Minneapolis – UnitedHealth Group Inc. will lose the chief executive that built it into a health insurance powerhouse, but Monday, Wall Street yawned.
UnitedHealth shares traded in a narrow range and analysts said that they had expected the departure of chairman and chief executive William McGuire because of apparent stock options backdating.
With McGuire gone from the boardroom immediately, and set to retire as chief executive by Dec. 1, the company’s board promoted president Stephen Hemsley to chief executive.
UnitedHealth shares slipped $1.21, or about 2.5 percent, to close at $47.54 on the New York Stock Exchange. They’re off from a high of $64.61 in December, with much of that loss since questions about the company’s stock-options timing arose in March.
By making Hemsley CEO, UnitedHealth’s directors signaled they would keep the company headed in the same direction, which has boosted UnitedHealth’s stock price exponentially over the past 15 years and transformed it into the nation’s second-largest health insurer. Hemsley has been at the company since 1997 and has run its day-to-day operations since 1999.
“The management uncertainty is largely resolved, and the worst-case scenario (which would have been losing both McGuire and Hemsley) has been seemingly averted,” Morgan Stanley analyst Christine Arnold wrote in a note to clients on Monday.
UnitedHealth said on Sunday that McGuire would step down after a company-commissioned report found widespread, systematic backdating was probably the explanation for his extraordinary good fortune in receiving stock options priced at the lowest possible point in eight different quarters.
Nothing in the report suggests that Hemsley was involved in any backdating, although the report concludes that he received stock options that were “likely backdated.”
“I don’t see how Hemsley can be separated from McGuire’s actions over the last eight years,” said Elizabeth Senko, an analyst at Williams Capital Group.
Referring to comic strip buddies known for getting into trouble together, she said: “They’re really Mutt and Jeff. I can’t believe that he was unaware of what was going on. Now where that falls under his legal responsibilities is another matter.”
She said Hemsley has been the architect of many of UnitedHealth’s successes.
