In this article, we will take a detailed look at the 17 Best Insurance Dividend Stocks To Invest In Right Now. For a quick overview of such stocks, read our article 5 Best Insurance Dividend Stocks To Invest In Right Now.
The insurance industry started off 2024 on a positive note, driven by huge gains in profits on the back of rising rates. Last year brought devastating losses for many insurance companies because of massive hurricanes and storms in the US. Many insurers kept taking it on the chin because of low premiums since applications for bump in rates take a lot of time for approvals. A Wall Street Journal report earlier this year quoted Paul Newsome, an insurance analyst at Piper Sandler, who said that home and auto insurance after the end of pandemic lockdowns were “underpriced” with insurance companies having to pay a lot more than their premiums. But later, many insurers won regulatory approvals to boost their insurance rates significantly in several states.
Performance of Insurance Stocks in 2024
KBW Nasdaq Property & Casualty Index (INDEXNASDAQ:KPX) is up about 12% so far this year, compared to the S&P 500’s gain of about 8%. Over the past one year KBW Property & Casualty Index is up about 21%, compared to SPY’s 23% gain. Some important names in the fund’s holdings include The Travelers Companies, Inc. (NYSE:TRV), Chubb Ltd (NYSE:CB) and Progressive Corp (NYSE:PGR).
What’s Happening with Health Insurance Stocks?
While casualty and property insurers rejoiced gains, some bad news came in for health insurance companies when it was revealed that federal payment rates for Medicare insurers in 2024 will be lower than expectations. After a related announcement from the Centers for Medicare and Medicaid Services, insurance stocks like Humana, CVS Health, UnitedHealth Group and Elevance Health fell.
Outlook for the Insurance Industry
Despite these challenges, the overall outlook for the insurance industry is strong. Swiss Re Institute increased its premium growth estimate for the property and casualty insurance industry for 2024 to 7.0% from 5.5%. S&P Global Market also said in a report that it expects insurance companies to continue to push for price increases to offset losses and to hedge against climate-related risks.
A report by Deloitte on the outlook of the insurance industry said that climate-related challenges remain on of the biggest risks for the insurance industry. The report said that the demand for catastrophe reinsurance in the US is expected to jump 14% in 2024. According to S&P Global, climate-related catastrophe losses have left a major impact on the property and casualty insurance industry:
“Elevated catastrophe losses continue to hamper the industry’s underwriting performance, adding about eight percentage points on average to the industry loss ratio over the past seven years. Insured catastrophe losses have exceeded $40 billion in six of the last seven years, driven in large part by an increase in the number of severe convective storms in the Midwest. • Catastrophe losses were ahead of 2022 through June 2023, but a quiet hurricane season will mitigate the impact on full-year results. Reinsurers have responded to higher losses by substantially raising rates and reducing capacity, particularly for coverage that protects against loss frequency, which has led primary insurers to retain more volatility risk and pay more for their coverage.”
Methodology
The insurance industry is one of the most stable industries, teeming with regular dividend-paying companies. For this article we scanned Insider Monkey’s database of 933 hedge funds and their holdings and picked top dividend-paying insurance stocks with the highest number of hedge fund investors. Why do we pay attention to hedge fund sentiment? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
17. Hartford Financial Services Group Inc (NYSE:HIG)
Number of Hedge Fund Investors: 29
With a dividend yield of 1.8% and 29 hedge fund investors, Hartford Financial Services Group Inc (NYSE:HIG) is one of the best insurance dividend stocks to buy according to hedge funds. The biggest stakeholder of Hartford Financial Services Group Inc (NYSE:HIG) as of the end of last year was Ric Dillon’s Diamond Hill Capital which owns a $267 million stake.
16. First American Financial Corp (NYSE:FAF)
Number of Hedge Fund Investors: 30
Title insurance services company First American Financial Corp (NYSE:FAF) is one of the best insurance dividend stocks to invest in according to hedge funds. With more than a decade of consistent dividend increases and 3.5% dividend yield, it’s a notable name in the dividend space.
Insider Monkey’s database of 33 hedge funds and their holdings shows that 30 hedge funds had stakes in First American Financial Corp (NYSE:FAF).
Heartland Mid Cap Value Fund made the following comment about First American Financial Corporation (NYSE:FAF) in its Q3 2023 investor letter:
“Financials. First American Financial Corporation (NYSE:FAF), the second-largest title insurance provider in the U.S., is a quintessential value bucket example (buying a high-quality operator at an attractive valuation when their business is in a recession).
