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The Zacks Analyst Blog Highlights Axis Capital Holdings, Cincinnati Financial, CNA Financial, First American Financial and American Financial

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For Immediate Release

Chicago, IL – August 22, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Axis Capital Holdings Ltd. (AXS - Free Report) , Cincinnati Financial Corp. (CINF - Free Report) , CNA Financial Corp. (CNA - Free Report) , First American Financial Corp. (FAF - Free Report) and American Financial Group (AFG - Free Report) .

Here are highlights from Wednesday’s Analyst Blog:

5 Dividend-Paying P&C Insurers That Ensure Stable Income

The Zacks Property and Casualty Insurance industry is well-poised to benefit from better pricing, prudent underwriting, increased exposure, an improving rate environment and a solid capital position. With the ongoing economic expansion, insurers remain well-poised for growth. The buoyancy in the industry is further confirmed by its Zacks Industry Rank #26, which places it in the top 10% of more than 251 Zacks industries.

However, industry players continue to grapple with issues like higher catastrophe events, both natural and man-made, which drag down underwriting profit.

According to Verisk’s Extreme Event Solutions group estimates, U.S. onshore wind property losses from Beryl were within the $2-$3 billion range. Per Allstate estimated catastrophe losses were $587 million for July alone from 20 events.

Despite these challenges surrounding the industry, the P&C insurance industry has risen 24.7% in the year-to-date period, outperforming the Zacks S&P 500 composite’s growth of 17.7% and the Finance sector’s 12.2% rise.

Industry players that boast an impressive dividend history have always attracted yield-seeking investors. Property and casualty insurers like Axis Capital Holdings Ltd., Cincinnati Financial Corp., CNA Financial Corp., First American Financial Corp. and American Financial Group have been investors’ favorites, driven by their solid fundamentals that ensure consistent dividend payments.

Global commercial insurance rates remained unchanged in the second quarter of 2024, per the Marsh Global Insurance Market Index.

Price hikes, operational strength, higher retention, strong renewal and the appointment of retail agents should help write higher premiums. Per Deloitte Insights, gross premiums are estimated to increase sixfold to $722 billion by 2030.

Analysts at Swiss Re Institute predict premium volume to reach $4.6 trillion in 2024 and $4.8 trillion in 2025. Per the Swiss Re Institute, property and casualty insurers are anticipated to enhance profitability in 2024, with industry-wide return on equity (ROE) at 10% so far in 2024. For 2025, the Swiss Re Institute estimates an ROE of more than 10%.

The insurance industry is rate-sensitive. An improving rate environment is a boon for insurers, especially long-tail insurers. The Fed held interest rates unchanged at 5.25-5.5% at the December FOMC meeting. With a large invested asset base, investment income should remain healthy, even if the Fed cuts rates later this year.

A solid capital level supports insurers in pursuing strategic mergers and acquisitions to gain market share, expand in niche areas and diversify operations into new business lines and geography, as well as increase dividends, pay special dividends and buy back shares. Deloitte estimates more mergers and acquisitions in the reinsurance space in 2024.

The P&C insurance industry is witnessing increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation that expedite business operations and save costs. Insurers continue to invest heavily in technology to improve basis points, scale and efficiencies.

How to Pick the Right Dividend Stocks

To choose some of the best dividend stocks from the aforementioned industry, we have run the Zacks Stock Screener to identify stocks with a dividend yield in excess of 2% and a sustainable dividend payout ratio of less than 60%, reflecting enough room for future dividend increases. These stocks also have a five-year historical dividend growth rate of more than 2% and a Zacks Rank #1 (Strong Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

5 Insurance Stocks for Dividend Investors

Axis Capital, with a market capitalization of $6.27 billion, provides various specialty insurance and reinsurance products worldwide. The P&C insurer remains poised to gain from repositioning the portfolio and markets, offering profitable growth, lower volatility, strong market presence, better pricing and margin expansion. AXS sports a Zacks Rank #1 at present.

The insurer’s payout ratio is 16, with a five-year annualized dividend growth rate of 2.04%. Its current dividend yield of 2.3% is better than the industry average of 0.2%. The insurer’s quarterly dividend payment witnessed a 10-year CAGR (2014-2024) of 5%. (Check Axis Capital’s dividend history here.)

Axis Capital Holdings Limited dividend-yield-ttm | Axis Capital Holdings Limited Quote

AXIS Capital is a leading specialty insurer and global reinsurer aiming for leadership in specialty risks. The company thus remains focused on growth in Marine Cargo, Cyber and Renewable Energy, which is likely to provide strong double-digit ROE opportunities. Focus on deploying resources prudently while enhancing efficiencies, improving its portfolio mix and underwriting profitability bode well. AXS continues to boost shareholder value through stock buybacks and dividend hikes. It boasts one of the highest dividend yields among its peers.

