Huachuang Securities: The net profit attributable to the parent company of listed insurance firms in H1 2026 generally showed significant growth, highlighting the defensive nature of the insurance sector.

Huachuang Securities released a research report stating that in the first half of 2026, listed insurance companies are expected to see significant net profit growth attributable to parents, with China Life performing exceptionally well, resonating with the sector and equity markets. However, in the first half of the year, the insurance sector continued to decline due to the impact of funding conditions and the "siphoning" effect of the technology market; since the second half of the year, the sector has shifted from a "K-shaped" recovery to a "rebalancing," with the insurance sector showing signs of rebound. Currently, most insurance companies' valuations are below the 50% percentile of the past decade, which suggests that pessimistic expectations may have been fully reflected, highlighting bottom-line value. In the short term, the overall sector faces considerable performance pressure in Q3; in the long term, although the net investment yield remains on a downward trajectory, the optimization of liability costs is expected to offset interest spread pressures, with the risk of "spread loss" likely to converge. The capacity for asset-liability linkage management is anticipated to continue improving, driving PEV valuation recovery. In property insurance, risk reduction management services are helping to lower the claims ratio, while stringent industry regulations are promoting cost ratio optimization, and the improvement in COR is steadily lifting ROE, leading to an increase in PB. Key viewpoints from Huachuang Securities are as follows: Life Insurance: Deepening transformation of participating insurance, individual insurance channels collectively recovering In the first half of 2026, all listed insurance companies achieved positive growth in NBV, with China Life, Sunshine, Taibao, Xinhua, and Ping An maintaining double-digit growth. The drivers for volume and price also varied; China Life showed strong performance in both volume and quality, while Sunshine, Ping An, and Taibao were driven by volume, and Taibao, Xinhua, and Renbao were price-driven. By channel, individual insurance has collectively warmed up, with all seven listed insurers showing positive growth in new business; the bancassurance channel is significantly differentiated, possibly due to intensified channel competition and expense control. In terms of product structure, the proportion of new business in participating insurance has significantly increased for Xinhua, Taibao, and Taiping. The industry's transformation towards participating insurance has further deepened, continuously diluting the cost pressure of existing policies. Property Insurance: COR generally optimized, top-tier car insurance growth slows down In the first half of 2026, the property insurance industry saw a general slowdown in premium growth, with Taiping and Ping An outperforming their peers, while Renbao and Taibao saw slight increases, and Sunshine faced downward pressure due to proactive reductions in guaranteed insurance. By category, car insurance growth has generally slowed apart from Taiping; non-auto insurance is differentiated, with Ping An performing exceptionally well due to high growth in health insurance. In terms of profitability, listed insurers (except Taiping) all optimized their COR, with Renbao leading the industry; car insurance COR has improved across the board, while non-auto insurance shows varied performance, with liability insurance still being a major drag, and the effect of unifying reporting and claims in non-auto insurance is expected to become more apparent. Investment: General increase in equity allocation and most investment returns rising In the first half of 2026, long-end interest rates continued their downward trend, placing pressure on net investment yields. In a structurally fluctuating equity market, insurance companies are actively seizing investment opportunities, with most total investment returns rising. In terms of allocation structure, listed insurers have continued to increase their equity exposure, with the proportion of stocks and funds generally rising; the bond allocation varies. In accounting classifications, the proportion of stocks under FVOCI varies, which may reflect differences in insurance companies' stock strategies; the proportion of bonds under FVTPL has generally decreased. Following the implementation of new asset-liability management regulations, insurance companies are expected to pay more attention to a strategy of "high dividend as the base + growth seeking excess returns" in their equity allocations. Risk Warning: Downward long-end interest rates, fluctuations in the equity market, transformation falling short of expectations, and frequent natural disasters.