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Thursday, April 15, 2010

Health Insurers Investment in Fast Food

Food for Thought??  from The WSJ Health Blog

Should life and health insurers be investing in the stocks of fast-food companies?

Researchers at the Cambridge Health Alliance, which is associated with Harvard Medical School, say no, citing the downside of fast food — associations with obesity and other health problems, heavy marketing to kids and the the chains’ environmental impact. Insurers, however, do have a responsibility to share- or policyholders to maximize returns, and that may include investments in companies that don’t share their health-promoting mission, they say.

Sensing that potential disconnect, the Cambridge researchers set out to find out the value of major insurers’ investments in the five leading fast-food companies:


Jack in the Box, McDonald’s, Burger King, Yum Brands and Wendy’s/Arby’s. Based on shareholder data from the Icarus database, they calculated the insurers’ combined fast-food holdings totaled $1.88 billion as of last June. Their findings, including a breakdown by company, are published today in the American Journal of Public Health.

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However, as with a similar analysis last year of tobacco stock holdings by insurers, companies disputed the numbers. MassMutual spokesman Mark Cybulski says the study’s calculations of $366.5 million were “absolutely incorrect.” In an email, he didn’t give an alternative number for June, but said that as of Dec. 31, the insurer’s fast-food related holdings were $1.4 million in a portfolio totaling $86.6 billion in cash and invested assets.

Northwestern Mutual held $422.2 million in fast-food stocks, according to the study; spokeswoman Jean Towell says that number is in error. At the time the data was collected the company had less than $257 million in holdings, about 0.19% of its general portfolio, and now that’s down to about $248 million, or 0.17%, she says.

Prudential Financial spokesman Bob DeFillippo said he couldn’t verify if the study’s $355.5 million calculation was accurate, and added that Prudential never talks about individual holdings, anyway. And, he says, many of the stocks are likely held in index funds for clients, meaning the insurer didn’t select the stocks but held them usually only because the stocks were index components.

Study author J. Wesley Boyd, an attending psychiatrist at CHA and assistant professor at Harvard, defends the numbers, saying according to the database they were correct. He says the U.S. companies studied were primarily life insurers and don’t sell health insurance per se, but that some of the Canadian and U.K. companies covered in the study do sell health insurance.

Why should we care whether a life or health insurer invests its money? “They’re profiting directly off the people who eat fast food, and if that leads to obesity or cardiovascular disease, they’ll charge you more for premiums if you have some of those conditions,” says Boyd. “They’re making money in either case.” The researchers say another option besides divestment is becoming activist investors in fast-food companies to push for changes such as lower-calorie menu options or different marketing policies.

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