China Securities Co., Ltd.: Both the asset and liability sides of insurance are expected to see improvement, and allocations to high-dividend OCI stocks are expected to increase further.

China Securities Co., Ltd. released a research report stating that looking ahead to 2027, both the asset and liability sides of the insurance industry are expected to see coordinated improvement, and it is optimistic about the valuation repair of the sector's medium- to long-term value and investment opportunities in high-dividend allocations. On the life insurance side, NBV growth is expected to recover from a relatively low base, with the extent of recovery depending on the pace of improvement in the opening-year sales campaign and the bancassurance channel. On the property insurance side, new energy vehicle insurance is expected to release profit elasticity, and comprehensive governance is expected to further optimize the expense ratio of non-auto insurance. On the asset side, the negative impact of declining interest rates on insurers is manageable, partially offset by new policies with low liability costs, and low interest rate expectations have already been largely reflected in the sector's valuation. Against the backdrop of a low interest rate environment and the implementation of new asset-liability management regulations, insurance capital is expected to further increase its allocation to high-dividend OCI stocks. The main views of China Securities Co., Ltd. are as follows: Life Insurance Outlook NBV growth is expected to recover from a relatively low base, with the extent of recovery depending on the pace of improvement in the opening-year sales campaign and the bancassurance channel. In 2026, the assumed interest rate was stable, and bancassurance sales came under pressure due to regulatory disruptions. Overall, the 2027 base is manageable, and NBV growth is expected to turn positive year-on-year. In terms of structure, the rising share of participating insurance optimizes rigid liability costs and consolidates the long-term spread, while the increase in the share of long-term regular premium business is expected to stabilize NBVM. Demand fundamentals for savings-type insurance are solid, with maturing deposits being redeployed and long-term retirement demand being released, supporting new premium growth in savings-type insurance. The transition to participating insurance, combined with new accounting standards, smooths earnings volatility, and regulation is guiding the industry toward benign competition; commercial health insurance is benefiting from policy support, with the out-of-pocket payment gap beyond basic medical insurance expanding, broadening mortality/morbidity margin gains and enriching the profit source structure. Property Insurance Outlook Policy tailwinds continue to emerge, and underwriting profit growth is expected to continue. In the first three quarters of 2026, leading property insurers demonstrated profit resilience amid a weak premium environment; catastrophe disruptions intensified in 3Q26, but the industry's combined ratio remained in profitable territory. Looking ahead to 2027, there are three main drivers of underwriting improvement: first, the dividends of comprehensive governance of non-auto insurance will be further released, with product phase-outs, the "report-and-execute consistency" rule, and the clearing out of high-risk businesses expected to further feed through to expenses and claims; second, auto insurance, as the profit ballast, may see limited incremental premium contribution, but under a stable competitive landscape, claims management and high-quality customer segment operations are expected to support the profit center; third, new energy vehicle insurance is gradually moving from a high-growth, loss-making phase toward a profit cycle, with leading players' advantages in pricing, risk control, and repair networks continuing to materialize, expected to unlock profit elasticity. Asset Side The negative impact of declining interest rates on insurers is manageable, new policies with low liability costs can provide partial offset, and low interest rate expectations have already been largely reflected in the sector's valuation. Under the backdrop of new asset-liability management regulations and new accounting standards, high-dividend OCI stocks can both contribute stable dividends to meet regulatory requirements for net investment yield coverage and reduce the impact of market value fluctuations on current-period profit. In 26H1, the seven listed insurers had a combined OCI stock allocation ratio of 5.6%, with OCI stocks accounting for 43.4% of their equity holdings, and this allocation ratio is expected to rise further. In terms of valuation, as of 11/7, the PEV of A-share listed insurers was generally in the range of 0.47-0.63x, and the sector's current valuation has fairly fully priced in the suppressing expectations of low interest rates. Risk Analysis Liability-side reform falling short of expectations; long-end interest rates declining more than expected; significant declines in the equity market; residents' demand recovery for protection-type products continuing to be significantly below expectations; market competition intensifying more than expected; auto insurance loss ratios rising more than expected; natural disaster risk impacts exceeding expectations.