Core Viewpoint - Xinhua Insurance has launched the first domestic service payment-type nursing insurance "Kanghu Wuyou," which marks a significant shift from "economic compensation" to "service guarantee" in the nursing insurance sector, aiming to enhance elderly care and inclusive finance [1][6]. Group 1: Product Features - "Kanghu Wuyou" has a low entry threshold for insurance, covering ages from 30 days to 75 years, with the maximum renewal age up to 100 years, and does not require medical examination [4][5]. - The product offers flexible payment designs, allowing users to choose between cash payments or professional nursing services, and provides various long-term care insurance payment periods of up to 24 months [5][6]. - The insurance covers essential nursing needs, including surgical hospitalization and long-term care, ensuring high-quality professional services are accessible [5][6]. Group 2: Industry Context - The nursing care industry in China is still in its early stages, facing challenges such as a significant shortage of nursing staff, lack of professional home care institutions, and high service costs [1][4]. - The launch of "Kanghu Wuyou" aligns with the national policy to accelerate the development of commercial long-term nursing insurance and loss of income insurance, addressing the urgent need for high-quality nursing services [4][6]. Group 3: Strategic Goals - Xinhua Insurance aims to deepen cooperation and explore innovative developments in service payment-type health insurance products to address the challenges of an aging population and contribute to a health security system with Chinese characteristics [7][8]. - The company is committed to building a multi-layered health and elderly care product system, having launched 12 new products in 2025, including major disease insurance and tax-advantaged nursing insurance [8][9].

Policy Direction - The policy aims to increase the proportion and stability of commercial insurance funds invested in A-shares, targeting a 30% investment of new premiums into A-shares from 2025[8] - The pilot program for long-term investment by insurance funds has been expanded, with a total of 222 billion yuan approved for long-term investments in 2023[9] - Regulatory rules are being optimized, including a 10% reduction in risk factors for stock investments and adjustments to the solvency ratio requirements for equity assets[9] Investment Projections - In a neutral scenario, insurance funds are projected to increase equity investments by 1.15 trillion yuan in 2026 and 1.45 trillion yuan in 2027, raising the equity asset proportion to 23.6% and 24.6% respectively[2] - If new premiums are allocated 30% to A-shares, the projected new equity investments would be 9.88 trillion yuan in 2026 and 10.77 trillion yuan in 2027, with equity asset proportions reaching 23.2% and 23.7%[28] Risk Factors and Challenges - Risks include lower-than-expected premium income, which could lead to insufficient new funds for investment[4] - Significant market volatility may impact investment returns and asset values, affecting the pace of insurance funds entering the market[4]

Investment Rating - The report maintains a "Recommendation" rating for the insurance industry, indicating an expectation that the industry index will outperform the benchmark index by more than 5% in the next 3-6 months [28]. Core Insights - The new asset-liability management regulations aim to deepen the alignment between asset and liability management, enhancing the industry's long-term stability and operational capabilities [16]. - The report highlights that the recent decline in long-term interest rates has put pressure on net investment returns, posing potential "spread loss" challenges for the industry [8]. - The report notes that the head-listed insurance companies are expected to manage their liability costs better than smaller firms, which may face greater pressure due to cost management issues [16]. Summary by Sections Regulatory Changes - The new regulations clarify asset-liability management goals, principles, governance structures, policies, procedures, and establish regulatory and monitoring indicators [3]. - Key changes include institutional integration, improved organizational structures, and optimized calculation standards for regulatory indicators [3]. Monitoring Indicators - Regulatory indicators for property insurance companies focus on cost-benefit matching, duration matching, and liquidity matching, with specific minimum standards set for various metrics [4][5][6]. - Life insurance companies have indicators such as effective duration gap and comprehensive investment income coverage ratio, with strict monitoring requirements [4]. Investment Performance - As of H1 2025, the average net investment return for listed insurance companies is approximately 3.5%, with significant variations among companies [8]. - The report indicates a notable decline in new business costs for life insurance companies, driven by adjustments in preset interest rates and unified pricing strategies [12][15]. Strategic Implications - The report suggests that the new regulations may lead to a trend of controlling the scale of whole life insurance business sales and increasing allocations to long-duration bonds [16]. - It is anticipated that the pricing of new insurance products will become more cautious as companies focus on cost-benefit matching [16].

