Zhongtai Securities has released a research report stating that a rebalancing of capital flows is expected to persist, with preliminary half-year results potentially boosting the sector's investment sentiment in July. Since late June, the sector has shown a pattern of "three steps forward, two steps back," indicating a trend of rising bottom support, and the firm continues to maintain a positive outlook for the sector's performance around the interim results. This year, the insurance sector's performance rhythm has notably diverged from the broader market. Against a backdrop where technology and growth styles have clearly dominated, the undervalued insurance sector has failed to attract significant capital. The firm believes the sector's overarching investment framework remains unchanged: "short-term relief from capital outflows, medium-term boost to value and profit growth from 'deposit migration & sustained slow bull market', and long-term resolution of spread loss concerns through cyclical recovery." The long-term foundation for the insurance sector lies in deposit migration on the liability side and a sustained slow bull market on the asset side. The key points from Zhongtai Securities are as follows:
Zhongtai Securities has projected the industry's investment yield for the next three years using its non-bank financial insurance fund utilization yield index system. Specifically, the firm first estimates the "new money investment yield" (NMII) level based on the asset allocation structure of insurance funds, combined with current yields of various asset classes (including bond yields to maturity, stock dividend yields, average returns on long-term equity investments, and expected trust yields). Next, assuming the net investment yield on existing assets is the 6-year average of the aforementioned major asset class yields, the firm derives the industry's average net investment yield (NII) based on the average duration of insurance funds and net cash flow scale (the difference between new premium inflows and existing policy payouts). Finally, the firm calculates the total investment yield (TII) by incorporating the buying and selling price difference (non-annualized) of trading financial assets.
Based on this, the firm estimates the current annualized new money yield is approximately 2.61%. The industry's average net investment yield for 2025, 2026, and 2027 is projected to be 3.35%, 3.09%, and 2.87%, respectively. The simulated TII for insurance funds year-to-date is 4.79%, placing it at the 63.49th percentile (upper-middle level) of the historical distribution over the past decade (since 2016). According to calculations, the simulated new money yield for the current period (June 2026) is 2.61% (previous period: 2.63%; same period last year: 2.73%). The simulated net investment yield for the current period is 3.23% (previous period: 3.24%; same period last year: 3.56%). The simulated annualized total investment yield for the current period is 4.79% (previous period: 4.67%; same period last year: 4.33%). The total investment yield exceeds the net investment yield because the non-annualized buying and selling price difference for trading financial assets reached 9.77% this period (previous period: 8.96%; same period last year: 5.14%).
Tracking Fixed-Income Asset Yields: Scarcity of Quality Assets Persists, Yields to Maturity Edge Lower
Based on the firm's calculations, the average NMII for bonds this period is 1.86%, with the existing NII at 2.76%. The adjusted average yield on new deposits is 1.62%, with the existing yield at 2.43%. According to data from Use Trust, the average expected annualized yield for non-standard asset management trusts is 4.79%.
Tracking Insurance Company Bond Allocation: Local Government Bonds with 20-30Y Maturities Are the Main Contributors to Total Allocation and Seasonal Progress
The Bond Connect Southbound channel opened in June, with the asset management arms of six leading insurance companies actively participating.
Tracking Equity Asset Yields: Equity Fund Yields Widen, Ping An's Southbound Enthusiasm for Bank Stocks Remains High
According to the firm's calculations, from the beginning of 2026 to the end of June, the investment yield for insurance funds' equity and fund investments was 9.0% (compared to 5.5% in the same period of 2025). The weighted dividend yield for the Shanghai, Shenzhen, and Hong Kong markets this period is estimated at 3.05%. According to iFind statistics, the weighted average ROE (TTM) for the CSI 300 in Q2 2026 was approximately 9.31% (previous value: 9.24%). This period, industries where insurance funds, as major shareholders, increased their holdings of Hong Kong-listed circulating shares were primarily concentrated in the banking sector. Ping An Insurance (Group) Company of China, Ltd. increased its stake in Agricultural Bank of China Ltd. H-shares, holding a total of 30.03% of the bank's H-share float after look-through at the period-end. Ping An continued to increase its holdings in China Merchants Bank Co., Ltd. H-shares, holding 26.2% of the bank's H-share float after look-through at the period-end, while reducing its stake in China Telecom Corporation Limited H-shares. Hongkang Life Insurance Co., Ltd. continued to sell Bank of Zhengzhou Co., Ltd. H-shares, and Fude Life Insurance Co., Ltd. sold Bank of Chongqing Co., Ltd. H-shares. The ten most frequently researched stocks by insurance funds this period were Jereh Group Co., Ltd., Guangxin Materials Technology Co., Ltd., Zhejiang Crystal-Optech Co., Ltd., BOE Technology Group Co., Ltd., Xinji Energy Co., Ltd., Dajin Heavy Industry Corporation, Rongda Photosensitive & Technology Co., Ltd., Lingyun Industrial Corporation, Ganfeng Lithium Group Co., Ltd., and Liangren Microelectronics Corporation.
Risk Warnings
Projections are subject to data availability and assumption reasonableness constraints, carrying a risk of deviation. Macroeconomic recovery may fall short of expectations, with long-term interest rates declining rapidly and significantly. Volatility in equity markets may intensify.
Comments