The board of Molina Healthcare Inc. has removed the sons of the company’s founder from its top executive positions following disappointing financial results.
Dr. J. Mario Molina will be replaced as chief executive and John Molina as chief financial officer by Joseph W. White, chief accounting officer, the company said in a press release Tuesday. White's chief executive role is temporary, while he will permanently become CFO. The board also named Director Dale B. Wolf as nonexecutive chairman, replacing Mario Molina as chairman.
The brothers will continue to be board directors, the company said. The changes were effective immediately.
“The Board of Directors appreciates Mario and John Molina’s leadership and contributions for more than two decades,” Wolf said in a statement. “In light of the Company’s disappointing financial performance, the Board has determined to change leadership in order to drive profitability through operational improvements.”
Shares of Molina Healthcare rose $8.95, or 17.6 percent, Tuesday to close at $59.75, up 21.5 percent from a week earlier and 20 percent above its share price one year ago.
The Long Beach-based health insurer and health care provider targets low-income patients on Medicare and Medicaid and expanded to provide insurance plans through the Affordable Care Act. While the company saw its membership and revenue grow last year, income fell short, according to its annual financial report.
Revenue in 2016 grew to $17.8 billion from $13.2 billion in 2015, as membership climbed to 4.2 million from 3.5 million. However, net income fell to $52 million last year from $143 million in 2015.
The company’s Ebitda dropped to $467 million last year from $508 million in 2015. Molina had issued revenue guidance of $720 million for 2016. Diluted net income per share fell to 92 cents in 2016 from $2.58 a year earlier, despite guidance of $3.50.
Molina Healthcare also released its first-quarter 2017 results Tuesday, reporting net income per diluted share increased to $1.37 in the first quarter of 2017 compared with $0.43 for the first quarter of 2016.
Net income per diluted share increased to $1.37 in the first quarter of 2017 compared with $0.43 reported for the first quarter of 2016.
A shareholders meeting has been moved to May 10 following the announcement.
J. Mario Molina, who has served as chief executive since 1996, has been one of the few health care executive to speak out publicly against Republican attempts in Congress to overhaul the Affordable Care Act, warning that without safeguards, including federal cost-sharing reductions and premium subsidies, both insurers and patients would be harmed.
Founded in 1980 by Dr. C. David Molina, the Fortune 500 company has been expanding its Southern California footprint. This year it signed a lease for 100,000 square feet at San Pedro’s Topaz office tower. The deal was one of the South Bay’s largest office leases in the last five years, according to CBRE.