Huachuang Securities: Insurance public funds' holdings have decreased to 1.49%, pay attention to the bottom value of the sector.

Huachuang Securities released a research report stating that the current valuations of most insurance companies are below the 50th percentile of the past ten years, indicating that the bottom value has emerged. In the short term, the performance of the 26Q1 is expected to be under pressure due to market fluctuations, but some insurance companies may outperform expectations with differentiated investment strategies. In the medium to long term, with the combined efforts of regulation and industry, the industry's debt cost is gradually optimizing, the top "spread loss" risk is expected to be mostly cleared, and the PEV valuation is expected to recover to 1x. In terms of property insurance, premium prosperity is linked to economic growth, risk reduction management systems reduce claims rates, industry strict supervision, comprehensive reporting and management integration promote expense ratio optimization, and property insurance ROE is expected to steadily rise, driving PB increase. Key points from Huachuang Securities are as follows: Industry Overview Non-bank financial holdings decreased by -1.19%, with insurance, securities, and diversified financial holdings all reduced. In 26Q1, the proportion of non-bank financial holdings was 2.10% (decreased by -1.19% month-on-month), with insurance industry holdings at 1.49% (decreased by -0.80% month-on-month), securities industry holdings totaling 0.45% (decreased by -0.39% month-on-month), and diversified financial industry holdings at 0.16% (decreased by -0.01% month-on-month). Insurance Industry: Holdings of individual stocks have generally decreased, with life insurance stocks experiencing larger declines than property insurance. Looking at individual stocks, in the 26Q1 public offering's over-weighted circulating stocks, Ping An Insurance and China Pacific Insurance remain core stocks, accounting for 0.83% and 0.30% respectively. Other stocks, except for PRU, have also reduced their holdings, with China Life Insurance and New China Life Insurance decreasing by -0.10% and -0.07% month-on-month to 0.149% and 0.145% respectively, while PICC P&C slightly decreased by 0.01% to 0.03%. The decline in holdings of life insurance stocks is larger than that of property insurance, mainly expected to be affected by performance elasticity. Changes in insurance stock holdings in the 26Q1 public offering's over-weighted portfolio are expected to be influenced by post-Spring Festival market volatility and performance expectations. Following the post-Spring Festival geopolitical tensions and market volatility in March, where the Shanghai and Shenzhen 300 index experienced a cumulative drop of 5.53% in March, insurance stocks also gave back gains from the previous year, with the insurance index experiencing a 16.25% cumulative drop in 26Q1. Furthermore, the high base high growth achieved by insurance companies in 25Q3 raised market expectations for their 25 annual reports, but with lower-than-expected earnings disclosures and performance outcomes, it reflects the pressure on investment performance of insurance companies in 25Q4, with the performance expectations being one of the core reasons for public offering portfolio adjustment. Recommendation Order: Short-term recommendation for New China Life Insurance, long-term recommendation to watch China Life Insurance, Ping An Insurance, China Pacific Insurance, and PICC P&C. Risk Warning: Policy changes, unexpected product transformations, increased natural disasters, market volatility, and continued declines in long-term interest rates.