While most people don’t think about title insurance when purchasing a home, policies indemnify homeowners and lenders against title defects that could result in significant losses arising from back taxes, liens, and other claims. Rising mortgage rates over the past two years have weighed on First American shares, as 30-year fixed rate residential mortgages more than doubled from around 3% at the end of 2021 to more than 7% today. Residential refinance volumes plunged 85% by late 2022, while new purchase volumes fell more than 40%. As a result, FAF’s earnings expectations are down nearly 50% relative to the cycle peak.
However, the year-over-year decline in the Mortgage Bankers Association Purchase Index is getting “less bad,” which is often when the share prices of good companies begin to recover (as long as the market considers the improvement to be sustainable). Meanwhile, management has taken several self-help steps to improve profitability. Examples include exiting unprofitable property and casualty operations and automating manual processes, which should boost margins.
FAF shares trade at just 12X earnings, based on forecasts for the next 12 months. While a P/E ratio of 12X is in line with the insurance industry, we do not believe the broader industry has the same cyclical earnings upside as First American. Historically, title insurers have traded at 15X or higher early in a cyclical recovery.”
15. Reinsurance Group of America Inc (NYSE:RGA)
Number of Hedge Fund Investors: 30
Life and health insurance company Reinsurance Group of America Inc (NYSE:RGA) ranks 15th in our list of the best insurance dividend stocks to buy according to hedge funds. The stock has gained about 44% over the past one year. Reinsurance Group of America Inc’s (NYSE:RGA) dividend growth record is also healthy.
As of the end of the fourth quarter of 2023, 30 hedge funds tracked by Insider Monkey had stakes in Reinsurance Group of America Inc (NYSE:RGA).
14. Lincoln National Corp (NYSE:LNC)
Number of Hedge Fund Investors: 31
Pennsylvania-based insurance company Lincoln National Corp (NYSE:LNC) is one of the top insurance dividend stocks popular among hedge funds. It’s a high-yield dividend stock in our list with a 5.8% yield as of April 9.
In February, Jefferies analyst Suneet Kamath upgraded the stock Lincoln National Corp (NYSE:LNC) to Hold from Underperform.
13. Prudential Financial Inc (NYSE:PRU)
Number of Hedge Fund Investors: 32
With a 4.5% dividend yield and about 15 years of consistent dividend increased under its belt, Prudential Financial Inc (NYSE:PRU) is one of the best insurance dividend stocks according to hedge funds. Over the past five years Prudential Financial Inc’s (NYSE:PRU) dividend increased at a CAGR (compound annual growth rate) of 6.42%.
Of the 933 funds in Insider Monkey’s database, 32 hedge funds reported owning stakes in Prudential Financial Inc (NYSE:PRU).
12. Unum Group (NYSE:UNM)
Number of Hedge Fund Investors: 33
Tennessee-based Unum Group (NYSE:UNM) is one of the notable stocks with over 2.7% dividend yield and healthy dividend growth track record. Unum Group’s (NYSE:UNM) dividend growth rate over the past five years, on an annualized basis, is 7%.
Of the 933 funds tracked by Insider Monkey, 33 hedge funds had stakes in Unum Group (NYSE:UNM).
11. Cincinnati Financial Corporation (NASDAQ:CINF)
Number of Hedge Fund Investors: 33
Ohio-based property and casualty insurance company Cincinnati Financial Corporation (NASDAQ:CINF) is a Dividend King, with about 64 years of consistent dividend increases. This spectacular dividend growth track record and a 2.6% dividend yield easily makes it one of the best insurance dividend stocks. Israel Englander’s Millennium Management owns a $141 million stake in Cincinnati Financial Corporation (NASDAQ:CINF).
Aristotle Value Equity Strategy stated the following regarding Cincinnati Financial Corporation (NASDAQ:CINF) in its fourth quarter 2023 investor letter:
“During the quarter, we sold our position in Cincinnati Financial Corporation (NASDAQ:CINF) and invested in two new positions: Teledyne Technologies and U.S. Bancorp.
We first invested in property and casualty insurer Cincinnati Financial during the fourth quarter of 2020. We continue to admire the company’s prudent underwriting, strong relationships with agencies and financial strength, as evidenced by 60+ consecutive years of dividend increases. Catalysts that have been realized during our holding period include market share gains for agencies and areas that were entered in prior years. We continue to admire this business but decided to sell in favor of what we think is a more optimal opportunity.”
