UnitedHealth Group has picked company President David Wichmann to replace CEO Stephen Hemsley in a long-planned transition that Wall Street greeted with polite applause.
The nation's largest health insurer says Wichmann, 54, will take over Sept. 1, and Hemsley will become executive chairman of the company's board. Current Chairman Richard Burke will shift to lead independent director.
Wichmann, a former partner with Arthur Andersen, joined UnitedHealth in 1998, a year after Hemsley arrived, and has worked through several key executive roles. He has overseen the company's largest business, its health benefits segment, since 2014. Wichmann also has led mergers and acquisitions as the insurer pushed well beyond processing doctor bills and delved deeper into other elements of patient care.
The leadership transition announced Wednesday had been underway for years and dates back to Wichmann's appointment as president in 2014, according to a company spokesman.
Hemsley said in a statement that the timing was right, "as the company is performing strongly and has a positive outlook for the forseeable future."
UnitedHealth is coming off a second quarter in which it made $2.28 billion and raised its forecast for 2017, a year in which analysts who follow the company expect it to bring in around $200 billion in revenue.
Wednesday's announcement generated little surprise among those analysts.
Sheryl Skolnick said in a research note that she was "very comfortable" with the change because Hemsley will still have an important role. The Mizuho Securities USA analyst also noted that Burke, one of the company's founders, will remain involved, "so the guardians of the (UnitedHealth) galaxy are firmly in place."
Health insurance is UnitedHealth's main business, but the company also has been plowing more resources into its Optum business, which provides pharmacy benefits management and technology services and also operates clinics and doctor's offices.
It acquired the pharmacy benefits manager Catamaran a few years ago in a deal valued at more than $12 billion. More recently, UnitedHealth spent about $2.3 billion to buy surgery center operator Surgical Care Affiliates.
The 65-year-old Hemsley is the second-longest serving CEO among publicly traded health insurers, trailing only Centene Corp.'s Michael Neidorff. Hemsley's tenure began in 2006, when he took over after the previous leader, William McGuire, was forced to leave over a scandal involving the backdating of company stock options.
UnitedHealth wound up wiping out more than $1.5 billion in past profits when it acknowledged that it backdated stock options, which involves manipulating the timing of options grants so they look as though they were made on days when the stock's value was lower.
Hemsley led the company past that problem, through the Great Recession and into unprecedented growth. UnitedHealth has gained favor with shareholders as a reliable stock that consistently beats earnings expectations. It also became the first health insurer to offer more than a token dividend several years ago.
Company shares slipped 67 cents to $193.83 Wednesday afternoon, as broader indexes edged higher.
Shares of UnitedHealth, a Dow Jones industrial average component, had already advanced about 22 percent so far this year and set several new all-time high prices.