Core Viewpoint - The insurance capital (险资) has become a focal point in the market this year, driven by policies promoting medium to long-term capital inflows, effectively optimizing the capital market structure and encouraging a shift towards value investing [1][3]. Group 1: Insurance Capital Market Activity - As of the end of Q3 2025, insurance capital appeared among the top ten shareholders of 633 A-share listed companies, with 270 new stock positions taken [3]. - The total market value of insurance capital holdings in A-shares exceeded 650 billion yuan, reflecting a growth of over 6% compared to mid-2025 [3]. - The insurance sector's investment strategy is characterized by a focus on long-term stability and value, aligning with the overall market recovery trend [5]. Group 2: Investment Performance and Preferences - In Q3 2025, the Shanghai Composite Index rose by 12.73%, with insurance companies' investment results significantly contributing to their net profit growth [4]. - Insurance capital's holdings in the top five industries by market value include banking, public utilities, transportation, communications, and electrical equipment [5]. - The top five industries by the number of individual stocks held by insurance capital are electronics, pharmaceuticals, electrical equipment, machinery, and automobiles [5]. Group 3: Investment Strategies and Tools - Insurance capital's investment strategy is primarily driven by liability-driven investment (LDI), focusing on matching assets with liabilities [6]. - The strategy includes a foundation of high-rated bonds (60%-70% of the portfolio) for stable returns, with equity investments typically comprising 10%-15% [6]. - The insurance version of asset-backed securities (ABS) has emerged as a key tool for insurance capital to navigate low interest rates and market volatility, providing a stable return and extending asset duration [7][9]. Group 4: Growth of Insurance Version ABS - In the first three quarters of 2025, the number of registered insurance asset-backed plans reached 66, with a total scale of 274.58 billion yuan, marking a 25.1% increase year-on-year [8]. - The insurance version of ABS serves as a "stabilizer" for returns and an "extender" for assets, typically offering a higher issuance rate of 5%-6% compared to similar credit bonds [8][9]. - The unique structured design of insurance version ABS allows for risk and return layering, catering to the needs of insurance capital for stable and secure investments [9][10].

Core Insights - The net profit of five A-share listed insurance companies reached CNY 426.04 billion in the first three quarters of 2025, representing a year-on-year increase of 33.5% despite a high base from the previous year [1] - Investment assets of these companies totaled CNY 20.26 trillion by the end of Q3 2025, up 10.4% from the beginning of the year, benefiting from a rising equity market [3] Group 1: Profit Performance - The net profit growth rates for the five insurance companies from highest to lowest are: China Life +60.5%, New China Life +58.9%, PICC +28.9%, Taikang +19.3%, and Ping An +11.5% [1] - In Q3 alone, the combined net profit reached CNY 247.85 billion, a year-on-year increase of 68.3%, with China Life and New China Life leading the growth due to investment income elasticity [1] - By the end of Q3 2025, the total net assets of these companies amounted to CNY 23.11 trillion, reflecting a growth of 10.3% from the beginning of the year [1] Group 2: Life Insurance and Non-Life Insurance Performance - The new business value (NBV) for life insurance companies showed significant growth, with the following year-on-year increases: PICC Life +76.6%, New China Life +50.8%, Ping An +46.2%, China Life +41.8%, and Taikang +31.2% [2] - The premium income for non-life insurance companies also saw positive growth, with PICC +3.5%, Ping An +7.1%, and Taikang +0.1%, primarily driven by stable growth in auto insurance premiums [2] - The combined loss ratio (COR) for these companies improved, with PICC at 96.1%, Ping An at 97.0%, and Taikang at 97.6%, indicating significant increases in underwriting profits [2] Group 3: Investment Performance - The total investment income for the five insurance companies increased significantly, with China Life +40.7%, New China Life +40.3%, PICC +36.6%, Taikang +26.8%, and Ping An +19.5% [3] - The overall net investment yield declined due to pressure from low interest rates on fixed-income assets, while the total investment yield improved due to a strong stock market [3] Group 4: Investment Recommendations - On the liability side, the dynamic adjustment of life insurance interest rates and the transformation of dividend insurance are expected to reduce liability costs and enhance NBV value rates [4] - The continuous improvement in underwriting profits is anticipated as non-life insurance companies advance channel integration and refined expense management [4] - The current public fund holdings in insurance stocks are relatively low, with the insurance index PB valuation at 1.42x, which is at a historical low level [4]

