Founder: Insurance investment side drives profit acceleration, while liability side continues to improve in quality.

Founder published a research report stating that the short-term market fluctuations have not changed the logic of industry valuation recovery. In the long term, trends such as reduced debt costs in the sector and steady growth of investment income are expected to continue, leading to further valuation recovery. The mid-term reports showed better-than-expected performance, and under the low base expectations for 4Q26, valuations may continue to improve. Recently, insurers have reported mid-term performances that exceeded expectations, driving a stabilization and rebound in valuations. Although there is significant pressure from the 3Q baseline on both asset and liability fronts in the short term, expectations are relatively sufficient. At the same time, the low baseline in 4Q26 and the adjustment in market style may allow funds to flow back, significantly enhancing market beta recovery, suggesting that sector valuations may gradually stabilize and improve from the bottom. In the long term, insurers will continue to see stable quality growth on the liability side, while the asset side will progressively optimize its internal structure and actively seize market investment opportunities, which are expected to jointly promote stable growth in metrics such as profit and NBV, thereby boosting valuation centers. Founders main points are as follows: Performance Overview: Net profit speeds up quarter-on-quarter; equity positions in active investments drop to a low point. Listed insurance companies show differentiated profit growth, but growth rates have accelerated on a quarter-on-quarter basis. In terms of growth rate: China Life (+229%) > ZhongAn (+132%) > Taiping (+90.3%) > New China (+54%) > PICC (+38.5%) Sunshine (+38.5%) > Ping An (+36.1%) > Property & Casualty (+32.1%) > Taibao (+10.4%). The differentiation in profits is expected to be due to differences in investment structures and baselines, with overall recovery primarily driven by the upward movement in the equity market. Affected by valuation declines, the ratio of active equity positions held by insurance A/H stocks dropped in 2Q26. The proportion of the insurance sector held by funds in 2Q26 was 0.58% quarter-on-quarter, down by 0.73 percentage points; previously, the top ten shareholders indicated that related holdings by the Central Huijin Investment were also reduced in 2Q26. NBV growth in life insurance remains stable, and growth in 26 is expected to continue. NBV continues to show stable growth. China Life (+33.7%) > Sunshine (+16.4%) > Taibao (+12.7%) > New China (+11.9%) > Ping An (+11.2%) > PICC Life & Health (+3.5%). In 2Q26, due to the decrease in new premium growth and a more stable policy sales rhythm, the NBV growth rate showed a slight decline; however, in 1H26, NBV continued to grow due to strong savings demand and enhanced product competitiveness, despite a high baseline. Premium growth continues, and the quality of liabilities gradually improves. Thanks to the continued competitiveness of insurance products, strong resident savings demand, and insurers gradually optimizing their business structures, periodic premium growth is widespread; at the same time, the integration of industry reporting and the continuous reduction of the prescribed interest rate this year have led to a decline in NBVs sensitivity to investments, improving the quality of liabilities. Differentiation in premium growth for property and casualty insurance, with improvements in COR. Premium growth shows differentiation. Total premium growth is as follows: Ping An Property & Casualty (+4.0%) > Taibao Property & Casualty (+1.4%) > PICC Property & Casualty (+1.3%). The slight differentiation in growth rates is expected due to baseline and risk business adjustments. Improvements in COR are evident: PICC P&C (94.0%) < Taibao (95.0%) < Ping An (95.1%) < ZhongAn (95.5%). This sustained improvement under a high baseline is primarily due to the low level of major disaster risk and the integration of various product reporting. Total investment returns are warming, with continued demand for equity allocation. Total investment returns generally rise: PICC (7.4%) > New China (6.7%) > China Life (5.6%) > Taiping (5.2%) > Taibao (4.8%) > Sunshine (3.6%), attributed to the warming of the equity market; however, the net investment return rate still faces pressure due to declining interest rates. Demand for equity allocation continues, with internal structure optimization: In 1H26, listed insurers gradually increased the intensity of equity allocations, with the proportion of equity funds in investment assets generally rising; this is expected to be partly due to the rise in equities such as technology, as insurers actively seize structural opportunities; on the other hand, some insurers have a low proportion of OCI, increasing allocations to high-dividend stocks to smooth and boost net investment income levels. Risk warning: Significant fluctuations in the stock market may increase performance volatility; substantial declines in interest rates may increase asset allocation pressure; sales of dividend insurance falling short of expectations could drag down premium growth; heightened disaster risks could negatively impact property and casualty insurance performance.