Guosen: Asset liability drives insurance profit growth for 25 years, significantly increasing equity allocation.

Guosen released a research report stating that by 2025, the life insurance business will achieve steady growth driven by the high increase in sales through bank-insurance channels and the transformation of dividend insurance, with a significant increase in value rate. On the asset side, listed insurance companies have actively increased their allocation to equities, with gains from equity capital becoming the core driver of annual profit growth, and the total investment yield reaching near-record levels in recent years or even in history. Against the backdrop of continued decline in predetermined interest rates and prolonged low interest rate environment, the insurance industry is accelerating its transformation from traditional fixed-income products to variable-income products. Guosen predicts that the industry's premium growth rate will be around 8% to 10% year-on-year in 2025, with NBV growth rate at 28%. Guosen's main points are as follows: Dual drive of asset-liability leads to continuous profit growth year-on-year By 2025, benefiting from the release of investment flexibility and continuous optimization of liability structure, the cumulative operating income of the five listed insurance companies on the A-share market will reach 2,928.129 billion yuan, a year-on-year increase of 7.8% on a high base. The net profit attributable to the owners will be 425.291 billion yuan, an increase of 22.4% year-on-year. Looking at the performance by quarter, the fourth quarter of the listed insurance companies is generally under pressure due to the volatility in the capital markets. In the fourth quarter, the five A-share listed insurance companies collectively recorded a net loss of approximately 700 million yuan, compared to a profit of 28.6 billion yuan in the same period last year, which had a certain impact on the annual performance. Life Insurance: Increase in the proportion of dividend insurance, continuous efforts in bank-insurance channel Against the backdrop of continued decline in predetermined interest rates and deepening integration of insurance and banking, the total new business value of the listed insurance companies on the A-share market is approximately 126.7 billion yuan, an increase of 35.8% year-on-year, continuing the high growth trend. Among them, the bank-insurance channel has become the core driver of value growth in this round of life insurance. The total NBV of listed insurance companies in the bank-insurance channel increased by 116.8% year-on-year to 32.8 billion yuan, and the importance of the channel continued to rise. In terms of product structure, the life insurance industry is accelerating its transformation to variable-income products. The proportion of variable income products in the first-year periodic premium of China Life Insurance is close to 50%; the proportion of dividend insurance in the new insurance period premium of China Pacific Insurance has increased to 50%, and the proportion of dividend insurance in New China Life Insurance's overall periodic premium has reached 77.0% in the fourth quarter. This transformation trend is both an active choice to cope with the pressure of liability costs under low interest rate environment and a more stable foundation for the healthy long-term development of the industry on the liability side. Property Insurance: Business shows resilience, COR improved year-on-year By 2025, PICC, Ping An Property Insurance, and Taiping Property Insurance achieved a total premium income of 1,096.136 billion yuan, an increase of 4.3% year-on-year, with a market share of 62.6%. Among them, the premium income of motor insurance business was 645.766 billion yuan, an increase of 3.0% year-on-year; the premium income of non-motor insurance business was 450.370 billion yuan, an increase of 6.2% year-on-year. In terms of comprehensive cost ratio, the industry as a whole continued to improve, with the comprehensive cost ratio of PICC Property Insurance, Ping An Property Insurance, and Taiping Property Insurance decreasing by 0.9, 1.5, and 1.1 percentage points year-on-year to 97.6%, 96.8%, and 97.5% respectively, all achieving underwriting profitability and steadily improving operational quality and efficiency. Investment side: Increasing equity holdings, improving investment returns By 2025, the scale of bond investments of listed insurance companies continued to grow, but the average proportion at the end of the year decreased to 50% year-on-year, a decrease of 1.8 percentage points; at the same time, companies generally significantly increased their allocation to stocks and equity funds, with the average proportion at the end of the year reaching 14.4%, an increase of 3.5 percentage points year-on-year. In terms of investment returns, the average total investment yield of listed insurance companies reached 5.4% for the full year, an increase of 0.4 percentage points year-on-year, but the net investment yield was affected by low interest rates and the maturity of high-yield assets, with an average decrease of 0.3 percentage points year-on-year to 3.2%. Risk warning: Premium income falls short of expectations; capital market volatility continues; decline in long-term interest rates, etc.