Guotai Haitong: Trading factors disrupt sector performance, insurance industry valuation restoration is expected.

Guotai Haitong released a research report stating that insurance stocks are still affected by irrational trading factors, while the profitability of leading insurance companies is showing improvement. They recommend actively paying attention to the opportunity for valuation recovery of insurance stocks under the expectation of stabilizing interest rates. Core operating data in the insurance industry in the first quarter remained stable. The operational improvement of the liability side of insurance companies continues, and the asset side will benefit from the stabilization and rise of interest rates as well as the recovery of the stock market. The industry maintains a "hold" rating. Guotai Haitong's main points are as follows: Disturbances from trading factors affecting performance, bullish on valuation recovery under stable interest rates From May 8th to May 22nd, the Shanghai and Shenzhen Insurance Index (801194.SI) fell from 1317.29 to 1180.11, representing a interval decrease of -10.41%. During the same period, the Shanghai and Shenzhen 300 index fluctuated by -0.55%, the Shanghai Composite Index by -1.60%, and the Hang Seng Index by -2.98%. The bank believes that insurance stocks are still being disturbed by irrational trading factors, while the profitability of leading insurers is showing improvement. They recommend actively focusing on the opportunity for valuation recovery of insurance stocks under the expectation of stable interest rates. Core operating data in the insurance industry in the first quarter remained stable 1) The combined insurance business income of 87 property insurance companies in the first quarter reached 530.822 billion yuan, a year-on-year increase of +2.8% under the same caliber, achieving a net profit of 25.408 billion yuan, a slight drop of 0.5% year-on-year under the same caliber; 2) The total premium for auto insurance policies of 69 property insurance companies in the first quarter was 225.083 billion yuan. 3) The balance of funds used by insurance companies in the first quarter was 3.944 trillion yuan, a quarter-on-quarter increase of 2.49%, with the proportion of bonds stable and the proportion of stocks continuously increasing; 4) In the first quarter, out of 86 property insurance companies, 72 life insurance companies, and 16 reinsurance companies, 14 received a risk comprehensive rating of AAA in solvency, while 5 insurance institutions did not meet the solvency standards; 5) The average comprehensive investment return rates for life insurance companies and property insurance companies in the first quarter were 0.44% and 0.36% respectively, an increase of +0.06 pt/-0.58 pt year-on-year. Ping An continues to increase allocations in Agricultural Bank of China and China Life Insurance, continuously deepening the "integrated finance + medical care and elderly care" strategy 1) According to data from the Hong Kong Stock Exchange, on May 18th, Ping An Insurance increased its holdings of 63.767 million H shares of Agricultural Bank Of China, with the latest holding amount reaching approximately 7.74 billion shares and the shareholding ratio rising from 24.97% to 25.17%; they also increased their holdings of 56.75 million H shares of China Life Insurance, with the latest holding amount reaching approximately 1.126 billion shares and the shareholding ratio rising from 14.37% to 15.13%. 2) At the annual shareholder meeting of Ping An Insurance in 2025, Chairman Ma Mingzhe expressed his strategy for the future "how to build unique advantages", stating "the company's strategy is clear, that is 'integrated finance + medical care and elderly care', and then empowering 'integrated finance + medical care and elderly care' with technology." The strategy for life insurance development is balanced channels and balanced products. Risk warning: Downward movement in long-term interest rates; fluctuations in equity markets; improvement in the cost of liabilities not meeting expectations; and customer demand falling short of expectations.