Investment Rating - The report maintains an "Overweight" rating for the insurance industry [1][2]. Core Insights - The "Insurance Company Asset-Liability Management Measures (Draft for Comments)" aims to comprehensively standardize the asset-liability management system of insurance companies, reinforcing the primary responsibility of companies and clarifying regulatory indicators to guide long-term stable operations [2][3]. - The introduction of the new measures is expected to enhance the asset-liability management framework, particularly under the backdrop of interest rate fluctuations and accounting standard reforms, benefiting leading insurance companies that align with stricter regulatory requirements [4]. Summary by Sections Regulatory Framework - The draft requires insurance companies to establish a governance structure for asset-liability management, with the board of directors ultimately responsible and senior management directly leading the efforts [4][5]. - It specifies the need for a professional department dedicated to asset-liability management, ensuring independence from business and investment management departments [4][7]. Management Policies and Procedures - The measures outline requirements for asset and liability analysis, product pricing management, asset allocation policies, and stress testing [4][5]. - Regulatory indicators include minimum standards for liquidity coverage ratios and effective duration gaps, with specific metrics for property and life insurance companies [9][10]. Monitoring and Risk Management - Monitoring indicators are established to identify and warn against asset-liability mismatch risks, enhancing risk management capabilities [4][9]. - The report emphasizes the importance of aligning asset-liability management with long-term operational goals, with a focus on achieving cost-revenue matching and liquidity matching [4][10]. Investment Recommendations - The report suggests that the new measures will guide the industry towards long-term stable operations and optimize asset-liability matching, maintaining an "Overweight" stance on the industry [4][12]. - Recommended companies include China Ping An, China Pacific Insurance, New China Life, and China Life Insurance [4][12].

Investment Rating - The report indicates a positive investment outlook for the non-bank financial sector, particularly highlighting the insurance and brokerage segments as having strong growth potential [1][3]. Core Insights - The non-bank financial index increased by 2.90% this week, outperforming the CSI 300 index by 3.17 percentage points. The insurance sector saw a significant rise of 7.03%, driven by asset under management (AUM) expansion and interest margin recovery, indicating a favorable market environment for insurance stocks [1][9]. - The brokerage sector also showed positive momentum with a 1.01% increase, supported by strategic mergers and acquisitions, which are expected to enhance market concentration and profitability [2][17]. - The banking sector experienced a modest increase of 1.00%, with expectations of improved credit growth driven by government policies and infrastructure investments [3][19]. Summary by Sections Insurance Sector - The insurance sector's index rose by 7.03%, significantly outperforming the CSI 300 index by 7.30 percentage points. Key players like Ping An and China Pacific saw their stock prices reach new highs, reflecting strong market confidence [1][13]. - The growth in the insurance sector is attributed to the dual drivers of AUM expansion and interest margin recovery, which enhance investment income certainty. The sector is positioned for a critical recovery phase in both performance and valuation [16][24]. - Recommendations include focusing on companies with strong dividend yields and low valuations, such as China Pacific and New China Life [16][24]. Brokerage Sector - The brokerage sector's index increased by 1.01%, with notable developments including the merger of China International Capital Corporation (CICC) with Dongxing and Xinda, which is expected to enhance CICC's market position [2][17]. - The report highlights a mismatch between profitability and valuation in the brokerage sector, suggesting potential for valuation recovery. Recommended stocks include large, low-valuation brokerages and those involved in mergers [18][17]. Banking Sector - The banking sector's index rose by 1.00%, with a focus on improving credit growth supported by government initiatives. The report emphasizes the transition from traditional investment models to a dual-driven approach focusing on both physical and human investments [19][21]. - Recommendations for the banking sector include focusing on high-quality regional banks and those with strong growth potential in government-related financing [23][19].

