David Wichmann is stepping down as chief executive of UnitedHealth Group after less than four years running Minnesota's largest company, an abrupt move that surprised investors Thursday and apparently drove a one-day decline in the Minnetonka-based company's stock price.
Analysts said they don't anticipate a strategy shift as the CEO job passes to Andrew Witty, a onetime chief executive at the pharmaceutical giant GlaxoSmithKline. He currently runs UnitedHealth Group's fast-growing Optum division for health care services.
The timing of Thursday's announcement puzzled some analysts, and investors sent UnitedHealth shares down 2.5%.
Witty only recently returned to the company after a seven-month leave to help the World Health Organization's program to develop and distribute coronavirus vaccines. When Wichmann became CEO in September 2017, the company said the leadership transition had been in the works for almost four years — a period of time that's longer than Wichmann's tenure as chief executive turned out to be, noted David Windley, an analyst with Jefferies.
"I thought it was surprising," Windley said in an interview. "I don't think it's performance driven. I don't think it's inability to execute on strategy or lack of delivery of growth — I don't think those could be the reason."
The value of UnitedHealth Group shares increased 69% during Wichmann's time as chief executive, the company said, while total shareholder return, which factors dividends, has been closer to 79%.
"Absent an explanation or an identifiable 'catalyst' investors are likely to respond negatively if just on uncertainty alone because this was not expected," Matthew Borsch, an analyst with BMO Capital Markets, wrote in a research note early in the day.
From 2008 to 2017, Witty was chief executive and a director of GlaxoSmithKline. At UnitedHealth Group, he becomes chief executive immediately and rejoins the company's board of directors.
From April to December of last year, Witty took an unpaid leave to serve as a Global Envoy for the World Health Organization's COVID-19 efforts. He also served as an adviser to the UK Government Vaccine Taskforce.
"Andrew Witty combines an extraordinary breadth and depth of health care experience, sophisticated strategic thinking and outstanding leadership development skills, making him uniquely well-positioned to help the company take the next steps on its steady path to grow and deliver for its shareholders and the customers and people we are privileged to serve," said Stephen Hemsley, chairman of the company's board of directors, in a statement.
Wichmann will continue in a transition period through March. In a memo sent to employees, Wichmann called the news that he is stepping down "bittersweet."
"While this is the right decision for me and my family, I will continue to be your biggest supporter," Wichmann wrote in the memo, which was obtained by the Star Tribune and first reported by the Wall Street Journal.
With 330,000 employees worldwide, UnitedHealth Group employs about 18,000 people in Minnesota.
The company is best known for its giant UnitedHealthcare health insurance business, which in December was providing coverage to 43 million people in the U.S. Optum, meanwhile, has been the faster-growing division for many years, with its mix of businesses ranging from management of pharmaceutical benefits in employee health plans to consulting with other insurers and health care providers on their data and IT needs.
Wichmann came to UnitedHealth Group in the 1990s, following previous CEO Stephen Hemsley from the accounting firm Arthur Andersen. His tenure as CEO was significantly shorter than that of his predecessors — Hemsley served as chief executive for just over 10 years while his predecessor, Dr. William McGuire, also held the top spot for more than a decade.
"United usually has longer tenures for their CEOs," said Stephen Parente, a health economist at the University of Minnesota.
UnitedHealth Group continued to grow and innovate under Wichmann, Parente said, while aggressively pursuing mergers and acquisitions. A $13 billion deal announced last month to purchase Nashville-based Change Healthcare, a technology and data firm, was "probably the smartest thing they could have done," he said.
Wichmann ranked No. 1 in the most recent Star Tribune CEO pay survey with compensation topping $52 million for 2019, a total fueled by long-term equity awards that were granted in previous years.
David Heupel, an analyst with Thrivent in Minneapolis., said the company has always had a "broad, deep bench of quality senior management," so the company's strategic direction likely won't change.
As Windley put it: "I think Dave and Andrew were pretty aligned in terms of strategy and where it was going."
The company's board lauded Wichmann for leading the company through a period of sizable growth before navigating the challenges of the coronavirus pandemic in 2020. Under Wichmann, UnitedHealth Group continued its push to become one of the nation's largest providers of health care, with a fast-growing unit for clinics, surgery centers and urgent care.
UnitedHealth's health care business is part of Optum, where Witty served as chief executive beginning in 2018.
In a statement, Witty called UnitedHealth Group "one of the most consequential organizations in health care, where our responsibility is to execute flawlessly and deliver on our potential each day. … Dave Wichmann is leaving a powerful legacy of service to others and commitment to innovation for us to build upon."
Witty added the role of president of UnitedHealth Group in November 2019. Before him, Wichmann was the last company executive to hold the title, a position he had before becoming CEO.
As part of Thursday's announcement, UnitedHealth Group said Dirk McMahon, UnitedHealthcare CEO since June 2019, becomes the company's president and chief operating officer.
Christopher Snowbeck • 612-673-4744