While Wall Street chases NVIDIA (NVDA), the real AI dividend story is unfolding in the sleepy insurance sector. These “boring” firms are quietly leveraging AI tools to slash costs, grow premiums, and—best of all—dish us bigger dividends.
AI is spreading across the economy much faster than many expected. That means we need to move even faster to front-run that shift.
We’ve already been hard at it. In July, we talked about our favorite dividend payer to grab as AI reworks farming. Few people realize it, but “ag” has a long history of leveraging tech. It’s a big reason why productivity per farm worker has shot up 16X since 1948.
Then there’s small business—and our favorite 8.8%-paying business development company (BDC), which funds many of these “mom-and-pop” shops. You don’t hear much about it, but small biz is wildly optimistic as AI helps it solve one of its toughest challenges: finding skilled workers.
So where to next?
Insurance: Our Next Stop for AI-Powered Dividend Growth
When most people think about AI in business, they think about annoying customer-service chatbots. But that’s just the public side, and only a small part of the story.
The real AI “juice”—especially for insurers—is on the back end. Picture an AI app pulling data from a patient’s medical records, zipping through the underwriting process and delivering a quote in seconds. While that’s going on, another runs compliance checks.
Claims? Send in a picture of your damaged car/house/business and your payout pops into your account in minutes. Absolute gold for customer retention.
All of this is happening in insurance right now. And that’s just on the efficiency side.
The growth story is where things get interesting, as salespeople use AI to zero in on leads and cross-sell products. One example, cited in a July 2025 report from research firm McKinsey & Co., is that an AI app could assess a new life-insurance customer and toss out a personalized package, including disability and critical-illness coverage.
As I said, initiatives like these are driving real returns for insurers today. And according to a January 2024 report from McKinsey, insurers that prioritize tech, including AI, have delivered far bigger total shareholder returns (TSR) than firms in other sectors:
The best part of all for us is that the public still sees insurers as stuffy pencil-pushers (the same type of outdated view that hovers over agriculture).
Let’s dive into three insurers leading the way in AI, and likely to hand their savings (and profit growth) to us in the form of dividend hikes. They all have appeal, but to make things simple, I’ve ranked them from “worst to first.”
Bronze Medal: Progressive Corp. (PGR)
Progressive (PGR) was already a leader in algo-driven insurance before AI came along. Through fictional salesperson “Flo,” it could deliver a competitive insurance quote for a car, home or even a boat in a few minutes. Fast-forward to today and Flo is, you guessed it, a chatbot.
Looking a bit deeper, the company is using AI to further refine Snapshot—its program that adapts rates based on real-time data from a customer’s car. It’s also using the tech to analyze photos of damage to speed up claims.
Members of my Hidden Yields service will remember this one: We bagged an 87% return on it during our last holding period, from June 2019 to May 2023.
PGR remains on my watch list, and we won’t hesitate to jump back into this savvy dividend payer (whose 0.16% yield masks the fact that it pays most of its dividend as a year-end special payout—often a big one).
But with the stock trading around 4.4-times book value, that time is not now. We’d also like to see more buybacks: PGR’s share count is about where it was 10 years ago.
Silver Medal: The Travelers Cos. (TRV)
The Travelers Cos. (TRV) is a giant in insurance, offering everything from property to personal and business coverage. On the claims side, Travelers, like Progressive, uses AI to analyze images of property damage and speed payments to policyholders, often before a human ever sets foot on the site.
That kind of speed gives TRV a much better shot at keeping customers happy—and hanging on to their business.
On the growth side, the company has tools like Business Owner Policy 2.0, which speeds up underwriting, getting a quote into a new small business customer much faster than in “analog” days. According to the company, the process cuts the number of questions a potential new business client has to answer by 70%, from around 40 to roughly nine.
Moves like these are rocket fuel for a business that’s already firing on all cylinders. In the second quarter, TRV saw its catastrophe losses drop from $1.5 billion a year ago to $927 million. Written premiums jumped 4% and net investment income jumped 6%. That last number is particularly impressive since an insurer’s “float”—made up of total premiums collected—has to be placed in safer investments.
Management loves its shareholders, too: Over the last decade, Travelers bought back 26% of its shares and hiked its payout 80%. That’s driven the share price up a stout 170%. With reinvested dividends, that return jumps to 237%!
Dividend, Buybacks Launch Travelers’ Share Price
The only drawback? We like to buy a stock when the share price lags its “Dividend Magnet”—a true sign of value—and that’s not the case here. That’s why we’re putting this “stealth” AI dividend play on our watch list, instead of our buy list.
Gold Medal: American International Group (AIG)
Meantime, the AI focus at American International Group (AIG) is solidly on underwriting. The company has teamed up with Palantir Technologies (PLTR) and Anthropic to develop AI tools that supercharge its human underwriters.
Through these deals, it aims to help its underwriters process 500,000 E&S submissions in 2030, generating at least $4 billion in new business premiums. (E&S covers risks that don’t fit neatly in the silos of other kinds of coverage.) To put that in context, AIG generates about $28 billion in revenue a year.
AIG also plans to create a “digital twin,” kind of a virtual mock-up of itself management can use to see what various decisions could have on the business.
It’s on the dividend front that AIG gets really interesting. It yields 2.3% today and, following a long, stale period stretching back to 2016, it has recently sprung back to life. Management hasn’t been leaving investors out in the cold, though—it’s been busy buying back its ultra-cheap stock.
That includes a massive repurchase of 56% of its shares outstanding in the last decade. Better still, it’s been accelerating those payouts just as it’s reawakened its dividend:
From “Meh” to a Shareholder’s Dream
Normally we don’t like to see a company buy more of its stock as it’s rising, as is the case here. But AIG’s reasonable valuation of around book value is backed up by its share price, which still lags the dividend. An AI-powered efficiency boost would only add to the stock’s momentum.
The Dividend Magnet Is Flashing BUY on These 5 Red-Hot Innovators Now
When it comes to AI, Wall Street is still obsessed with Big Tech. But what they’re not telling you is that many of the big name AI gains are already priced in there.
That’s why we’re looking beyond Silicon Valley for our next AI-driven dividend-growth hit. Insurance is just the start.
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