China Galaxy Securities Co., Ltd. has released a research report indicating that 2026, as the inaugural year of China's 15th Five-Year Plan, presents dual opportunities for the insurance industry stemming from improvements on the asset side and transformation on the liability side.
On the asset side, there is potential for diversified optimization of asset allocation, and investment return pressures for insurers are expected to ease against the backdrop of a healthy bull market in equities.
On the liability side, participating insurance has become the core contributor to new premium income. The stabilization of the predetermined interest rate for life insurance reduces reliance on "sales halts," while the "deposit shift" effect in a low-interest-rate era continues to unlock the latent potential of the liability side. The firm is optimistic about the valuation recovery potential within the insurance sector.
It suggests focusing on high-quality targets such as China Life Insurance (601628.SH), PICC Group (601319.SH), Ping An Insurance (601318.SH), China Pacific Insurance (601601.SH), and New China Life Insurance (601336.SH). The key points from China Galaxy Securities' analysis are outlined below.
Market Performance Review
For the month of May (1st to 29th), the insurance sector declined by 9.96%, underperforming the CSI 300 Index by 11.72 percentage points.
In a sector comparison, the communications sector led with gains of 20.40%, while the insurance sector lagged behind all 28 primary industries.
Looking at individual stocks, the five A-share listed insurers collectively faced pressure during May (1st to 29th). The performance was as follows: China Pacific Insurance (-13.56%), China Life Insurance (-7.74%), New China Life Insurance (-7.30%), and PICC Group (-4.74%). Ping An Insurance, China Life Insurance, New China Life Insurance, and PICC Group outperformed the sector average, delivering relative gains.
Transition Period Ends for Solvency II, Industry Capital Adequacy Remains Robust
By the end of the first quarter of 2026, the insurance industry's average comprehensive solvency adequacy ratio stood at 181%, with a core solvency adequacy ratio of 131.9%, both exceeding the regulatory minimums of 100% and 50%, respectively.
Specifically, property and casualty insurers reported ratios of 242.6% and 210.6%, life insurers reported 170.7% and 118.1%, and reinsurers reported 207.40% and 179.8%.
Bond Allocation Increases Overall, Equity Holdings Remain Elevated
In terms of bond asset allocation, the proportion of insurance funds allocated to bonds increased slightly by 0.09 percentage points, rising from 50.43% in Q4 2025 to 50.52% in Q1 2026.
Using the combined "stocks + securities investment funds" metric for life and P&C insurers, the allocation to equity assets increased by 0.15 percentage points, from 15.38% in Q4 2025 to 15.53% in Q1 2026.
Within this, the allocation to stock assets edged up by 0.02 percentage points, from 10.07% in Q4 2025 to 10.09% in Q1 2026.
Premium Growth Slows in April, Industry Net Assets Surpass 4 Trillion Yuan
From January to April, the insurance industry generated original premium income of 27.329 trillion yuan, a year-on-year increase of 5.30%, though the growth rate narrowed by 0.95 percentage points compared to the previous period.
For life insurance, premium income reached 22.400 trillion yuan from January to April, up 6.84% year-on-year, with the growth rate narrowing by 1.05 percentage points.
For property and casualty insurance, premium income was 492.9 billion yuan from January to April, down 1.19% year-on-year, with the decline narrowing by 0.15 percentage points.
In April alone, industry premium growth decelerated. Original premium income for the month was 422.5 billion yuan, a modest year-on-year increase of 0.37%, with the growth rate narrowing by 1.02 percentage points.
As of the end of April 2026, the total assets of the insurance industry reached 429.3 trillion yuan, marking a year-on-year increase of 12.63% and growth of 3.92% since the end of the previous year.
The industry's net assets amounted to 4.11 trillion yuan, reflecting a year-on-year increase of 14.33% and growth of 12.12% since the end of the previous year.
Risk Warnings
Potential risks include weaker-than-expected macroeconomic performance, a sustained decline in long-term interest rates, and heightened volatility in the equity markets.
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