Core Viewpoint - The insurance industry has shown unexpected growth in profits for the first three quarters of the year, with major companies reporting a combined net profit of 426 billion yuan, a year-on-year increase of 33.5% [4][5]. Group 1: Profit Growth and Investment Strategies - The primary source of profit growth for the major insurance companies has been capital market gains, with investment income contributing over 60% to profits [5]. - The CSI 300 index rose by 18% in the third quarter, benefiting insurance companies with large capital and long liability durations, leading to increased equity investment ratios [6]. - Insurance companies have shifted from defensive positions to more aggressive growth strategies, with a focus on technology growth stocks and broad-based ETFs [8][9]. Group 2: Company-Specific Performance - New China Life Insurance was the most proactive player, achieving an 88% year-on-year profit increase in the third quarter, with an annualized total investment return of 8.6% [8]. - China Pacific Insurance experienced a significant turnaround, with core business profits rebounding sharply due to improved investment returns [10]. - China Ping An and China Taiping adopted more conservative investment strategies, with Ping An reporting a non-annualized investment return of 5.4% [12][13]. Group 3: Market Outlook and Future Challenges - The current profit surge may not be sustainable as the market approaches the end of the valuation recovery phase, raising concerns about balancing high returns with long-term solvency risks [16]. - The insurance industry is seeing positive signals in the liability side, with a slight increase in individual insurance agent numbers for the first time in two years [17]. - Future growth will depend on product innovation, channel optimization, and long-term interest rate management as the industry transitions to a "post-asset cycle" phase [18].

Investment Rating - The industry investment rating is "Overweight," indicating that the industry index is expected to outperform the CSI 300 index by 10% or more over the next six months [6]. Core Insights - The report highlights a downward adjustment in the preset interest rate for ordinary life insurance products to 1.90%, a decrease of 9 basis points from the previous quarter, reflecting a trend of gradual reduction since Q4 2024 [4][5]. - The report notes significant growth in new business for major listed insurance companies, with year-on-year increases of 55% for Xinhua, 52% for China Life, 46% for PICC Life, and 21% for Ping An in Q3 2025, driven by a "stop selling" catalyst [4]. - The net profit of five A-share listed insurance companies increased by 33.5% year-on-year in the first three quarters of 2025, with a remarkable 64.3% growth in Q3 alone, primarily due to improved investment returns [4]. Summary by Sections Investment Highlights - The preset interest rate for life insurance products has been adjusted to 1.90%, with a consistent downward trend observed since Q4 2024 [4]. - The market interest rate is expected to stabilize, with the report indicating that the downward adjustment in preset rates will likely slow down in the future [4]. - The report emphasizes the importance of product switching and the potential for value growth in the insurance sector [4]. Market Performance - The report indicates that the insurance sector is currently undervalued, presenting significant investment opportunities, especially as market sentiment improves [4]. - The report suggests that the insurance sector will benefit from a shift in investment styles towards dividend stocks as year-end profit-taking occurs [4]. Recommendations - The report recommends focusing on large listed insurance companies with a clear competitive advantage, as they are expected to perform well in the current market environment [4].