Cincinnati Financial, with a market capitalization of $20.41 billion, provides property casualty insurance products in the United States. This Zacks Rank #3 insurer remains poised to gain from price increases, a higher level of insured exposures and several growth initiatives, which include the expansion of Cincinnati Re and Cincinnati Global. This P&C insurer intends to grow the Commercial Lines and Excess and Surplus lines through additional agency appointments, expansion of local field presence, higher renewal written premiums and higher average renewal estimated pricing.

The insurer’s payout ratio is 47, with a five-year annualized dividend growth rate of 7.96%. The dividend yield of 2.4% makes Cincinnati Financial an appealing choice for investors seeking stable returns. The insurer’s quarterly dividend payment witnessed a 10-year CAGR (2014-2024) of 6.3%. (Check Cincinnati Financial’s dividend history here.)

Cincinnati Financial Corporation dividend-yield-ttm | Cincinnati Financial Corporation Quote

Cincinnati Financial’s consistent cash flow continues to boost liquidity. In terms of capital management, CINF has returned capital to shareholders through share buybacks, regular cash dividends, as well as special dividends. The board had increased the annual cash dividend rate for 64 consecutive years, a record that is believed to be matched by only seven other publicly traded companies in the United States. The dividend increases reflected strong operating performance and signaled management's and the board's positive outlook and confidence in outstanding capital, liquidity and financial flexibility.

CNA Financial, with a market capitalization of $13.40 billion, offers commercial P&C insurance products, mainly across the United States. The insurer’s focus on better pricing, increased exposure, higher new businesses and retentions across its Specialty, Commercial and International segments poise it well for growth. Stable fixed-income returns and higher limited partnership returns should continue to support investment results. The insurer carries a Zacks Rank #3 at present.

The insurer’s payout ratio is 36, with a five-year annualized dividend growth rate of 4.66%. Its current dividend yield of 3.5%. The insurer’s quarterly dividend payment witnessed a 10-year CAGR (2014-2024) of 5.8%. (Check CNA Financial’s dividend history here.)

CNA Financial Corporation dividend-yield-ttm | CNA Financial Corporation Quote

CNA Financial boasts a solid balance sheet with capital remaining above the target levels required for all ratings. This, along with sufficient cash flows, enables CNA Financial to engage in shareholder-friendly moves like dividend hikes. On the back of a disciplined execution, denoted by strong underwriting results and confidence in future earnings performances, the company hiked its dividend over the past couple of years. Thus, the company remains committed to returning more value to shareholders.

First American Financial, with a market capitalization of $6.33 billion, provides financial services and operates through the Title Insurance and Services and Home Warranty segments. FAF remains well-poised to capitalize on the increased demand among millennials for first-time home purchases. This Zacks Rank #3 insurer is poised to rise on growing leadership in title data, benefiting from proprietary data extraction, sturdy distribution relationships, prudent underwriting and continued investments in technology.

The insurer’s payout ratio is 58, with a five-year annualized dividend growth rate of 5.56%. Its current dividend yield of 3.4%. The insurer’s quarterly dividend payment witnessed a 10-year CAGR (2014-2024) of 16% (Check First American’s dividend history here.)

First American Financial Corporation dividend-yield-ttm | First American Financial Corporation Quote

FAF remains focused on strategic initiatives to strengthen its product offerings, intensify focus on its core business, invest in technology and redeploy capital to areas that fetch higher returns. Banking on strong operational performance, the company distributes wealth to its shareholders via dividends. It has been increasing its dividend payout each year and buying back shares.

American Financial, with a market capitalization of $10.75 billion, is an insurance holding company that provides specialty property and casualty insurance products in the United States. The insurer is set to benefit from business opportunities, growth in the surplus lines and excess liability businesses and higher retentions in the renewal business, which boost premium growth.

The insurer’s payout ratio is 27, with a five-year annualized dividend growth rate of 12.17%. Its current dividend yield is 2.2%. The insurer’s quarterly dividend payment witnessed a 10-year CAGR (2014-2024) of 12.4%. (Check American Financial’s dividend history here)

American Financial Group, Inc. dividend-yield-ttm | American Financial Group, Inc. Quote

American Financial has traditionally maintained a moderate adjusted financial leverage of around 20%, with a good cash flow and interest coverage ratio. This Zacks Rank #3 insurer scores strongly with credit rating agencies. Also, in each of the last 18 years, the company has successfully increased its dividends.

The robust operating profitability at the P&C segment, a stellar investment performance and effective capital management support effective shareholders return. The insurer expects its operations to continue to generate significant excess capital throughout the remainder of 2024, which provides ample opportunity for additional share repurchases or special dividends over the next year.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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