Investment Rating - The industry investment rating is "Recommended," indicating an expected increase in the industry index by more than 5% over the next 3-6 months compared to the benchmark index [19]. Core Insights - The report highlights a significant policy shift with the approval of an additional 600 billion yuan for long-term investments by insurance funds, aimed at stabilizing the market and boosting investor confidence [7][8]. - The adjustment of risk factors for stock investments by insurance companies, with a reduction of 10%, is expected to encourage greater market participation from these firms [7][8]. - The report emphasizes the potential for insurance companies to enhance their investment returns through equity investments, particularly in high-dividend assets, as they navigate challenges related to interest rate spreads [7][8]. Industry Overview - As of May 2025, the total market capitalization of the insurance sector is approximately 27,440.85 billion yuan, with a circulating market value of about 18,928.15 billion yuan [4]. - The report notes a mixed performance in the insurance sector, with a 1-month absolute performance of -2.1% and a 12-month performance of 26.2% [5]. Key Company Forecasts and Valuations - China Ping An: Expected EPS of 7.56 yuan in 2025, with a PE ratio of 6.72 and a rating of "Strong Buy" [8]. - China Pacific Insurance: Expected EPS of 4.87 yuan in 2025, with a PE ratio of 6.24 and a rating of "Recommended" [8]. - New China Life: Expected EPS of 6.39 yuan in 2025, with a PE ratio of 7.60 and a rating of "Recommended" [8]. - China Life: Expected EPS of 3.09 yuan in 2025, with a PE ratio of 11.90 and a rating of "Recommended" [8].

Core Viewpoint - The development of China's insurance industry has undergone three distinct stages, evolving from a focus on insurance compensation to a dual emphasis on underwriting and investment, and now entering a "chain stage" that expands the insurance industry's value chain through integration with healthcare and elderly care services [4][5][6]. Summary of Insurance Regulatory Evolution - The evolution of insurance regulation in China can be divided into several phases, starting from 1949 to 1978, where the People's Bank of China initially managed the insurance sector, followed by the Ministry of Finance, and a period of suspension of domestic insurance business [5]. - From 1979 to 1998, the domestic insurance business was gradually restored under the supervision of the People's Bank of China, leading to the establishment of the China Insurance Company in 1983 and the implementation of the Insurance Law in 1995 [5][6]. - The period from 1998 to 2018 saw the establishment of the China Insurance Regulatory Commission (CIRC) and the introduction of a modern regulatory framework focusing on solvency, corporate governance, and market behavior [6]. - Since 2018, the China Banking and Insurance Regulatory Commission (CBIRC) has unified the regulation of banking and insurance, enhancing solvency regulation and establishing a national financial regulatory authority in 2023 [7]. Challenges Facing Insurance Regulation - The legal framework for insurance regulation in China is still incomplete, with a lack of specific laws governing new business models such as mutual insurance and reinsurance, and unclear regulatory responsibilities across different sectors [8][9]. - There are deficiencies in differentiated regulation for various types of insurance institutions, leading to a "one-size-fits-all" approach that does not adequately address the unique characteristics of different entities [8][9]. - Issues in behavior and functional regulation persist, including misleading sales practices and inadequate oversight of insurance intermediaries, which contribute to market inefficiencies [9][10]. International Insurance Regulatory Experience - Internationally, insurance regulation has evolved from behavior-based oversight to solvency regulation, with frameworks established by organizations such as the International Association of Insurance Supervisors (IAIS) focusing on solvency as a core principle [12][13]. - The United States employs a dual regulatory system with federal and state oversight, emphasizing risk-based capital requirements to ensure insurance companies maintain adequate solvency [13]. - The European Union has implemented the Solvency II framework, which sets capital requirements based on business scale and enhances risk management and governance standards [14]. Future Directions for China's Insurance Regulation - There is a need to improve the legal and regulatory framework for insurance, including timely revisions to the Insurance Law and the establishment of specific regulations for mutual insurance and reinsurance [17][18]. - Differentiated regulatory approaches should be adopted based on the type of insurance institution, with increased scrutiny for those with higher risks [18]. - Innovations in behavior and functional regulation are necessary to protect consumer rights and adapt to new business models, including the implementation of regulatory sandboxes for innovative insurance products [19][20].