Angela Braly resigned as chairman and chief executive officer of WellPoint Inc. (WLP) after recent criticism from shareholders who said the second-leading U.S. insurer was underperforming. The shares rose.
John Cannon, the company’s executive vice president and general counsel, will serve as interim CEO while WellPoint searches for a replacement, the Indianapolis-based insurer said today in a statement. Cannon isn't a candidate for the permanent job, according to the statement.
During her five-year tenure, Braly, 51, made herself a foe of the health-care overhaul and, more recently, of investors after WellPoint missed earnings estimates and cut its forecast twice in four months. Even before the resignation, investors had touted James Carlson, the Amerigroup Corp. (AGP) chief, and David Snow Jr., the former Medco Health Solutions Inc. CEO, as replacement candidates, said Jason Gurda, an analyst at Leerink Swann & Co.
“I have spoken with our board and we have agreed this is the right action for WellPoint at this time,” Braly said in a memo to company employees. “The board and I feel, though, that the company will benefit from getting a fresh perspective on ways we can improve execution across the company.”
Royal Management Group LLC called for Braly’s ouster in an reported by Bloomberg News on Aug. 23. That following similar public criticism from shareholders Orbimed Advisors LLC, an investment fund, and hedge fund Omega Advisors Inc.
Robert Medway, a partner in Royal Capital Management, said WellPoint will benefit from Braly’s departure in a telephone interview after the announcement.
“This is a pleasant surprise that boards of directors sometimes do their jobs,” Medway said. “Now we look forward to seeing who takes the helm and creates some value here.”
WellPoint traded at a 2 percent premium to an S&P 500 index of the top six health insurers when Braly took over as chairman on March 1, 2010. As of yesterday, it changed hands at a 44 percent discount, suggesting investors’ waning confidence. The company has lost about $8 billion of its value during that time, according to data compiled by Bloomberg.
The WellPoint board had supported Braly, who took over as CEO in June 2007, before today in two public statements in the face of calls for her ouster. Braly was one of 20 women running Fortune 500 companies.
“Now is the right time for a leadership change,” Jackie Ward, a WellPoint director, said in today’s statement. “We believe the remaining executive team is dynamic and strong, with great potential to drive WellPoint’s future success.”
Braly’s resignation came after nearly two weeks of meetings between WellPoint’s board and top shareholders of the company.
WellPoint is buying Amerigroup, a rival insurer, for $4.9 billion, and Medco was acquired for $29.1 billion in April by Express Scripts Holding Co., a fellow drug-benefits manager.
Other names raised by investors include Chief Financial Officer Wayne Deveydt, Gail Boudreaux, the head of the health plan division at UnitedHealth Group Inc. (UNH), the biggest U.S. health insurer, and Kenneth Goulet, WellPoint’s executive vice- president, said Thomas Carroll, a Stifel Nicolaus & Co. analyst in Baltimore.
In its letter to the board, dated Aug. 22, Royal Capital wrote that Braly has “failed miserably” since becoming CEO in June 2007. The statement, signed by partners Medway and John Lancefield, cited disappointing profits, a stock that’s lagged behind competitors and “managerial blunders.”
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