NEW YORK -- WellPoint's stock climbed more than 7 percent in midday trading on Wednesday as the insurance company's CEO stepped down amid investor frustration with the its disappointing financial results.
THE SPARK: Late Tuesday WellPoint announced that Angela Braly resigned. The Indianapolis company said that executive vice president and general counsel, John Cannon, will serve as interim president and CEO.
WellPoint has hired an executive search firm to help find Braly's replacement. Cannon does not wish to be considered for the permanent job.
THE BACKGROUND: Investors have become increasingly anxious about WellPoint's performance over the past year. Last month, WellPoint, the nation's second-largest health insurer, cut its 2012 profit forecast and reported second-quarter earnings that fell short of Wall Street's expectations, triggering a sharp drop in its share price.
THE ANALYSIS: Stifel Nicolaus'Thomas Carroll said in a client note that not all of WellPoint's underperformance can be blamed on Braly.
"She took control during a difficult underwriting year, the beginning of the health care reform debate and imploding financial markets. A difficult environment to say the least," he wrote in a note to clients.
Carroll said that Amerigroup CEO Jim Carlson may be a top candidate for the WellPoint CEO post, as he is a respected managed care executive. WellPoint in July said it would spend about $4.46 billion to buy Amerigroup Corp., which runs Medicaid coverage in 13 states. Medicaid is the state-federal program that provides coverage for the needy and disabled. Insurers see lucrative growth opportunities in working with "dual eligibles," or the people who qualify for both Medicaid and the federally-funded Medicare program.
The analyst said the deal is now expected to close this year instead of next. He reaffirmed a "Buy" rating and $70 price target.
Michael Baker of Raymond James & Associates also sees Carlson as a candidate, as well as Dave Snow, Gail Boudreaux and Ken Goulet. Snow, who headed Medco before its sale to Express Scripts, used to run WellPoint's New York health plan.
Boudreaux runs UnitedHealth's benefits business and has a Blue Cross/Blue Shield background. Goulet currently leads WellPoint's employer, Medicaid, individual and specialty business unit. Baker considers him the most likely internal candidate.
The analyst maintained a "Market Perform" rating.
SHARE ACTION: Shares of WellPoint Inc. rose $4.49, or 7.8 percent, to $61.88 in midday trading, the biggest one-day percentage jump since January 2009.
Over the last year, the stock has traded in a range of $52.52 to $74.73. For the year to date, the shares are down 6.6 percent.