Guotai Haitong: Research on life insurance reservation interest rates sees rebound, expected to stabilize within the year.

Guotai Haitong released a research report stating that the newly proposed life insurance interest rate research value has rebounded, and it is expected that the interest rates for products will remain stable within the year. The stability of long-term interest rates is favorable for improving insurance companies' interest rate differentials, and the industry is recommended to maintain a "hold" position. The bank predicts that strong demand for life insurance savings among residents will drive a 26% growth in NBV, and the bank predicts that the banking and insurance channels will be important drivers of growth. Due to market volatility, the bank predicts that the overall net profit of listed insurance companies in the first quarter of 2026 will be under pressure. However, due to optimized asset allocation, it is expected to be better than the market's previous pessimistic expectations. The bank still sees opportunities for valuation recovery in high-quality insurance stocks under the expectation of stable interest rates. Guotai Haitong's main points are as follows: Events On April 24th, the Insurance Association organized a meeting of the expert advisory committee on the assessment interest rates of life insurance business responsibilities for the first quarter of 2026. The research suggests that the current research value of interest rates for ordinary life insurance products is 1.93%. Regulatory guidance suggests adjusting life insurance product interest rates along with market rates. In the third quarter of 2025, traditional insurance interest rates were guided to be adjusted to 2.0%. According to the notice from the China Banking and Insurance Regulatory Commission regarding the establishment of a mechanism for coupling and dynamically adjusting interest rates to market rates, the Insurance Association will publish the research value of interest rates quarterly, based on changes in market rates such as the 5-year Loan Prime Rate (LPR), 5-year benchmark deposit rate, and 10-year government bond rate. When the maximum interest rate of ordinary life insurance products sold by insurance companies exceeds the research value by 25 basis points or more for two consecutive quarters, the maximum interest rate for new products should be adjusted downward. The research values published by the Insurance Association on January 10th, 2025, April 21st, 2025, July 25th, 2025, October 29th, 2025, and January 20th, 2026 were 2.34%, 2.13%, 1.99%, 1.90%, and 1.89% respectively. In the third quarter of 2025, the mechanism for interest rate adjustment was triggered, and insurance companies generally adjusted the maximum interest rates for new traditional insurance products/dividend insurance/guaranteed minimum interest rates for universal insurance to 2.0%, 1.75%, and 1.0% respectively. The latest research value of interest rates has increased by 4 basis points compared to the previous period, and it is expected that the interest rates for life insurance products will remain stable in the short term under the background of stabilizing long-term interest rates. In January 2026, the Insurance Association announced that the latest research value of interest rates is 1.93%, an increase of 4 basis points from January 2025. Considering the upper limit of interest rates for life insurance products and the rules for adjusting interest rates, if the research value continues to be below 1.75% for two consecutive quarters, it will trigger a mechanism for interest rate reduction. Since 2026, the 10-year government bond yield has been running in the range of 1.76% to 1.90%. The bank predicts that if market interest rates remain relatively stable, there will not be another downward adjustment to interest rates in the short term. Positive resonance between assets and liabilities is expected to drive an improvement in insurance interest rate spreads. On the liability side, given that the maximum interest rate for ordinary life insurance products has continuously decreased to 2.0% in the past three years, combined with the transformation of floating income products, it is expected that the gradual decrease in the cost of new rigid liabilities will drive an improvement in the cost of existing liabilities. On the asset side, with the stabilization of long-term interest rates and the insurance companies' optimization of asset allocation to increase the allocation of high-quality equity assets, the stabilizing investment yield is favorable. The bank believes that interest rates are still a core factor affecting the management of insurance assets and the valuation of insurance stocks. Risk warning: downward trend in long-term interest rates; volatility in equity markets; improvement in liability costs falling short of expectations.