Guotai Haitong: Investment recovery driving profit improvement, steady operation of property and life insurance.

Guotai Haitong released a research report stating that it is expected that listed insurance companies will benefit from the recovery of external equity markets and flexible active asset allocation strategies to achieve profit improvement in the first half of 2026. The performance of insurance companies' profits may show differentiation; the operational performance of property and casualty insurance continues to improve; shareholder return policies remain steady. The current implied 10-year treasury yield in stock prices is significantly lower than the actual level of treasury yields, suggesting opportunities for valuation recovery in insurance stocks, maintaining an industry "buy" rating. Guotai Haitong's main points are as follows: Under the overall market recovery, the bank expects the profit outlook of listed insurance companies in the first half of 2026 to be optimistic, with growth rates showing differentiation. 1) The bank expects the recovery of the equity market to drive a significant increase in profits of listed insurance companies in the first half of 2026 compared to the first quarter, but differences in equity allocation structures may lead to profit performance differentiation. The bank predicts that the net profit growth rates of listed insurance companies in the first half of 2026 are as follows: China Life Insurance (153.9%) > CHINA TAIPING (87.2%) > New China Life Insurance (61.4%) > Ping An Insurance (33.3%) > The People's Insurance (30.9%) > PICC P&C (21.7%) > SUNSHINE INS (15.6%) > China Pacific Insurance (9.2%). 2) The bank expects stable release of life insurance CSM, robust growth in property insurance underwriting profit, improvement in investment service performance, and continued clearance of impairment risks to drive steady growth in OPAT. The bank predicts that Ping An Insurance will grow by 7.5% year-on-year in the first half of 2026, China Pacific Insurance by 7.0%. 3) It is expected that listed insurance companies will maintain a steady shareholder return policy in the first half of 2026. 4) Profit improvement combined with improvement in asset-liability ratio, it is expected that the net assets attributable to shareholders of listed insurance companies will increase steadily in the first half of 2026 compared to the beginning of the year. The bank expects steady growth in life insurance NBV in the first half of 2026. 1) In terms of premiums, life insurance original premiums have grown steadily from January to May 2026, with premium growth slowing since Q2 due to the impact of new regulations on the convergence of banking and insurance and base effects, but the bank expects strong demand for savings insurance under the trend of resident deposit migration. New business premiums of listed insurance companies are expected to continue to grow steadily; 2) The bank predicts that the reduction in the benchmark interest rate, channel cost control, and optimization of the term structure of insurance companies will further improve the value rate. The bank predicts that the NBV growth rates in the first half of 2026 for listed insurance companies are as follows: China Life Insurance (42.1%) > New China Life Insurance (15.3%) > Ping An Life Insurance (13.3%) > TAIPING Life Insurance (12.2%) > PICC Life Insurance (7.2%). The bank expects a slowdown in the growth of property insurance premiums, with the profitability level of leading insurers remaining steady. 1) It is expected that the premium growth of property insurance of listed insurance companies will be slow in the first half of 2026. The growth of auto insurance is under pressure due to fluctuations in new car sales. 2) It is expected that the continuous improvement trend in underwriting profitability of leading insurers will not change despite the stage of catastrophic disturbances. Leading property insurance companies continue to control underwriting quality and deepen the comprehensive management of non-auto insurance, and underwriting profitability is expected to continue to improve. Predicted COR of listed insurance companies in the first half of 2026 are: PICC Property Insurance (95.1%, YoY -0.10pt), Ping An Property Insurance (96.1%, YoY -0.20pt), TAIPING Property Insurance (94.6%, YoY -0.19pt). Risk warning: Downward trend in long-term interest rates; market volatility; improvement in cost of liabilities may not meet expectations.