UnitedHealth CEO Departure: Pain or Relief For Investors?

| About: UnitedHealth Group (UNH)

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Embattled CEO To Step Down At UnitedHealth and UnitedHealth's Next Challenge Is Uncertainty [Wall Street Journal]

Summary: UnitedHealth Chairman and CEO Dr. William McGuire holds options valued at $1.78B. Yesterday, after releasing the results of its options backdating probe, the company announced Dr. McGuire would be retiring as chairman role immediately, and that second-in-command Stephen Hemsley would replace him as CEO by December 1. Examiners concluded options grants had been backdated to the recipients' benefit: McGuire received twelve grants between 1994 and 2002; all were dated before sharp increases in the share price, and three were dated on the lowest price of the year. McGuire took over in 1991, and is credited with transforming UnitedHealth into a leading health-insurer valued at over $60B. UNH shares currently trade at close to 18X 2006 earnings, higher than competitors WellPoint and Aetna.
Investors are now presented with the choice of giving the stock "the Greenberg treatment or the Fiorina treatment": when AIG CEO Maurice Greenberg stepped down in 2005, the stock dropped 7% due to his centrality in the company; when Carly Fiorina was removed from Hewlett-Packard, share prices rose 7% due to relief in the change of management. Since the initial exposure of UNH's backdating probe in March, the stock has plummeted 23%. New CEO Hemsley also received significant grants, but was cleared by the probe.
Related links: UnitedHealth Group Press ReleaseWSJ Options Scandal ScorecardUnitedHealth Under FireUnitedHealth Problems Continue • Findings of WilmerHale Probe
Potentially impacted stocks and ETFs: UnitedHealth Group Inc. (NYSE:UNH) • Key competitors: WellPoint (WLP), Aetna (NYSE:AET)

Comment on this article

Seeking Alpha is not affiliated with The Wall St. Journal.

Seeking Alpha's Wall Street Breakfast summarizes today's key market- and stock-moving news. Receive it by email every weekday morning (free/no spam).

About this article:

Tagged: , Health Care Plans
Problem with this article? Please tell us. Disagree with this article? .