Open-source securities: The long-term logic of insurance remains unchanged, optimistic about the opportunities for sector layout.

Open Source Securities released a research report stating that it is expected that the liability side will maintain rapid growth in 2026Q1, individual insurance channels are expected to recover, and the bancassurance channel will continue to see high growth. However, the investment side will face certain pressure due to the impact of the stock market, making the overall performance growth in the first quarter challenging. In the medium to long term, factors such as the potential growth of household deposits, strong demand for retirement and health, are expected to continue driving growth on the liability side. The stabilization of long-term interest rates will support the profit margins of insurance companies, and the industry's long-term logic remains unchanged. Additionally, following the adjustments in the insurance sector in March, current listed insurance companies have high dividend yields and PEV valuations have returned to historically low levels, with the first quarter NBV exceeding expectations expected to bring positive catalysts. The main points of Open Source Securities are as follows: First-quarter stock market pressure may drag down investment income, resulting in some pressure on performance Under the new accounting standards, the net profit of insurance companies mainly comes from: (1) insurance service performance: deducting insurance service fees from insurance service revenue, with the main components being the current amortization of Contractual Service Margin (CSM). Most listed insurance companies show small and steady growth trends. Some insurance companies may be affected by the choice of discount rates under VFA contracts, and fluctuations in long-term interest rates can affect insurance service fees, creating disturbances in the performance of insurance services. (2) Investment service performance: fluctuations in the stock and bond markets impact investment income in the current period, which in turn affects investment service performance, with expenditure items being related to underwriting financial gains and losses. In terms of the stock market, the 2026Q1 performance of the Shanghai and Shenzhen 300/Hang Seng Index/Sci-Tech Innovation 50/Partial Stock Fund Index were -3.9%/-3.3%/-6.5%/-0.9% respectively, compared to +1.2%/+15.3%/+3.4%/+4.7% in 2025Q1, indicating weaker stock market performance in 2026Q1. In the bond market, the 2026Q1 performance of the China 10-Year Treasury Bond Active Index was +0.44%, compared to -1.65% in 2025Q1, indicating slightly better performance in the bond market in 2026Q1 compared to 2025Q1. Overall, the impact of stock market fluctuations is expected to be greater than that of the bond market, and investment income in the first quarter is expected to be under pressure year-on-year, with a slight decline in net investment income rates. Without considering the impact of other non-recurring factors, it is expected that the average year-on-year decrease in net profit attributable to shareholders of listed insurance companies will be around 20%. For individual companies, China Life Insurance's insurance service performance may be impacted by the downward trend in long-term interest rates in the first quarter, causing some pressure on a high base. Meanwhile, Ping An Insurance, with a high stock allocation and a diversified profit structure of its subsidiaries, is expected to have relatively better profit growth speed. The transformation of dividend insurance is effective, and it is expected that the high growth in new policies in the first quarter will drive the growth of new business value The trend of deposit migration continues, with the market acceptance of dividend insurance products with "guaranteed + floating income" high yield expectations on the rise. Coupled with the continued high growth of bancassurance channels, as well as improvements in individual insurance channels on a low base, the transformation of dividend insurance is further effective, with listed insurance companies expected to achieve a strong start in policy sales in the first quarter. By channels, individual insurance channels are expected to see improved growth in 2026Q1 due to the popularity of dividend insurance on a low base in 2025Q1; Bancassurance channels are benefiting from continued investments by listed insurance companies, the transformation of dividend insurance, and the trend of deposit migration, and are expected to continue high growth. Overall, the bank expects the year-on-year growth rate of first-quarter new premium income for each listed insurance company to be between 30%-55%. At the same time, due to the increase in the proportion of dividend insurance and the continued high growth of bancassurance channels, the new business value rate may see a slight narrowing year-on-year, with traditional insurance and dividend insurance rates scheduled to drop significantly compared to 2025Q1, possibly offsetting some of the impact on the value rate of dividend insurance. Taking into account the changes in new policies and value rates, the bank predicts that the year-on-year growth rate of new business value for each listed insurance company in 2026Q1 will range between +15% and +35%, with China Life Insurance and Ping An Insurance expected to lead the growth. Risks: Significant downward movement in long-term interest rates poses a risk of profit margin losses; Capital market fluctuations pose risks.