UnitedHealth Rises as Profit Beats Estimates, CFO Mikan's Role Is Expanded

UnitedHealth Group Inc., the largest U.S. insurer by sales, promoted Mike Mikan and Gail Boudreaux to run the health-services and health-benefits divisions, moves that may signal the executives are candidates to head the company in the future.

Mikan, 40, had been chief financial officer since 2006 and will now run the OptumHealth and Ingenix units as well as share responsibility for Prescription Solutions, the Minnetonka, Minnesota-based company said in a statement. Boudreaux, 51, had been in charge of the company’s commercial division. Chief Executive Officer Stephen Hemsley also picked a three-man team to take on companywide roles within his office.

UnitedHealth has a “history of rotating” executives to “diversify their experiences,” Hemsley, 58, told investors on a conference call today and referred to the personnel moves as “routine.” The promotions line up candidates for when Hemsley retires, said Dave Shove, a New York-based analyst at the Bank of Montreal.

“Boards take lots more things seriously these days. This one seems to want a few people to think about for succession,” Shove said in a telephone interview. “Hemsley is still young and I don’t see him leaving for a while, but this exercise feels a lot like succession planning to me.”

Hemsley was appointed CEO and company president on Nov. 30, 2006, according to the UnitedHealth’s website.

Development and Growth

“Given the markets we serve today, our potential and the changing health-care landscape, we will benefit from having some of our leaders take on new and different responsibilities as we begin the next stage of our development and growth,” Tyler Mason, a company spokesman, said today in an e-mail.

UnitedHealth declined 25 cents, or less than 1 percent, to $40.31 at 4:02 p.m. in New York Stock Exchange composite trading. The stock has increased 22 percent since President Barack Obama signed the health-care overhaul into law on March 30.

Fourth-quarter net income climbed 10 percent to $1.04 billion, or 94 cents a share, from $944 million, or 81 cents a share, the insurer also said today. The results beat the average estimate of 84 cents by 13 analysts surveyed by Bloomberg, as mandates from the health-care overhaul weren’t as demanding as the company expected and U.S. unemployment lessened use of medical care.

More Candidates

Mikan will share responsibility for the prescription solutions business with William Munsell, one of the three men who have been given roles in the CEO office, the company said. Larry C. Renfro and Anthony Welters also will work with Hemsley. David S. Wichmann will become CFO and Jeff Alter will be the head of the commercial division.

“Mike Mikan’s move to head up health services is significant,” Ana Gupte, an analyst at Sanford C. Bernstein in New York, said in an e-mail today. “They are giving him operating experience to develop him.”

Boudreaux is also a “leading horse in the race,” Gupte said in a telephone interview. “But the board would not want to put all their eggs in any one basket.”

Shove said Munsell, 58, who has been the president of the company’s health-care services unit, is an “obvious candidate” to move up, given his new position and increased exposure to the board.

As part of the U.S. health-care law, the Department of Health and Human Services issued rules on Nov. 22 that compel insurers to spend at least 80 percent of premiums on medical care. UnitedHealth said it spent 80.6 percent in the quarter, compared with 81.3 percent a year earlier.

Lower Than Expected

UnitedHealth’s claims related to new mandates from the overhaul “are coming in lower than company expectations,” Gupte said. Use of medical care “continues to remain slow,” said the analyst, who has an “outperform” rating on the stock and had estimated fourth-quarter earnings of 96 cents a share.

UnitedHealth is the first insurer to report earnings for the quarter, giving investors an initial peek at the earliest effects of the health-care law. WellPoint Inc., the largest health insurers by enrollment, will report its earning on Jan. 26, the Indianapolis-based company has said.

UnitedHealth’s revenue rose 10 percent to $24 billion, boosted by increased enrollments in Medicaid, the government health program for the poor, and Medicare, the health plan for the elderly and disabled.

“State budgets are under pressure everywhere, prompting a greater push into Medicaid managed care,” David Windley, a Nashville, Tennessee-based analyst at Jefferies & Co., in a note. UnitedHealth “likely benefited from some of that.”

To contact the reporters on this story: Pat Wechsler in New York at pwechsler@bloomberg.net

To contact the editor responsible for this story Reg Gale at rgale5@bloomberg.net

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