Income investors looking for quality businesses for long-term dividend growth should consider insurance stocks. 

Insurance companies have an attractive business model. They collect premium income on the policies they underwrite, and also make money by investing the large sums of accumulated premiums that have not been paid out as claims.

Due to this, many insurance stocks can be found on the various lists of long-term dividend growth stocks such as the Dividend Aristocrats and Dividend Kings.

The following 3 insurance stocks have solid dividend yields, and long-term dividend growth potential. 

Lincoln National (LNC)

Lincoln National Corporation offers life insurance, annuities, retirement plan services and group protection. The corporation was founded in 1905 as The Lincoln National Life Insurance Company. 

Lincoln National reported fourth quarter and full year 2023 results on February 8th, 2024, for the period ending December 31st, 2023. Adjusted income from operations equaled $1.45 per share compared to $0.76 in the same prior year period. Additionally, annuities average account balances rose by 4% to $147 billion and group protection insurance premiums grew 3% to $1.3 billion. Book value per share (including adjusted income from operations) surged 43% year-over-year to $34.81.

Following Lincoln’s Fortitude Reinsurance deal, and the announcement of its Osaic deal, the company has laid out the long-term outlook for its target operating income earnings mix. It is targeting for Annuities to account for 45% to 55% of its earnings mix, group to account for 25% to 35%, retirement to be 5% to 15%, and life to make up the remaining 5% to 10%. This means Lincoln will be reducing its exposure to annuities, increasing its exposure to group and life, while retirement will remain in its current range.

LNC’s dividend appears to be in safe territory with an expected payout ratio of 27% for 2024, but LNC is not recession resistant and could face headwinds from a slowing economy. The company lists its automated underwriting within a defined criterion, and its LincXpress product, a simplified issue process, as marketplace competitive advantages.

LNC stock currently yields 5.6%, making it a high-dividend stock.

The Hartford Financial Services Group (HIG)

The Hartford Financial Services Group Inc. (HIG) is a diversified insurer that offers a diverse range of property and casualty (P&C) insurance, group benefits, and mutual fund services to a customer base of individuals and corporations in the United States, the United Kingdom, continental Europe, and internationally. The company was founded in 1810 and has approximately 18,100 employees. 

On October 24th, 2024, Hartford Financial released its third quarter 2024 results for the period ending September 30th, 2024. For the quarter, the company reported net income of $761 million ($2.56 per diluted share), which represents an 18% increase compared with net income of $645 million ($2.09 per diluted share) in the same quarter of 2023. Reported core earnings for the same periods were $752 million ($2.53 core earnings per diluted share) and $708 million ($2.29 core earnings per diluted share), which represents an increase of 6% year-over-year. 

The quarterly results benefited from strong performances in the Commercial Lines, Personal Lines, and Group Benefits businesses. The Property & Casualty (P&C) segment demonstrated robust growth with written premiums increasing by 10%, driven by both Commercial and Personal Lines, which grew by 9% and 12%, respectively. Written Personal Lines premiums reached $970 million, marking a 12% increase compared to the third quarter of 2023. 

The renewal written price for auto insurance rose to 20.8% in the third quarter of 2024, down from 23.4% in the second quarter of 2024, while home insurance saw a renewal price increase to 15.2%, up from 14.9% over the same period. The Commercial Lines segment achieved a third-quarter combined ratio of 92.2 and an underlying combined ratio of 88.6, indicating strong profitability.

Hartford Financial has a long history of paying dividends and has 15 consecutive years of annual dividend increases. In October 2024, Hartford Financial has increased its quarterly dividend by 10.6% from $0.47 to $0.52 per share. The company also announced a new $3.3 billion share repurchase program, effective from August 1st, 2024, through the end of 2026.

American Financial Group (AFG)

American Financial Group (AFG) 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. In business for over 150 years, this company has regularly increased its quarterly dividend since 2006. 

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. The management team highlighted the continued significant excess capital on the company’s balance sheet and their intention to continue issuing regular and special dividends, as well as to conduct opportunistic share buybacks. 

Additionally, they intend to deploy some capital into AFG’s core businesses as they identify the potential for healthy, profitable organic growth, and opportunities to expand its specialty niche business through acquisitions and start-ups that meet their target return thresholds. 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%. 

The combination of regular quarterly dividends with special dividends mean that the company can quickly return capital to shareholders in special cases and events, like the recent divestiture of their annuities business, without restricting their ongoing ability to take on new opportunities. Additionally, the sale of the annuities business also helps the company focus on its more profitable property and casualty insurance divisions, which have better growth prospects and more reliable earnings.

Disclosure: No positions in any stocks mentioned