1. Report Industry Investment Rating No relevant content provided. 2. Core Views of the Report - In the past three years, the re - allocation of insurance funds may have been an important factor in the flattening of the interest rate curve. When the supply of high - yield assets such as non - standard assets shrank, insurance funds favored ultra - long - term interest - rate bonds [5][28]. - The impact of the "premium开门红" on the bond market has weakened. Premium income is not the only factor determining the rhythm of insurance bond allocation. Insurance institutions often time their bond allocations, and high new premiums do not necessarily lead to high bond - allocation scales [5][34]. - After the reduction of the scheduled interest rate, the cost of new insurance liabilities will decrease, and the criteria for high - dividend assets to enter the pool may be lowered. Insurance may gradually focus on overseas income - generating assets [6][61]. - Due to the change in accounting standards and the pursuit of risk - return ratio and profit - smoothing mechanisms, insurance funds prefer high - dividend assets. Under the new accounting standards, most bonds are placed in the FVOCI account, and the trading attributes and the characteristic of realizing profits at the end of the quarter have been amplified [6][86]. - The "Solvency II" has higher requirements for the duration and transparency of insurance assets, but for most insurance institutions, the level of risk factors alone is difficult to affect the allocation preference of insurance funds [6][118]. - The net secondary - market purchases of treasury bonds, policy - bank bonds, local government bonds, and financial bonds (excluding policy - bank bonds) by insurance institutions are highly correlated with the actual changes in their holdings, which is worthy of tracking [6]. 3. Summary According to the Table of Contents 3.1 In recent years, insurance funds may have been an important factor in the flattening of the interest rate curve - Premiums are an important source of insurance funds. The long - term nature of insurance liabilities makes insurance funds prefer long - term assets. The proportion of life insurance premiums in total premiums has increased from 52% in 2022 to 56% in 2024 [25]. - When the supply of high - yield non - standard assets shrank, insurance funds re - allocated to ultra - long - term interest - rate bonds, resulting in the flattening of the interest rate curve. From 2022Q2 to 2025Q1, the proportion of non - standard assets in total insurance funds decreased from 26.9% to 19.3%, and the term spread between 30Y and 10Y treasury bonds changed from "mean - reversion" to "downward - trend" after 2020 [28]. 3.2 The impact of the "premium开门红" on the bond market has weakened, and currently, insurance asset allocation values the risk - return ratio more - In the past, due to the lack of long - term government bond issuance in January, insurance funds flowed into the secondary market in the early part of the year. However, in recent years, the supply of long - term government bonds in the primary market has increased, and the influence on the secondary market has weakened [34]. - Premium income is not the only factor determining the rhythm of insurance bond allocation. The reasons include sufficient primary - market supply, relatively high deposit returns, and the importance of timing bond allocation to increase returns in a low - interest - rate environment [41]. - Before the reduction of the scheduled interest rate, insurance institutions usually try to boost premiums but time their bond allocations. Although the reduction of the scheduled interest rate on August 31, 2025, was greater than expected, the "premium - boosting" phenomenon was not obvious, and the preference for bond market allocation weakened. After the reduction, the cost of new insurance liabilities decreased, and the attractiveness of 30Y treasury bonds and 20Y and above local government bonds increased when their YTM was higher than 2% [51][61]. - Insurance may focus on overseas fixed - income assets. The expansion of the scope of eligible investors for the Southbound Bond Connect is imminent, which may increase the proportion of overseas investment by insurance institutions and help improve investment returns [64]. 3.3 Stock - bond rebalancing and the switch between old and new accounting standards make high - dividend assets more popular - As the domestic long - term bond yield may remain low for a long time, insurance companies may seek high - yield fixed - income assets overseas and increase their allocation of equities [73]. - Under the new accounting standards, most bonds are placed in the FVOCI account, and the trading attributes and the characteristic of realizing profits at the end of the quarter have been amplified. Insurance institutions prefer to buy high - dividend assets and re - classify them into the FVOCI account to smooth profit fluctuations [86][97]. - High - dividend equity assets can support investment returns when bond yields are low. Their full - return index has performed better than ultra - long - term treasury bonds since 2019 [103]. 3.4 "Solvency II" has higher requirements for the duration and transparency of insurance assets - Since 2023, the solvency adequacy ratio of insurance institutions has been steadily increasing. As of 2025Q1, the comprehensive solvency adequacy ratio of Chinese insurance companies reached 204.5%, and the core solvency adequacy ratio reached 146.5% [110]. - "Solvency II" requires a higher degree of matching between asset and liability durations. If the asset duration is less than the liability duration, the minimum capital for interest - rate risk will increase rapidly under stress - testing scenarios [113]. - Holding assets such as trusts, real estate, and non - standard assets will increase the risk factor, raise the minimum risk capital, and lower the solvency adequacy ratio. However, for most insurance institutions, the level of risk factors alone is difficult to affect their asset - allocation preferences [118]. 3.5 Insurance focuses on primary - market subscriptions and supplements with secondary - market transactions 5.1 Which types of bonds in the cash - bond trading data of insurance institutions are worthy of high - frequency tracking - The net secondary - market purchases of treasury bonds, policy - bank bonds, local government bonds, and financial bonds (excluding policy - bank bonds) by insurance institutions are highly correlated with the actual changes in their holdings. In 2024, insurance institutions showed more obvious trading behaviors in the secondary market [119]. 5.2 Rules for insurance trading of treasury bonds - Insurance institutions tend to increase their net purchases of long - term treasury bonds at the end of the quarter and sell them at the beginning of the next quarter. Since 2023, their net purchases of 30Y treasury bonds have increased significantly [125]. - Although there are obvious rules for insurance institutions' trading of treasury bonds at the end of the quarter, it is difficult for a single type of investor to affect the bond - market trend [136]. 5.3 Insurance trading of local government bonds: The spread can be used as a leading indicator - The supply pressure of local government bonds affects the spread, which in turn affects the net secondary - market purchases of local government bonds by insurance institutions. The spread of local government bonds is an important indicator for judging the net - buying power of insurance institutions in the secondary market. When the spread increases by 5 - 6bp within a month, the net - buying scale of insurance institutions may increase significantly [138]. 5.4 Insurance trading strategy for Tier 2 and perpetual bonds - Since May 2024, insurance institutions have continuously sold medium - and long - term Tier 2 and perpetual bonds because these bonds cannot pass the cash - flow test and most are re - classified into the FVTPL account, which has a greater impact on current profits [152].

