Guotai Haitong: Asset-liability linkage is the key to the operation of insurance companies, and diversified asset allocation promotes profitable and steady growth.

Guotai Haitong released a research report stating that in the past 25 years, the operating quality of listed life insurance companies has improved, with high profit growth and stable dividend increases; bancassurance has become the driver of NBV growth, and strengthening the quality of assets and liabilities will be more critical. From the liability side, it is expected that the demand for insurance savings will drive steady growth in NBV, while the cost of liabilities will continue to decrease; from the investment side, it is expected that the effective improvement in asset-liability management capabilities of insurance companies and diversified asset allocation strategies will drive profitable and steady growth. They maintain an "hold" rating on the industry. Guotai Haitong's main points are as follows: Industry's main operating indicators meet expectations By 2025, with the equity market and interest rates rising, insurance companies are strengthening their asset-liability capabilities, leading to high growth in profit, net assets, and overall value, meeting expectations overall. Under high profit growth, the dividend payout ratio remains stable, emphasizing shareholder returns. Bancassurance is a highlight on the liability side, with equity appreciation being the main reason for the improvement in financial indicators 1) The improvement in investment services is the main source of profit for life insurance companies, with some companies also benefiting from the performance of insurance services and improvements in income tax; COR improvement drives high underwriting profit for property insurance. 2) Overall, net assets attributable to shareholders show positive growth, benefiting from the profit growth driven by the rise in the equity market, offsetting the negative impact of other comprehensive income from interest rate fluctuations, with the improvement in BBA insurance contract financial variation resulting from the rise in interest rates not fully offsetting the OCI bond fair value decline, still causing a negative impact on net assets. 3) Overall, CSM shows positive growth, with new business contributions unable to fully offset CSM amortization, but accounting estimate changes, interest value additions, and VFA financial changes support positive contributions. 4) The transformation of bancassurance value drives high NBV growth for listed insurance companies. 5) EV overall shows growth, but differences in the growth of NBV, economic deviations, and market value adjustments lead to differentiation in growth rates. Three key words for the industry: rise of bancassurance, linkage of assets and liabilities, insurance + services 1) Under the background of "integration of reports and operations", bancassurance channels have become new drivers of business growth for listed insurance companies. 2) Although new single premium rates have been reduced, the improvement in the cost of existing liabilities is slow, leading to pressure on NBCSM as insurance companies shorten the duration of their liabilities; external environments and insurance companies' asset allocation strategies jointly affect investment returns; two-way fluctuations in interest rates require further enhancement in asset-liability matching. 3) Deepening "product + service" to enhance customer loyalty will become the insurance companies' important narrative in creating a unique competitive advantage. Risk alerts: Decline in long-term interest rates; volatility in the equity market; improvement in the cost of liabilities not meeting expectations.