The insurance industry is one of the financial sector’s most resilient and consistently profitable segments. Consequently, insurance stocks are a favored asset class of equity investors seeking long-term growth potential and a dependable dividend income. Several factors make insurance stocks attractive:
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Superior Cash Flow
Most individual and business consumers consider at least some forms of insurance a necessity. Very few homeowners will forgo property insurance, and no responsible company conducts business without liability insurance. All of this is to say that insurance companies enjoy very consistent cash flows from premium collection. Insurance is always in demand regardless of the business cycle or the economy, which means stable revenue and earnings for stockholders.
Dividend Payments
Because they have high and dependable revenue streams, many insurance stocks pay regular dividends. Some have consecutive years or even decades of increasing their dividends. This makes them very attractive to investors seeking a reliable current income today, and particularly dividend growth investors who want to build income over time and take advantage of long-term capital appreciation opportunities.
Highly Regulated
Insurance is a highly regulated industry. Virtually every state has an insurance commission or similar regulatory body that works on behalf of the consumer and shareholder. Strict, mandatory financial guidelines ensure that insurance companies avoid high-risk behaviors, remain financially sound and have sufficient reserves to pay claims and stay solvent.
In addition, many governments, including the U.S., provide tax incentives that encourage and even subsidize certain types of insurance, such as health insurance and retirement plans. Such policies benefit the customer, the company and investors.
Diversified Product Lines
One way insurers mitigate risk is by providing several different lines of insurance and offering related financial products and services. It is not uncommon to see a company that primarily sells life insurance also offer auto insurance, casualty insurance and retirement plans. Diversification among product lines is common among insurance companies and is a prominent feature of every company on this list.
Virtually all large-cap insurance stocks also offer geographic diversification as well, many of them on a global scale. Doing business internationally and branching out into emerging markets can open new opportunities for sustained growth over the long run.
7 Insurance Stocks for Income and Growth
Those are only a few of the advantages of owning insurance companies. The benefits of buying and holding dividend-paying insurance stocks boil down to the fact that they offer a dependable income and excellent growth potential. Here are seven insurance stocks to consider adding to your portfolio today:
| Insurance Stock | Forward Dividend Yield* |
| Prudential Financial Inc. (ticker: PRU) | 4.0% |
| American International Group Inc. (AIG) | 1.9% |
| Travelers Cos Inc. (TRV) | 1.6% |
| Chubb Ltd. (CB) | 1.2% |
| Cincinnati Financial Corp. (CINF) | 2.2% |
| First American Financial Corp. (FAF) | 3.2% |
| Aflac Inc. (AFL) | 1.6% |
*As of Oct. 17 market close.
Prudential Financial Inc. (PRU)
PRU has an impressive market cap of close to $46 billion. The company is based in Newark, New Jersey, and has a history dating back 149 years to 1875. Over all that time, PRU has maintained an enviable reputation for sound business practices and superior customer service.
PRU offers permanent and term life insurance, variable insurance, income and retirement annuities, financial and retirement planning services, mutual funds, and exchange-traded funds, better known as ETFs.
The stock currently pays an annual dividend of $5.20 per share, but it’s likely shareholders will see an even higher dividend rate in the future. PRU has increased its dividend every year since 2008.
If you’re looking for a high dividend yield and good prospects for growth, PRU is an insurance stock worth considering.
Dividend yield: 4%
American International Group Inc. (AIG)
AIG is an insurance and financial services powerhouse with a market cap that tops $50 billion.
The company serves individual, institutional and business customers in North America and internationally. AIG has three main divisions: General Insurance, Life Insurance and Retirement, and a broad category it simply calls Other Services.
AIG’s General Insurance segment is its catch-all division for traditional insurance. It provides life, business, auto and casualty policies, as well as workers compensation, liability, health insurance and more. The Life and Retirement Division specializes in retirement planning products such as variable and fixed annuities, retirement plan services and financial planning. Finally, the division aptly named Other offers custom-designed surplus lines of insurance and specialty insurance products to suit the unique needs of large international financial institutions.
Right now the annual dividend stands at $1.60 per share. The company’s board of directors has raised the dividend every year since 2013. UBS and Jeffries both rate the stock a “buy.”
