Core Insights - The article discusses the 400th update of the "13精" database, focusing on the performance and sensitivity analysis of life insurance companies in China, particularly regarding their effective business value and new business value. Group 1: Sensitivity Testing Results - The sensitivity testing results indicate how changes in certain factors affect the effective business value (EBV) and new business value (NBV) of life insurance companies. For instance, a 50 basis point decrease in investment return assumptions leads to a -27.9% change in EBV and a -22.4% change in NBV for China Pacific Life Insurance [6][9]. - The trend shows that the impact of investment factors on the value structure of most life insurance companies is declining over time, with the exception of PICC Health, which has the lowest investment sensitivity among the analyzed companies [6][9]. - The effective business value of China Pacific Life Insurance under various scenarios demonstrates significant fluctuations based on changes in assumptions such as mortality rates and expense ratios [7][18]. Group 2: Business Value Analysis - The effective business value represents the present value of future profits from existing policies, while the new business value reflects the profitability of newly sold policies. Both values are crucial for assessing the growth potential and profitability of life insurance companies [5][6]. - The analysis highlights that the sensitivity of the effective business value varies across companies, with New China Life and PICC Life showing the highest investment sensitivity, indicating a greater proportion of income from investment-sensitive products [9][12]. - Conversely, Ping An Life and PICC Health exhibit lower investment sensitivity, suggesting a smaller share of income from such products [12]. Group 3: Expense Sensitivity - The expense sensitivity testing results indicate that the impact of expense factors on the value structure of all companies is also declining over time [15][18]. - Among the companies analyzed, PICC Life has the highest expense sensitivity, while Ping An Life has the lowest, reflecting differences in how companies manage expense pressures [18].

Summary of Key Points from the Conference Call Industry Overview - The insurance industry is divided into life insurance and property insurance, each with distinct business models and financial metrics [1][12]. Core Insights and Arguments - **Life Insurance Profitability**: Life insurance companies derive profits from three main sources: mortality difference (死差), expense difference (费差), and interest difference (利差). Effective management of expected payouts and expenses can yield additional profits, but the cost of liabilities varies significantly among companies due to hidden components [1][3][4]. - **Property Insurance Simplicity**: Property insurance premium calculation is straightforward, equating to expected payouts plus additional fees. Companies with strong underwriting capabilities can achieve profitability before investments, making their business model more attractive to investors [1][5]. - **Valuation of Life Insurance Companies**: Evaluating life insurance companies requires the concept of policy value, which estimates future costs and revenues, incorporating assumptions about payouts, expenses, and investments to assess policy profitability [1][6]. - **Embedded Value vs. Accounting Value**: The embedded value system focuses on shareholder returns using DCF methods to discount future profits to net assets, while the accounting system emphasizes reported profits through accounting assumptions [1][7]. - **Valuation Drivers**: Key drivers for life insurance company valuations include the growth and realizability of policy profitability. New business value reflects growth expectations, and the high proportion of interest difference makes the sector sensitive to market fluctuations [1][11]. Important but Overlooked Content - **Core Competitiveness**: The core competitiveness of insurance institutions lies in the linkage between assets and liabilities, necessitating an analysis of their feedback relationship. Companies with high short-term asset yield elasticity also face higher liability costs [1][15][16]. - **Liability Characteristics**: Life insurance liabilities often have long durations (over 20 years) and include hidden costs. The management of these liabilities is crucial to avoid risks associated with high-interest liabilities [1][17]. - **Asset Allocation Considerations**: When allocating assets for life insurance companies, three factors must be considered: cash flow matching, cost-benefit matching, and duration matching. Balancing these factors is essential to mitigate risks associated with interest rate changes [1][18]. - **Key Elements of Successful Insurance Companies**: Successful insurance companies are characterized by long-term strategic vision from shareholders, capable management, and strong corporate governance, which collectively drive positive operational outcomes [1][19].

Summary of Insurance Industry Mid-Year Investment Strategy 2025 Industry Overview - The insurance industry achieved excess returns in the first half of 2024, despite a slowdown in new business growth, indicating strong overall profitability [1][3] - The current valuation levels in A-shares and Hong Kong stocks reflect relatively pessimistic investment return assumptions, with valuation percentiles at historically low levels [1][4] Core Insights and Arguments - Short-term earnings in the insurance sector are primarily driven by valuation increases, while intrinsic value will contribute more significantly in the long term [1][4] - The risk of interest spread loss is low, with a continuous decline in new business liability costs and improved expenses, limiting the impact of long-term interest rate declines on leading listed insurance companies [1][5] - Effective business value can be used to assess the reasonable valuation level of existing businesses, as it has clear sensitivity calculations and conservative estimates [1][6] - The fundamental aspects will not drag down the current insurance industry's valuation, with trends favoring leading companies in product and service competitiveness [1][7] Investment Recommendations - The current insurance sector has room for valuation recovery, with a stable outlook on the liability side [2][8] - Recommended stocks include flexible options like Xinhua Insurance or Hong Kong stocks, as well as dividend-yielding stocks like China Ping An and China Pacific Insurance [2][9] Additional Important Points - As of June 20, 2025, the insurance index rose by 3.5 percentage points, outperforming the market by nearly 6 percentage points, with significant excess returns from companies like Ping An, Taiping, and Xinhua [3] - The trend of integrating insurance and banking is beneficial for leading companies, enhancing their market share and competitive position [1][7]