Core Viewpoint - The recent fluctuations in the A-share market around the 3600-point mark have drawn attention to insurance funds, which have become significant players in the market by frequently acquiring bank stocks. This shift is driven by a decline in the preset interest rate for ordinary life insurance to 1.99%, creating pressure for asset allocation amidst falling bond yields, leading to a potential transformation in investment logic for insurance stocks [1][8]. Group 1: Insurance Market Dynamics - The Chinese insurance market is characterized by a dual-track system of property and life insurance, with distinct participants, product forms, and profit logic, contributing to a diverse commercial model [2]. - In the property insurance sector, six major non-life insurance companies, including China Pacific Insurance and Ping An Property Insurance, hold a combined market share of 70%, focusing on quantifiable losses from risks like property damage and business interruption [2]. - The life and health insurance market is dominated by seven major companies, including China Life and Ping An Life, which contribute 46% of the premium scale, with products spanning life insurance, pensions, and health insurance [4]. Group 2: Profit Sources and Challenges - Investment spread is the core profit driver for Chinese life insurance companies, with a shift towards dividend-type policies to mitigate pressure from declining risk-free interest rates [6]. - The mortality/morbidity spread reflects the value of protection products, with a focus on accurate pricing and commission control, necessitating enhanced actuarial capabilities and channel management [6]. - The expense spread in the Chinese market is unique, with larger companies benefiting from economies of scale, contrasting with smaller firms that face higher marketing costs [6]. Group 3: Future Outlook and Valuation - Recent changes in the insurance industry have sparked discussions about whether it can replicate the valuation recovery seen in bank stocks, driven by improvements in fundamentals and valuation [8]. - The adjustment of preset interest rates is crucial for alleviating the "spread loss" pressure in the life insurance sector, with expectations of a decline in new business liability costs [8][9]. - Current internal insurance companies have a PEV (Present Embedded Value) below 1, indicating significant undervaluation, with companies like China Pacific Insurance and China Life being notably undervalued [9][10]. Group 4: Market Catalysts - The combined effect of policy guidance and the insurance companies' own needs is expected to accelerate the influx of incremental funds into the market, enhancing stability and long-term investment returns [11]. - The insurance sector's current improvement in fundamentals and low valuations may lead to a similar valuation recovery as seen in bank stocks if asset returns continue to improve and liability structures adjust smoothly [11].

Investment Rating - The investment rating for the company is "Buy" and is maintained [8]. Core Views - The current asset side of the insurance industry is the main contradiction, and the company, as a pure life insurance provider, possesses industry-leading sensitivity and elasticity, recommended as a quality beta asset allocation [2][10]. - The company's current stock price corresponds to a 2025 PEV of 0.67 times, which is at a historical low, and the recommendation to buy is sustained [2][10]. Summary by Sections Financial Performance - In the first quarter of 2025, the company achieved a net profit attributable to shareholders of 28.8 billion yuan, a year-on-year increase of 39.5%. The comparable new business value grew by 4.8% year-on-year [6][10]. - The significant decrease in insurance service fees, down 32.8% to 27.58 billion yuan, was the main reason for the profit improvement [10]. - The company's net assets attributable to shareholders increased by 4.5% quarter-on-quarter, primarily due to accounting standard differences [10]. New Business Value - The new business value on a comparable basis increased by 4.8% year-on-year, mainly due to improvements in value rates [10]. - The new single premium was 107.43 billion yuan, a year-on-year decrease of 4.5%, likely influenced by a shift towards dividend insurance products [10]. - The company's surrender rate remained stable at 0.29% [10]. Team and Operational Insights - As of the end of the first quarter of 2025, the individual insurance team size was 596,000, a decrease of 3.1% from the end of 2024 and a year-on-year decrease of 4.2%, indicating stability [10]. - The quality of the team has improved, with effective improvement in retention rates and team enhancement rates, reflecting the success of team reforms [10]. Investment Recommendations - The company is recommended as a high-elasticity target due to its position as a pure life insurance company, which provides significant sensitivity and elasticity in the current insurance industry landscape [10]. - Despite certain pressures in the individual insurance channel, the liability side is not a decisive factor for short-term performance [10].