Recent analysis from Guosen Securities Co.,Ltd. highlights the ongoing transformation within the insurance sector's liability side, as companies deepen their comprehensive overhaul of products, channels, and costs. The transition towards participating policies and improvements in channel quality are progressing steadily, strengthening underwriting profitability resilience. On the asset side, the demand for long-duration asset allocation and high-dividend core holdings persists, with a balanced restructuring of asset portfolios advancing and overall earnings stability gradually improving.

Delving into performance metrics, the first half of 2026 witnessed a notable surge in profits for listed insurers, driven primarily by investment gains. Specifically, China Life Insurance, New China Life Insurance, Ping An Insurance, PICC Group, and China Pacific Insurance saw net profits attributable to shareholders rise by 228.6%, 54.0%, 36.1%, 38.5%, and 10.4% year-on-year, respectively. This divergence in performance can be largely attributed to differences in investment-side elasticity. Underwriting profits continued to serve as a stabilizer, contributing 26%, 41%, 44%, 53%, and 67% to the total profits of these five insurers, with investment activities emerging as the primary driver of growth for the period.

Focusing on the life insurance segment, the New Business Value (NBV) has maintained a strong growth trajectory. China Life Insurance, New China Life Insurance, PICC Group, Ping An Insurance, and China Pacific Insurance reported NBV increases of 33.7%, 11.9%, 2.5%, 11.2%, and 12.7%, respectively. Participating policies have become the dominant product type, with Ping An Insurance seeing these products account for over 90% of its new business and China Pacific Insurance raising its share to 55.5%. While these policies effectively meet savings demand, they typically carry lower value margins. On the distribution front, regulatory document No. 65 is steering bancassurance towards a value-focused transformation, leading to significant divergence in premium growth rates. Leading insurers are proactively balancing scale and value by extending premium payment periods, deepening engagement with high-net-worth clients, and expanding into health and elderly care ecosystems. The Contractual Service Margin (CSM) balance has generally accelerated compared to the start of the year, indicating an expanding profit potential for the future.

In the property and casualty (P&C) insurance sector, the combined operating ratio (COR) is improving, underscoring underwriting resilience. In the first half of 2026, the top three P&C insurers saw aggregate premiums rise by 2.1% year-on-year. Within auto insurance, new energy vehicles (NEVs) provided the core growth impetus, with premium growth rates exceeding 20% for all three companies and China Pacific Insurance attributing 23.9% of its auto premiums to NEVs. In the non-auto segment, health, accident, and liability insurance products continued to expand. Underwriting profitability improved across the board, with PICC P&C, Ping An P&C, and CPIC P&C reporting CORs of 94.5%, 95.1%, and 95.0%, respectively—down 0.8, 0.1, and 1.3 percentage points year-on-year. Expense ratios generally declined, aided by the "unified reporting and settlement" policy. Despite extreme natural disasters in the first half of the year elevating claims pressure, leading insurers smoothed volatility through catastrophe reserve provisioning, and the comprehensive management of non-auto risks is beginning to show results.

Turning to investment strategies, a three-dimensional rebalancing is underway to hedge against market fluctuations. While total investment returns improved for the industry in the first half of the year, buoyed by a recovery in the equity market, net investment yields faced pressure due to falling interest rates, resulting in mixed performance among insurers. Leading companies are executing rebalancing across three key dimensions: equity structure, asset classes, and fund allocations. Within equities, there is a noticeable shift towards adding to high-dividend Other Comprehensive Income (OCI) assets while reducing Trading at Fair Value through Profit or Loss (TPL) growth stocks. For instance, China Life Insurance saw its OCI equity balance increase by 69%, and Ping An Insurance by 17%, while both actively reduced their TPL equity exposure by up to 21%. A clear movement from non-standard to standard assets is evident, with the broad non-standard asset proportion declining by 0.7 to 1.7 percentage points across the five major insurers. Fund allocations are diverging, with New China Life Insurance and PICC Group reporting fund balance increases exceeding 30%. Under IFRS 17, insurers are adopting differentiated account strategies: traditional insurance accounts utilize OCI assets to stabilize profits, while participating accounts leverage CSM to seek higher returns.

Key risks that could impact these trends include premium income falling short of expectations, continued volatility in the capital markets, and a decline in long-term interest rates.