Amerigroup Declines After Losing Tennessee Contract

Amerigroup Corp. (AGP), the provider of managed health care for poor Americans in 11 states, dropped 8.9 percent on the New York Stock Exchange after failing to win a contract with Tennessee.

Amerigroup, based in Virginia Beach, Virginia, fell $2.60 to $26.49 at 4:03 p.m. New York time in composite trading. Contracts went to UnitedHealth Group Inc. and BlueCross BlueShield of Tennessee, the state said today on its Web site.

``Over time a win in Tennessee could have added up to 20 cents to 25 cents in annual EPS, all else equal,'' Matt Perry, an analyst at Wachovia Securities Inc., wrote in an e-mailed note today. ``The failure to win a contract in Tennessee is disappointing and highlights the volatile nature of growth opportunities in the Medicaid business.''

Another company, United American Healthcare Corp. (UAHC), said its proposal with Molina Healthcare also failed to win the Tennessee contract. United American Healthcare, a Detroit-based health provider that covers part of Western Tennessee, slumped the most in three years. The company fell 43 percent to $1.70 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

Amerigroup is a good value at today's price, Perry said. Amerigroup remains a well-run company that should be valued above its Medicaid peers, said Perry, who ranks the shares outperform with a target price of $38.

Amerigroup provides Medicaid coverage in the middle region of Tennessee. The contract it failed to win would have allowed the company to expand into eastern and western Tennessee.

Amerigroup provides care for more than 1.7 million people in 10 states and the District of Columbia.

To contact the reporter on this story: Kelly Riddell in Washington at kriddell1@bloomberg.net

To contact the editor responsible for this story: Colleen McElroy at cmcelroy@bloomberg.net

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