Core Viewpoint - The insurance sector is currently experiencing significant stock price declines due to global market volatility, with PB valuations at the lower end of the past three years, indicating a high cost-performance beta value. Long-term, major listed companies in the insurance sector are expected to leverage their robust balance sheets and profitability to navigate through cycles and benefit from a new development phase characterized by supply-side concentration, low-cost liabilities, and a shift towards dividend insurance [1][2][6]. Short-term Analysis - In the short term, the insurance sector is impacted by substantial fluctuations in global stock markets, leading to PB valuations returning to the lower end of the past three years, suggesting a high cost-performance beta value. The traditional insurance sales model has resulted in decreased stability in performance, with stock prices generally evaluated based on net assets, maintaining a stable fluctuation range [2][6]. Long-term Outlook - The insurance industry is entering a new cycle, with listed companies poised to benefit from the low-cost liability development phase. The current interest rate reduction cycle has exacerbated industry differentiation, and stringent regulations are expected to favor major listed companies, allowing them to thrive in the new development cycle [2][3]. - The difference in liability costs among large, medium, and small insurance companies is significant, with major companies benefiting from a lower overall liability cost below 3%, compared to smaller firms. Additionally, listed insurance companies have extended asset durations over the past five years, with bond allocations expected to increase by 5.0 percentage points by the end of 2024 compared to 2023 [2][3]. Regulatory Environment - Regulatory policies, such as the integration of reporting and operational channels, are reshaping the insurance distribution landscape, concentrating market share among leading companies. Companies with a high proportion of bank insurance channels are likely to see substantial growth in new business value, benefiting from both volume and price increases [3][4]. Transition to Dividend Insurance - The year 2025 is anticipated to mark the beginning of the transformation towards dividend insurance, with a significant increase in the proportion of dividend insurance products observed since the first quarter of 2025. The transition's sustainability will require further observation, but confidence in the shift towards dividend insurance is supported by several factors, including the higher guaranteed rates of dividend insurance compared to deposit rates in a low-interest environment [3][4]. Investment Strategy - The investment strategy suggests a short-term focus on beta value and a long-term investment in the new development cycle. The current low-interest environment is expected to exacerbate differentiation within the insurance industry and promote supply-side concentration, rather than leading to overall margin compression. The anticipated long-term inflationary pressures and the shift towards dividend insurance are expected to enhance the stability and profitability of the insurance sector [6][7].

Core Viewpoint - The report emphasizes that a single factor is insufficient for long-term success in industry comparisons, advocating for a comprehensive evaluation that incorporates multiple factors, particularly focusing on valuation metrics [3]. Valuation Analysis - Directly using valuation for industry comparisons yields poor results, as the absolute value perspective shows that valuation has an insignificant impact on stock prices. Historical data indicates that both PE and PB valuations have unstable influences on industry stock prices [4]. - Standardizing valuations improves the effectiveness of comparisons, yet the results remain inconsistent. Different industries have unique characteristics and developmental stages, making absolute valuation comparisons potentially misleading [4]. Market Sentiment Impact - The effectiveness of valuation improves significantly when combined with market sentiment. High or low valuation factors struggle to maintain consistent performance, as short-term stock performance is often influenced by marginal changes in fundamentals and market events rather than valuation alone [5]. - Market sentiment plays a crucial role in determining investor preferences for high or low valuation stocks. During periods of rising sentiment, investors favor high valuation sectors, while in declining sentiment, they gravitate towards low valuation sectors [5]. Enhanced Distinction with Market Sentiment - When market sentiment is considered, the distinction in industry performance based on absolute valuation improves significantly. Both PE and PB valuations show enhanced differentiation, with a stable upward trend in the performance of various groups [6]. - However, standardized valuation scores do not perform as well when combined with market sentiment, showing less clear differentiation and unstable performance trends [6]. Best Performing Valuation Metric - Among various valuation metrics, PE valuation combined with market sentiment yields the best scoring results. The investment strategy based on PE valuation from January 2013 to February 2025 shows annualized returns of 16.3%, 11.7%, 4.3%, 0.9%, and -4.7% for different groups, with a total annualized return of 20.9% for the long-short portfolio and a Sharpe ratio of 1.08 [7].