Insurer Names Its President As CEO -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 17, 2017).

UnitedHealth Group Inc. said David S. Wichmann, its current president, will next month succeed Stephen J. Hemsley as chief executive, a widely expected transition at the top of the nation's largest health insurer.

Mr. Wichmann, 54 years old, will take over the CEO job on Sept. 1, and Mr. Hemsley, 65, who has held the title since 2006, will become executive chairman. UnitedHealth Group's current board chairman, Richard Burke, will then take the title of lead independent director.

Mr. Wichmann, who previously served as chief financial officer of UnitedHealth Group as well as president of UnitedHealthcare, its insurance operation, is seen as likely to continue the direction of his predecessor, who transformed the company by building up UnitedHealth's rapidly growing Optum health-services arm and expanding its core insurance business.

UnitedHealth has typically posted steadily growing earnings and revenue, and its shares have generally outperformed peers', with analysts frequently lauding the company as the industry leader based on its financial results, diversity and reach. In its most recent quarter, the company beat analysts' expectations and raised its earnings outlook for the year.

Shares of UnitedHealth are up 22% so far this year. In early trading Wednesday, shares rose 0.2% to $194.97.

Analysts have long eyed Mr. Wichmann as the likely CEO-in-waiting, particularly after he assumed the president title in 2014.

"This is the right time for this transition to take place, as the company is performing strongly and has a positive outlook for the foreseeable future, and Dave Wichmann is the right choice to succeed as CEO for that future," Mr. Hemsley said in a statement.

Also in a statement, Mr. Burke said the succession was "the culmination of almost four years of discussion, careful planning, leadership development and execution," noting that Mr. Wichmann was among Mr. Hemsley's first hires at UnitedHealth and "has been preparing for the CEO role for many years."

He also said that Mr. Hemsley will still "have substantial responsibilities, and be fully engaged in the company's ongoing affairs and long-term direction."

Mr. Wichmann will run a health-care behemoth that this year is expected to hit $200 billion in revenue. Its health-insurance unit covers 49.5 million people, diversified across government and employer plans. Optum's businesses stretch from pharmacy-benefit management to health-data analysis to a burgeoning national footprint in doctor practices.

UnitedHealth also has a growing overseas business, including a big health insurance and hospital operation in Brazil.

"Helping to guide this enterprise, with its extraordinary people, purpose and capabilities, is a distinct yet humbling honor," Mr. Wichmann said.

In a June presentation at an investor conference, Mr. Wichmann emphasized areas of growth for UnitedHealth that he said would play out over the next decade. They included pharmacy-benefit services, health-care technology, overseas expansion and health-care delivery through doctor practices and urgent-care clinics, among other venues.

UnitedHealth said Mr. Wichmann's roles have included leading external development and merger-and-acquisition efforts, as well as integration activities, and that he currently oversees UnitedHealth's business in Brazil, among other global markets, which the company said was "experience essential for building out the 'third leg' of UnitedHealth Group's long-term growth strategy."

Before joining UnitedHealth in 1998, Mr. Wichmann was a partner at Arthur Andersen. Mr. Hemsley came to UnitedHealth a year earlier from the same firm, where he was chief financial officer.

Though Mr. Wichmann's long tenure at the company and close ties to Mr. Hemsley, as well as the orderly style of the transition, are likely to soothe investors, he will still face tough comparisons to Mr. Hemsley.

Mr. Hemsley took over UnitedHealth as his high-profile predecessor, William McGuire, agreed to leave after an internal probe concluded stock-option grants that benefited him and other executives were likely manipulated. In a later settlement with the Securities and Exchange Commission, Dr. McGuire neither admitted nor denied wrongdoing.

At the time, investors asked whether UnitedHealth Group would be the same without Dr. McGuire, who had built it from a regional health management organization into a national health-insurance heavyweight. But Mr. Hemsley, by forging Optum through a steady diet of acquisitions while continuing to expand the core health-insurance unit with a powerful Medicare franchise, among other assets, has gone farther than his onetime mentor, who handed him a far smaller, less diverse company with $71.5 billion in annual revenue.

UnitedHealth didn't partner up during a 2015 frenzy of deal-making among managed-care companies -- and retained its market leadership when two big deals among its rivals blew up in the wake of courts' negative antitrust decisions.

One of Mr. Hemsley's rare missteps, in the eyes of investors, was UnitedHealth's aggressive expansion in the insurance exchanges created under the Affordable Care Act. But Mr. Hemsley, taking responsibility for unexpected losses on the business, quickly reversed course, pulling back sharply in 2017, and shares of UnitedHealth Group have continued their steady rise, powered by consistently expanding earnings and enrollment.

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

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August 17, 2017 02:47 ET (06:47 GMT)