AMERIGROUP Corporation Earns Record $0.72 Per Share In First Quarter On 35 Percent Increase In Net Income

VIRGINIA BEACH, Va., April 29 /PRNewswire-FirstCall/ -- AMERIGROUP Corporation today announced that net income for the first quarter of 2004 increased 35 percent to $18,438,000 or $0.72 per diluted share, compared with $13,694,000, or $0.63 per diluted share for the first quarter of 2003.

Total revenues for the first quarter of 2004 increased 8.4 percent to $424,295,000, compared with $391,250,000 for the first quarter of 2003. Membership increased 8.5 percent to 867,000 at March 31, 2004, as compared with 799,000 at March 31, 2003.

  Highlights for the first quarter include:

  * Revenues of $424,295,000, an 8.4 percent increase over the first quarter
    of 2003;

  * Health benefits ratio of 81.0 percent of premium revenues;

  * Selling, general and administrative expenses of 10.7 percent of total
    revenues;

  * Days in claims payable within the expected range at 64;

  * Unregulated cash of $212,948,000; and

  * Return on average equity of 19.4 percent.

"Our first quarter operating results are in line with our expectations and reflect our ability to achieve predictable and sustained success despite short-term challenges," said Jeffrey L. McWaters, chairman and chief executive officer. "The Company continues to control medical and administrative costs to meet the realities faced by our state partners as we work together in solving our nation's toughest healthcare challenges by improving quality and access."

Health Benefits

Health benefits were 81.0 percent of premium revenues for the first quarter of 2004. "We believe that our Early Case Finding programs contribute to stable and predictable costs and lead to better health access for our members," McWaters added.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (SG&A) were 10.7 percent of total revenues for the first quarter of 2004, showing continued efficiencies related to technology and scale.

Balance Sheet and Cash Flow Highlights

Cash and investments at March 31, 2004, totaled approximately $566,024,000, a portion of which is regulated by state regulatory requirements. The unregulated portion at March 31, 2004, was approximately $212,948,000. Operating cash flow totaled $79,000 for the quarter ended March 31, 2004, compared to $39,108,000 in the prior year. The year-over-year variance is primarily due to normal versus early receipt of premium as well as consistent claim liability in the first quarter compared to significant growth in the prior year due to the PHP acquisition. The number of days in claims payable at the end of the first quarter was 64, consistent with AMERIGROUP's targeted range of 60 to 65.

  Outlook
  Reiterated 2004 full-year expectations are as follows:

  * Same-store premium revenue growth of 10 to 12 percent, which includes
    weighted-average rate increases of approximately 3 to 5 percent;

  * Health benefits ratio less than or equal to 81.0 percent of premium
    revenues;

  * Selling, general and administrative expenses of 10.5 to 11.0 percent of
    total revenues; and

  * Fully diluted shares outstanding of approximately 26.0 million.

AMERIGROUP senior management will discuss the Company's first quarter results on a conference call, Friday, April 30th, at 8:00 a.m. Eastern Time. The conference can be accessed by dialing 1-800-838-4403. A recording of this conference call will be available from 12:00 p.m. Eastern Time on Friday, April 30th, until 11:59 p.m. Eastern Time on Friday, May 7. To access the recording, dial 1-800-428-6051 and enter passcode 348677. A live webcast of the call also will be available through the investor relations page on the AMERIGROUP Web site at http://www.amerigroupcorp.com/, or through CCBN at http://www.companyboardroom.com/. A 30-day replay of this webcast will be available on these Web sites approximately two hours following the conclusion of the live broadcast.

AMERIGROUP Corporation, headquartered in Virginia Beach, Virginia, is a multi-state managed health care company focused on serving people who receive healthcare benefits through publicly sponsored programs including Medicaid, State Children's Health Insurance Program, or SCHIP, and FamilyCare. The Company operates in Texas, New Jersey, Maryland, Illinois, Florida and the District of Columbia. For more information about AMERIGROUP Corporation, please visit the Company's Web site at http://www.amerigroupcorp.com/.

This release is intended to be disclosure through methods reasonably designed to provide broad, non-exclusionary distribution to the public in compliance with the Securities and Exchange Commission's Fair Disclosure Regulation. This release contains certain "forward-looking" statements, including statements related to expected 2004 performance such as membership, revenues, same-store revenues, operating cash flows, health benefits expenses, seasonality of health benefits expenses, selling, general and administrative expenses, days in claims payable, income tax rates, earnings per share, and net income growth, as well as expectations on the effective date and successful integration of acquisitions and debt levels, made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements. These risks and uncertainties include, but are not limited to, national, state and local economic conditions, including their effect on the rate-setting process, timing of payments, as well as the availability and cost of labor, utilities and materials; the effect of government regulations and changes in regulations governing the healthcare industry, including our compliance with such regulations and their effect on our ability to manage our medical costs; changes in Medicaid payment levels, membership eligibility and methodologies and the application of such methodologies by the government; liabilities and other claims asserted against the company; our ability to attract and retain qualified personnel; our ability to maintain compliance with all minimum capital requirements; the availability and terms of capital to fund acquisitions and capital improvements; the competitive environment in which we operate; our ability to maintain and increase membership levels; and demographic changes.

