Centene CEO to Retire After 25 Years; Politan Adds to Board

(Bloomberg) -- Centene Corp. said Chief Executive Officer Michael Neidorff will retire next year and the managed-care company will refresh its board in an agreement with activist investor Politan Capital Management LP.

Neidorff, 78, plans to retire after 25 years as chief executive officer. After he steps down, he will serve as executive chairman until the end of 2022. The board has been crafting a succession plan and will evaluate internal and external candidates for the CEO post, St. Louis-based Centene said in a statement.

When Neidorff joined Centene in 1996, the health insurer served three counties in two states, according to the statement. It now has almost 76,000 employees and 26.5 million members across all states and three international markets.

Separately, Centene said it will add five directors to its board as part of an agreement with Politan. Directors will be subject to a new rule requiring they retire at age 75, though current directors will be allowed to complete their terms. Six current directors will retire from the board over time, Centene said.

Centene shares rose 2.6% at 9:55 a.m. in New York. Through Monday’s close they had increased 30% this year.

Activist Pressure

The company came under pressure in November after Politan, run by Quentin Koffey, built a stake. The settlement is a first for Politan, which Koffey formed this year. A former executive at Elliott Investment Management, he previously led the activist strategies at Senator Investment Group and D.E. Shaw & Co.

Neidorff built Centene into a powerhouse health insurer through a series of big acquisitions. Between 2015 and 2020, it bought Health Net, Fidelis Care and WellCare Health Plans. Revenue more than quadrupled in that period to $111 billion in 2020.

Centene focused on health plans for people in government-subsidized programs including Medicaid for low-income Americans, Medicare for the elderly and disabled, and the Affordable Care Act exchanges. The strategy helped the company profit from the growth of Obamacare and capture a growing share of expanding markets.

Politan wants Centene to consolidate the operations of state plans that are run locally, according to people familiar with the situation. Centralizing operations and focusing on core products will enable Centene to expand margins, following a playbook that other insurers like WellCare and Molina Healthcare Inc. have used, the people said.

Profit Focus

Centene’s priority more recently shifted from growing membership to widening profit margins.

“We have reached the size and scale that can be leveraged for meaningful margin expansion, and we are absolutely committed to doing so on a sustainable basis,” Neidorff said at an investor conference in June.

Neidorff was a scant presence at the company’s investor day last week, attending virtually due to an illness and making brief remarks.

The event instead was led by three top executives: Sarah London, vice chairman of Centene’s board, Brent Layton, chief operating officer, and Drew Asher, chief financial officer. Together they make up what the company now calls the “value creation office.”

Still, investors have been skeptical of some of the company’s moves, and Centene announced a strategic review earlier this year. It is weighing divesting small international businesses, including a U.K. hospital operator it purchased just months ago. Centene also took more than $1 billion in charges to settle disputes with state government clients over its prescription drug fees.

“Despite the circuitous path, [management] seems to be getting to more-focused decisions now,” Jefferies analyst David Windley wrote in a Dec. 12 research note, before Neidorff’s retirement was announced. “We see and expect positives to come from the strategic review, leaving a cleaner, more streamlined business.”

Board Refresh

The board moves position some veterans of WellCare to shape the future of its new owner.

Kenneth Burdick, who led WellCare when the company combined with Centene in 2020, will join Centene’s board. James Dallas, a former WellCare director who joined Centene’s board after the acquisition, will become the lead independent director immediately. By the end of next year Dallas will become independent chair, the company said.

Other new board members include:

• Wayne S. DeVeydt, a longtime Anthem Inc. executive
• Chris Coughlin, who joined Tyco in a turnaround role following its accounting scandal
• Ted Samuels, former president of Capital Guardian Trust Company

A fifth director to be agreed upon by Centene and Politan has yet to be named.

The new board members “will help ensure Centene is ideally positioned to deliver excellent quality of care at lower costs while enhancing returns for all shareholders,” Koffey said in a statement.

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