Investment Rating - The report maintains a positive outlook on the insurance and brokerage sectors, suggesting an "Overweight" rating for both industries, indicating expected outperformance compared to the overall market [2][66]. Core Insights - The brokerage sector is experiencing a fundamental and valuation mismatch, with a recommendation to focus on leading firms benefiting from improved competitive dynamics [2][5]. - The insurance sector is poised for a systematic value reassessment, with significant regulatory changes expected to enhance asset-liability management practices [2][17]. Summary by Sections Market Performance - The Shanghai Composite Index closed at 4,568.18 with a slight decline of -0.28% over the week, while the non-bank index rose by 2.90% [5]. - The brokerage, insurance, and diversified financial sectors reported gains of 1.01%, 7.03%, and 1.39% respectively [5]. Key Data in Non-Banking Sector - As of December 19, 2025, the average daily trading volume in the stock market was 18,033.77 billion yuan, reflecting a decrease of 15.23% compared to the previous month [41]. - The margin trading balance reached 24,993.66 billion yuan, an increase of 34.0% from the end of 2024 [15]. Brokerage Sector Insights - The report highlights the merger of China International Capital Corporation (CICC) with Dongxing Securities and Xinda Securities, marking a significant consolidation trend in the brokerage industry [2][29]. - The brokerage index's price-to-book ratio (PB) is currently at 1.38, indicating a low valuation compared to historical levels [2]. Insurance Sector Insights - The new asset-liability management regulations are expected to significantly impact the insurance industry, emphasizing the need for effective risk management and alignment of assets and liabilities [2][17]. - The insurance sector index increased by 7.03%, outperforming the Shanghai Composite Index by 7.30 percentage points [2]. Investment Recommendations - For the brokerage sector, the report recommends focusing on top-tier firms such as Guotai Junan, GF Securities, and CITIC Securities, which are expected to benefit from improved competitive conditions [2]. - In the insurance sector, companies like China Life, Ping An, and China Pacific Insurance are highlighted for their potential in the ongoing value reassessment [2].

Investment Rating - The report maintains an "Accumulate" rating for the insurance industry [1] Core Insights - The report discusses the introduction of the "Insurance Company Asset-Liability Management Measures (Draft for Comments)" aimed at enhancing the asset-liability management capabilities of insurance companies and strengthening regulatory frameworks [2][3] - The draft includes five main aspects: defining asset-liability management goals and principles, standardizing governance structures, clarifying policies and procedures, establishing regulatory and monitoring indicators, and enhancing supervision [2][4] - The regulatory indicators set minimum standards for insurance companies, including coverage ratios and liquidity measures, which are designed to improve risk management and ensure better alignment between assets and liabilities [4][5] Summary by Sections Background - Prior to 2018, the asset-liability management regulations for insurance companies were fragmented and lacked specific constraints. The establishment of a comprehensive regulatory framework began with the issuance of various rules by the former insurance regulatory authority [3] - Recent changes in the external environment and internal conditions of the insurance industry necessitate a more robust asset-liability management framework, especially with the upcoming implementation of new accounting standards in 2026 [3] Content - The draft aims to integrate existing regulations and enhance the asset-liability management framework by introducing clear management goals, governance structures, and regulatory indicators [4] - Key regulatory indicators for property insurance companies include: 1. Coverage ratio of settled funds: minimum standard of 100% 2. Income coverage ratio: minimum standard of 100% 3. Liquidity coverage ratio under stress scenarios: minimum standard of 100% [4][6] - For life insurance companies, the draft specifies: 1. Effective duration gap: must not exceed 5 years or be less than -5 years 2. Comprehensive investment income coverage ratio: minimum standard of 100% 3. Net investment income coverage ratio: minimum standard of 100% 4. Liquidity coverage ratio under stress scenarios: minimum standard of 100% [4][7] Impact - The introduction of these measures is expected to enhance the asset-liability management capabilities of insurance companies, thereby improving their long-term operational resilience. The measures address existing gaps in management practices and regulatory standards [5] - By quantifying regulatory indicators and optimizing monitoring metrics, the draft aims to reflect the true economic value and risk levels of insurance companies, promoting better alignment of assets and liabilities [5]

Group 1 - The core view of the report indicates that the A-share insurance industry is expected to return to a P/EV of 1x, with both asset and liability sides flourishing, driven by a recovery in EV growth and favorable interest rate conditions [3][4][36] - The report anticipates a long-term EV growth rate returning to double digits, with a focus on opportunities for long-term interest rates to break through the 2.0% threshold [3][36] - The insurance sector is expected to benefit from a gradual recovery in the equity market, which will enhance the investment ecosystem for insurance capital [6][39] Group 2 - In the life insurance sector, the report highlights a comprehensive and sustained widening of profit sources, with a positive outlook for the 2026 performance driven by asset reallocation and a gradual bull market in equities [4][36] - The non-auto insurance sector is set to improve underwriting profitability through a regulatory shift towards quality enhancement, with a projected increase in underwriting profit of approximately 5.8 billion yuan if profit margins improve by 1 percentage point [5][36] - The report suggests that the insurance companies are likely to maintain double-digit growth in core premium income and value growth in 2026, supported by effective channel expansion and improved sales dynamics [4][52] Group 3 - The report emphasizes the importance of the investment strategy, noting that the current low interest rate environment necessitates a focus on equity investments to enhance returns [6][39] - It is projected that the average EV growth for listed insurance companies will be 10.6%, 10.9%, and 10.8% from 2025 to 2027, with NBV growth rates of 34.7%, 21.7%, and 10.0% respectively [36][37] - The report indicates that the insurance sector's valuation is expected to gradually approach 1x P/EV as long-term interest rates stabilize and improve [39][40]