10. Travelers Companies Inc (NYSE:TRV)
Number of Hedge Fund Investors: 34
Ranking 10th in our list of the best insurance dividend stocks is commercial property casualty insurance company Travelers Companies Inc (NYSE:TRV) which has upped its dividend consistently for the past 19 years. The stock has increased by 33% over the past one year.
Of the 933 funds in Insider Monkey’s database, 34 hedge funds reported owning stakes in Travelers Companies Inc (NYSE:TRV).
ClearBridge Sustainability Leaders Strategy made the following comment about The Travelers Companies, Inc. (NYSE:TRV) in its Q3 2023 investor letter:
“Other positioning moves involved the sale of Progressive and the addition of The Travelers Companies, Inc. (NYSE:TRV). After a rebound in shares, we felt the risk reward was superior at Travelers, which is both more diversified and less expensive, in our view.”
9. Chubb Ltd (NYSE:CB)
Number of Hedge Fund Investors: 37
With three decades of consistent dividend increases, Chubb Ltd (NYSE:CB) is one of the most popular stocks among the 933 hedge funds tracked by Insider Monkey. Earlier this month BofA published a list of some of the least shorted stocks as a percentage of float. Chubb Ltd (NYSE:CB) was part of the list.
Aristotle Atlantic Core Equity Strategy made the following comment about Chubb Limited (NYSE:CB) in its third quarter 2023 investor letter:
“Chubb Limited (NYSE:CB) contributed to outperformance due to sustained momentum across business units and global regions, a favorable property and casualty (P&C) rate environment and an attractive valuation with shares trading below historical averages. The company’s earnings report early in the quarter highlighted its underwriting and risk-assessment capabilities, with management projecting a continuation of what we believe are positive pricing trends through the remainder of this year.”
8. Arthur J Gallagher & Co (NYSE:AJG)
Number of Hedge Fund Investors: 38
Arthur J Gallagher & Co (NYSE:AJG) has a strong dividend growth history and hedge fund interest. Insider Monkey’s database shows that 38 hedge funds had stakes in the insurance brokerage and risk management services company Arthur J Gallagher & Co (NYSE:AJG) as of the end of 2023.
7. Metlife Inc (NYSE:MET)
Number of Hedge Fund Investors: 43
Insurance company Metlife Inc (NYSE:MET) has over a decade of consistent dividend increases to its record, which makes it a relatively safe and reliable insurance dividend stock. As of the end of the last quarter of 2023, 43 hedge funds of the 933 funds tracked by Insider Monkey had stakes in Metlife Inc (NYSE:MET).
The biggest stakeholder of Metlife Inc (NYSE:MET) was Richard S. Pzena’ sPzena Investment Management which owns a $669 million stake in Metlife Inc (NYSE:MET).
6. American International Group (NYSE:AIG)
Number of Hedge Fund Investors: 51
American International Group (NYSE:AIG) management talked about American International Group’s (NYSE:AIG) dividend growth plans and policies during an earnings call in February:
Throughout 2024, we expect to continue to execute the capital management strategy we’ve outlined before. Our insurance company subsidiaries continue to have excess capital to support the type of organic growth we have seen through 2023 and would expect to see in the future. We’ve made enormous progress on our debt structure and maturities. Since year-end 2021, we’ve reduced over 50% of AIG’s debt outstanding, which is over $11 billion of debt reduction. The primary focus in 2024 will be on returning capital to shareholders through share repurchases and dividends. Since the start of 2024, we have repurchased an additional $760 million of common shares. We expect to continue at this pace for the first half of 2024, subject to market conditions, which should bring us near the high end of our target share count range.
Post Corebridge deconsolidation, we should achieve the low end of our range, which is approximately 600 million of common shares. The AIG board increased the dividend in 2023, reflecting our confidence in the future earnings power of AIG, and we will continue to evaluate our dividend policy in 2024.
Read the full earnings call transcript here.
Diamond Hill Large Cap Strategy stated the following regarding American International Group, Inc. (NYSE:AIG) in its fourth quarter 2023 investor letter:
“Other top contributors in Q4 included Allstate, American International Group, Inc. (NYSE:AIG) and Target. Insurance company AIG is likewise benefiting from improved underwriting margins while simultaneously making progress selling its stake in life insurer Corebridge and redeploying the proceeds into share repurchases at attractive prices.”
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Disclosure. None. 17 Best Insurance Dividend Stocks To Invest In Right Now was initially published on Insider Monkey.
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