Health, life insurers hold billions in tobacco stocks

More than a decade after Harvard Medical School 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 letter about insurance company holdings, published in the June 4 issue of the New England Journal of Medicine, shows that U.S., Canadian, and U.K. insurance firms hold at least $4.4 billion of investments in companies whose subsidiaries manufacture cigarettes, cigars, chewing tobacco, and related products.

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,” said J. Wesley Boyd, lead author of the letter, an assistant clinical professor of psychiatry at Harvard Medical School, and an attending psychiatrist at Cambridge Health Alliance. “It’s clear their top priority is making money, not safeguarding people’s well-being.”

For example, Boyd and his colleagues point to Newark, N.J.-based Prudential Financial Inc., 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, whose subsidiary R.J. Reynolds manufactures Camel and Pall Mall cigarettes, and Philip Morris, maker of the popular Marlboro brand.

Sun Life Financial Inc., based in Toronto, sells life, health, disability, and long-term care insurance. It also owns slightly over $1 billion in stock in two tobacco companies, including $890 million in Philip Morris.

London-based Prudential PLC, which offers health, disability, and long-term care insurance, has holdings of $1.38 billion in two tobacco companies, including British American Tobacco, which markets Kent and Lucky Strike cigarettes.

The researchers also itemized the substantial tobacco holdings of Northwestern Mutual of Milwaukee and Massachusetts Mutual Life of Springfield, Mass., along with those of Standard Life PLC, a health and life insurer based in Edinburgh, Scotland.

Boyd and co-authors David Himmelstein and Steffie Woolhandler, who are also faculty members at Harvard Medical School and clinicians at Cambridge Health Alliance, 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 such as Dow Jones and Reuters.

“Although investing in tobacco while selling life or health insurance may seem self-defeating,” wrote the authors, “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.”

The same researchers, all of whom are affiliated with Physicians for a National Health Program, first published data about the “tobacco-insurance company connection” in 1995 in the medical journal Lancet. They argue that because private, for-profit insurers have repeatedly put their own financial gain over the public’s health, people in the United States, Canada, and the United Kingdom should be wary about insurance firms’ participation in care.

They added, “These data raise a red flag about the prospects of opening up vast new markets for private insurers at public expense, as has happened in our state of Massachusetts, whose recent health care reform is often cited as a model for national reform.”