Core Viewpoint - The insurance industry is facing significant challenges in asset-liability management due to a prolonged low interest rate environment, which has led to declining yields on assets and increasing pressure from liability costs [1][9]. Group 1: Importance of Asset-Liability Management - Asset-liability management is a strategic process that plays a crucial role in the stable development and risk prevention of insurance companies [2]. - The healthy development of the insurance industry is essential for providing risk protection and stable long-term funding for the economy [3]. Group 2: Risk Management and Value Growth - Insurance companies must manage various risks, including interest rate risk and liquidity risk, to ensure their survival and growth [4]. - Effective asset-liability management can help insurance companies predict and manage risks, ensuring they have sufficient resilience during risk exposure [4]. Group 3: Performance Improvement and Dual-Driven Model - The traditional asset-liability management framework driven by liabilities needs to shift to a dual-driven model to achieve performance growth in a low-interest, high-competition environment [5]. - Companies should strategically allocate assets based on liability characteristics to stabilize investment returns and optimize product structures to reduce liability costs [5]. Group 4: Regulatory Requirements and Overview - In 2018, regulatory bodies introduced rules to enhance asset-liability management capabilities and prevent mismatches in the insurance industry [6]. - The insurance industry has seen a narrowing of interest spread, prompting companies to adjust their product offerings to manage liability costs effectively [7]. Group 5: Challenges in Asset-Liability Management - The continuous decline in long-term interest rates directly impacts the investment returns of insurance companies, making it difficult to meet long-term return targets [9]. - The scarcity of high-quality non-standardized debt assets increases reinvestment risks for insurance companies [10]. Group 6: International Practices in Low-Interest Environments - Foreign insurance companies have adjusted their product structures to increase the proportion of interest-sensitive products, thereby alleviating liability cost pressures [15]. - The U.S. insurance industry has seen a significant increase in the share of equity investments to enhance potential returns [17]. Group 7: Domestic Practices and Recommendations - Domestic insurance companies are adopting a "barbell" asset allocation strategy to manage reinvestment risks while increasing equity asset allocations [19]. - Companies are encouraged to strengthen their asset-liability management foundations and optimize strategies to enhance investment returns and reduce liability costs [20][21].

Core Insights - The average settlement interest rate for universal life insurance products has decreased to 2.68%, down approximately 18 basis points year-on-year, with the highest rate at 3.50% and the lowest at 0.36% [1][2][3] - A significant 68.4% of the 269 universal life insurance products reported settlement rates below 3% [1][2] Summary by Category Settlement Rates - As of October 12, 269 universal life insurance products disclosed their September settlement rates, with 85 products (31.6%) having rates of 3% or above, a notable decline from approximately 62% in the same period last year [2][3] - The distribution of rates shows that 66.5% of products have rates between 2% and 3%, while 5 products reported rates below 2% [2] Factors Influencing Rate Changes - The decline in settlement rates is attributed to three main factors: pressure on investment returns, regulatory guidance to mitigate interest rate risk, and proactive adjustments by insurance companies to lower liability costs [3][4] - Regulatory changes, particularly the April notification from the National Financial Regulatory Administration, require insurance companies to align settlement rates with actual investment returns, thereby capping the upper limits of these rates [3][5] Market Trends - The universal life insurance market has shown a slight decline in premium income, with new policyholder investment contributions totaling 458.8 billion yuan in the first eight months of the year, nearly unchanged from the previous year [4] - The shift towards guaranteed return products, such as increasing interest in whole life insurance, has diverted savings demand away from universal life insurance [4][6] - The industry is moving towards floating return products, with dividend insurance becoming a mainstream choice, although universal life insurance will continue to meet specific long-term financial needs due to its flexibility [6]

Core Viewpoint - The overall trend of universal insurance settlement rates is declining, with most products showing rates between 2.5% and 3% as of September 26, 2023, which is a significant drop compared to previous years [1][2][4]. Group 1: Current Settlement Rates - As of September 26, over 1200 universal insurance products have disclosed their August settlement rates, with the highest being 3.5% and the lowest at 0.36% [1]. - Nearly 100 products have settlement rates exceeding 3%, with over 85% of products falling within the 2.5%-3% range [2]. - In comparison, during the same period in 2024, most products had rates not lower than 3%, and in 2023, hundreds of products had rates above 4% [2]. Group 2: Factors Influencing Rate Changes - The decline in settlement rates is attributed to lower investment returns from fixed-income assets and the volatility of equity assets, impacting insurance companies' overall investment income [2][5]. - Regulatory measures are also in place to mitigate interest rate risk, leading to a reduction in the upper limit of settlement rates to align with actual investment returns [2][4]. Group 3: Future Outlook - Industry experts predict that universal insurance settlement rates may continue to decline, influenced by the downward trend in market interest rates, including 10-year government bond rates and deposit rates [5]. - The premium scale for universal insurance has decreased, with a reported 1% decline in new premium income for the first seven months of the year, totaling 419.3 billion [5]. - To enhance the attractiveness of universal insurance, companies are encouraged to focus on the product's core insurance benefits and improve its long-term protection features [5][6].

