Guotai Haitong: Investment Disruption Affects Profit Expectations, Recommend Attention to Undervalued Insurance Sector.

Guotai Haitong Research Report released stated that in the context of improvement in macroeconomic indicators and stabilization of interest rates, the valuation recovery of insurance stocks is expected to gradually begin. Opportunities for configuration in top-quality insurance companies with sound operations, low valuation, and high dividend yields are highlighted. On the liability side, the bank expects overall growth in new business in Q1 2026, with the expectation that the bancassurance channel will be an important driver of growth; on the investment side, stable interest rates combined with optimization of asset allocation by insurance companies are expected to drive profit improvement. The industry maintains a "hold" rating. Guotai Haitong's main points are as follows: Investment fluctuations affect profit expectations, and stable interest rates drive valuation recovery From March 27 to April 10, the Shenwan Insurance Index (801194.SI) rose from 1268.21 to 1304.34, an increase of +2.85%. During the same period, the Shanghai and Shenzhen 300 index rose by +2.98%, the Shanghai Composite Index by +1.85%, and the Hang Seng Index by +3.77%. The market has been paying close attention to the performance expectations of listed insurance companies in Q1 2026. The bank expects profits to decline year-on-year due to stock market fluctuations, and the pessimistic expectations on the investment side have already been reflected in stock prices. Despite concerns about disruptions from internal and external factors affecting the improvement of insurance assets and liabilities in 2026, in the context of improving macroeconomic indicators and stabilization of interest rates, the valuation recovery of insurance stocks is expected to gradually begin. The bank believes that opportunities for configuration in top-quality insurance companies with sound operations, low valuation, and high dividend yields are evident. Stricter regulation on channel costs and sales behavior, steady progress in developing insurance for smart driving 1) The China Banking and Insurance Regulatory Commission issued a notice regarding further strengthening the management of bank agency channel costs, detailing requirements for submitting commission incentive, training, and customer service fees. It is expected that under the deepening of "one report for both banks and insurance companies," the competitive advantages of top insurance companies will be further highlighted. 2) The 2026 edition of the negative list for life insurance further standardizes sales behaviors, which is favorable for the industry's stable operations. 3) The Beijing Financial Regulatory Commission officially announced the launch of the development and application of commercial insurance for smart connected new energy vehicles, which is beneficial for further improving the quality and coverage of insurance for smart driving. Listed insurance companies further optimize equity investments, and insurance services continue to upgrade 1) China Reinsurance released its performance report, achieving total premium income of 180.368 billion yuan in 2025, a year-on-year increase of 1.1%, and a net profit of 10.217 billion yuan, a year-on-year decrease of 7.8%. 2) Listed insurance companies have improved their investment asset structure by investing in high-quality equity assets. Events related to this include: the establishment of Chengdu Guangyi Fund, in which China Pacific Insurance's Taibao Xinhui holds a 50% stake; Shenzhen Hongyi Medical completed Series C/C+ financing, with C+ round investment participation from SUNSHINE INS; Ping An Insurance increased its stake in Agricultural Bank Of China H shares, with the latest number of shares held being approximately 7.08 billion shares, and the latest ownership percentage being 23.03%. 3) Ping An Insurance announced the upgrade of AI "quick service" and "global emergency rescue" services by 2026, further expanding and improving the "insurance + service" landscape. Risk warning: Decline in long-term interest rates; volatility in equity markets; improvement in liability costs falling short of expectations; customer demand falling short of expectations.