The insurance market witnessed significant softening in 2025, with substantial rate cuts that have created a challenging landscape for underwriters and brokers. Despite lower pricing, underwriting discipline remains strong. The U.S. market continued to witness increasing casualty rates. The U.S. insurance market experienced slowing premium growth after past highs, continued strong demand for catastrophe coverage, increasing tech adoption (AI), as well as significant M&A activity, along with navigating economic uncertainty and potential climate impacts.

The United States Federal Reserve has cut interest rates by a quarter of a percentage point, marking the last rate cut of 2025. A majority of policymakers voted to lower the benchmark lending rate by a quarter point for the third consecutive time, to a range of 3.5% to 3.75%, the lowest in more than three years. The U.S. Federal Reserve also projected to reduce the target range of the fed funds rate an additional 50 basis points by year-end 2027, where the target range would fall from 3.50-3.75% to 3.00-3.25%. 

Thus, investors always look for a safe haven that ensures a steady return. Insurers like Radian Group Inc. (RDN Quick QuoteRDN - Free Report) , Cincinnati Financial Corporation (CINF Quick QuoteCINF - Free Report) , American Financial Group, Inc. (AFG Quick QuoteAFG - Free Report) and Sun Life Financial Inc. (SLF Quick QuoteSLF - Free Report) have been investors’ favorites, driven by their solid fundamentals that ensure consistent dividend payments. Industry players that boast an impressive dividend history have always attracted yield-seeking investors.

Price Performance

The insurance industry has returned 6.3% in the year-to-date period compared with the Zacks S&P 500 composite’s appreciation of 20% and the Finance sector’s growth of 18.2%.

YTD Price Performance

Image Source: Zacks Investment Research

Dividend Stocks to the Rescue

Investors consider dividend-paying companies useful as the income they provide can help them meet liquidity needs, and dividend-focused investing has historically demonstrated the ability to help lower volatility. Dividends are a major factor in reducing overall portfolio risk. A stable dividend acts as a cushion during market downturns, reducing overall portfolio swings. Companies that have consistently increased their dividends tend to be more financially stable, higher-quality businesses, and are more likely to have the ability to pay dividends consistently.

While dividend stocks are primarily known for providing income, they also offer the potential for capital appreciation. Companies that consistently pay and increase dividends over time are often in strong financial health, which can lead to steady growth in their stock prices. Investors may benefit from share price growth while also receiving periodic dividend income, which together form the total return on investment.

Outlook for 2026

At the December 2025 Federal Open Market Committee meeting, the Core Personal Consumption Expenditures inflation projection was lowered to 3.0 in 2025, 2.5 in 2026, and maintained at 2.1 in 2027 and 2.0 in 2028.

Swiss Re estimated global real GDP growth of 2.5% in 2026 and 2.6% in 2027. Swiss Re further estimated that global insurance premiums (both non-life and life) growth will slow to an average of 2.3% in real terms in 2026 and 2027, just below the 2.5% compound annual growth rate of the last five years. 

Per Swiss Re, global non-life premiums will increase 1.7% in real terms next year and by around 2.5% in 2027.

Investment income is an important contributor to insurers’ performance. They invest a portion of their premiums. Thus, insurers are direct beneficiaries of a rising rate environment. With a lower rate of return, investment income will suffer. However, a broader invested base will limit the downside. 

Insurers should continue to invest heavily in technology to improve scale and efficiencies, while M&A is likely to be on the rise as more insurers seek growth through expansion.

Key Picks for Dividend Investing

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.

Let us dig deep into four such stocks.

Radian, with a market capitalization of $4.93 billion, is a niche player in the P&C markets, with a focus on specialized commercial products for businesses. RDN sports a Zacks Rank #1. 