Core Viewpoint - The recent adjustment of the maximum guaranteed interest rate for life insurance products in China reflects ongoing trends in the market, with the current rate set at 1.99%, down from 2.13% in the previous quarter, indicating a continuous decline in interest rates and a shift in product attractiveness towards participating insurance [1][3][10]. Summary by Sections Current Rate Adjustments - The current guaranteed interest rate for ordinary life insurance products is 1.99%, which is a decrease of 14 basis points from the previous quarter's 2.13% [1][3]. - The maximum guaranteed interest rate for ordinary life insurance products is now set at 2.5%, with adjustments triggered by the rate being above the research value for two consecutive quarters [3][4]. Market Reactions - Major insurance companies like China Life and Ping An Life have announced adjustments to their new insurance products' maximum guaranteed interest rates following the announcement from the Insurance Association [4][11]. - The new maximum rates are 2% for ordinary products, 1.75% for participating products, and 1% for universal products [4][11]. Industry Trends - The downward adjustment of interest rates is seen as a necessary response to the broader economic context, including declining market interest rates and the impact of new accounting standards on financial reporting [5][6]. - The shift towards participating insurance products is expected to increase as their relative attractiveness grows due to smaller rate reductions compared to other types of insurance [6][9]. Future Implications - Short-term effects may include a temporary halt in the sale of existing products as companies adapt to the new rates, potentially leading to increased training costs for sales personnel [7][10]. - Long-term, the low-interest-rate environment is likely to accelerate structural changes in the industry, with participating insurance products becoming more dominant due to their combination of guaranteed and variable returns [7][10]. Premium Growth - The insurance industry reported a total premium income of 3.74 trillion yuan in the first half of the year, with life insurance premiums growing by 5.34% year-on-year [8][10]. - The demand for savings-type insurance products remains strong, driven by the decline in deposit rates, although the recent rate adjustments may impact future premium growth [8][10][12].

