Higher Rates Fuel Dividend Growth at Insurance Giants MetLife, Allstate, and Travelers

Insurance companies are benefiting from higher interest rates as they collect premiums upfront and pay claims later. This 'float' mechanism is generating profits for insurers, which can then be invested to generate even more income.

Three insurance companies stand out for their dividend growth: MetLife (MET), Allstate (ALL), and Travelers (TRV).

MetLife has a global reach with customers in over 60 countries. Its customers pay premiums, which are then invested to generate interest, providing a steady stream of income. The company has increased its dividend payout by 33% since 2020, with a current yield of 2.37%. MetLife's safety record is strong, with $16.4 billion in statutory adjusted capital at the end of June.

Allstate has improved its underwriting profit and investment income. The company's net investment income rose by 33.8% to $1 billion. Allstate's dividend payout has also increased steadily since 2020, with a current yield of 1.65%. However, the risk for Allstate lies in its exposure to catastrophic events.

Travelers has raised its dividend every year for over two decades at a compound annual rate of 8%. The company's core ROE was 24.9% in Q2, and it has posted net favorable prior year reserve development in 19 out of the last 20 years. Travelers' safety record is strong, with $11 billion in operating cash flow over the trailing twelve months.

These insurance companies are dividend-growth compounders rather than high-yield plays. Their earnings sit on top of a giant, rising-yield bond portfolio that funds the payout while claims work their way through.