Investors should also refer to our Form 10-K filed with the Securities and Exchange Commission on March 9, 2004, 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. We specifically disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

AMERIGROUP CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (Dollars in thousands, except per share data) Three months ended March 31, 2004 2003 Revenues: Premium $ 422,335 $ 389,562 Investment income 1,960 1,688 Total revenues 424,295 391,250 Expenses: Health benefits 342,247 317,298 Selling, general and administrative 45,487 44,070 Depreciation and amortization 5,624 5,762 Interest 181 550 Total expenses 393,539 367,680 Income before income taxes 30,756 23,570 Income tax expense 12,318 9,876 Net income $ 18,438 $ 13,694 Weighted average number of common shares and dilutive potential common shares outstanding 25,629,465 21,631,779 Diluted net income per share $ 0.72 $ 0.63

The following table sets forth selected operating ratios. All ratios, with the exception of the health benefits ratio, are shown as a percentage of total revenues.

Three months ended March 31, 2004 2003 Premium revenue 99.5 % 99.6 % Investment income 0.5 0.4 Total revenues 100.0 % 100.0 % Health benefits(1) 81.0 % 81.4 % Selling, general and administrative expenses 10.7 % 11.3 % Income before income taxes 7.2 % 6.0 % Net income 4.3 % 3.5 % (1) The health benefits ratio is shown as a percentage of premium revenue because there is a direct relationship between the premium received and the health benefits provided.

The following table sets forth the approximate number of members served in each of our service areas as of March 31, 2004 and 2003.

March 31, Market 2004 2003 Houston 149,000 138,000 Dallas 89,000 89,000 Fort Worth 102,000 78,000 Maryland 124,000 126,000 District of Columbia 37,000 37,000 New Jersey 101,000 99,000 Chicago 33,000 32,000 Tampa 132,000 114,000 Orlando 42,000 49,000 Miami/Fort Lauderdale 58,000 37,000 Total 867,000 799,000

The following table sets forth the approximate number of members in each of the products we offer as of March 31, 2004 and 2003.

March 31, Product 2004 2003 AMERICAID (Medicaid-TANF) 589,000 519,000 AMERIKIDS (SCHIP) 189,000 189,000 AMERIPLUS (Medicaid-SSI) 74,000 67,000 AMERIFAM (FamilyCare) 15,000 24,000 Total 867,000 799,000 AMERIGROUP CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) March 31, December 31, 2004 2003 Assets Current assets: Cash and cash equivalents $ 388,112 $ 407,220 Short-term investments 29,499 8,750 Premium receivables 34,416 38,259 Deferred income taxes 8,144 10,164 Prepaid expenses and other current assets 15,873 15,995 Total current assets 476,044 480,388 Property, equipment, and software, net 40,736 42,158 Goodwill and other intangible assets, net 143,192 144,398 Long-term investments, including investments on deposit for licensure 148,413 154,479 Other long-term assets 5,443 4,598 $ 813,828 $ 826,021 Liabilities and Stockholders' Equity Current liabilities: Claims payable $ 240,124 $ 239,532 Unearned revenue 26,749 54,324 Accounts payable 4,174 5,523 Accrued expenses, capital leases and other current liabilities 45,621 53,431 Total current liabilities 316,668 352,810 Deferred income taxes, capital leases and other long-term liabilities 10,100 11,497 Total liabilities 326,768 364,307 Stockholders' equity: Common stock, $.01 par value 247 244 Additional paid-in capital 338,599 331,751 Retained earnings 148,214 129,719 Total stockholders' equity 487,060 461,714 $ 813,828 $ 826,021 AMERIGROUP CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Three months ended March 31, 2004 2003 Cash flows from operating activities: Net income $ 18,438 $ 13,694 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,624 5,762 Loss on disposal or abandonment of property, equipment and software 1,112 3 Deferred tax expense (benefit) 931 (662) Amortization of deferred compensation 57 90 Tax benefit related to option exercises 2,397 89 Changes in assets and liabilities increasing (decreasing) cash flows from operations: Premium receivables 3,843 2,455 Prepaid expenses and other current assets 122 753 Other assets (816) (721) Claims payable 592 24,682 Unearned revenue (27,575) (783) Accounts payable, accrued expenses and other current liabilities (4,984) (7,092) Other long-term liabilities 338 838 Net cash provided by operating activities 79 39,108 Cash flows from investing activities: Proceeds from purchase of investments, net (14,572) (50,172) Purchase of investments on deposit for licensure, net (111) (671) Purchase of property, equipment and software (3,999) (3,307) Purchase of contract rights and related assets 48 - Cash acquired through Florida acquisition - 27,483 Net cash used in investing activities (18,634) (26,667) Cash flows from financing activities: Payment of capital lease obligations (1,131) (852) Repayments of credit facility - (2,000) Other financing activities, net 578 918 Net cash used in financing activities (553) (1,934) Net increase (decrease) in cash and cash equivalents (19,108) 10,507 Cash and cash equivalents at beginning of period 407,220 207,996 Cash and cash equivalents at end of period $ 388,112 $ 218,503

CONTACT: Julie Loftus Trudell, Vice President, Investor Relations of AMERIGROUP Corporation, +1-757-321-3535.

AMERIGROUP Corporation

CONTACT: Julie Loftus Trudell, Vice President, Investor Relations ofAMERIGROUP Corporation, +1-757-321-3535

Web site: http://www.amerigroupcorp.com/