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Analysts, investors laud Anthem's new CEO, but reasons for turnover remain unclear

November 6, 2017

Anthem Inc.'s surprise announcement Monday that Joseph Swedish plans to step down as CEO later this month pushed the insurer's shares up as much as 3 percent in morning trading, but one analyst said there might be a "period of uncertainty" among some investors until the reasons for the management switch become clear.

Many analysts were quick to praise industry veteran Gail K. Boudreaux, 57, who is slated to take over as CEO and president on Nov. 20. She has been serving as an industry consultant since 2014, when she stepped down as CEO of UnitedHealthcare, the biggest unit of Minnesota-based UnitedHealth Group, the nation’s largest health insurer.

gail boudreauxGail Boudreaux

“Ms. Boudreaux is held in very high regard within the industry and among analysts and investors,” Matt Borsch, an analyst at BMO Capital Markets, wrote in a research note. “This is such that ‘When will Gail return?’ has been a question asked among sector-focused investors ever since she left UnitedHealth in mid-2014.”

Stephen Halper, an analyst at Cantor Fitzgerald, noted that Swedish’s appointment as CEO in 2013 “was somewhat controversial,” as Swedish had little experience in the insurance sector. He previously served as a hospital industry executive.

“The naming of Ms. Boudreaux should not be controversial, in our view,” Halper wrote in a research note, noting her industry experience and calling her appointment “a good choice.”

Other analysts sounded similarly upbeat views. Evercore ISI analyst Michael Newshel, in a note, called Boudreaux "well-known and respected by investors.” He added: “We have a positive view of the management change and expect the market to as well.”

Yet the possibility of turnover at the top wasn't even on Wall Street’s radar in recent months. In a conference call with analysts on Oct. 25 to discuss third-quarter results, Swedish did not mention a succession plan, even in general terms, and not a single analyst asked about any upcoming changes in senior leadership.

Anthem shares certainly have surged under his leadership. The company's stock price is up 51 percent to about $217 per share since Jan. 1. Since the beginning of 2014, shares have risen 135 percent.

The news that Swedish will step down from the executive suite and become an adviser and executive chairman rattled some analysts. Borsch, for one, acknowledged the move surprised many investors.

“We expect there may be a period of uncertainty among some investors until the reasons for the reported leadership change are understood and fully accepted by the market,” he wrote.

An Anthem spokeswoman told IBJ on Monday that the company couldn't make Boudreaux available for an interview this week.

As for the timing of the announcement, "the transition to a new chief executive officer is part of the normal course of business and has been part of the board’s succession planning for more than a year," said Anthem spokeswomen Jill Becher. "As a result of Joe’s leadership, Anthem has a foundation of strong performance that allows the company the opportunity to transition to a new chief executive officer."

In her new role, Boudreaux will compete against her former company. Dan Krajnovich, UnitedHealthcare’s president of Indiana operations, declined an IBJ request to comment on Boudreaux's change from colleague to competitor.

In 2014, when Boudreaux stepped down from UnitedHealth, the company issued a statement noting she had achieved numerous growth and performance goals.

"We are deeply grateful for Gail’s many contributions to our enterprise, her executive leadership, the focus she brought to local health care markets, building our culture and fostering innovation, as well as for her fellowship and counsel,” UnitedHealth said at the time.

Shares of Anthem were trading at $216.92 in early Monday afternoon activity, up 2.4 percent. Shares of UnitedHealthcare's parent, UnitedHealth Group Inc., had dipped 0.2 percent to $212.43.

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