Shenwan Hongyuan Group Co., Ltd. has released a research report stating that the recent phased adjustment in the insurance sector is primarily due to the amplification of the sector's beta attributes amid increased market attention. The firm maintains a positive medium-term outlook on the trend of improvement in both assets and liabilities. Following the introduction of new public fund regulations, the entry of insurance capital into the market, and the formation of a consensus expectation for a bull market, attention on the significantly underweighted insurance sector has continued to rise. Some institutions view insurance allocation as a "strong offensive" strategy, which amplifies the sector's beta characteristics during market fluctuations. The firm is optimistic about the medium-term systemic value revaluation opportunities in the insurance sector. The main points of Shenwan Hongyuan's analysis are as follows:

The implementation of new accounting standards in the insurance industry has profound implications. To enhance comparability of performance and profitability transparency, listed insurers adopted the new financial instruments standard (IFRS 9) and the new insurance contracts standard (IFRS 17) in 2023, while non-listed insurance companies are required to adopt them by January 1, 2026. The new standards fundamentally alter the recognition and measurement rules of the previous standards, significantly impacting insurers' accounting practices, operational management, and valuation logic.

IFRS 9: Asset classification shifts from four categories to three, increasing the proportion of assets measured at fair value. 1) The classification of financial assets is now based on an objective three-category approach—Amortized Cost (AC), Fair Value Through Other Comprehensive Income (FVOCI), and Fair Value Through Profit or Loss (FVTPL)—determined by the business model for managing financial assets and the contractual cash flow characteristics of the financial assets. For specific assets: i) Stocks: Can be classified as FVTPL or FVOCI. If classified as FVOCI, there are holding period restrictions; dividends are recorded in the income statement, while fair value changes are recorded in other comprehensive income. Upon sale, fair value changes are directly transferred to the balance sheet without affecting profit. ii) Bonds: Classified as AC, FVTPL, or FVOCI based on the business model and contractual cash flow characteristics. If classified as FVOCI, interest is recorded in the income statement, while fair value changes are recorded in other comprehensive income. Upon sale, fair value changes are recorded in the income statement. iii) Funds: Currently, all funds are classified as FVTPL. 2) The impairment loss provision method has shifted from the "incurred loss model" to the "expected credit loss model." This approach measures the impairment provision required at the current balance sheet date based on the expected value of potential future default events, reflecting the true value of financial assets in a timely manner.

IFRS 17: Reshapes the logic of financial statements, making the structure of profit sources clearer. 1) The premium recognition principle shifts from a cash basis to an accrual basis, recognizing only revenue corresponding to services rendered in the current period, while excluding the "investment component" from contracts. 2) The segmentation and measurement of insurance contracts focus more on the essence of the contracts. Under the new standard, insurance contract groups are the sole measurement unit for financial models, with new measurement approaches introduced for participating policies, onerous contracts, and short-term insurance to accommodate their specific characteristics. 3) The sensitivity of insurance contract liabilities to spot interest rates has significantly increased, leading insurers to pay greater attention to asset-liability matching in volatile interest rate environments. A new item—Contractual Service Margin (CSM)—is introduced, representing the potential or unearned profit from future services to be provided under insurance contracts. CSM is gradually recognized as actual profit over the insurance term as services are rendered to customers, serving as the most important source of current underwriting profit and closely linked to insurers' profitability performance.

Risk warnings include a decline in long-term interest rates, significant fluctuations in the equity market, frequent natural disasters, and regulatory policy impacts exceeding expectations.