Citi analyst Carl McDonald comments on the highly regarded management team that comes with WellPoint’s acquisition of Amerigroup, including chief executive (and former president of United Healthcare) Jim Carlson.
It’s no secret that Angela Braly, WellPoint’s CEO, has a tenuous relationship with many of the company’s largest shareholders, who weren’t pleased initially with her lack of operating experience, and WellPoint’s stock underperformance relative to United hasn’t done much to improve the situation, with WellPoint’s stock down 25% since she took over. It’s also no secret the relationship among some of WellPoint’s senior executives has been shaky. There’s evidence of this among the number of senior executives at WellPoint that have come and gone over the past few years, but even among those executives that remain, there are still questions about whether everyone is in the role they should be.
Assuming for a minute that this version of events is somewhat close to accurate, if you’re Angela Braly, it raises the question of why invite the fox into the henhouse? As we noted before, Jim Carlson has a lot of publicly traded experience, he was quite successful at his last company, he used to run a big commercial operation, and he has a significant amount of cachet with investors. Before, WellPoint’s board didn’t have a lot of obvious choices if they wanted to go in a new direction with the leadership of WellPoint, but that’s no longer the case.
There are a couple of possible explanations. The simplest one is that Angela Braly’s standing at WellPoint is a lot more secure than those of us outside the company perceive, and that she doesn’t see Jim Carlson as any kind of threat. A second possible explanation is Jim Carlson’s age. He’s 59 today, and assuming the board wanted him to have a year or two of experience within WellPoint, it would raise the question of whether the board would name someone CEO knowing that they’d have to go through another CEO succession process in a limited number of years.
A third possible explanation is that Angela Braly, Chairwoman, President, and CEO of WellPoint, has decided that being the CEO of WellPoint isn’t everything it was made out to be. It’s possible we end up in a scenario where Braly stays as an executive chairwoman of the board, with Carlson taking over day to day operations of the company.
In any event, whether any of these scenarios play out or not, we think the investment community will like the added depth that WellPoint’s management team now has, and the additional leadership flexibility it gives the company going forward.
McDonald adds that the acquisition of Amerigroup is a good deal for WellPoint, despite the high price paid. The deal adds heft to the WellPoint’s Medicaid line–a growing business–and reduces the company exposure to commercial, which faces profit pressures because of ObamaCare.