Larry Glasscock, the top executive of Indianapolis-based Anthem, is set to receive a $42.5 million stock-and-cash incentive package as a reward for the health insurer's rapid growth the past three years, while three other top Anthem execs split another $43 million in bonuses.
The windfall Glasscock is due to receive over the next two years comes as Anthem prepares to close a merger announced last October with WellPoint Health Networks, based in Thousand Oaks, Calif., that will create the nation's largest managed-care company.
In a Securities and Exchange Commission filing late Tuesday, Anthem detailed the payout to Glasscock from a three-year incentive plan the Blue Cross and Blue Shield licensee established in 2000 that was tied to company performance the following three years.
Anthem exceeded the key goal established in the plan of 15% growth in the company's net income each of the three years, Anthem spokesman Ed West said. As it turned out, Anthem's profit grew an average of 41% per year during the three-year period.
"Back when the company established the performance goals, it was considered such a wild stretch that it seemed almost unachievable," West said. "By anybody's measure, the growth has been extraordinary. So, therefore, the plan has provided this extraordinary reimbursement."
The incentive award to Glasscock, Anthem's 55-year-old president, chief executive and chairman, is in addition to the $1.04 million salary he received last year, a $2.3 million bonus and other 2003 compensation of $273,000.
The incentive package will grant Glasscock a cash bonus of $21.2 million this year plus a restricted stock award totaling another $21.2 million. Half of the stock award will be vested next year and half in 2006, West said. The long-term compensation includes another $101,868 in other compensation.
If Glasscock's upcoming gain from the incentive package is spread equally over the past three years, his total compensation including salary and bonuses last year was $17.8 million, West said.
Glasscock isn't the only Anthem executive due to receive a large incentive award as a result of the company's growth the past three years. According to the SEC filing, two others are due to receive $16 million each in long-term payouts and stock awards: David Frick, Anthem's executive vice president and chief legal and administrative officer; and Michael Smith, executive vice president and chief financial and accounting officer. Keith Faller, president of Anthem Midwest, will get a total $11.8 million.
In morning trading today, Anthem shares were down 26 cents at $92.86 on the New York Stock Exchange. Anthem converted in late 2001 from a policyholder-owned company to a shareholder-owned corporation.
The initial offering price for the stock was $36 each.
Glasscock became Anthem's top officer in 1999, when the company operated only in Indiana. With 12 million members, Anthem now owns Blue Cross and Blue Shield plans in eight other states: Colorado, Connecticut, Kentucky, Maine, New Hampshire, Nevada, Ohio and part of Virginia.
Anthem announced plans in October to buy larger WellPoint in a cash-and-stock deal that was valued at $16.4 billion at the time it was announced. The merger with WellPoint would create the nation's largest managed-care provider with nearly 27 million members from Maine to California. The merger is subject to shareholder and regulatory approval and is expected to be closed at midyear. Some regulatory hurdles already have been cleared.
Glasscock would head the new company, which will be based in Indianapolis and renamed WellPoint Inc.