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WellCare Seeks New CEO as Chairman Takes Over for Cunningham

Nov. 1 (Bloomberg) -- WellCare Health Plans Inc., a provider of managed-care plans for about 2.8 million people, is seeking a new chief executive officer and said 2013 profit may be lower than anticipated. The shares sank.

Chairman David Gallitano, 65, will be the interim replacement for departing CEO Alec Cunningham, 46, the Tampa, Florida-based health insurer said today in a statement. WellCare said earnings excluding certain items will be $4.70 to $4.80 a share this year, trimming a previous outlook of as much as $4.90.

WellCare lowered the profit forecast even as it said revenue may be $9.35 billion to $9.4 billion, more than previously expected. Fourth-quarter expenses are now anticipated to be higher, the company said. The combination of the lower profit expectation and an unexpected management change are likely to weigh on the stock, said Chris Rigg, an analyst with Susquehanna Financial Group.

“The CEO announcement wasn’t expected and will raise plenty of questions for a stock that is up 37 percent year to date and 80 percent under his tenure,” David Windley, an analyst with Jefferies, wrote in a research note today.

On a conference call, analysts peppered Gallitano with questions about the dismissal of Cunningham.

‘That Simple’

“The board is looking for a CEO that is more strategic and has a better understanding of how to deal operationally with the complexities of not only the industry but of a larger company,” Gallitano told them. “It’s really pretty much that simple.”

WellCare fell 6.1 percent to $62.60 at the close in New York, in their biggest decline since December.

Gallitano said a time frame of nine months for the CEO search is “not unrealistic,” and that he plans to move to Tampa temporarily to be at the company “24/7.”

“I’ve been involved a lot more in the past year than I suspect most of you have anticipated,” Gallitano said. He has been a WellCare board member since 2009 and was named chairman in May.

WellCare, which provides managed-care services targeted to government-sponsored health-care programs, reported third-quarter net income rose 67 percent to $64 million, or $1.45 a share. Excluding one-time items, earnings were $1.56 a share, topping by 5 cents the average of 12 analysts’ estimates compiled by Bloomberg.

WellCare’s management transition, coupled with future growth prospects, make it “a more intriguing acquisition candidate,” Brian Wright, an analyst with Monness Crespi Hardt, wrote in a research note.

Gallitano said on the call that while the board has an obligation to be open to interested parties, “there are no active discussions and I don’t see any potential active discussions at this time.”

To contact the reporters on this story: Kristen Hallam in London at khallam@bloomberg.net; Meg Tirrell in New York at mtirrell@bloomberg.net

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

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