Regulatory Dynamics - Three departments are promoting the development of commercial insurance annuities and other insurance products to enhance financial adaptability to service consumption [6] - The Medical Insurance Bureau plans to expedite the clearing of major illness insurance funds and medical assistance funds, aiming for annual clearance completion by March 31 each year starting in 2028 [8][9] - The Medical Insurance Bureau has allocated 416.6 billion for medical insurance financial subsidies and construction funds for 2026 [10] - The Financial Regulatory Bureau emphasizes long-term assessment for insurance companies to prevent excessive pursuit of business expansion and short-term profits, introducing new regulatory indicators [11][12] - The China Insurance Industry Association has published a guide on ESG information disclosure for insurance institutions to enhance their practices [13] - Sichuan province is encouraging insurance companies to develop technology insurance products through the "Tianfu Sci-tech Insurance" initiative [14] Company Dynamics - Zhongyou Life has increased its stake in Sichuan Road and Bridge to 5%, triggering a takeover bid [16] - Great Wall Life has increased its holdings in Qin Port shares by 906,000 shares [17] - Great Wall Life has also increased its stake in Datang New Energy by 5 million shares [18] - China Pacific Insurance reported a cumulative original insurance premium income of 250.32 billion for the first 11 months, a 9.4% year-on-year increase [28] - New China Life's cumulative original insurance premium income reached 188.85 billion, with a 16% year-on-year growth [29] - China Life has increased its investment in the Guoshou Qihang No. 1 (Tianjin) equity investment fund by 5 billion [22] - Ping An Life has been approved to issue up to 20 billion in capital supplement bonds [25] - Huagui Life has been approved to increase its registered capital by 615 million, raising it to 2.615 billion [24] Industry Dynamics - Insurance companies have supplemented capital by 114.4 billion this year, with a notable focus on bond issuance [55] - The value of insurance stocks is being reassessed as both asset and liability sides continue to optimize [57] - The retirement income replacement rate for high-net-worth seniors has reached 75%, highlighting the significant role of commercial annuity insurance [58] - The establishment of the China Insurance Investment Fund and other partnerships in Xiamen with a capital contribution of 5 billion [63] - Ant Group has launched an AI health application, enhancing health services through technology [64] - The stock of Muxi Co. surged by 692% on its first trading day, with significant gains for insurance capital involved in its pre-IPO financing [65][66]

Core Viewpoint - The issuance of perpetual bonds by insurance companies is increasing as they seek to strengthen their capital base and meet regulatory requirements, particularly in light of the upcoming end of the transition period for the new solvency regulations. Group 1: Bond Issuance Details - On December 18, Great Wall Life successfully issued 1 billion yuan of perpetual bonds with a coupon rate of 2.70% [1] - In December, several insurance companies, including Ping An Life and Dongwu Life, have issued perpetual bonds or capital supplement bonds, totaling 23.5 billion yuan [1] - The issuance of bonds is primarily aimed at enhancing the solvency levels of these companies and supporting their ongoing business development [3] Group 2: Regulatory and Market Context - The acceleration in bond issuance is attributed to the approaching end of the transition period for the "Solvency II" regulations, which has led to a concentrated release of previously accumulated capital needs [4] - The new accounting standards have increased the volatility of solvency ratios, prompting companies to issue bonds to quickly replenish capital and stabilize regulatory metrics [4] Group 3: Strategic Importance of Capital - The issuance of bonds is seen as a way to prepare for the next year's business operations and to reserve capital for long-term growth needs [4] - As the industry shifts towards protection-oriented and long-term savings products, sufficient capital is necessary to support business expansion and strategic investments [5] Group 4: Trends in Perpetual Bonds - Perpetual bonds have emerged as a key tool for insurance companies to supplement their capital, with a total issuance of 514.7 billion yuan by 12 companies since 2025 [6] - The supply of perpetual bonds is concentrated among large and medium-sized insurance institutions, as they meet the higher issuance criteria compared to smaller firms [7] Group 5: Long-term Capital Strategies - While bond issuance provides short-term capital relief, the long-term solution lies in enhancing the internal capital generation capabilities of insurance companies [8] - Companies are encouraged to focus on high-quality development, optimize their business structures, and improve operational efficiency to achieve sustainable growth [8][9]