Anthem Confirms Joseph Swedish to Step Down as CEO -- 2nd Update

By Anna Wilde Mathews Features Dow Jones Newswires

Anthem Inc. Chief Executive Joseph R. Swedish will step down, and veteran managed-care executive Gail K. Boudreaux will take over as the insurance giant's next leader Nov. 20.

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Ms. Boudreaux will take the titles of chief executive and president, the company said. She will also join Anthem's board. Mr. Swedish will remain as executive chairman until May 2018 and will be a senior adviser through May 2020.

Ms. Boudreaux, 57, is well-known among managed-care investors, previously serving as chief executive of the biggest U.S. health insurer, the insurance arm of UnitedHealth Group Inc. She is regarded as a strong operator, and she has experience overseeing Blue Cross Blue Shield plans like those that Anthem operates.

In a statement, Anthem's lead independent director, George A. Schaefer, Jr., said the insurer's board was "confident Gail will draw from her extensive experience to deliver strong operating performance, excellent financial results and a laser focus on customer experience and shareholder value. In an evolving industry, Gail brings the right skills for the times." He also credited Mr. Swedish with "a foundation of strong performance that allows us the opportunity to transition to a new Chief Executive Officer."

After the move was reported by The Wall Street Journal on Friday, industry analysts reacted favorably to the choice. Leerink Partners LLC's Ana Gupte called Ms. Boudreaux "a very highly seasoned and respected managed-care executive" who is "likely to drive immediate multiple expansion and get [Anthem] to its well-deserved premium to peers."

Anthem, the second-biggest health insurer, had revenue of around $84.9 billion last year.

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Mr. Swedish, 66, would be leaving after his signature strategic effort, Anthem's $48 billion bid to buy Cigna Corp., ran aground earlier this year. However, since the beginning of the year, Anthem shares have risen by 47%, along with strong results across the health-insurance sector and Anthem's announced pullback from the Affordable Care Act exchange business.

The Cigna deal was blocked by courts on antitrust grounds, but it was already mired in well-publicized acrimony between the companies' top executives, including Mr. Swedish and his opposite number at Cigna, Chief Executive David Cordani.

Anthem and Cigna are currently suing each other for billions of dollars in damages. The litigation focuses partly on the CEOs' actions and words over the years, as the two insurers were negotiating and then trying to consummate their deal.

Anthem has accused Cigna and Mr. Cordani of sabotaging the deal, and Cigna has said that Anthem, over Cigna's objections, chose an antitrust defense and strategy that failed. Cigna has said Anthem didn't use its "reasonable best efforts" to get regulatory approval, and as a result the acquisition was blocked.

Mr. Swedish has led Anthem since 2013, replacing previous CEO Angela Braly, who resigned under pressure from investors unhappy with the company's direction. The board turned to Mr. Swedish, a hospital-industry veteran with no experience leading a managed-care company, to steer the insurer through the challenges of the ACA marketplace launch. Anthem, which had revenue of $71 billion in 2013, has grown under Mr. Swedish's watch, but his tenure has been marked by challenges.

Anthem remains locked in litigation with its current pharmacy-benefit manager, Express Scripts Holdings Inc., with Anthem alleging that Express overcharged for drugs. Express has denied the allegations and made its own counterclaims.

Mr. Swedish unveiled a plan last month for Anthem to start its own pharmacy-benefit manager, to be serviced by CVS Health Corp. A little over a week later, The Wall Street Journal reported that CVS was in talks to take over Aetna Inc., an Anthem rival. Anthem factored in the possibility that CVS might buy another insurer in structuring its contract with the drugstore giant, according to a person with knowledge of the matter. The new PBM is slated to launch in 2020, after the end of Anthem's current contract with Express Scripts.

Mr. Swedish also made the call for Anthem to pull back in the ACA's exchanges in most of its markets amid uncertainty in the business. The law's marketplaces were once expected to be an engine of growth for the company. But Anthem has retained a bigger footprint than other big national insurers such as Aetna. Anthem has projected that next year its enrollment in ACA plans will drop by around 70%, but it said the business is expected to be profitable in 2018, after break-even results in this year.

Anthem's 2017 proxy statement says Mr. Swedish could be due to receive a payout worth around $26.5 million upon his retirement. According to a regulatory filing made by Anthem on Monday, Mr. Swedish will receive his current salary while he remains chairman, and will receive $4.5 million in annual salary while he is senior adviser.

Ms. Boudreaux left UnitedHealth in 2015, with a two-year noncompete agreement, according to a filing that UnitedHealth made when her departure was announced.

Before coming to UnitedHealth in 2008, Ms. Boudreaux was an executive at Health Care Service Corp. -- like Anthem, the parent of Blue Cross Blue Shield plans -- which gave her an understanding of the how Blue insurers work. Ms. Boudreaux's UnitedHealth experience may be appealing to Anthem because of its burgeoning Optum health-services arm; other insurers are eager to add similar operations.

According to Anthem's filing Monday, Ms. Boudreaux will receive an annual base salary of $1.4 million, as well as being eligible for an incentive bonus as well as long-term incentive awards with a target value of $10.25 million for 2018. Upon starting with Anthem, she will also get a grant of "performance stock units" with a target value of $2 million that vests "based on the level of achievement of company performance" from 2017 through 2019.

Among Mr. Swedish's most visible legacies at Anthem is the name of the company, which changed from WellPoint Inc. in 2014.

Joann S. Lublin contributed to this article.

Write to Anna Wilde Mathews at anna.mathews@wsj.com

(END) Dow Jones Newswires

November 06, 2017 08:48 ET (13:48 GMT)