Wednesday, October 26, 2011

Research: AGP Amerigroup and its recent drop in earniings

This one is not easy for me to analyze since it's an insurance company, which is practically finance. When it comes to numbers purely on a yearly basis, this company looked good. It has a pretty "standard" unusual expense from the 2008 year, in which many companies had to write off a loss for any mortgage backed bonds that they might have been holding. It has manageable levels of debt, operating cash, and capital expenditures. The sharp drop in the stock price near 8/1/2011 was hard to ignore, so I looked at the 10-Q, as the drop occurred right after earnings. In their most recent quarter, they've have to pay out more health benefits and their selling/general/admin costs and premium tax have gone up. These contributed to the drop in AGP's income for the quarter. I'm not familiar enough with insurance companies and the special laws they operate under to know if this drop in income is only temporary. I also don't know if this is due to too little revenue coming in.

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