JPMorgan has released a research report stating that it expects Chinese insurance companies to report very weak third-quarter earnings, with industry net profit potentially falling 53% year-on-year due to stock market volatility, following a sharp 223% surge in the second quarter.

However, the bank does not believe this will become a major downward pressure on share prices, as first-nine-month net profit is expected to be roughly stable with only a 3% year-on-year decline, earnings warning risk is limited, 2026 earnings per share forecasts have seen limited revisions after strong first-half results, and the sector has underperformed the broader market over the past month.

Therefore, the bank recommends using the weakness as an opportunity to increase holdings in Ping An (02318) and China Life (02628), citing their attractive expected dividend yields of 8% and 4% respectively for fiscal year 2027, solid solvency capital, and steady growth in contractual service margin.

Key catalysts before year-end include final dividend per share guidance announced during third-quarter earnings conference calls, and potential government support policies for pension and long-term care that may come with tax incentives.

The bank notes that weak third-quarter results are largely priced in by the market. China Life and NCI (01336) are expected to face the greatest pressure, with net profit forecast to decline 89% and 70% year-on-year respectively.

Due to insurers' equity exposure and fair value through profit or loss classification, accounting profits remain highly sensitive to stock market movements. According to the bank's estimates, a 10% change in stock market volatility translates to a sensitivity of approximately 46% to forecast fiscal year 2026 net profit.

JPMorgan expects major insurers' new business value to grow 22% year-on-year in 2026, with life insurance growth remaining solid; non-life insurance growth is relatively weak with higher catastrophe risk.

The bank prefers stocks that benefit from dividends and policy support over those facing diminished underwriting momentum and higher reinvestment risk, with the ranking being Ping An, China Life, CPIC (02601), PICC Group (01339), NCI, and PICC P&C (02328).