The insurance sector is being identified by several brokerages as entering a period of valuation recovery.
As of the midday close on June 10, 2026, the insurance sector index rose by 3.22%. Among individual stocks, Ping An Insurance (Group) Company Of China, Ltd. (SHSE: 601318) gained 2.41%, New China Life Insurance rose 3.81%, China Life Insurance surged 4.19%, China Pacific Insurance advanced 3.23%, and PICC Group increased by 2.42%, indicating a broad-based and significant rebound for the sector.
In a research note dated June 2, Guosen Securities pointed out that the insurance sector has experienced a significant correction since 2026, with the average price-to-embedded-value (P/EV) ratio for major A-share insurers falling to a range of 0.5x to 0.7x. As of May 30, the average P/EV for A-share insurers was approximately 0.61x, sitting at the 30.6th percentile since 2017.
In a mid-year strategy report for the insurance industry released on June 7, Guojin Securities noted that the insurance index has declined by 22.8% year-to-date, underperforming the CSI 300 Index by 26.8 percentage points. The report suggests that while the industry's fundamentals continue to improve, capital market flows remain a key factor suppressing share price performance.
The simultaneous occurrence of falling share prices and improving fundamentals forms the core narrative for recent discussions on insurance stocks. The recovery logic presented by brokerages generally revolves around the liability side, asset side, and capital flows: the liability side is supported by bancassurance, participating insurance, and new business value; the asset side gains profit elasticity as the equity market recovers; while capital flow disruptions are suppressing short-term performance. Low valuation alone does not guarantee recovery, but low valuation coupled with improving business metrics does bring insurance stocks back into focus.
Valuation at Lows: Is the Liability Side the Deciding Factor?
From a market performance perspective, it has been a challenging year for insurance stocks.
Guojin Securities' review indicates the insurance index has fallen 22.8% year-to-date. The sector initially rose due to strong "first-quarter" performance but later entered a volatile phase, affected by external risks, pressure on first-quarter profits, and capital rotation into technology and growth sectors.
Capital flow pressure has been a direct factor. Guojin Securities' report shows that from January to February 2026, broad-based index products like CSI 300 ETFs saw significant net outflows, with 25 such ETFs experiencing cumulative net outflows of approximately 5,998 billion yuan over six weeks starting January 5. Given that listed insurers had a combined weighting of about 4.1% in the CSI 300 at the start of the year, they faced passive selling pressure amid sustained ETF redemptions.
Capital outflows and underweight positioning explain the sector's weakness despite improving fundamentals. Low valuation is merely an outcome; the real question for a recovery is whether capital is willing to return.
The first pillar of support for the insurance stock recovery thesis comes from the life insurance liability side.
Guosen Securities data shows that from January to April 2026, the industry's original premium income reached 2.73 trillion yuan, a year-on-year increase of 5.3%. Within this, life insurance premium income grew by 6.3%, while property and casualty insurers' original premium income rose by 2.2%. Life insurance maintained growth despite a high base in the same period last year.
New business value provides stronger support for valuation. In Q1 2026, new business value for A-share listed insurers continued to grow. Guosen Securities data indicates that China Life Insurance, New China Life Insurance, PICC Group, Ping An Insurance, and China Pacific Insurance saw their new business value grow by 75.5%, 24.7%, 21%, 20.8%, and 9.6% year-on-year, respectively. All listed insurers achieved positive new business value growth in Q1 2026, but divergence intensified.
The bancassurance channel is a focal point of the current liability-side strength. From January to April 2026, industry-wide regular premium income through bancassurance reached 200.1 billion yuan, up 18% year-on-year. Among this, the "top seven" insurers saw regular bancassurance premiums of 80.4 billion yuan, a surge of 59%; ten bank-affiliated insurers reported 41.8 billion yuan, down 1% year-on-year; non-bank foreign insurers had 6.8 billion yuan, down 3%; and other small and medium-sized domestic insurers recorded 71 billion yuan, up 3%. Guojin Securities noted that the market share of regular new single premiums for the "top seven" insurers in bancassurance increased by about 10 percentage points year-on-year to 40%.
Participating insurance is also boosting channel activity. The current guaranteed interest rate for participating policies is 1.75%, with potential for higher returns, making them attractive to risk-averse savings-oriented customers. In Q1 2026, participating insurance premiums accounted for over 80% of China's life insurance premiums, returning to historically high levels.
It should be noted that the current bancassurance expansion is not solely about scale. Following the deepening of the "fee-to-premium alignment" regulations, the scope for fee competition has narrowed, amplifying the advantages of leading insurers in brand, channel, and investment capabilities. At the end of March 2026, regulators issued a notice strengthening fee management in bank agency channels, expanding the cost scope from commissions to total costs, including salaries for bancassurance specialists, training, customer service fees, and fixed cost allocations. With channel fees being standardized, the improvement in bancassurance value margins has become a key reason for brokerages' optimism on the liability side.
Asset Side Transforms from Drag to Source of Elasticity
Equity investments are expected to see rapid growth.
Pressure on insurers' profits in the first quarter primarily stemmed from the investment side.
