Guotai Junan Securities: Domestic insurance capital's equity allocation scale is expected to expand, and increasing holdings benefit securities and other targets from the entry of incremental funds into the market.

Guotai Junan Securities has released a research report stating that insurance funds, as an important source of medium to long-term funds, are expected to bring incremental benefits to the capital market with clear regulatory guidance and continued policy implementation. It is recommended to increase holdings of brokers, financial information service providers, and pure life insurance with greater flexibility in the equity investment sector benefiting from incremental funds entering the market. Stock recommendations include Hithink RoyalFlush Information Network (300033.SZ), China Galaxy (601881.SH), CICC (03908), New China Life Insurance (601336.SH), and China Life Insurance (601628.SH). Guotai Junan Securities main points are as follows: Long-term interest rates are declining, with overseas insurance funds increasing their equities allocation to enhance investment returns. 1) United States: The percentage of stock assets has gradually increased from around 10% in the early days to currently around 30%. This is due to the long-term decline in US bond interest rates since the 1980s, leading to a shift from products mainly focusing on protection to savings-oriented products like annuities in the US life insurance market. The independent accounts formed by annuities and other products allocate 76% to stock assets, resulting in an increase in equity allocation; 2) Japan: Against the backdrop of long-term decline in long-term interest rates, Japanese insurance funds have increased their allocation to equities both domestically and internationally. For example, the fluctuation of the domestic equity market in Japan in 2013 led to pressure on domestic equity investment returns, while overseas market equity investment returns remained stable, benefiting the current stability of insurance general account investment returns; 3) Europe: The asset allocation of European insurance funds has long-term and stable returns, with a focus on fixed-income assets. In recent years, with the decline in long-term interest rates, there has been a slight decrease in the proportion of fixed income assets, with corresponding increases in equities and alternative investments to enhance investment returns. Timing for increasing allocation is right, and the domestic insurance industry is expected to increase its equity allocation. The central allocation of equities in the domestic insurance industry has remained stable, with the central allocation of stocks and funds since 2016 at 12.7%, which is significantly below the regulatory maximum equity investment ratio limit. This is due to various factors such as market volatility, short-term pressures, capital constraints, and accounting standard changes. With the new situation of declining long-term interest rates and narrowing credit spreads, insurance funds need to strengthen their risk asset allocation. With the favorable policy environment and support for increasing equity investments, it is expected that high dividend yield strategies will become an important direction for insurance funds to increase their equity allocations. It is estimated that the five major state-owned insurance companies will bring approximately 400 billion incremental funds to the market in the next three years. In January, six cabinet departments issued the "Implementation Plan for Promoting the Entry of Medium and Long-term Funds into the Market" and held a press conference, explicitly guiding large state-owned insurance companies to invest 30% of their annual new premiums in A-shares starting from the year 2025. Based on the calculation logic of "new premiums = total premiums - insurance service fees - operating and management expenses", taking only the guidelines from the press conference into account, it is estimated that the five major state-owned insurance companies can bring in incremental funds of 378.8 billion, 393.3 billion, and 408.5 billion in the next three years. Risk warning: Significant fluctuations in the equity market; policy implementation falling short of expectations.