Core Insights - The China Insurance Industry Association announced a new benchmark interest rate for ordinary life insurance products at 1.99%, a decrease of 14 basis points from the previous rate, indicating a trend of declining interest rates in the insurance sector [1][4][5] - Major insurance companies, including China Life and Ping An Life, have announced adjustments to their insurance product interest rates, with the maximum rate for ordinary insurance products set at 2.0% [5][9] - The downward adjustment of the benchmark interest rate is seen as a necessary response to the ongoing decline in market interest rates, which helps insurance companies manage their financial stability and reduce liability costs [9][14] Industry Adjustments - The new maximum interest rates for various insurance products are as follows: ordinary insurance products at 2.0%, participating insurance products at 1.75%, and universal insurance products at a maximum guaranteed rate of 1.0% [5] - The adjustment aligns with the regulatory framework established earlier this year, which mandates that if the maximum interest rate for insurance products exceeds the benchmark rate by 25 basis points for two consecutive quarters, it must be lowered [4] Market Reactions - Insurance agents are leveraging the current market conditions to promote sales, emphasizing the urgency for consumers to secure higher rates before further declines [10][13] - The trend indicates a shift towards participating insurance products as the maximum interest rates for fixed-income products decrease, which may enhance the appeal of variable yield products [13] Expert Opinions - Experts suggest that the adjustment in interest rates reflects the need for insurance products to align with market realities, thereby improving pricing strategies and reducing the risk of interest rate mismatches [9][14] - There is a cautionary note regarding potential marketing practices that may exaggerate the impact of interest rate changes, which could mislead consumers [14]

Core Viewpoint - The life insurance industry in China is set to undergo a significant adjustment in the predetermined interest rates for life insurance products, with the current research value dropping to 1.99%, indicating a new round of rate reductions [2][5][7]. Group 1: Predetermined Interest Rate Adjustments - The China Insurance Industry Association has announced that the research value for ordinary life insurance products' predetermined interest rate is now 1.99%, down from 2.13% in the previous quarter [6][7]. - The current maximum predetermined interest rate for ordinary life insurance products is 2.5%, and the new research value has fallen below this threshold by 25 basis points, triggering the adjustment mechanism [7][8]. - Insurance companies, including China Life, Ping An Life, and others, will adjust their new registered insurance products' maximum predetermined interest rates, effective from August 31, with ordinary products set at 2.0% [8][9]. Group 2: Market Impact and Company Responses - The reduction in predetermined interest rates is expected to affect the attractiveness of traditional products like whole life and annuity insurance, potentially increasing sales difficulties [12]. - In response to the changing macroeconomic conditions and interest rate trends, many life insurance companies have begun product switches and are focusing on product innovation, particularly in developing floating yield insurance products [12].

Core Viewpoint - The recent adjustment of the predetermined interest rate for personal insurance products in China to 1.99% indicates a downward trend, triggering a mechanism for rate reduction, which is expected to impact product pricing and consumer returns [1][2][4]. Group 1: Predetermined Interest Rate Adjustments - The maximum predetermined interest rates for various insurance products have been set: 2.0% for ordinary insurance, 1.75% for participating insurance, and 1.0% for universal insurance, effective from August 31 [1][4]. - The latest predetermined interest rate research value of 1.99% reflects a continuous decline over two quarters, with previous values being 2.34% and 2.13% [2][4]. - The adjustment mechanism is based on market interest rates, with the current reference rates being 3.5% for the 5-year LPR, 1.3% for the 5-year fixed deposit rate, and 1.65% for the 10-year government bond yield [3][4]. Group 2: Market and Consumer Impact - The reduction in predetermined interest rates is expected to lead to a slight decrease in guaranteed returns for savings-type insurance and potential premium increases for protection-type products [4][6]. - The shift towards lower predetermined interest rates may alleviate the risk of interest margin losses for insurance companies, although short-term sales could be pressured [4][6]. - The market response has shown a decrease in irrational behaviors such as "speculative buying," with consumers becoming more rational and focused on long-term benefits [6][7]. Group 3: Company Strategies and Adaptations - Insurance companies are proactively adjusting to the new interest rate environment by enhancing product structures, optimizing asset-liability management, and focusing on floating yield and non-interest-sensitive products [5][6]. - Companies like Great Wall Life are implementing strategies to adapt to the changing landscape, including product restructuring and system upgrades to facilitate rapid product iteration [5][6]. - The emphasis on floating yield insurance products is expected to increase, with many companies already launching products with lower predetermined interest rates [5][6].

