Orient Securities: Improving Fundamentals and Investment Gains Bolster China's Insurance Sector

China's insurance industry saw its fundamentals continue to improve in the first half of 2026, driven by a strong rebound in investment returns and enhanced operational discipline, according to a new research report from Orient Securities. The brokerage recommends that investors maintain a close watch on the sector, citing a combination of rising profits, lower liability costs, and attractive shareholder returns.

Investment Rebound Drives Profit Surge

A recovery in equity markets was the primary catalyst for a significant increase in net profits for major listed insurers in the first half of 2026. The report noted that gains from fair value changes in equity assets and the disposal of stocks and funds provided a major boost to earnings.

Key net profit growth figures for 1H26 compared to the prior year period include:

• China Life: +228.6%
• Ping An of China: +36.1%
• China Pacific Insurance (CPIC): +10.4%
• New China Life: +54.0%
• People's Insurance Company of China (PICC): +38.5%
• China Taiping: +90.4%

Orient Securities also highlighted that major A-share listed insurers have implemented mid-term dividends. In the current low-interest-rate environment, these high-dividend policies enhance the appeal of insurance stocks and provide a valuation floor, supported by both value recovery in the life business and improved investment income.

Life Insurance Shifts to Value and Lower Costs

The life insurance segment demonstrated a clear shift from scale to value, with all major listed companies reporting positive growth in New Business Value (NBV). According to the report, Contractual Service Margin (CSM) and embedded value also grew, indicating a continued improvement in the quality of the life insurance business.

A significant product trend was the accelerated pivot to participating policies, whose share of total premiums for six major insurers rose from 19.1% in 2025 to 36.1% in 1H26. This shift, combined with lower guaranteed interest rates and channel fee reforms, is effectively driving down the cost of new business liabilities.

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P&C Underwriting Discipline Improves

In the property and casualty (P&C) segment, premium growth has slowed, but profitability has strengthened. The report stated that major P&C insurers saw their combined ratios improve significantly, a key metric where a figure below 100% indicates an underwriting profit.

• PICC P&C: 94.5%
• Ping An P&C: 95.1%
• CPIC P&C: 95.0%

This improvement was primarily attributed to a lower expense ratio, resulting from regulatory reforms and increased online sales, rather than a decrease in the loss ratio. This suggests that underwriting profits are being driven by greater operational efficiency and an optimized business structure.

Navigating a Low-Rate Environment

Despite the strong overall results, insurers still face reinvestment pressure on the asset side, as yields on new bonds are lower than those of maturing assets. This has led to a continued decline in net investment yields. However, the strong performance of the equity market significantly boosted total investment yields in the period.

Orient Securities noted that insurers are adapting their asset allocation strategies. They are using long-duration bonds to match liabilities, high-dividend stocks to supplement recurring income, and other equities to capture market upside. Insurers are also increasingly classifying long-term equity holdings as FVOCI (Fair Value through Other Comprehensive Income) to reduce the impact of short-term market volatility on their income statements.