"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 Wesley Boyd, the study’s lead author and a faculty member of Harvard Medical School. “It’s clear their top priority is making money, not safe-guarding people’s well-being."Of course, that's not exactly what's happening. This is a simple hedge. Health insurers know that smoking leads to health problems. Health problems lead to more expense for insurers. Smoking leads to more profits for tobacco companies. Therefore, by investing in such companies, the insurers are indirectly hedging their position. If smoking subsides, tobacco companies lose out, but the insurers will save more due to less smoking-related illness*. If smoking increases, tobacco companies make more but insurers lose more, but they gain back those losses through their investment. Seems logical to me.
*Contra: there is an emerging body of literature that suggests smoking actually reduces overall life health costs because it kills you earlier, thus eliminating the cost of elder care and other health problems that increase with age.