Core Viewpoint - The upper limit of the predetermined interest rate for personal insurance has been lowered to 1.99%, down from 2.13%, triggering the adjustment mechanism for the second consecutive quarter [1][3][4]. Summary by Relevant Sections Predetermined Interest Rate Adjustment - The current predetermined interest rate for ordinary personal insurance products is set at 1.99%, a decrease of 14 basis points from the previous quarter [1][3]. - The adjustment mechanism is activated when the maximum predetermined interest rate exceeds the research value by 25 basis points for two consecutive quarters, which has now occurred [4][5]. Market Impact and Company Responses - Major insurance companies like China Life and Ping An Life have announced adjustments to the maximum predetermined interest rates for their new insurance products following the association's announcement [5]. - The new maximum rates are 2% for ordinary insurance products, 1.75% for participating insurance products, and 1% for universal insurance products [5]. Industry Trends and Future Outlook - The downward adjustment of the predetermined interest rate is seen as a necessary response to the ongoing decline in market interest rates, with 1-year fixed deposit rates falling below 1% and 10-year government bond yields at 1.74% [4][6]. - The adjustment is expected to enhance the relative attractiveness of participating insurance products, as their reduction is less than that of other types [6]. - In the short term, the adjustment may lead to a temporary halt in the sale of old products, while in the long term, it is anticipated to accelerate the structural transformation of the industry, with participating insurance becoming more dominant [7].

Core Viewpoint - The insurance industry is undergoing a significant adjustment in predetermined interest rates for various insurance products, with the maximum rates for ordinary life insurance set to decrease to 2%, dividend insurance to 1.75%, and universal insurance to 1.0%, reflecting a downward trend in market interest rates and regulatory requirements [1][10][13]. Summary by Sections Predetermined Interest Rate Adjustments - Major insurance companies have announced a reduction in the maximum predetermined interest rates for their products, with ordinary life insurance dropping to 2%, dividend insurance to 1.75%, and universal insurance to 1.0%, marking declines of 50, 25, and 50 basis points respectively [1][10][13]. - The current maximum predetermined interest rate for ordinary life insurance was previously 2.5%, which has now reached the threshold for adjustment due to being 25 basis points above the research value [5][12]. Market Trends and Regulatory Impact - The downward adjustment in predetermined interest rates is a response to the ongoing decline in long-term market interest rates, with the 5-year loan market quoted rate (LPR) at 3.5% and 10-year government bond yields around 1.7% [14]. - Regulatory changes, including the introduction of IFRS 17 and the second-generation solvency regulatory framework, have increased the transparency of product pricing and financial reporting, prompting insurance companies to adopt more prudent actuarial practices [14]. Sales Strategies and Market Dynamics - The reduction in predetermined interest rates is expected to impact the attractiveness of insurance products to consumers, potentially leading to increased sales challenges for insurance companies [19]. - Companies are shifting towards dividend insurance products, which have seen a smaller reduction in predetermined interest rates, making them more appealing in the current market environment [15][16]. - The industry is experiencing a transition towards dividend insurance as companies prepare for the new rate adjustments, with many already offering products with predetermined interest rates as low as 1.5% [18]. Consumer Behavior and Market Response - Historical patterns suggest that prior to rate adjustments, there is often a surge in sales driven by consumer perceptions of impending changes, although this trend may be less pronounced in the current environment due to increased consumer rationality and transparency in pricing [18]. - The overall sales environment for life insurance companies has been challenging, exacerbated by previous market demand being pulled forward due to speculative sales tactics [19].

