Western insurers' mid-year investment strategy: Significant increase in OCI equity allocation, greater emphasis on timing in bond selection.

Western released a research report stating that, overall, in the first half of 2026, the investment side of listed insurers showed a clear trend of "fixed income as the foundation, equity for enhancement, standardization as the mainstay, and duration optimization." The industry generally used long-duration interest rate bonds to build a stable income base, high-dividend blue chips and high-quality equity assets to enhance return elasticity, relied on standardized assets to reduce credit risk and improve portfolio liquidity, and smoothed cyclical fluctuations through duration matching and accounting classification optimization. The balanced allocation paradigm of high dividends + long duration + moderate equity was further consolidated, becoming a core strategic choice for insurers to cope with declining interest rates, seize market opportunities, and achieve sound asset-liability matching. Western's main views are as follows: In terms of major asset allocation By the end of June 2026, the total investment assets of the six listed insurers reached RMB 23.3 trillion, an increase of about 5% from RMB 22.3 trillion at the end of 2025, accounting for about 57% of the insurance industry's capital utilization balance, with industry concentration remaining stable. The main line of asset allocation shifted from non-standard assets to standardized assets, with the scale and proportion of non-standard assets continuing to decline, the proportion of high-rated assets remaining high, and yields steadily declining. On the fixed income side, bonds remained the core foundation, and the industry generally increased allocation to interest rate bonds. Under the new accounting standards, OCI bonds were the main body of bond allocation, while the proportions of AC and TPL bonds diverged. Deposit scale and structure diverged, the industry's deposit proportion shifted downward at the midpoint, and duration strategies showed differences. On the equity side, a comprehensive increase in allocation cycle arrived. Driven by policy guidance and market recovery, the scale and proportion of equity assets increased, with stock allocation growth significant. TPL equity maintained high-liquidity elasticity characteristics, while the proportion of OCI equity rose steadily, becoming an important tool for insurers to smooth returns and enhance long-term returns. In terms of investment returns Net investment yield came under overall pressure due to declining long-end interest rates and increased reinvestment pressure, with the industry midpoint shifting downward. Ping An Insurance and The People's Insurance led with duration management and diversified return structures. Total investment yield improved significantly with the upward movement of the equity market, fully releasing return elasticity: The People's Insurance led by a wide margin with an annualized total investment yield of 7.4% due to high equity exposure, followed by New China Life Insurance and China Life Insurance in terms of elasticity. Comprehensive investment yield was more consistent with long-term allocation capability and was generally lower than total investment yield due to the adjustment in the dividend sector and the decline in OCI equity valuations, with leading insurers showing outstanding return resilience. In terms of classified asset return analysis In 2026H, OCI debt yield rebounded to the 2.2%-2.9% range, coupon contributions were stable, and fair value changes turned positive as the bond market stabilized. OCI equity yield performed steadily, dividend contributions were stable, and the value of high-dividend coupons was prominent, while OCI fair value changes were overall negative amid equity market volatility. TPL assets had sufficient return elasticity, and the improvement in the equity market drove a significant rise in TPL yields, with TPL disposal gains and fair value changes released in a concentrated manner. Insurance bond allocation intensity was lower than the same period last year, but allocation to stocks and fund assets remained active Focusing on ultra-long bonds, insurers' allocation progress in ultra-long interest rate bonds exceeded last year, but this mainly relied on ultra-long local government bonds. In addition, the overall duration of insurance bond purchases lengthened, reducing duration gap pressure. Although participating insurance has expanded strongly in recent years and the constraint of rigid asset costs has decreased, insurers still face great pressure in cost matching and still focus on absolute returns in allocating to tier-two capital bonds and general credit bonds. Risk warnings: interest rate decline risk, equity market volatility risk, premium pressure, and statistical caliber deviations.