Riding on continued financial strength and flexibility, Radian declared a 4.1% increase in quarterly dividend in the first quarter of 2025. This marks the sixth consecutive year that the company has raised its quarterly dividend, which has more than doubled over the past five years. Its current dividend yield of 2.8% betters the industry average of 2.2%. The insurer’s payout ratio is 24, with a five-year dividend growth rate of 17%. (Check RDN’s dividend history here)

Radian Group Inc. Dividend Yield (TTM)

Radian Group Inc. dividend-yield-ttm | Radian Group Inc. Quote

Radian remains focused on improving its mortgage insurance portfolio to drive long-term earnings growth. Its superior mortgage insurance portfolio is expected to create a strong foundation for future earnings. Business restructuring intensifies its focus on core business and services with higher growth potential, ensuring a predictable and recurring fee-based revenue stream. Radian Group maintains a solid balance sheet with sufficient liquidity and strong cash flows that help Radian Group to deploy capital via share repurchases and dividend hikes that enhance shareholders’ value. 

Cincinnati Financial, with a market capitalization of $25.76 billion, markets property and casualty insurance. It carries a Zacks Rank #3.

Through 2024, the company had increased the annual cash dividend rate for 64 consecutive years, a record that is believed to be matched by only seven other U.S. publicly traded companies. In January 2025, the board increased the regular quarterly dividend by 7%, setting the stage for the 65th consecutive year of increasing cash dividends. Its current dividend yields 2.1%, better than the industry average of 0.2%.
The insurer’s payout ratio is 45, with a five-year dividend growth rate of 8.3%. 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 (Check CINF’s dividend history here)

Cincinnati Financial Corporation Dividend Yield (TTM)

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

Cincinnati Financial continues to grow through a disciplined expansion of Cincinnati Re, which is making a nice contribution to its overall earnings, better pricing, strong renewal, solid retention and exposure growth. A higher volume of written policies with a focus on earning new business through an agent-focused business model should drive long-term growth. It is building an agent network to sell its policies. This is because an agent-driven business is proving to be a more effective driver of growth and, therefore, holds promise for the long term.

American Financial Group, with a market capitalization of $11.52 billion, is a niche player in the P&C markets, with a focus on specialized commercial products for businesses. AFG carries a Zacks Rank #3 at present. 

Dividend payments and share repurchases totaled $6.9 billion over the last five years. Its current dividend yields 2.5%, better than the industry average of 0.2%. The insurer also pays special dividends. The insurer’s payout ratio is 33, with a five-year dividend growth rate of 12%. (Check AFG’s dividend history here)

American Financial Group, Inc. Dividend Yield (TTM)

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

AFG’s robust operating profitability at the P&C segment, a stellar investment performance and effective capital management support effective shareholders’ return. It expects operations to continue to generate significant excess capital, which provides ample opportunity for additional share repurchases or special dividends over the next year.

Sun Life Financial, with a market capitalization of $34.99 billion, provides protection and wealth management products and services to individual and group customers worldwide. SLF carries a Zacks Rank #3 at present. 

Over the past five years, SLF has increased its dividend 13 times. Backed by a solid capital position and operational excellence, the insurer announced a 4.7% increase in the dividend in May 2025 to reinforce the commitment to provide strong returns to shareholders. Its dividend payout ratio is targeted within the 40-50% range. The company also repurchases shares, reflecting its strong cash and capital generation in its businesses. The insurer’s payout ratio is 50, with a five-year dividend growth rate of 8.3%. (Check SLF’s dividend history here)

Sun Life Financial Inc. Dividend Yield (TTM)

Sun Life Financial Inc. dividend-yield-ttm | Sun Life Financial Inc. Quote

Sun Life Financial’s capital position remains strong, with Sun Life Assurance’s Life Insurance Capital Adequacy Test (LICAT) ratio at 138% as of Sept. 30, 2025. The balance sheet and capital positions remain robust, driven by organic capital generation. Its capital and cash positions remain healthy and, along with a low leverage ratio, provide flexibility and opportunity for further capital deployment. The company remains focused on improving ROE and retention of flexibility for future growth opportunities. This reflects disciplined capital management and a sustained emphasis on capital-light businesses.