Minsheng Securities: From performance differentiation to asset-liability synergy, focusing on seizing opportunities in both insurance alpha and beta.

Minsheng Securities released a research report stating that by 2025, the overall quality of insurance business is showing a good trend of improvement, with the quality of life insurance business continuously increasing, NBV generally growing and individual insurance channel workforce basically stabilizing. The bancassurance channel has performed excellently, with value contribution continuously increasing. In terms of property insurance, the refined operation of motor and non-motor insurance is expected to drive a continuous slight optimization of COR, consolidating the underwriting profit foundation. In terms of investment, the asset allocation of major listed insurance companies is stable and is expected to continue benefiting from the rebound performance of the equity market under the expectation of macroeconomic stabilization and recovery. Sector valuation is expected to continue to recover. The firm suggests actively seizing opportunities of stock price corrections, with current insurance funds focusing on asset-liability matching to address interest rate spread risk and liability duration matching. The main viewpoints of Minsheng Securities are as follows: Life insurance: the proportion of dividend insurance is expected to increase, strengthening channel quality further. 1) Premium growth: new single premiums are expected to continue under pressure, with structural quality expected to improve and NBV expected to continue positive growth. In terms of new single premiums, the firm expects major listed insurance companies in 2025 to still be under pressure overall, except for New China Life Insurance, expecting negative growth to be maintained, total premiums are expected to continue to grow steadily due to the support of past renewal premiums. 2) Channel end: individual insurance workforce is expected to stabilize, "reporting branch integration" is expected to improve channel quality performance. It is expected that in the second half of 2025, the workforce scale of the top listed insurance company's individual insurance channels will achieve quarter-on-quarter positive growth, and per capita productivity is expected to continue to improve. Bancassurance channels deepen cooperation and become important channels contributing scale and value synchronously, with the value rate of new business (NBVM) in bancassurance channels expected to continue to increase, emphasizing the value contribution of bancassurance channels. 3) Product structure: with the decrease in interest rates, the demand for potential interest spread losses is increasing, the proportion of dividend insurance is expected to continue to increase. Non-life insurance: Liability side continues steady growth, underwriting profit continues to improve. 1) Motor insurance: expected to grow steadily, new energy vehicle insurance becoming a core driver of premiums, the firm expects the annual motor insurance premiums of the non-life insurance industry to maintain a steady growth rate of about 4-6%, the premium scale is expected to reach close to RMB 1 trillion by the end of 2025, providing steady liability side support for the non-life insurance sector. 2) Non-motor insurance: Growth is expected to continue to exceed that of motor insurance, policy business and innovative business are expected to jointly drive rapid growth in non-motor insurance premiums. 3) Underwriting profit: improvement in claims, continued expense control, significant improvement in COR, since the beginning of 2025, natural disasters have been light, and claims have significantly improved in 1Q25. 4) Competitive landscape: the market share of the top "big three" is expected to continue to increase, and the Matthew effect may be reinforced. Investment side: Insurance funds entering the market for long-term capital, equity investments become core variables for investment returns. 1) Long-term capital entering the market, equity investments are expected to provide elasticity. 2) Industry investment portfolio structure: the proportion of bonds and equity investments is expected to continue to increase, with bond ratios maintaining high levels while structures continue to optimize, the growth rate of the proportion may slow down marginally. With long-term capital entering the market, the proportion of stock allocation is expected to continue to increase. The pure stock allocation ratio of life insurance companies is 8.4%, up 0.9% year-on-year, maintaining a consecutive three-quarter rise; the pure stock allocation ratio of non-life insurance companies is 7.6%, up 0.4% year-on-year, also continuing a slight upward trend. 3) Investment portfolio under IFRS9: OCI is expected to continue to increase, searching for certainty with targets of high dividends and high stock returns. Embedded value: NBV is expected to continue to improve, with the growth of EV of top insurance companies differentiating, focusing on asset-liability matching capabilities. With the switch to dividend insurance and channel "reporting branch integration" cost control, the negative impact of adjustments to long-term investment yield assumptions is expected to be gradually absorbed, potential interest spread pressure is expected to gradually decrease, and insurance companies with better matching of assets and liabilities, business structure, and channel quality are expected to benefit more. The overall performance of ROEV is expected to significantly improve. Risk warning: policies falling short of expectations, increased volatility in capital markets, slower growth in household wealth than expected, faster-than-expected decline in long-term interest rates, insurance reform falling short of expectations.