washington, contract award, the dual eligible opportunity, rates, medical cost trends, the closing of the Health Plus acquisition as well as our 2012 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 advice listeners to review the risk factors discussed in our press release this morning as well as other SEC documents that have been furnished or filed with the SEC.
I’d now like to turn the call over to our Chairman and Chief Executive Officer, Jim Carlson. Jim?
Jim Carlson
Thank you, Julie, and thank you all for joining us this morning. In the fall of 2010, we described 2011 as the year in which we would lay the foundation for significant growth ahead. We predicted that we would grow the top line a little bit slower than usual, high single-digits over 2010 and we would see very important new and renewal business come to market. We were tested from a competitive perspective and couldn’t be happier with our success in that front.
In fact we believe that our 2011 success will set the stage for growth for several years to come. We surpasses the 2 million member mark and total revenues exceeded $6 billion. 2011 was also a strong year for earnings with a 3.1% net income margin. We now expect dynamic growth in 2012 and beyond.
As you can see from the 2012 outlook parameters as outlined in the press release, we expect our earnings to be impacted particularly in the first half of 2012 by the large volume of new business being implemented in the first quarter and the targeted closing of the Health Plus acquisition in the second quarter.
I think we might further describe 2011 as a tipping point. Regardless of exactly when it happen is pretty clear that by the end of the year, the value proposition, the track record of the private sector and state budget challenges all converge to yield wide spread acceptance of managed care as the preferred strategy for administering publicly funded safety net programs. And that has certainly been evidenced in the discussions on the dual eligible opportunity which I will talk about in a few minutes.
Well as I noted, we are very pleased with our successful participation in a number of highly competitive opportunities to expand our business. Including the consistently high technical scores we have been awarded. In the largest managed care RFP in history, we maintained our positions as Texas’ leading managed care vendor in terms of market share adding about $1 billion in annualized revenue beginning in 2012. Texas continues to be on the forefront of Medicaid privatization and their long-term care program studied by many other states looking to address similar populations.
Louisiana our 12th states represents a carefully designed program to move approximately 865,000 citizens into a statewide managed care program. The first phase the New Orleans region went live on February 1, and we are pleased with our initial positioning. The remaining regions are expected to go live on April 1 to June 1 of this year. And several other markets including New Jersey, New York, Ohio, and Virginia, we have expanded our product offerings and service areas.
Our planned acquisition of Health Plus in New York will provide an additional scale and leverage in a market with the largest Medicaid spend in the country. We believe we are on-track for a second quarter closing. Beyond this acquisition a number of opportunities remain in this market, notably New York’s plan for addressing their dual eligible population through their Medicaid Advantage Plus program.
And finally, the Washington State Healthcare Authority announced in January its intent to contract with us and for other firms as a result of a state-wide bidding process. We expect to participate in Washington’s Healthy Options program and provide services for TANF and CHIP as well as more than 100,000 seniors and people with disabilities who are not also eligible for Medicare. Additionally, we expect to participate in the State’s basic health program which currently provides subsidized health coverage for approximately 40,000 low income adults. The State has also submitted a letter of intent to CMS on the duals.
We expect to initially operate in 22 of the State’s counties including four of the five most populated counties. The State hopes to finalize contracts by the end of the month. While we are talking about expansion prospects, I’d like to spend a couple of minutes reviewing the dual eligible opportunity.
By the end of the year, the market was beginning to recognize what we have been anticipating for a long time, despite all of the growth in the past year, we believe our largest opportunity may lay ahead of us. The opportunity to help the States with their long-term care challenges and integrating care for individual eligible for both Medicaid and Medicare.
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