Core Viewpoint - The overall trend of universal insurance settlement rates is declining, with most products showing rates between 2.5% and 3% as of September 26, 2023, which is a significant drop compared to previous years [1][2][3] Group 1: Universal Insurance Settlement Rates - As of September 26, 2023, over 1,200 universal insurance products reported settlement rates, with the highest at 3.5% and the lowest at 0.36% [1] - The majority of universal insurance products have settlement rates not exceeding 3%, with over 85% falling within the 2.5%-3% range [1] - In comparison, during the same period in 2024, most products had rates not lower than 3%, and in 2023, hundreds of products had rates above 4% [1] Group 2: Impact of Market Conditions - The decline in universal insurance settlement rates is linked to lower investment returns from fixed-income assets and volatility in equity markets, affecting insurance companies' overall investment income [2] - Regulatory measures are in place to mitigate interest rate risk, leading to a reduction in the upper limit of settlement rates to align with actual investment returns [2][3] Group 3: Future Outlook - Industry experts predict that universal insurance settlement rates may continue to decline due to ongoing downward trends in market interest rates, including 10-year government bond rates and loan market quotation rates (LPR) [3] - The premium scale for universal insurance has decreased, with new policyholder investment contributions amounting to 419.3 billion yuan in the first seven months of the year, a 1% decline from the previous year [3] - To enhance the attractiveness of universal insurance, companies need to focus on the product's core insurance benefits and long-term protection features [3][4] Group 4: Regulatory Changes and Product Strategy - In April 2023, regulatory authorities issued guidelines prohibiting the development of universal insurance products with terms shorter than five years, encouraging companies to extend the actual policy duration through design adjustments [4] - The reduction in settlement rates poses challenges to the product's appeal, shifting customer focus from price to value, emphasizing the unique advantages of universal insurance such as guaranteed rates and flexible withdrawals [4]

Core Viewpoint - The insurance industry plays a crucial role in mitigating economic risks, maintaining social stability, and enhancing livelihood security, as evidenced by the performance of listed insurance companies in their semi-annual reports [1] Group 1: Service to the Real Economy and Public Welfare - The life insurance sector is continuously enriching inclusive insurance products and services, providing essential support for healthcare, protection against loss, and elderly care [2] - China Life has engaged in over 200 major illness insurance projects and 70 long-term care insurance projects, while also launching innovative health insurance products [2] - China Pacific Insurance has increased its investment in the second pillar pension management assets to 678.3 billion yuan, a 5.1% increase from the beginning of the year [2] Group 2: Technology and Green Investments - China Pacific Insurance has increased its technology investment balance to 119.7 billion yuan, while New China Life has established a venture capital fund focused on new infrastructure and strategic emerging industries [3] - China Life has made significant investments in green sectors, including a major IPO in the renewable energy sector, while China Pacific has developed a green investment management system [3] Group 3: Market Stability through Investment - Several listed insurance companies have actively responded to calls for insurance capital to enter the market, enhancing equity allocation and investment capabilities [4] - New China Life has optimized its asset structure and participated in long-term capital market pilot reforms, establishing funds focused on high-quality listed companies [4] Group 4: A-share Market Investment Growth - China Insurance has increased its A-share investment assets by 26.1% by mid-year, with a focus on long-term investment value and stable dividend returns [5] Group 5: Investment Strategy for the Second Half of the Year - China Life remains optimistic about the A-share market, focusing on sectors such as technology innovation and advanced manufacturing for investment opportunities [6] - The company plans to maintain a flexible allocation strategy in fixed income while optimizing equity allocation towards high-dividend stocks [6] Group 6: Cost Reduction and Risk Management - The insurance industry is optimizing product structures and accelerating the development of floating yield dividend insurance products to mitigate interest rate risk [7] - New China Life has established a leadership group to promote the transformation of dividend insurance, achieving significant results in premium growth [8] Group 7: Asset-Liability Management - New China Life is enhancing its asset-liability matching capabilities by diversifying its fixed income portfolio and reducing reinvestment risks [9] - China Life has successfully narrowed the effective duration gap of its new business to 1.5 years, demonstrating effective interest rate risk management [9][10]

