China Taiping Insurance Holdings: Overall improvement in the value rate of new business, life insurance NBV continued to grow in Q1 25.

Guotai Haitong released a research report stating that thanks to the overall improvement in the new business value rate and the active business strategies of some insurance companies driving new single sales, the 1Q NBV of life insurance continued to grow in 2025. However, the net investment yield continues to be under pressure in a low interest rate environment, with the total investment yield and comprehensive investment yield showing differentiation. It is expected that the new single sales of listed insurance companies in the second quarter of 2025 will be better than expected, and the reduction in predetermined interest rates and strengthened cost control will bring about an improvement in the value rate, with optimism for the NBV of listed insurance companies in the second quarter. With the push of incremental funds into the market, it is expected that insurance companies will increase their equity investment ratio and optimize their asset allocation structure. Guotai Haitong's main points are as follows: NBV continues to grow, COR significantly improves, profit and net assets differentiate 1) Thanks to the overall improvement in the new business value rate and the active business strategies of some insurance companies driving new single sales, the 1Q NBV of life insurance in 2025 continued to grow, respectively: New China Life Insurance (67.9%) > Taikoo Life Insurance (39.0%) > Ping An Insurance (34.9%) > PICC Life Insurance (31.5%) > AIA (12.8%) > China Life Insurance (4.8%). 2) Due to the reduction in catastrophe claims and optimization of business structure, the 1Q COR of property insurance in 2025 improved significantly, respectively: PICC Property Insurance (94.5%, -3.4pt), Ping An Property Insurance (96.6%, -3.0pt), Taikoo Property Insurance (97.4%, -0.6pt). 3) The net investment yield continues to be under pressure in a low interest rate environment, with differentiation in total investment yield and comprehensive investment yield. 4) The profit performance of listed insurance companies in 1Q 2025 showed some differentiation, expected to be affected by both insurance service performance and investment service performance, with ROE growth rates for the parent company being: PICC P&C (92.7%) > The People's Insurance (43.4%) > China Life Insurance (39.5%) > New China Life Insurance (19.0%) > China Pacific Insurance (-18.1%). 5) The net asset performance of listed insurance companies in 1Q 2025 showed differentiation, with growth rates compared to the beginning of the year being: PICC P&C (4.9%) > China Life Insurance (4.5%) > The People's Insurance (3.9%) > Ping An Insurance (1.2%) > China Pacific Insurance (-9.5%) > New China Life Insurance (-17.0%), expected to be affected by differences in insurance contract liability assessment methods. Balancing assets and liabilities in response to a low interest rate environment, good for stability of long-term profitability and dividends 1) Since 1Q, the proportion of floating income products of listed insurance companies has increased, benefiting from the reduction in the rigid cost of liabilities; since 2025, the regulatory authority has continuously issued policies to guide the industry to establish a dynamic adjustment mechanism for predetermined interest rates of products, benefiting from the improvement in the risk of interest spread. 2) In 1Q, some insurance companies improved their solvency adequacy ratio through financial asset reclassification, with the downward cycle of interest rates increasing the proportion of OCI assets, benefiting from promoting asset-liability matching and relieving fluctuations in financial statements. It is expected that the NBV will continue to improve in the second quarter, with an increase in equity allocation on the asset side It is expected that listed insurance companies will continue to increase their sales efforts for dividend insurance in the second quarter, and despite expectations of a reduction in predetermined interest rates, insurance savings remain attractive. It is expected that the new single sales of listed insurance companies in the second quarter of 2025 will be better than expected, and with the reduction in predetermined interest rates and strengthened cost control, an improvement in the value rate is expected, with optimism for the NBV of listed insurance companies in the second quarter. With the push of incremental funds into the market, it is expected that insurance companies will increase their equity investment ratio and optimize their asset allocation structure. Investment recommendation From the underwriting side, PICC P&C underwriting profits have significantly improved, expected to be mainly due to improvements in external catastrophe claims and internal business structure optimization; for life insurance companies, it is expected that the reduction in life insurance predetermined interest rates and strengthened cost control will benefit the improvement in policy profitability. From the investment side, market fluctuations and differentiated asset allocation strategies have led to a differentiation in investment yield. In a low interest rate environment, it is expected that strengthening asset-liability matching is gradually becoming an industry consensus, with the reduction in liability costs and optimization of asset allocation benefiting the stability of profits and dividends of listed insurance companies. Recommendations for the insurance industry focus on two main lines: 1) Head property insurance companies are expected to have a higher certainty of profit improvement, and it is recommended to increase holdings of PICC P&C (02328); 2) With the background of incremental funds entering the market, there will be more significant flexibility in the investment side of life insurance, and it is recommended to increase holdings of New China Life Insurance (601336.SH), China Life Insurance (601628.SH), China Pacific Insurance (601601.SH), and Ping An Insurance (601318.SH). Risk warning Long-term interest rate decline; market volatility; failure to control liability costs as expected.