Health insurers enjoyed a boom year in 2013, with soaring earnings and stock prices, and some of the biggest companies shelled out millions of dollars to either keep or attract their leaders.
Aetna Inc. Chairman and CEO Mark T. Bertolini saw his total compensation more than double to top $30 million last year, largely due to restricted stock and options valued at $17.6 million that the nation’s third-largest insurer gave him last August. Meanwhile, WellPoint CEO Joseph R. Swedish received $1.5 million in restricted stock for joining the second-largest insurer last year and about $3.8 million to make up for pay he forfeited leaving his old job running a multistate Catholic hospital system.
WellPoint, which runs Blue Cross Blue Shield plans in several states, also picked up the legal tab to negotiate the new CEO’s employment agreement and reimbursed more than $78,000 in costs for the executive’s move to Indianapolis, where the insurer is based. All told, Swedish, 62, received total compensation valued at nearly $17 million for 2013, according to a proxy statement filed with the Securities and Exchange Commission Tuesday after markets closed.
Aetna Inc., based in Hartford, Conn., and WellPoint Inc. polished off multibillion-dollar acquisitions last year, reported earnings growth, and both saw their share prices jump about 50 per cent. Those gains trumped the nearly 30 per cent advance of the Standard & Poor’s 500 index.
Investors have grown to like health insurance stocks after watching the industry weather challenges like Medicare Advantage funding cuts and changes brought by the health care overhaul, the massive federal law that was passed in 2010 and aims to cover millions of uninsured people. Insurers have had to adjust to fees and coverage requirements initiated by the law, as well as the start of state-based public insurance exchanges, on which they now compete for some of their business.
“If you think about the last five years, each and every year, it seems we had something to worry about,” said Thomas Carroll, a managing director for the investment bank Stifel who follows the industry. He noted that there is much less uncertainty ahead in the next five years.
Aetna said in its proxy filing that it gave Bertolini that one-time stock and options award to recognize his performance since he became CEO in 2010 and to help keep him with the insurer through a period of “unprecedented” industry change and aggressive company goals.
“Mr. Bertolini continues to be a recognized thought leader who serves as a positive and constructive influence on the implementation of health care reform and the related transformation of the health care system,” the proxy stated.
The award is based on the company’s performance over the next few years, and Bertolini only receives it if Aetna reaches some performance goals, spokeswoman Cynthia Michener noted.
She also said his 2013 compensation included $1.3 million in stock awards that were based on the company’s 2012 performance.
Bertolini, 57, also received a $996,169 salary, a cash bonus of nearly $1.4 million and $283,385 in other compensation, largely for his personal use of corporate aircraft, something Aetna requires for security purposes. His compensation totalled $30.7 million, according to Associated Press calculations.
The Associated Press formula calculates an executive’s total compensation during the last fiscal year by adding salary, bonuses, perks, and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits.
Swedish became WellPoint’s CEO on March 25, 2013. He received a salary of $913,461, a $2.5 million cash bonus and stock and options totalling $9.5 million in his first year on the job.