AMERIGROUP Corporation (NYSE: AGP) announced today that it expects to report earnings for the third quarter of 2009 in the range of $0.42 to $0.44 per diluted share. The new guidance for the third quarter primarily reflects elevated medical costs associated with the onset of a severe flu season due to the H1N1 virus.
Based on claims paid data through the month of September, the Company now estimates medical costs incurred in the quarter will be above its expectations, due largely to a significant spike in flu related activity which is most pronounced in September. As health officials have noted, the H1N1 virus is particularly virulent among children, pregnant women and other high-risk population groups, and this demographic represents approximately 87% of the Company's 1.7 million members.
In contrast to elevated medical costs in the third quarter, the Company's previously established reserves for medical costs as of June 30, 2009 continue to appear adequate.
The Company currently believes that it will not meet its previously announced 2009 annual earnings guidance of $2.55 to $2.75 per diluted share. The Company is withdrawing its guidance for the current year due to the wide range of medical cost outcomes that may occur in the fourth quarter.
"In September, we experienced a spike in flu-related activity among our Medicaid members," said James G. Carlson, AMERIGROUP Chairman and Chief Executive Officer. "The vast majority of our members are within the demographic most at risk for the flu and we appear to be early in the cycle. With this in mind, it is difficult to determine if, and when, the situation will abate, continue at current trends or worsen."
On October 24th, President Barack Obama signed an Emergency Declaration for H1N1 Flu. According to the Centers for Disease Control, millions of Americans have been infected with the virus, with more than 20,000 hospitalizations. Additionally, vaccine distribution has been much slower than anticipated. Over 11 million doses have been shipped for distribution to date, with an additional 50 million doses expected to be available in November and 150 million in December. Flu activity is reported to be widespread in 46 states.
Carlson continued, "In the long run, we continue to believe that the fundamentals of our business and operations are solid. We also believe that the impact of economic recovery at the state level and expansion of Medicaid programs due to health care reform will create positive opportunities for AMERIGROUP in the future."
Third Quarter Earnings Call
AMERIGROUP senior management intends to discuss the Company's third quarter results on its previously scheduled conference call, Friday, October 30, 2009 at 7:30 a.m. Eastern Time (ET). The conference can be accessed by dialing 866-260-3161 (domestic) or 706-679-7245 (international) approximately ten minutes prior to the start time of the call. A recording of the call may be accessed by dialing 800-642-1687 (domestic) or 706-645-9291 (international) and providing passcode 34392568. The replay will be available shortly after the conclusion of the call until Friday, November 6, at 11:59 p.m. Eastern Time. The conference call will also be available through the investors' page of the Company's web site, www.AMERIGROUPcorp.com, or through www.earnings.com. A 30-day replay of this webcast will be available on these web sites beginning approximately two hours following the conclusion of the live broadcast earnings conference call.
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