Guotai Haitong: Dividend insurance will become the main transformation trend of savings insurance in the low interest rate era, maintaining the industry's "outperform" rating.

Guotai Haitong released a research report stating that in a low interest rate environment, the risk of spread loss in traditional high guarantee products is increasing. Global savings-type life insurance products are transitioning from high guarantee and rigid income commitments to low guarantee, floating income, and risk-sharing. The overall risk preference of Chinese residents leans towards stability. It is expected that dividend insurance will become the main line of transformation for savings insurance in the low interest rate era, driving improvement in industry liability costs and product value. The industry rating is maintained as "hold". Guotai Haitong's main points are as follows: Overseas Experience Global savings-type life insurance is transitioning to floating income, with specific forms varying in different countries and regions. In the United States, universal, index, and account-based products are dominant, with annuity insurance accounting for 52.4% of total premiums in 2024, up from 10.1% in 1970. In Germany, the proportion of guaranteed mixed annuities and fund-linked annuities in new policies is about 39% in 2024. Variable insurance accounts for about 19% of new policies in Japan in 2024, while in South Korea, variable and interest-linked products together account for nearly 80% of new policies. In Hong Kong, dividend savings insurance accounts for 85.5% of new policies in 2025, up from 32.6% in 2000. External Drivers The direction of product transformation is jointly determined by the low interest rate environment, regulatory guidance, and adaptability to capital markets. Low interest rates limit the supply of high guarantee products, and regulations are guiding the industry to shift from fixed rate competition to risk-sharing through measures such as lowering guaranteed interest rates, enhancing disclosure of investment-type products, strengthening sales suitability, and capital constraints on solvency. Resident risk preferences determine the acceptance of floating income products. Insurance Company Transformation Product functionality, income realization, account systems, and channel integration are the core focus. (1) Enriching product functionality: Represented by dividend insurance in Hong Kong, insurance companies upgrade savings policies to wealth management and inheritance tools through features such as multi-currency conversion, dividend locking and withdrawals, policy splitting, and changing insured persons. (2) Stable income realization: The focus of dividend insurance competition is shifting from illustrated returns to dividend account management and dividend realization rates, with top insurers like AIA achieving more stable dividends through their long-term investment capabilities. (3) Building a diversified account system: Companies like Prudential in the US combine fixed accounts, index accounts, and separate accounts to achieve a combination of "protection + account allocation + risk stratification". (4) Strengthening channel integration: Banks and insurance companies serving savings customers, agents enhancing protection and inheritance explanations. Overall, competition among insurance companies will shift from rate competition to comprehensive competencies in products, investments, accounts, and channels. Domestic Implications China's savings-type life insurance products have evolved from regular to universal, increasing lifetime coverage to dividend insurance. It is expected that the trend of transitioning to dividend insurance will continue in the future, optimizing product structures. Dividend insurance balances guaranteed benefits with non-guaranteed dividends, catering to customers' stability and investment income-sharing needs, and is more suitable for Chinese residents' stable savings requirements. It also helps reduce the cost of rigid liabilities, optimize asset-liability duration gaps, and mitigate financial report fluctuations through the VFA model under the new accounting standards. Looking ahead, the transformation of dividend insurance will drive industry competition towards investment capabilities, dividend account management, capital strength, brand credit, and channel explanation abilities, with leading insurers leveraging long-term investment, asset-liability management, dividend realization rates, and synergies between banking and insurance channels. The industry landscape is expected to continue to improve. Risk factors: Decline in long-term interest rates; volatility in equity markets; sales and dividend realization of dividend insurance falling short of expectations; regulatory policy changes; decline in resident risk preferences.