Guotai Haitong: Insurance sector undergoing a phase of correction, stable interest rates beneficial for valuation recovery.

Guotai Haitong released a research report stating their optimism on the valuation repair opportunities for undervalued insurance stocks. On the liability side, the bank predicts strong demand for resident insurance savings driving the growth in the 26th year, with expected interest rate cuts, transformation of dividend insurance, and the implementation of a unified multi-channel report system all contributing to a decrease in industry liability costs. On the asset side, long-term interest rates have generally been running in the range of 1.79% - 1.90% since 26 years. The bank believes that with expectations of stability in long-term interest rates, combined with insurance companies optimizing asset management and balancing allocation/trading strategies, a mutual improvement in profitability is expected. The industry maintains a "hold" rating. The main points of Guotai Haitong are as follows: Adjustment of the insurance sector, stability in interest rates is beneficial for valuation repair From February 13 to February 27, the Shanghai and Shenzhen Insurance Index (801194.SI) fell from 1474.31 to 1419.21, a decrease of 3.74%. During the same period, the Shanghai and Shenzhen 300 Index had an increase of +1.08%, the Shanghai Composite Index +1.98%, and the Hang Seng Index +0.24%. The bank believes that narratives such as "AI's productivity improvement leading to long-term deflation" (from Citrini Research's "2028 Global Intelligent Crisis - A Financial History Thought Experiment from the Future") were important catalysts for the significant decline in the sector. Against the backdrop of overall stabilization and rebound in interest rates, the bank continues to be optimistic about the valuation repair opportunities for undervalued insurance stocks. Increased allocation of equity assets in the insurance industry in 25 years, overall solvency 1) In the 25 years, the insurance industry (calculated based on "life insurance + property insurance") significantly increased their allocation to equity, with "stocks + funds" increasing by 1.6 trillion yuan since the beginning of the year, accounting for an increase of 2.6pt to 15.4%; the increase in bond allocation has slowed down, increasing by 0.9pt to 50.4% (increased by 4.4pt/4.1pt in 23/24 years, respectively), reflecting some insurers' investment strategy of timing interest rates. 2) At the end of the fourth quarter of 25 years, the average comprehensive solvency ratio of insurance companies was 181.1%, with a core solvency ratio of 130.4%, higher than the regulatory standards of 100% and 50%. Among them, property insurance companies were 243.5%, 212.7%, life insurance companies 169.3%, 115.0%, and reinsurance companies 244.6%, 212.5%; from the data of 57 life insurance companies and 77 property insurance companies that have disclosed their solvency reports, the vast majority of insurance companies have sufficient solvency and controllable risks, but there are still 5 companies that have not crossed the regulatory red line and are in a state of non-compliance. 3) According to the 2026 survey of insurance institutions' asset allocation prospects for the banking and insurance asset management industry, stocks and securities investment funds are domestically favored investment assets for 2026 by insurance institutions, with most insurance institutions planning a slight increase in A-shares. CHINA TAIPING reduced its holdings in Grandjoy Holdings Group, personnel changes in Ping An Life, China Ping An launched a dividend-type life insurance product with a preset interest rate of 1.25% 1) From August 2025 to February 2026, Taiping Life and Taiping Assets collectively held 214 million shares of Grandjoy Holdings Group, with their combined ownership decreasing to 4.99%. 2) On February 14, Ping An Life announced that Chairman Yang Zheng is due to retire and plans to step down once his term is complete, and his duties will be taken over by Vice Chairman and Executive Deputy General Manager Cai Ting. 3) China Ping An has launched a new dividend-type lifetime life insurance product, Fulljoy C (Enjoy Edition) Lifetime Life Insurance (dividend-type), reducing the preset interest rate to 1.25%. Risk warning: Decline in long-term interest rates; volatility in equity markets; improvement in liability costs falling short of expectations.