In Q1 2026, the five major A-share listed insurers collectively achieved net profit attributable to shareholders of 69.88 billion yuan, a year-on-year decrease of 17%. The report attributes the widespread negative profit growth mainly to drag from the asset side, citing factors including Q1 international volatility, weaker performance of the CSI 300 and Hang Seng indices compared to the same period last year, and a significant increase in insurers' equity allocation compared to last year.
However, the asset side is also the source of potential elasticity for subsequent valuation recovery. Since April, the CSI 300 has risen approximately 8.2%. If the equity market maintains this trend, insurers' Q2 investment returns are expected to improve significantly, driving net profit growth. Another Guojin Securities weekly report cited a roughly 9.2% gain for the CSI 300 since April, with a largely consistent directional view.
The composition of insurance capital's equity allocation is also changing. As of the end of 2025, the average allocation to stocks and funds for seven listed insurers was 17.4%, comprising 12.2% in stocks and 5.2% in funds. In 2025, the total secondary equity holdings for these seven companies grew by 59% for the full year, an absolute increase of 1.48 trillion yuan. By Q1 2026, stock, fund, and long-term equity investments for the life and property & casualty insurance industries continued to grow by 343.5 billion yuan.
At the industry level, by the end of Q1 2026, total investment assets for life and property & casualty insurance amounted to 38.02 trillion yuan, up 2.5% from the end of the previous year. Bonds accounted for 50.5%, up 0.1 percentage points from year-end, while the combined share of stocks, funds, and long-term equity investments was 23.4%, up 0.3 percentage points. Insurance capital has not abandoned its fixed-income core holdings, but the importance of equity assets has increased.
Allocation styles are shifting as well. Guojin Securities stated that after 2024, insurance capital increased its exposure to technology and advanced manufacturing, expanding its style from "dividend-steady" to "dividend-steady + growth." In Q1 2026, insurance capital reduced holdings in high-flying sectors like communications and non-ferrous metals, while increasing allocations to high-dividend stocks in home appliances, banking, utilities, food & beverage, and coal.
Guosen Securities focused on other comprehensive income (OCI) high-dividend assets. The institution believes that in a low-interest-rate environment, the net investment yield's strategic importance for insurance capital has risen, with dividend assets evolving from a temporary defensive tool to an "institutional core holding" for insurers' cross-cycle asset allocation. Guosen Securities estimates that, under its model assumptions, incremental allocation by insurance capital to OCI dividend stocks could accumulate to about 1.8 trillion yuan by 2028 and approximately 3.5 trillion yuan by 2030.
With long-term interest rates at low levels and reinvestment yields for fixed-income assets declining, high-dividend assets are becoming an important source for supplementing insurers' net investment income.
Recovering Low Valuation Depends on Interest Rates and Profit Realization
Brokerage views on the recovery of insurance stocks are not identical, but the underlying logic is broadly similar. The liability side is supported by participating insurance, bancassurance, and new business value; the asset side looks to equity market recovery and high-dividend allocations; valuations are at historical lows; while capital flow disruptions create short-term pressure.
Guosen Securities posits that the industry is currently in a misaligned phase of strong liability-side momentum, converging asset-side volatility, and still-low valuations. Guojin Securities' mid-year strategy report states that once market expectations stabilize and focus returns to Q2 earnings logic, insurance stocks will experience valuation recovery.
However, recovery will not rely solely on the phrase "low valuation." The 17% year-on-year decline in Q1 profits reminds the market that asset-side volatility can still quickly impact the income statement. The 10-year government bond yield remains low; Guosen Securities' report mentions it is currently around 1.7%, with the low-rate environment continuing to pressure net investment yields. Guojin Securities also lists equity market volatility, a significant decline in long-term interest rates, and intensified industry competition as major risks.
From an operational standpoint for insurers, declining liability costs and the shift towards participating insurance in a low-rate environment have indeed improved new business quality. Guojin Securities noted that in 2025, the break-even yield for new business value for listed insurers (excluding Taiping) decreased by 0.75 percentage points year-on-year, indicating enhanced policy profitability. Meanwhile, in Q1 2026, the agent forces for China Life Insurance and China Pacific Insurance grew by 1.2% and 1.1%, respectively, from year-end, showing signs of stabilization for leading insurers' agent numbers.
Therefore, the valuation recovery for insurance stocks resembles a process requiring continuous verification. Whether high growth in regular bancassurance premiums continues, whether participating insurance sales maintain their appeal after potential demonstration rate adjustments, whether Q2 investment returns can fill the Q1 profit gap, and whether long-term interest rates stabilize within a market-acceptable range will all influence the pace of capital returning to the sector.
The renewed attention on insurance stocks does not necessarily indicate a market reversal. More accurately, there are now observable changes in valuation, the liability side, and the asset side that warrant discussion. For the market, the next steps involve monitoring not just the "recovery is expected" narrative in research reports, but also the profits in Q2 earnings, the regular premiums in bancassurance channels, the high-dividend yields in investment portfolios, and whether capital is willing to allocate some funds away from the concentrated technology trade.
For now, insurance stocks have established the narrative foundation for valuation recovery. But moving from narrative to share price performance requires confirmation from both earnings and capital flows.
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