According to a research report from Guotai Haitong Securities Co., Ltd. (ASX: 601211), the base effect from the third quarter may impact the short-term growth rate of insurers' liability side. In the long term, robust demand for insurance savings among residents is expected to drive steady growth in the liability side of listed insurers.
The report anticipates that the semi-annual results and dividend expectations of listed insurers will be a short-term market focus. The long-term valuation anchor remains influenced by interest rates and asset-liability matching levels. The implied 10-year government bond yield in current stock prices is significantly lower than the actual yield, suggesting potential for valuation recovery in insurance stocks. The firm maintains an "Overweight" rating on the sector.
Key Points from the Report
The event relates to a quarterly meeting of the Life Insurance Industry Reserve Assessment Rate Expert Advisory Committee held on July 20, which concluded that the current research value for the guaranteed rate of ordinary life insurance products is 1.94%.
Regulations guide the adjustment of life insurance product guaranteed rates in line with market rates. In Q3 2025, the guaranteed rate for traditional insurance was guided down to 2.0%.
According to regulatory notifications, the Insurance Association of China will announce a quarterly research value based on market rates. A mechanism is triggered requiring insurers to lower the maximum guaranteed rate for new products if their in-force product rates exceed this research value by 25 basis points or more for two consecutive quarters.
The research values announced on specific dates in 2025 and 2026 showed a declining trend, culminating in a trigger in Q3 2025. Insurers subsequently adjusted the maximum rates for new traditional, participating, and universal life products to 2.0%, 1.75%, and 1.0%, respectively.
Latest Research Value Trends
The latest research value for the guaranteed rate, announced in July 2026, is 1.94%, a 1 basis point increase from the 1.93% recorded in April 2026.
As of July 21, 2026, the 10-year government bond yield was 1.74%. Its moving averages show signs of stabilization. Based on the current upper limit for life insurance product rates and the adjustment rules, a subsequent research value persistently below 1.75% for two quarters would trigger another rate reduction mechanism.
The firm expects that if market rates remain relatively stable, another trigger for a guaranteed rate cut is unlikely in the short term.
Asset and Liability Synergy
On the liability side, the continued reduction in the maximum guaranteed rate for ordinary life products over recent years, coupled with a shift towards floating-return products, is expected to gradually improve the cost of existing liabilities.
On the asset side, the stabilization of long-term interest rates and insurers' optimization of asset allocation towards high-quality equity assets are favorable for stabilizing investment returns.
The report emphasizes that interest rates remain a core factor influencing insurance operations and stock valuations.
Risk Factors
Key risks include a decline in long-term interest rates, volatility in the equity market, and slower-than-expected improvement in liability costs.
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