Dividend yield: 1.9%
Travelers Cos Inc. (TRV)
TRV was established in Hartford, Connecticut, in 1853. The company was originally founded to provide life and accident insurance, but with the advent of steamships and railroad travel in the late 19th century, it expanded quickly to cover domestic and international shipping and rail freight.
Today, TRV, through its many partnerships and subsidiaries, offers a wide variety of business and personal property and casualty insurance — commonly called P&C — to individuals, companies and institutions including governments and government agencies.
TRV offers all the P&C lines you’d expect, including liability, auto and accident. It also provides several other less well-known lines, such as professional indemnity, terrorism insurance, and kidnap and ransom insurance. Additionally, TRV is well known in the financial markets as a leader in bond insurance, which is specialty coverage that guarantees the timely payment of interest and principal of covered corporate bonds.
Most consumers will instantly recognize the company’s iconic red umbrella logo, which it has used for more than 60 years.
Dividend yield: 1.6%
[READ: 8 Companies That Could Issue the Next Stock Split.]
Chubb Ltd. (CB)
CB is a $122 billion insurance company that helps large insurance companies and financial institutions manage risk.
The firm’s P&C division offers a full line of commercial insurance that covers every conceivable kind of business and financial risk. Through an extensive network of brokers and agents, CB offers comprehensive coverage in customized packages that can include several policies and several types of insurance. It offers traditional lines such as health, liability and accident insurance, but it is quickly expanding into modern products such as cyber risk and data loss protection.
CB is very prominent in the unique area of reinsurance. This highly specialized coverage protects insurance companies and other high-risk institutions against large, unexpected losses from natural disasters and financial catastrophes.
CB is a member of the Dividend Aristocrats, an exclusive club of S&P 500 stocks that have raised their annual dividend for at least 25 consecutive years.
Dividend yield: 1.2%
Cincinnati Financial Corp. (CINF)
Ohio-based Cincinnati Financial is a 74-year-old, $22 billion insurance company offering commercial lines, personal lines, surplus lines and life insurance to individuals and small businesses in the U.S.
The company is known for its sound financial principles and the consistency of its overall performance.
Beyond the revenue and profit it earns from insurance operations, CINF generates significant profits from its large investment portfolio. It primarily invests in dividend-paying equities and various types of public and private fixed-income securities.
Back in January, the CINF board of directors announced it was raising the stock’s annual dividend from 75 cents to 81 cents, an 8% increase. That move represented the 64th consecutive year the company has increased its dividend.
Dividend yield: 2.2%
First American Financial Corp. (FAF)
First American Financial was founded in California in 1889. This $7 billion company specializes in title insurance, which is an important type of real estate transaction coverage. By ensuring that property titles are legitimate and free of legal encumbrance, FAF plays a critical role in making sure real estate sales and transfers are safe, secure and efficient for all parties.
FAF’s clients can be lenders, borrowers, attorneys, trusts, estates, corporations and anyone else that might buy, sell or hold residential or commercial property.
While title insurance is its primary business, FAF offers ancillary services such as appraisals, mortgage servicing and real estate data management.
Wall Street is looking for $6 billion in revenue from FAF for 2025 and $7 billion in 2026, a healthy increase of 13%.
Dividend yield: 3.2%
Aflac Inc. (AFL)
Aflac is an established leader in the supplemental health and life insurance industry. The company’s two divisions — Aflac Japan and Aflac U.S. — combine to give AFL a market cap of more than $64 billion.
AFL sells term and whole-life insurance, but its primary focus is on supplemental health coverage. It provides hard-to-find insurance for things like nursing care, physical therapy, loss of employment income, short-term disability, hospice care and rare cancers.
The company has a large number of proprietary sales associates, but much of its business comes from independent insurance agents, brokers and corporate agencies.
The current annual dividend for AFL stands at $2 per share. The dividend is distributed in quarterly increments in February, May, August and November of each year. Notably, AFL has increased its dividend for 41 consecutive years.
Dividend yield: 1.6%
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7 Insurance Stocks to Buy for Income and Growth originally appeared on usnews.com
Update 10/18/24: This story was previously published at an earlier date and has been updated with new information.
