Big WellPoint investor Royal Capital calls for CEO's ouster

Back to TopCommentsE-mailPrintBookmark and Share

Royal Capital Management LLC is calling for the ouster of WellPoint Inc. CEO Angela Braly in a letter to the health insurer, saying she has “failed miserably.”

“It is incumbent upon the board of directors to fulfill its fiduciary responsibility to shareholders by changing leadership,” Royal Capital said in the letter sent Wednesday.

The New York-based hedge fund had 837,800 shares of WellPoint, the second-biggest U.S. health insurer, as of June 30, according to data compiled by Bloomberg.

Braly, CEO since 2007, has been under fire since cutting the Indianapolis-based insurer’s full-year forecast last month after earnings missed analysts’ estimates for the second time in three quarters. WellPoint’s share price has declined 7 percent since she because chairman in March 2010, leading two other shareholders, investment fund Orbimed Advisors LLC and hedge fund Omega Advisors Inc., to criticize the management of the company.

“The market has spoken, as evidenced by WellPoint’s stock price,” Royal Capital partners Robert Medway and John Lancefield said in the letter. Braly “has failed miserably, shareholders have paid dearly and it is time to make a change. Leadership that demands excellence, accuracy and results is needed, and she simply does not fit the bill.”

The fund owned 0.26 percent of WellPoint’s outstanding shares as of June 30, according to data compiled by Bloomberg.

Kristin Binns, a WellPoint spokeswoman, didn’t respond to a message seeking comment.

WellPoint shares declined 1.4 percent Thursday, to close at $57.74 each. Shares have dropped 2.9 percent in the past 12 months. Minnetonka, Minn.-based UnitedHealth Group Inc., the only U.S. plan larger than WellPoint, has gained 20 percent in the same 12-month period and increased has 58 percent since Braly took on WellPoint’s chairmanship.

“We believe there is one, and only one, explanation for WellPoint’s underperformance: well-deserved investor antipathy toward Ms. Braly as a result of a regular cadence of managerial blunders that has plagued her term as CEO,” Medway and Lancefield said in the letter. “We, of course, cannot know what additional surprises and accompanying stock price sell-offs the year has in store if Ms. Braly is allowed to stay, but the recent guidance reduction augurs poorly.”

Medway and Lance blamed the 51-year-old Braly for what they called five years of underperformance, including reduced guidance, regulatory problems with Medicare products, political fights with Democratic politicians, and departing customers.

Lancefield declined to comment beyond the letter, saying that it spoke for itself.

WellPoint owns Blue Cross plans in 14 states and is the nation’s largest seller of health policies to individuals and small businesses. Both markets have been losing customers, and are expected to become less profitable because of new rules in the health-care law. Membership in WellPoint’s medical plans fell 2.3 percent, to 33.5 million, in the second quarter from a year earlier.

Last month, WellPoint announced the $4.9 billion purchase of Amerigroup Corp. to become biggest private provider of Medicaid plans to low-income customers.

Royal Capital is the latest investor to single out Braly for WellPoint’s disappointing performance.

“There’s a universal view that the CEO is the wrong CEO to lead the business,” said Leon Cooperman, founder of New York- based Omega Advisors Inc., in an interview last month. Cooperman’s hedge fund held 2.1 million WellPoint shares as of March.

Kuhn Tsai, an analyst at Orbimed Advisors in New York, which held 1.25 million shares in March, earlier this month also attributed the company’s poor performance to “management missteps.”

The Royal Capital investors also criticized the WellPoint board, saying that keeping Braly “will be viewed as inexplicable complacency in the face of abundant evidence that change is needed.” WellPoint’s board has been meeting with investors following the release of the company’s second-quarter results on July 25.

Investors “are understandably confused as to what process the board is undertaking,” they wrote.

Braly has the support of the board, lead director Jacquelyn Ward said in a statement released after the July 25 earnings report. The directors are “fully involved in the strategy WellPoint is pursuing and is supportive of the strategy and our management team,” Ward wrote in an e-mail.

Lenox Baker, a retired cardiac surgeon who has been on the board of the Indianapolis-based insurer for about a decade, said on Aug. 10 in a telephone interview that the board backed Braly, and the pressure to remove her was being driven by short-term investors.


Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
thisissue1-092914.jpg 092914

Subscribe to IBJ
  1. On my rental property, before tax caps, I was paying $2,000/yr in property taxes. After the tax caps I'm paying $4,000/yr. How exactly am I "benefiting the most"?

  2. Nick, I too tried that new Walmart NM on Michigan a couple of weeks ago. I had the same feeling, it had good prices, but something was just off about it. I can't put my finger on what it is, but it just didn't feel right. On the plus side, it was easy to get in and out of and much less busy than a typical Walmart.

  3. @Young Hoosier - you might want to check out the Paris skyline again....it's decidedly taller than 7-8 stories http://all-that-is-interesting.com/paris-skyline-photo

  4. Are you in need of Loan or financial help?, you need a loan for your business or to solve other monetary issues. James Lewis Loan Company started offering loans with a very low interest rate of 3% for a minimum of 15 years, Interested applicants should submit their request via email (jameslewisloan@gmail.com) for immediate processing with the information listed below: Names in full:................ Address:...................... Gender:.................... Email:........................ Phone Number:....... Amount Required:... Loan Duration:....... Country:................. Occupation:.................. ================================== In acknowledgment to these details, I will send you a well calculated Terms and Conditions for the amount you require. Warm Regards, Mr James Lewis

  5. So the GOP legislature passed a bill that gave big breaks to business at the expense of Indiana families. Color us not surprised.