Two weeks after Angela Braly was forced out as WellPoint Inc. (WLP) chief executive officer, the management team she put in place has been told by the board it will stay, said Chief Financial Officer Wayne Deveydt. The company’s shares fell.
The insurer’s executives are committed to remaining, Deveydt said today at a conference in New York. WellPoint, the second-biggest U.S. health insurer, declined 1.4 percent to $59.45 at 4 p.m. New York time. The drop erased an earlier gain, after Deveydt also said the company wasn’t ready yet to predict its earnings for next year.
Braly resigned as head of the Indianapolis-based company on Aug. 28 after shareholders expressed discontent with her leadership. John Cannon, WellPoint’s general counsel, will serve as interim CEO during the search for a replacement, the insurer said at the time.
“The stockholders want to see dramatic changes in Wellpoint’s performance,” Erik Gordon, a professor at the University of Michigan’s Steven M. Ross School of Business in Ann Arbor, said in an e-mail. “The changes start at the top, but they don’t end there.”
Cannon isn’t interested in taking the job on a permanent basis, Deveydt said. The board will conduct a search and no timeline has been set to choose a replacement.
“Our board very proactively wants to maintain the management team and they’ve reached out to us in that manner,” Deveydt said at the Morgan Stanley Global Healthcare Conference.
Braly, 51, took over the CEO job in June 2007. During her tenure, she became a high-profile foe of President Barack Obama’s health-care overhaul and, more recently, sparked the ire of investors after WellPoint missed earnings estimates and cut its forecast twice in four months.
Braly’s successor will have to right the company’s financial performance and oversee WellPoint’s integration of insurer Amerigroup Corp. (AGP) and vision company 1-800-Contacts Inc.
In June, WellPoint agreed to buy eye-wear provider 1-800- Contacts Inc. for about $900 million. In July, the company announced the $4.9 billion acquisition of Amerigroup to become the biggest private provider of plans for Medicaid, the federal- state program for the poor.
Setting the Bar
When the company gives its 2013 forecast, “we would expect a very conservative guide,” Thomas Carroll, a Stifel Nicolaus & Co. analyst in Baltimore, said in an e-mail. WellPoint faces a “challenging operational environment as well as the traditional ’set the bar low for a new CEO’ strategy.”
The Amerigroup deal may close in the fourth quarter, Deveydt said today. The company had predicted the acquisition would be finished in next year’s first quarter.
The CFO said WellPoint still expects a profit of $7.30 to $7.40 a share this year.
While the early close of the Amerigroup deal may help profit, pressure on commercial insurance prices may push earnings in the other direction, Deveydt said. And the company will also have to spend money as it prepares for an expansion of insurance coverage under Obama’s health-care law, he said.
“The build-up that will occur between now and 2014 to make that happen will be substantial,” he said.
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