Generally, rising interest rates are a burden for consumers and businesses. They raise borrowing costs, making big-ticket purchases more expensive and therefore less attractive. But one interesting characteristic of higher interest rates is that companies with large corporate treasuries can generate decent returns just by having their cash in short-term, low-risk investments.
One industry that typically has a bigger cash hoard than most is the insurance industry. That’s because insurance stocks take millions in premiums from customers, then sit on it until the benefits need to be paid. In the interim, they put that money to work in interest-bearing assets — and right now, that is quite lucrative.
[Sign up for stock news with our Invested newsletter.]
Not all insurance stocks are created equal, however. Many have struggled to match the market in 2023, and others deliver lackluster dividends back to shareholders. The following seven stocks are a good place to start looking if you’re interested in the industry, however, as all have positive returns this year and offer a 3% yield or better:
| Stock | Forward dividend yield |
| Fidelity National Financial Inc. (ticker: FNF) | 4.1% |
| Jackson Financial Inc. (JXN) | 5.3% |
| Manulife Financial Corp. (MFC) | 5.5% |
| Mercury General Corp. (MCY) | 3.5% |
| Old Republic International Corp. (ORI) | 3.4% |
| Radian Group Inc. (RDN) | 3.6% |
| Unum Group (UNM) | 3.5% |
Fidelity National Financial Inc. (FNF)
Fidelity National provides various insurance products ranging from title insurance and escrow management for real estate to home warranties to protect against costly repairs to life insurance and annuity products. This diversified operation allows for consistency, which supports an above-average dividend. Unfortunately, FNF recently was the victim of a cyberattack that sparked uncertainty and has been weighing on shares. The long-term value proposition of this leading insurance stock remains, however, and shares are still up 18% this year through Nov. 29 despite this news.
Forward dividend yield: 4.1% Market capitalization: $12.2 billion
Jackson Financial Inc. (JXN)
A specialist in life insurance, Jackson Financial provides both traditional, fixed whole life insurance policies and related products like annuities and variable life insurance. The company has a history of doing the math to ensure competitive rates as well as efficient operations to ensure profitability as premiums are paid. Jackson is one of the more generous dividend stocks on this list, with a yield that is more than three times the payday of the broader S&P 500, but it’s also one of the top performers, with a gain of 35.2% through Nov. 29.
Forward dividend yield: 5.3% Market capitalization: $3.8 billion
Manulife Financial Corp. (MFC)
You may not recognize the Canadian insurance company Manulife, but its significant scale and sizable dividend make this financial stock worth a look. Manulife is mainly a life insurance provider, serving North America as well as key international markets like Asia. In addition to life insurance and annuities, the company also offers asset management and retirement services, as well as managing income-generating assets such as timberland. Incorporated back in 1887, this Toronto-based company has a rich history and a track record of consistent income.
Forward dividend yield: 5.5% Market capitalization: $35.4 billion
[SEE: 9 Highest Dividend-Paying Stocks in the S&P 500]
Mercury General Corp. (MCY)
Mercury General is largely a property and casualty insurer, writing policies for homeowners, commercial organizations covering property or equipment, and “umbrella” insurance products that offer extended or supplemental coverage in these areas based on customer needs. Small but mighty, Mercury has seen its shares skyrocket about 23% in the last 30 days, thanks to strong third-quarter earnings that indicated improving financials as well as bigger cash reserves. That second factor is very attractive in a high-interest-rate environment.
Forward dividend yield: 3.5% Market capitalization: $2.1 billion
Old Republic International Corp. (ORI)
Old Republic is a century-old insurance underwriter in Chicago that provides coverage for automobiles and boats as well as travel and workers’ compensation insurance. It also offers title and mortgage insurance to the real estate market. Though perhaps not the best-known insurance stock out there, it is one of the most reliable income plays in the industry. In 2023, ORI marked its 42nd consecutive year of dividend increases and its 82nd year of uninterrupted regular cash dividend payments. Shares are up 18.9% on the year, too, adding to the appeal.
Forward dividend yield: 3.4% Market capitalization: $8.1 billion
Radian Group Inc. (RDN)
Mortgage and real estate services company Radian offers credit-related insurance coverage, primarily including private mortgage insurance on residential home loans. Radian also has a title services line, which many home buyers also have opted for to protect against errors in the paperwork. It’s not a particularly glamorous business, and Radian is admittedly not a sure thing, as interest rates cause uncertainty around home sales. However, RDN management knows its business well — and as proof, shares are up 32.6% on the year despite the macroeconomic picture. That, along with an above-average dividend, is incentive for shareholders who buy and hold.
Forward dividend yield: 3.6% Market capitalization: $3.9 billion
Unum Group (UNM)
Unum is the parent company of Colonial Life, which you may recognize from TV commercials in the U.S. The firm also provides insurance products across the U.K. and Europe, including disability, health, dental and vision products. Unum stock has been a bit more volatile than the other picks on this list in 2023, in part because of a change in accounting practices to its long-term-care segment that spooked some investors. But with decent scale and diversification across product lines, long-term investors may still want to look at UNM stock for its income potential.
Forward dividend yield: 3.5% Market capitalization: $8.4 billion
More from U.S. News
7 International Dividend Stocks for Diversification
4 Growth Stocks, 4 Value Stocks to Buy
7 Dividend Stocks Paying 5% and Above
7 Insurance Stocks to Buy for Income originally appeared on usnews.com
Update 11/30/23: This story was previously published at an earlier date and has been updated with new information.
