In this article, we will take a look at 11 of the best insurance dividend stocks to buy. If you want to see more of the best insurance dividend stocks, go directly to 5 Best Insurance Dividend Stocks To Buy Now.
Interest rates have risen substantially in 2022. To fight inflation, the Federal Reserve has raised interest rates five times this year alone, with the last three raises at a pretty steep 0.75 percentage points each. As a result, the federal funds rate is now 3% to 3.25%, which is substantially higher than what it was at the beginning of the year. The interest rate hikes might not be over as many expect the federal funds rate to be between 4% and 4.5% by the end of the year.
Like they have in many other sectors, the rising interest rates have affected the insurance industry.
According to the Office of Financial Research,
Modestly rising interest rates are generally positive for the insurance industry. When rates rise at a reasonable pace, portfolio yields also rise. With these new, higher-yielding corporate and other bond purchases, insurers’ investment earnings also increase. Life insurers, in particular, benefit from a rising interest rate environment as they’re likely to earn improved spreads over the cost of funding liabilities.
As a result of the higher rates, some insurance companies have an easier time earning profits and shares of those companies have outperformed the market this year.
If inflation becomes too much of a problem, however, many insurers could also face headwinds, especially P&C insurers. The Office of Financial Research added,
Adding inflation to the mix, however, affects insurers differently. For example, while property and casualty (P&C) insurers also benefit from increased bond portfolio yields, higher-than-expected claim costs for home, automobile, and other insurance lines may impair earnings.
Similarly, if interest rates rise too much, the U.S. economy could enter into a deeper than expected recession and demand for insurance products could decrease.
Given the uncertainty in the markets today, it can be a good idea for investors to have a well diversified portfolio of stocks across many different sectors.
In terms of the insurance sector, here are 11 stocks with dividends to consider,
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Methodology
For the list of 11 Best Insurance Dividend Stocks To Buy Now, we took many of the largest insurance companies by market cap that are listed on the NYSE or NASDAQ and that also paid dividends. We then ranked them based on the number of hedge fund holders in our database that held shares in the same stock at the end of Q2 2022.
11 Best Insurance Dividend Stocks To Buy Now
11. Sun Life Financial Inc. (NYSE:SLF)
Dividend Yield as of 10/25: 5.09%
Number of Hedge Fund Holders: 12
Sun Life Financial Inc. (NYSE:SLF) is a leading insurer headquartered in Toronto with a dividend yield of slightly over 5% as of 10/25. Although interest rates have increased, Sun Life Financial Inc. (NYSE:SLF) shares have fallen around 25% year to date given lower equity values have been a headwind for the company’s asset management business. As a result, Sun Life Financial Inc. (NYSE:SLF) trades for a price to book value of 1.32. On 10/12 John Aiken of Barclays cut his price target to C$63 from C$67 on Sun Life Financial Inc. (NYSE:SLF) but kept an ‘Overweight’ rating.
Alongside Cigna Corporation (NYSE:CI), Humana Inc. (NYSE:HUM), and UnitedHealth Group Inc. (NYSE:UNH), Sun Life Financial Inc. (NYSE:SLF) is an insurance stock with a dividend that’s owned by many hedge funds in our database at the end of Q2 2022.
10. Prudential Financial, Inc. (NYSE:PRU)
Dividend Yield as of 10/25: 4.73%
Number of Hedge Fund Holders: 18
On 10/7 Jimmy Bhullar of JPMorgan cut his price target on Prudential Financial, Inc. (NYSE:PRU) to $118 from $122 and kept a ‘Neutral’ rating. Bhullar wrote that although the rise in interest rates is a positive, the weaker stock market as well as more macro uncertainty are headwinds.
The markets have also been cautious given that shares of Prudential Financial, Inc. (NYSE:PRU) are down slightly over 6% year to date. Nevertheless, Prudential Financial, Inc. (NYSE:PRU) has a quality business and also a dividend yield of 4.73% as of 10/25.
9. Hartford Financial Services Group, Inc. (NYSE:HIG)
Dividend Yield as of 10/25: 2.22%
Number of Hedge Fund Holders: 28
Unlike many stocks in the market, Hartford Financial Services Group, Inc. (NYSE:HIG) shares are actually positive this year, with the stock up 0.65% year to date.
One reason could be that Hartford Financial Services Group, Inc. (NYSE:HIG) has been buying back stock. In July, the company announced a new share repurchase authorization of $3 billion through 2024. Hartford Financial Services Group, Inc. (NYSE:HIG) also has a dividend yield of 2.22% as of 10/25.
In July, Hartford Financial Services Group, Inc. (NYSE:HIG) reported Q2 adjusted EPS of $2.15 versus the consensus of $1.52. The company had 12 month core earnings ROE of 14%.
8. Travelers Companies, Inc. (NYSE:TRV)
Dividend Yield as of 10/25: 2.11%
Number of Hedge Fund Holders: 31
For Travelers Companies, Inc. (NYSE:TRV), 2022 has been a strong year as shares of the insurer are up 12.5% year to date. One reason for the performance could be strong earnings.
For Q3, Travelers Companies, Inc. (NYSE:TRV) reported core EPS of $2.2 versus the consensus of $1.6. Adjusted book value per share rose 7% year over year to $111.9 and Travelers Companies, Inc. (NYSE:TRV) also returned $722 million in total capital during the quarter, with $501 million in stock buybacks. In terms of dividends, Travelers Companies, Inc. (NYSE:TRV) has a dividend yield of 2.11% as of 10/25.
7. Chubb Limited (NYSE:CB)
Dividend Yield as of 10/25: 1.65%
Number of Hedge Fund Holders: 35
Despite the weaker market, Chubb Limited (NYSE:CB) is up 4% year to date with strong earnings likely one reason for the strong performance.
For Q3, Chubb Limited (NYSE:CB) reported EPS of $3.17 versus the consensus of $2.51 given the company’s excellent underwriting results and record investment income. Although the company faces macro headwinds, Chubb Limited (NYSE:CB) nevertheless expects EPS to ‘continue to grow at a healthy rate into the future’.
As of 10/25, Chubb Limited (NYSE:CB) has a dividend yield of 1.65%. Of the 895 hedge funds in our database, 35 were long Chubb Limited (NYSE:CB), ranking the company #7 on our list of 11 Best Insurance Dividend Stocks To Buy Now.
6. Metlife, Inc. (NYSE:MET)
Dividend Yield as of 10/25: 2.82%
Number of Hedge Fund Holders: 36
Metlife, Inc. (NYSE:MET) shares have rallied over 13.5% given higher interest rates and other factors. The stock also has a dividend yield of 2.82% as of 10/25. In September, Wilma Burdis of Raymond James initiated Metlife, Inc. (NYSE:MET) with a $73 price target and a ‘Market Perform’ rating. Burdis believes Metlife, Inc. (NYSE:MET) is a solid company with a track record of robust capital returns and that the company has solid underlying growth trends.
Like Metlife, Inc. (NYSE:MET), Cigna Corporation (NYSE:CI), Humana Inc. (NYSE:HUM), and UnitedHealth Group Inc. (NYSE:UNH) are insurance stocks with dividends that’s owned by many hedge funds in our database at the end of the second quarter.
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Disclosure: None. 11 Best Insurance Dividend Stocks To Buy Now is originally published on Insider Monkey.
