On Sept. 24, the public will have a chance to buy and sell a new stock in the blue chip Dow Jones Industrial Average index: a health insurance stock.
The S&P Dow Jones Indices announced Friday that UnitedHealth Group, the nation’s largest managed-care company, will replace Kraft Foods Inc. at the end of trading on Sept. 21.
The change in the index is occurring because Kraft Foods is spinning off its North American groceries business, which will be renamed Kraft Foods Group, on Oct. 1. After the split, Kraft Foods will operate under the new name Mondelez International Inc. The S&P Dow Jones Indices said that the DJIA committee felt that the reduced market capitalization of Mondelez and estimates of future revenue are lower and thus not representative of the U.S. Large Cap market.
The Wall Street Journal reported:
“The shift reflects the growing importance of healthcare expenses in the U.S. economy,” said Peter Jankovskis, co-chief investment officer at Oakbrook Investments. “It reflects shifts that have already taken place within the U.S. and so the change makes sense in terms of what the Dow is trying to do as a 30-component representation of the U.S economy.”
UnitedHealth Group, based in Minnetonka, Minnesota, becomes the second insurance company — after Travelers Companies — to be included in the DJIA. Healthcare companies are largely represented by only pharmaceutical companies such as Pfizer and Johnson & Johnson in the blue chip index.
UnitedHealth Group has two main businesses: UnitedHealthcare, which is its health benefits business, and Optum, which is the company’s health services business. In 2011, UnitedHealth Group had $102 billion in revenue, up from $94.2 billion in 2010. In the past 12 months, its stock, which currently trades on the New York Stock Exchange, was up 18.5 percent to $53.89