Huaxi: Listed insurance companies' net profit is expected to maintain double-digit growth by 2025, and the sector's valuation may see ongoing recovery.

Huaxi released a research report stating that it is optimistic about the securities industry as a new quality production factor for financing and as an intermediary for patient capital long-term allocation services. The recommendations include: 1) securities companies with expectations of industry mergers and acquisitions. 2) Top securities firms with a more comprehensive layout of overseas business. 3) Companies with prominent retail brokerage business and effective wealth management transformation in the context of medium and long-term capital entering the market. The bank expects that the net profit of listed insurers in 2025 will continue to maintain double-digit growth for the whole year, with the improvement of capital negative synchronized with the opening red or exceeding expectations, and the valuation of the insurance sector may see continuous repair. Huaxi's main points are as follows: Non-bank financial positioning From the beginning of 2025 to December 28, non-bank financials rose by 12.12%, ranking 19th among the 31 Shenwan first-level industries; underperforming the Shanghai Composite Index by 6.13 percentage points. The non-bank price-earnings ratio was 11.62 times, ranking 23rd in the first-level industry; the weighted price-to-book ratio was 1.79 times, the lowest in the past ten years at 37%. Performance outlook 46 comparable listed securities firms achieved adjusted revenue of 432.6 billion yuan in the first three quarters of 2025, with a net profit attributable to the mother of 179.0 billion yuan; an increase of 45% and 62% respectively. The high growth of brokerage net income and proprietary net income support the industry's performance in 2025. In the first three quarters of 2025, the net profit attributable to the mother of the five A-share listed insurers totaled 426 billion yuan, an increase of 33.5% year-on-year on the high base of the same period last year. Considering the better performance of the equity market in the fourth quarter of 2025 compared to the same period last year, the bank expects that the net profit of listed insurers in 2025 will continue to maintain double-digit growth. Policy summary On April 25, 2025, the Central Political Bureau of the Communist Party of China proposed "continuously stabilizing and activating the capital market," releasing a clear positive signal. In 2026, the policy of the securities industry in the "Fifteen Five" plans of various regulatory departments and financial industries in various provinces and cities will gradually become clearer and be implemented. Multiple departments and measures to promote the entry of medium and long-term funds into the market, smooth the entry barriers for social security, insurance, financial management, and other funds, and promote the realization of "long-term money and long-term investment." Risk factors: Persistent downside risks in macroeconomy; domestic liquidity easing process falling short of expectations; downside risks from unexpected long-term interest rate declines. Significant fluctuations in the RMB against the US dollar, large changes in the US-China interest rate differential, and liquidity impacts. Risks of low trading activity in A-shares, risks of incremental funds in the equity market falling short of expectations. Risks of unexpected downward trends in various service fees or commission rates of the securities industry; compliance risks of listed companies and shareholder qualifications risks of securities companies. Risks of channel reform in insurers falling short of expectations; risks of insurers' new product development falling short of expectations; risks of large-scale claims due to extreme weather events.