- Centene reached a deal with activist investor group Politan Capital Management in which longtime CEO Michael Neidorff will retire and be replaced by the end of next year. The deal also includes expanding the board to 14 directors and adopting a new policy mandating a retirement age of 75 for board members. Centene currently has 11 board members after David Steward's recent departure.
- As part of the deal, the board will appoint five new directors, including Ken Burdick, former CEO of WellCare, which Centene acquired for $17 billion in 2020; Ted Samuels, a former investment executive; Wayne DeVeydt, former CEO of Surgery Partners and former Anthem CFO; and Christopher Coughlin, former CFO of Tyco. Together, Centene and Politan will pick a fifth board member to be named at a later date.
- Three current board members are out and will retire in 2022, including Robert Ditmore, a former UnitedHealth Group executive; Tommy Thompson, former HHS secretary and governor of Wisconsin; and John Roberts, a former Arthur Andersen executive. All of them are older than 78, according to the most recent proxy from March, which indicates Neidorff's age was 78 at that time.
Reports surfaced in early November that Centene was facing pressure from Politan Capital Management, which has sizable stake in the company, to shake up its board in a bid to improve shareholder return.
Until Tuesday, St. Louis-based Centene has been largely silent on the matter and did not address the issue at Friday's investor day.
The deal means the new board will pick the next CEO, bringing to a close Neidorff's long tenure.
Neidorff joined Centene as CEO in 1996 when the company operated in just two states. Now, the company is the nation's largest Medicaid managed care provider, largest insurer on the Affordable Care Act marketplaces and is among the largest insurers in the country by membership.
"It has been one of the greatest privileges of my life to serve as CEO of Centene," Neidorff said in a statement.
Shares were up more than 3% on Tuesday morning following the news.
Analysts seemed to welcome the news. Cowen analysts said Centene has an attractive margin improvement story that "will benefit from a board refresh and the opportunity to appoint a new CEO to lead the company over its next phase."
The board restructuring comes as Centene is in the middle of its long-term plan to improve its profit margin. The company has dubbed the initiative the value creation plan and tapped three top executives to lead the effort.
As part of the plan, Centene is reexamining every unit of its business to determine whether it is still the best owner. So far, Centene has sold a majority stake in U.S. Medical Management and is eyeing whether to offload its international business units Circle Health in the U.K. and Ribera in Spain, both of which operate hospitals.
As part of the deal with Politan, a maximum of five board members will join the value creation plan steering committee, which reports to the three executives leading it — Sarah London, vice chairman; Brent Layton, chief operating officer; and Drew Asher, chief financial officer.
Quentin Koffey, managing partner of Politan Capital Management, said the board reorganization will bring fresh perspective and expertise from those with experience in managed care, pointing out Burdick formerly of WellCare and DeVeydt formerly of Anthem.
Koffey said these changes "will help ensure Centene is ideally positioned to deliver excellent quality of care at lower costs while enhancing returns for all shareholders."