Soochow Securities has released a research report indicating that demand in the insurance market remains robust. The ongoing transition towards participating policies is expected to further optimize the cost of fixed liabilities, thereby alleviating pressures from the spread compression risk. With the yield on 10-year government bonds currently stabilizing around 1.69%, the firm anticipates that if the long-term rates continue to recover and rise alongside domestic economic resurgence, the pressure on insurers' new fixed-income investment yields will ease.
By the end of the second quarter of 2026, public fund holdings in insurance stocks had dipped to 0.42%, reflecting a significant underweight position. As of August 31, 2026, the sector's valuation stood at 0.47-0.76 times the 2026E embedded value (PEV) and 0.93-1.62 times the price-to-book ratio (PB), hovering near historical lows. Consequently, the firm maintains its "Overweight" rating on the industry.
Investment Returns Drive Strong Earnings Growth, Dividends Offer Attractive Yields
1) The combined net profit attributable to shareholders of the top A-share and H-share listed insurers surged by 78% year-on-year in the first half of the year, with A-share insurers reporting robust growth in Q2, primarily fueled by enhanced investment returns. Notably, China Life saw its H1 profit skyrocket by 229% year-on-year, largely due to its outstanding performance in equity investments.
2) The aggregate net assets attributable to shareholders of the five major A-share insurers grew by 6.8% from the start of the year, while their embedded value increased by 7.0%. 3) Interim dividends generally saw rapid growth with payout ratios remaining broadly stable. For instance, China Life and PICC both increased their dividend per share by 50% and 47% year-on-year respectively, with PICC also lifting its payout ratio.
Investments: Investment Returns Soar, Secondary Equity Allocation Hits New Record
1) The scale of investment assets grew steadily, with the total for the five A-share insurers increasing by 4.5% from the start of the year. 2) The buoyant stock market significantly boosted investment returns. ① Total investment returns saw substantial year-on-year growth across the board in H1, with China Life and Taiping up 147% and 121% respectively. All companies also registered high trading gains, indicating they capitalized on market strength to lock in floating profits. ② The average annualized net investment yield for listed insurers dipped 0.4 percentage points year-on-year, mainly due to low interest rates. However, the average annualized total investment yield jumped 1.7 percentage points year-on-year, driven by the strong equities market. Due to structural differentiation in market performance, the comprehensive investment yield trailed the total investment yield. 3) Allocation to secondary equities increased further, with a notable shift towards FVOCI stocks. ① Investment in bonds continued to grow, maintaining a broadly stable proportion of total investment assets, up an average of 0.2 percentage points from the start of the year. Government bonds remain a key allocation focus, though the pace of extending asset duration has further decelerated. ② Listed insurers continued to increase their secondary equity exposure, with the average allocation to stocks and equity funds rising by 1.3 percentage points from the start of the year to 17.8%. New China Life led the pack, increasing its allocation by 4.4 percentage points to 25.5%. The proportion of equities designated as FVOCI also rose, with the weighted average for listed insurers reaching approximately 46%, up 5.5 percentage points from the start of the year. China Life and Ping An saw their FVOCI proportions increase by 10 and 9.3 percentage points respectively, marking the most significant rises.
Life Insurance: NBV Continues to Grow, Liability Costs Expected to Improve Further
1) Premiums: New business premiums grew at a healthy clip in H1, though the growth rate moderated sequentially in Q2. Participating policies have become the primary driver of new business, accounting for over 90% of new sales for most companies. 2) Distribution Channels: ① Individual agency business performed strongly, with most insurers recording double-digit growth in new business premiums from this channel in H1. The total number of agents at listed companies edged down 0.4% from the start of the year, but productivity per agent improved markedly. ② Bancassurance results were mixed, with performance diverging due to a high comparison base from the previous year and strategic differences. Sunshine Insurance and Ping An saw comparatively faster growth in new bancassurance premiums. 3) NBV: Continued its upward trajectory, with sensitivity to investment yields still improving. ① The combined NBV for listed insurers grew 18.5% year-on-year, with China Life leading the pack at a 33.7% increase. NBV margins remained broadly stable. ② The sensitivity of NBV/VIF to investment yields for listed insurers in H1 2026 continued to decline compared to 2025, suggesting ongoing improvement in liability costs for both new and existing business.
Property & Casualty Insurance: Combined Ratio Improves Year-on-Year
1) Premiums: Overall growth remained subdued, but the share of non-auto insurance continued to rise. H1 premiums for listed P&C insurers grew 1.7% year-on-year, with Ping An posting the fastest growth among the "Big Three" at 4%. The average proportion of non-auto premiums increased by 0.8 percentage points. 2) Combined Ratio: Underwriting profitability broadly improved, benefiting from continued expense optimization. All listed insurers achieved underwriting profits, with an average combined ratio of 96.1%, a 0.2 percentage point year-on-year improvement driven mainly by a lower expense ratio. PICC reported the lowest combined ratio at 94.5%, while CPIC showed the most significant improvement, with its combined ratio down 1.3 percentage points year-on-year.
Risk Warning
Key risks include a secular downtrend in long-term interest rates, volatility in the equity market, and new business growth falling short of expectations.