Zhongtai Securities Co.,Ltd. has released a research report indicating that the rebalancing of insurance funds is expected to continue, with the sector likely to maintain its positive momentum from July into August in terms of both relative and absolute returns. The recent recovery in equity markets has significantly improved investment returns for insurers, but the dividend realization rates of listed companies have remained stable under strict "upper limits." Meanwhile, the settlement rates for universal life insurance policies have bottomed out, suggesting that the overall interest rate spread may gradually widen. In recent years, regulators have dynamically adjusted product preset interest rates, reducing the guaranteed cost rates of new business liabilities. Combined with the strategic timing of fixed-income asset allocation, this has led to a coordinated optimization of liability costs and asset returns, effectively alleviating the pressure from interest rate losses in a low-rate environment. This has significantly enhanced asset-liability matching capabilities, providing strong support for the sector's valuation floor.

The shift toward participating insurance products has become an industry consensus. Increasing the proportion of participating policies can optimize duration management and overall liability cost control. In recent years, regulatory efforts to curb the floating returns of existing universal life and participating insurance products have been effective. According to the Financial Stability Report, by the end of 2024, the industry-wide average settlement rate for universal life insurance had fallen to 3.3% from 4.1% a year earlier, an average reduction of 80 basis points, cutting costs by 27 billion yuan. Participating insurance dividend rates were reduced to 3.1%, an average decline of 110 basis points, reducing costs by a total of 91 billion yuan. The report suggests that the industry must strike a balance between product yield competitiveness and comprehensive liability costs, testing both the operating philosophy of insurers and the wisdom of regulators.

The dividend realization rate is a metric that measures the difference between the actual dividend level of participating insurance products and the expected dividend level, calculated based on the product as a whole. Participating insurance products can distribute surplus through cash dividends or additional insurance dividends, but future dividends and their realization rates are uncertain. In mid-2025, regulators maintained a stance against "excessive competition" in a persistently low-interest-rate environment, using the life insurance industry's average financial return rate over the past three years (3.20%) as a "guideline" for the investment return rate corresponding to the proposed dividend level. Based on disclosures from various companies, this "upper limit" remains in effect. For the latest period, the cash dividend realization rates for new products from top insurers (with a demonstration rate of 3.5% and a preset rate of 1.75%/2.0%) were mostly above 100%, while the realization rates for older products (with a demonstration rate of 3.9%/4.5% and a preset rate of 2.0%/2.5%) were in the 40% to 50% range.

The report selected four major insurers—China Life, Ping An, CPIC, and New China Life—that have disclosed their latest dividend realization rates for a sample analysis. CPIC's actual customer return rate for cash dividends has been relatively stable, with the annual dividend return rate for policyholders still at 3.29% in the early stages of the "upper limit" policy, leading among the top companies. China Life's dividend levels for both new and old products in the latest period reached the regulatory window guidance upper limit of 3.2%. Ping An's dividend realization rates for most products within the same policy effective period were relatively consistent, and the company innovatively launched several products with differentiated dividend accounts this year, creating unique accounts like "Stable Wealth Treasure" and "Benefit Treasure." New China Life showed a stabilizing trend in the current period after two years of downturn, coinciding with its 30th anniversary. Its "Participating Account No. 2" has built a multi-dimensional allocation system featuring "fixed-income as a ballast, equity enhancement, and global allocation." CPIC and New China Life are the only two among the four that offer additional insurance dividend products. Under the "upper limit" policy, the dividend differences among companies have further narrowed, with terminal dividends becoming a differentiating tool. In the current period, CPIC's average realization rate for additional insurance dividends was 70%, and its average terminal dividend realization rate was 56%. New China Life's average realization rate for additional insurance dividends was 151.6%, with an average terminal dividend rate of 77.8%.

The settlement rate for universal life insurance has first declined and then stabilized, currently "bottoming out." As of May 2026, the average annual settlement rate for 1,164 universal life insurance products industry-wide was 2.70%, down approximately 8 basis points from the May 2025 average of 2.78%. A horizontal comparison of the settlement rates of the "Old Seven" insurers shows that New China Life had the highest rate at 2.83%, while Taiping Life had the lowest, with overall differences being small. According to the latest data (May 2026), the average settlement rate of key insurers was 4 basis points lower than that of non-key insurers. The major companies remain relatively "restrained," likely for two reasons: first, regulators and insurers need to balance product competitiveness against comprehensive liability costs, and the current universal life settlement rate is already below the customer return level of 3.2% for participating insurance products after the "upper limit"; second, the "9·24" rally in 2024 generated substantial price differentials and unrealized gains, which have somewhat supported the bottom level of settlement rates.

Risk warnings: The transition to participating insurance products may fall short of expectations. There is a risk of deviation in estimating the impact of different preset rates, demonstration rates, and allocation ratios on dividend levels across different periods and account products. Significant volatility in the equity market could negatively affect the investment returns of insurance companies.