Core Viewpoint - Hong Kong insurance companies face significant challenges in maintaining high dividend realization rates for policies, particularly savings and participating life insurance, in a low interest rate environment. The underlying operational logic and response mechanisms are crucial for navigating these challenges [1]. Group 1: Spread Loss Risk - The essence of the issue is "Spread Loss Risk," which occurs when the actual investment return on premiums collected is lower than the promised rates to clients, leading to potential losses [3]. - Low interest rates have directly reduced yields on fixed-income assets, significantly increasing the "spread loss" risk [3]. Group 2: Strategies to Mitigate Risks - **Diversified and Global Asset Allocation Strategy ("Opening Up")**: Hong Kong insurance companies do not solely invest in low-yielding US dollar bonds. Their core investment strategy focuses on risk diversification and seeking higher returns [3]. - Increased allocation to equity assets (stocks) is employed to compensate for low returns from fixed-income assets, with a strategic focus on global stock markets [3]. - Investment targets include large blue-chip stocks and growth stocks to enhance overall portfolio returns through dividends and capital appreciation [5]. Group 3: Alternative Investments - Alternative investments and private markets serve as a "secret weapon" for maintaining high yields, as these assets have low correlation with traditional stocks and bonds and can provide a premium [5]. - Private equity investments involve acquiring equity in unlisted companies, aiming for high returns through company growth and eventual public offerings [5]. - Private debt investments involve lending to companies at interest rates typically higher than those of publicly traded corporate bonds [6]. - Real estate investments focus on global prime commercial properties to secure stable rental income and asset appreciation [7]. - Infrastructure investments target projects like airports and power plants that generate long-term stable cash flows [8]. Group 4: Flexible Bond Strategies - Strategies include extending duration to lock in relatively high long-term rates at the beginning of a low interest rate cycle [9]. - Investing in lower-rated (but not junk-rated) high-yield corporate bonds to achieve higher coupon rates is also part of the strategy [9]. - Global allocation is not limited to US dollar bonds but includes bonds in other currencies (e.g., Euro, Renminbi) to capture opportunities across different markets [9]. Group 5: Strong Capital and Buffering Mechanisms - **Capital Requirements**: The regulatory framework in Hong Kong mandates that insurance companies maintain sufficient capital to withstand market fluctuations and potential losses [11]. - This capital acts as a buffer, ensuring that companies can meet dividend obligations to clients without immediate reductions during market downturns [12]. Group 6: Legacy Assets and Profit Release - Many large insurance companies possess substantial "in-force books" of policies sold decades ago, which were backed by high-yielding assets (6%-8% returns) [13][14]. - The profits generated from these legacy assets exceed the returns promised to older policyholders, creating a "profit reservoir" that can be utilized to subsidize new policies and stabilize dividend levels [15]. Group 7: Dividend Policies and Smoothing Mechanisms - Insurance companies do not distribute all investment profits annually; a portion is retained as "unallocated profits" in a dividend reserve [15]. - The "smoothing mechanism" allows companies to store excess profits during good years and draw from reserves during poor years, maintaining stable dividend levels [15][16]. - This mechanism aims to provide clients with a more stable and predictable dividend experience, mitigating the impact of market volatility [16]. Group 8: Consumer Guidance - Insurance is a long-term commitment, and understanding the non-guaranteed nature of dividends is essential for policyholders [18]. - It is crucial to focus on the financial strength of insurance companies, selecting those with a strong capital base and experienced management teams [18]. - Reviewing long-term dividend realization rates (5-10 years) is recommended to assess a company's cross-cycle management capabilities [19]. - Setting realistic expectations for long-term returns in a low-growth, low-interest environment is advised [20]. Group 9: Conclusion - In the era of low US dollar interest rates, Hong Kong insurance companies combine diversified investments, strong capital buffers, and sophisticated smoothing mechanisms to maintain high dividend realization rates [21][22].