A research report from China Securities Co., Ltd. indicates that the insurance sector demonstrated robust growth in the first half of 2026, with steady increases in both life insurance new business value (NBV) and property & casualty (P&C) underwriting profits. The favorable performance of the equity markets also contributed to a broad improvement in total investment yields across the board. Looking ahead, the firm anticipates that the sector's primary investment theme will gradually shift towards valuation recovery and high-dividend allocation opportunities, driven by long-term value considerations.
China Securities Co., Ltd. highlights that the life insurance segment benefits from a confluence of four positive factors: strong resident demand for savings-type policies, industry policies against "involution" (excessive competition), expanded distribution channels for new growth, and the high-quality transition towards participating (dividend) insurance products. These factors solidify a positive long-term outlook for the life insurance liability side. Meanwhile, for non-auto insurance, the implementation of the "report-act-single" (unified reporting and pricing) policy and comprehensive governance measures directly address the pain points of aggressive expansion models. This is expected to drive improvements in P&C expense ratios, potentially strengthening the industry's "Matthew Effect" (where leaders gain further advantages). Currently, sector valuations offer a considerable margin of safety, making their long-term allocation value significant.
Reviewing the H1 2026 performance, the liability side saw life insurance NBV maintain steady growth, with the arithmetic average NBV growth rate for the seven listed insurers reaching +13.7%. The agency channel was the primary driver, posting an arithmetic average NBV growth of +20.3% for these seven companies. P&C underwriting profits also grew steadily, with the combined underwriting profit for the five listed P&C insurers up 15.3% year-on-year. Auto insurance remained the main growth driver, primarily due to improved expense ratios resulting from listed insurers' proactive efforts in refined expense management and strict cost controls amid the deepening "report-act-single" reform. On the asset side, buoyed by the positive equity market, the arithmetic average annualized total investment yield for the seven listed insurers increased by 1.3 percentage points year-on-year to 5.5%. Their arithmetic average net profit growth attributable to shareholders reached +70.9%. The listed insurers increased their allocation to equities compared to the previous year, with the proportion remaining broadly stable compared to the end of last year. Specifically, allocations to OCI (Other Comprehensive Income) equities and TPL (Trading Profit and Loss) equities increased by 1.6 and 1.5 percentage points year-on-year to 5.5% and 6.8%, respectively, and by +0.5 and -0.2 percentage points compared to the end of last year.
Looking forward to Q3, China Securities Co., Ltd. believes the sector's investment focus will increasingly shift towards valuation recovery and high-dividend allocation driven by long-term value. However, the report acknowledges that growth rates may face sequential pressure in Q3 due to a high comparison base from the previous year. Consequently, the primary drivers for future stock price appreciation are expected to gradually transition towards these value-based recovery and income-focused investment demands.
On the asset side, listed insurers are optimizing their asset allocation through multiple measures to provide strong support for the long-term investment return benchmark. This, combined with the liability-side transition to participating products and a rising proportion of policies with lower predetermined interest rates, helps optimize rigid liability costs, thereby solidifying long-term interest spreads through coordinated asset-liability management. In terms of valuation, as of August 31, the P/EV (Price to Embedded Value) ratio for A-shares of listed mainland insurers ranged from 0.47x to 0.70x, while for H-shares it was between 0.28x and 0.56x. Seven listed insurers have already announced interim dividend payments, with the arithmetic average increase in interim dividends reaching +24.7%. The dividend yield for some targets exceeds 4%, indicating a high overall safety margin. Overall, the medium-to-long-term allocation value of the insurance sector is prominent at current levels. Should potential pressure on Q3 growth rates, due to the high base, cause short-term market fluctuations, the report suggests investors seize the opportunity to position themselves.
The key risks include: underperformance in liability-side reforms; a more significant than expected decline in long-term interest rates; a sharp downturn in the equity market; a sustained and significant shortfall in the recovery of resident demand for protection-type products; intensified market competition beyond expectations; a rise in auto insurance loss ratios exceeding expectations; and natural disaster risks impacting results beyond expectations.
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