Updated on October 4th, 2024 by Bob Ciura
Insurance companies often produce a high level of profits each year, because they make money in two ways. First, insurance companies collect premium income on the policies they underwrite.
Second, they are able to make money by investing the large sums of accumulated premiums that have not been paid out as claims.
Due to this, insurance companies have been among the most rewarding to own over the past several decades. In fact, many of the Dividend Aristocrats and Dividend Achievers are in the insurance industry.
You can download our Excel spreadsheet list of over 60 insurance stocks (with important metrics that matter such as P/E ratios and dividend yields) for free by clicking the link below:
Our insurance stocks list is derived from the holdings of two exchange-traded funds:
- SPDR S&P Insurance ETF (KIE)
- iShares U.S. Insurance ETF (IAK)
The insurance industry has created many great fortunes. That’s because it’s slow changing and highly profitable, if the business is done well. Investing in insurance stocks is how Shelby Davis made $900 million from $50,000 starting in his late 30’s.
In recent years, the insurance industry (and other parts of the financial sector like banks) have struggled from low interest rates, which narrow the spread between what insurance companies can earn on their invested capital, versus what they pay out in claims.
In turn, higher interest rates would be a positive catalyst for insurance stocks, which would see their net investment income rise.
Still, there are a number of insurers that look attractively priced today that are poised to deliver strong total annual returns over the next five years.
This article will rank the top 5 insurance stocks now, in order of expected total annual returns.
Table Of Contents
- Best Insurance Stock #5: American Financial Group (AFG)
- Best Insurance Stock #4: The Hanover Insurance Group (THG)
- Best Insurance Stock #3: Lincoln National (LNC)
- Best Insurance Stock #2: W.R. Berkley (WRB)
- Best Insurance Stock #1: Globe Life (GL)
Best Insurance Stock #5: American Financial Group (AFG)
- 5-year expected annual returns: 11.1%
American Financial Group is an insurance holding company that is engaged in property and casualty insurance, focusing on specialized commercial products for businesses. In 2021, the company completed the sale of its annuity business for $3.8 billion in cash.
AFG reported Q2 2024 earnings on August 6th, 2024. For the quarter, earnings-per-share was $2.49, above the $2.34 per share that the company reported for the same period in 2023. During the quarter the company paid $0.71 per share in regular quarterly dividends.
Annualized core operating return on equity was 18.5% for the second quarter, and increased investment income as a result of the strong underwriting margins and higher interest rates. The company’s book value per share stands at $52.25, and the company’s growth of book value plus dividends during the quarter stood at 4.7%.
Click here to download our most recent Sure Analysis report on AFG (preview of page 1 of 3 shown below):
Best Insurance Stock #4: The Hanover Insurance Group (THG)
- 5-year expected annual returns: 11.3%
The Hanover Insurance Group is a holding company whose primary business is offering property and casualty insurance products and services. The company markets itself through independent agents and brokers in the United States.
In 2023, Personal Lines accounted for approximately 42% of segmented revenues; Commercial Lines, 36%; Other Property & Casualty, 22%. The company operates an investment portfolio that is primarily exposed to fixed-income securities.
On July 31st, 2024, The Hanover Insurance Group reported its financial results for the second quarter for the period ending June 30th, 2024. The company announced net income of $40.5 million, or $1.12 per diluted share, a significant improvement from a net loss of $69.2 million, or $1.94 per basic share, in the same period the previous year.
Operating income for the quarter was $68.1 million, or $1.88 per diluted share, compared to an operating loss of $68.3 million, or $1.91 per diluted share, in the prior-year quarter.
The combined ratio for the second quarter, excluding catastrophes, was 88.5%, reflecting continued effective pricing and margin recapture initiatives across its three segments.
Click here to download our most recent Sure Analysis report on THG (preview of page 1 of 3 shown below):
Best Insurance Stock #3: Lincoln National (LNC)
- 5-year expected annual returns: 14.8%
Lincoln National Corporation offers life insurance, annuities, retirement plan services and group protection. The corporation was founded in 1905.
Lincoln National reported second quarter 2024 results on August 1st, 2024, for the period ending June 30th, 2024. The company generated net income of $5.11 per share in the quarter, which compared favorably to $2.94 in the second quarter of 2023. Adjusted income from operations equaled $1.84 per share compared to $2.02 in the same prior year period.
Additionally, annuities average account balances rose by 6.8% to $158 billion and group protection insurance premiums grew 2.8% to $1.3 billion.
Click here to download our most recent Sure Analysis report on LNC (preview of page 1 of 3 shown below):
Best Insurance Stock #2: W.R. Berkley (WRB)
- 5-year expected annual returns: 15.3%
W.R. Berkley is an insurance holding company operating through a wide range of subsidiaries in the commercial casualty insurance segment. The firm primarily operates in two business segments: Insurance and Reinsurance.
On July 22nd, 2024, W.R. Berkley announced its Q2 2024 result, posting revenues of $2.85 billion, which were up 11.5% year-over-year. WRB reported non-GAAP EPS of $1.04 that beat the market’s estimates by $0.12.
The company achieved an 88.0% combined ratio before catastrophe losses and a reported combined ratio of 91.1%. Additionally, average rate increases, excluding workers’ compensation, were approximately 8.3%.
WRB also enhanced shareholder value, with book value per share growing 4.7% before dividends and share repurchases and returning $381.3 million to shareholders through share repurchases and dividends. Operating cash flow significantly increased 24.4% to $881.3 million.
Click here to download our most recent Sure Analysis report on WRB (preview of page 1 of 3 shown below):
Best Insurance Stock #1: Globe Life (GL)
- 5-year expected annual returns: 16.3%
Globe Life is an insurance holding company providing primarily life and supplemental health insurance via direct to consumer, exclusive agents, and independent agents. Founded in 1979, Globe Life has raised its dividend every year for the past 19 years.
Globe Life reported Q2 2024 earnings on July 24th, 2024. For the quarter, earnings-per-share were $2.83, above the $2.24 the company reported in the same quarter of 2023. The results reflect the adoption of new accounting standards, which resulted in the restating of prior year’s figures.
Return on equity (ROE) was 20.8% for the 3 months ended June 30th, 2024, and net sales for life and health increased over the year-ago quarters by 16% and 7% respectively. In total, Globe Life’s net investment income grew by 9% compared to the year-ago quarter.
The company continued its share buyback program and repurchased 3.8 million shares during the quarter for a total of $314 million in capital returned to shareholders at an average price of $81.87 per share. The company has also announced a new dividend to be paid on the first of August.
The company raised its EPS guidance to between $11.80 and $12.10 per share for the 2024 fiscal year.
Click here to download our most recent Sure Analysis report on GL (preview of page 1 of 3 shown below):
Final Thoughts
Insurance is often considered to be a boring industry, but investors looking for solid annual returns and dividend income should consider insurance stocks.
Many insurance stocks have increased dividends for at least a decade. Some have done so for multiple decades.
Not only has nearly every company on this list exhibited a pattern of steady dividend growth for many years, all have an above-market average dividend yield as well.
As a result, many insurance stocks are appealing for income investors.
Investors looking for exposure to this industry could see strong returns from these top 5 insurance stocks.
The following articles contain stocks with very long dividend or corporate histories, ripe for selection for dividend growth investors.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 53 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
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