Orientation: FVTPL assets lead to differentiation in insurance performance. It is recommended to allocate resources to the sector at low points.

Orient's research report stated that in the short term, there will still be some volatility in the equity market in the first quarter of 2026, and the performance differentiation between insurance companies' profit and loss statements may continue; but in the medium to long term, after the current sector experiences a continued pullback, the attractiveness of valuations will further increase. Overall, in the short term, the sector is suppressed by fluctuations on the investment side, but in the medium to long term, the value of allocation is further highlighted, and it is recommended to pay attention to allocation opportunities after the pullback. From January to February 2026, premium income from life insurance continued to grow rapidly, the overall prosperity of the liability side remains stable, and the balance of insurance funds is expected to continue to grow steadily, laying a solid foundation for long-term investment and value investment of insurance funds. Since the beginning of 2026, the insurance sector as a whole has continued to pull back, with short-term fluctuations in the market due to geopolitical factors, but disruptions on the investment side have not changed the long-term stable upward trend. The bank recommends buying on dips. Orient's main points of view are as follows: Held for Trading (HFT) assets have become the main determinant of listed insurance companies' current profits In the fourth quarter of 2025, insurance company profit and loss statements were under pressure, with the main drag coming from fair value changes in HFT assets, and bond valuation fluctuations also being an important source. In the fourth quarter of 2025, the stock market did not see significant unilateral declines, with A-shares showing more structural differentiation in high-level shocks; the profit and loss from fair value changes in the quarter were negative for all five A-share listed insurance companies, but since the proportion of HFT in the investment portfolio as a whole is not high, its drag on the overall investment portfolio return and asset stability is relatively controllable. The impact of fair value changes in the fourth quarter of 2025 on the total investment portfolio was 0.97%, -0.39%, -0.74%, and -0.31%, respectively. In the first quarter of 2026, the equity market further declined, and it is expected that the performance differentiation between insurance companies' profit and loss statements will continue to increase, depending on the asset structure under IFRS9. As of the end of 2025, the proportion of HFT stocks in the investment portfolio of China Life Insurance, Ping An Insurance, China Pacific Insurance, New China Life Insurance, and The People's Insurance was 8.1%, 6.4%, 7.0%, 9.1%, and 5.0% respectively, and the proportion of equities in stock assets was 72.2%, 43.5%, 63.0%, 81.4%, and 57.6% respectively. The proportions of HFT stocks in the investment portfolio and stock assets of New China Life Insurance and China Life Insurance were relatively high, so the transmission of equity market corrections to the profit and loss statement may be more direct. It is expected that the performance of the fixed income side in the first quarter of 2026 will be stable, and the marginal disturbance of bond fair value fluctuations on the profit and loss statement will be weaker than that on the equity side. The overall outlook for the bond market is still stable; against the background of no obvious exposure to credit risks, the impact of the bond side on the insurance company's financial statements is expected to be more of a periodic valuation disturbance rather than a systemic deterioration. As of the end of 2025, the proportion of fixed-income assets accounted for in HFT of China Life Insurance, Ping An Insurance, China Pacific Insurance, New China Life Insurance, and The People's Insurance was 15.3%, 11.8%, 12.5%, 9.5%, and 15.6% respectively, with a relatively low proportion and limited impact. Investment recommendations and targets After major listed insurance companies released their full-year 2025 performance, their stock prices continued to adjust, reflecting more the disturbance of fair value changes in the fourth quarter of 2025 on the profit and loss statements. It is neither indicative of a deterioration in the investment structure or long-term yield pressure, nor of a deterioration in the quality of insurance company assets or a systemic change in liability trends. In the short term, there will still be some volatility in the equity market in the first quarter of 2026, with insurance companies' profit and loss statements showing differentiation; but in the medium to long term, after the sector experiences a continued pullback, the attractiveness of valuations will further increase. On the liability side, premium income from life insurance continues to grow rapidly, the proportion of participating insurance is expected to continue to increase, the product structure is continuously optimized, and the potential pressure on interest spreads is expected to gradually ease; on the asset side, with the sale of dividend insurance with a guaranteed interest rate of 1.75%, the current pressure on insurance portfolio income matching is easing, and with the continuous entry of long-term funds into the equity market, the logic of "asset-liability resonance" in the insurance sector is still expected to play out. Overall, the sector is suppressed in the short term by fluctuations on the investment side, but in the medium to long term, the value of allocation is further highlighted, and it is recommended to pay attention to allocation opportunities after the pullback. Since the beginning of the year 2026, the insurance sector as a whole has continued to pull back, with short-term fluctuations in the market due to geopolitical factors, but disruptions on the investment side have not changed the long-term stable upward trend. The bank recommends buying on dips. Key areas of focus: companies with strong performance at the beginning of the year, leading the transformation of dividend insurance, and stable channel operations; companies with more flexible equity assets, higher proportions of OCI, and better duration matching, which have stronger valuation recovery and performance elasticity. Risk warning Policies fall short of expectations, capital market volatility increases, household wealth growth falls short of expectations, long-term interest rates fall more than expected, and insurance reforms fall short of expectations.