Core Viewpoint - The current predetermined interest rate for ordinary life insurance products is set at 1.99%, triggering a downward adjustment in the maximum allowable rates for various insurance products [1][3][7]. Summary by Sections Predetermined Interest Rate Adjustments - The China Insurance Industry Association announced that the maximum predetermined interest rates for new insurance products will be adjusted: ordinary life insurance to 2.0%, participating insurance to 1.75%, and universal insurance to a minimum guaranteed rate of 1.0% [1][7]. - As of August 31, 2025, insurance companies will no longer accept applications for products with rates exceeding these new maximums [2][8]. Historical Context and Mechanism - The predetermined interest rate research value has been linked to market interest rates, including the 5-year loan market quotation rate (LPR) and 10-year government bond yields [3][5]. - The recent adjustment marks a significant historical low for predetermined interest rates, with the previous values being 2.34% in January and 2.13% in April of the same year [3][5][7]. Market Reactions and Future Implications - Major insurance companies, including China Life and Ping An Life, have responded to the new research value by adjusting their product offerings accordingly [1][7]. - The insurance industry is expected to continue transitioning towards participating insurance products, as the 2% predetermined interest rate is seen as a critical threshold for sales performance [8][9].

Core Viewpoint - The National Financial Regulatory Administration has issued the "Measures for the Appropriateness Management of Financial Institution Products," which aims to enhance the management of insurance product sales and protect consumer interests, effective from February 1, 2026 [1][2]. Group 1: Regulatory Framework - The new measures require financial institutions to classify and grade insurance products based on various factors, including product type and benefits, to ensure appropriate sales practices [2][3]. - Financial institutions must strengthen the management of sales personnel, behaviors, and channels, establishing a tiered management system for insurance sales qualifications [2][3]. Group 2: Consumer Protection - The measures mandate that if a financial institution determines that an insurance product is not suitable for a policyholder, it must recommend the termination of the insurance application [2][3]. - For investment-type insurance products, specific conditions must be met before underwriting, such as premium limits relative to the policyholder's income [3]. Group 3: Industry Impact - The measures are expected to significantly reduce sales misguidance and enhance the protection of consumer rights, contributing to the long-term healthy development of the insurance industry [1][4]. - The introduction of these regulations aligns with previous initiatives aimed at establishing a matching system among products, sales personnel, and customers to minimize sales misguidance [4][5].

Core Viewpoint - The insurance industry is accelerating product transformation in the current low-interest-rate environment, with dividend insurance becoming a key focus for life insurance companies. Regulatory guidance has been issued to ensure prudent determination of dividend levels for 2024, emphasizing sustainable operations and long-termism while preventing excessive competition in dividend levels [1][2][5]. Group 1: Regulatory Guidance - The regulatory opinion requires insurance companies to balance the predetermined interest rates of dividend insurance with actual investment returns and to ensure that dividend levels reflect the performance of their accounts [2][3]. - Companies must improve the quality of their dividend insurance business, aligning it with asset-liability management principles and ensuring that dividend levels are sustainable [2][5]. - Specific conditions are outlined for companies proposing dividend levels that exceed certain thresholds, necessitating thorough justification and approval from asset-liability management committees [3]. Group 2: Market Trends - Dividend insurance is currently a significant segment in the insurance industry, with 151 out of 403 new life insurance products launched in 2023 being dividend insurance, representing a 37% share, an increase of 9 percentage points from the previous year [4]. - Analysts predict that dividend insurance will dominate new business premiums, potentially accounting for 50% to 60% of new policies due to its "guaranteed + floating" characteristics, which align well with the current low-interest-rate environment [6]. - The shift towards floating yield insurance products is seen as beneficial for both insurers and consumers, as it can lower the rigid liability costs for insurance companies while sharing excess returns with policyholders [4][6].