Life Insurance Companies' Tobacco Investments: Profits over Health

Includes: PRU, SLF, SLFPF
by: The Burrill Report

More than a decade after Harvard University researchers first revealed that life and health insurance companies were major investors in tobacco stocks—prompting calls upon them to divest—the insurance industry has yet to kick the habit, they say. A new article on insurance company holdings, published in the New England Journal of Medicine, shows that U.S., Canadian, and U.K.-based insurance firms hold at least $4.4 billion of investments in companies whose subsidiaries manufacture cigarettes, cigars, chewing tobacco, and related products. These tobacco products currently contribute to the deaths of 5.4 million people worldwide annually, according to the World Health Organization. Tobacco use is a major risk factor for stroke, heart attack, lung disease and cancer.

“Despite calls upon the insurance industry to get out of the tobacco business by physicians and others, insurers continue to put their profits above people's health,” says J. Wesley Boyd, lead author of the article. “It's clear their top priority is making money, not safeguarding people’s well-being.”
Boyd and his colleagues point to Newark, New Jersey-based Prudential Financial (NYSE:PRU), which sells life insurance and long-term disability coverage. With total tobacco holdings of $264.3 million, Prudential Financial is a major investor in three tobacco firms, including Reynolds American (NYSE:RAI), whose subsidiary R.J. Reynolds manufactures Camel and Pall Mall cigarettes, and Philip Morris (NYSE:PM), maker of the popular Marlboro brand.
Sun Life Financial (NYSE:SLF), based in Toronto, sells life, health, disability, and long-term care insurance. It also owns slightly more than $1 billion in stock in two tobacco companies, including $890 million in Philip Morris.
London-based Prudential, which offers health, disability, and long-term care insurance, has holdings of $1.38 billion in two tobacco companies, including British American Tobacco (NYSEMKT:BTI), which markets Kent and Lucky Strike cigarettes.
The researchers also itemize the substantial tobacco holdings of Northwestern Mutual of Milwaukee and Massachusetts Mutual Life of Springfield, Massachusetts, along with those of Standard Life (OTC:SLFPF), a health and life insurer based in Edinburgh, Scotland.
Boyd and his co-authors, David Himmelstein and Steffie Woolhandler at the Cambridge Health Alliance and Harvard Medical School, culled their data from Osiris, a proprietary database of industrial, banking and insurance companies. Osiris draws upon Securities and Exchange Commission filings and news reports from providers like Dow Jones and Reuters.
“Although investing in tobacco while selling life or health insurance may seem self-defeating,” the authors write, “insurance firms have figured out ways to profit from both. Insurers exclude smokers from coverage or, more commonly, charge them higher premiums. Insurers profit—and smokers lose—twice over.”