Zhongtai Securities: Dividends and Universal Insurance earnings “limit the bottom” balance steady operation with interest spread risk

The Zhitong Finance App learned that Zhongtai Securities released a research report saying that the rebalance in insurance funding is expected to continue, and the August sector is expected to continue contributing to relative and absolute earnings in July. The recovery in the equity market in the past two years has led to a marked improvement in insurance investment income, but the dividend realization rate of listed insurers has remained stable and strictly “high”, and the bottom of Universal Insurance settlement interest rates has leveled off, indicating that the overall level of interest spreads is expected to gradually widen. In recent years, regulations have dynamically adjusted interest rates reserved for products, reduced the guaranteed cost ratio for new business liabilities, and achieved collaborative optimization of debt costs and asset returns by allocating fixed income assets at different times, effectively relieving the pressure on interest spreads and losses in a low interest rate environment. The ability to match assets and liabilities has been significantly enhanced, and the bottom of sector valuation is expected to be strongly supported.

The main views of Zhongtai Securities are as follows:

The transformation of dividend insurance has become an industry consensus. Increasing the share of dividend businesses can optimize long-term management and comprehensive debt cost control

In recent years, regulation has been effective in reducing pressure on the floating returns of personal insurance products such as universal insurance and dividend insurance. According to the “Financial Stability Report”, at the end of 2024, the industry-wide universal insurance settlement interest rate fell to 3.3% from 4.1% in the same period of the previous year, with an average pressure drop of 80 basis points, and a pressure drop cost of 27 billion yuan; the dividend insurance dividend level was reduced to 3.1%, an average reduction of 110 basis points, with a total pressure reduction cost of 91 billion yuan. The bank believes that the industry needs to balance the level of competitiveness of product returns with the cost of comprehensive debt, which not only tests the operating philosophy of insurers, but also reflects regulatory wisdom.

The dividend fulfillment rate is an indicator that measures the difference between the actual dividend level of dividend insurance and the expected level of dividends based on the overall calculation of the product

Dividend insurance products can use cash dividends or incremental dividends to distribute surpluses. Future dividends and dividend realization rates are uncertain. In mid-2025, the regulatory attitude towards “anti-corruption” competition in an environment where interest rates continue to be low, and the life insurance industry's average financial return for the past 3 years (3.20%) was used as the “guideline” for return on investment corresponding to the proposed dividend level. Judging from the disclosure of various companies, this “high limit” continues. Judging from the dividend realization rate, the cash dividend realization rate for the latest installment of leading insurance companies' new products (corresponding demo interest rate is 3.5%, predetermined interest rate is 1.75%/2.0%), and the dividend realization rate for existing products (corresponding demo interest rate is 3.9%/4.5%, scheduled interest rate is 2.0%/2.5%) is mostly in the 40%-50% range.

The bank selected four leading insurers, China Life Insurance, Ping An, Taibao, and Xinhua, that have disclosed the implementation rate of the latest dividend installment for sample analysis

The actual yield of Taibao's cash dividend customers is relatively stable. At the beginning of the “High Limit Order”, the customer yield corresponding to the annual dividend of the insurance policy was still 3.29%, leading the way among leading companies. The average dividend level for the latest installment of China Life Insurance's new and old products reached 3.2% of the supervisory window guidance limit. Ping An has a consistent dividend realization rate for the vast majority of products within the effective range of the same insurance policy, and this year it innovatively launched a variety of products that differentiate between dividend accounts to create “Stable Win” and “HuiWingBao” special accounts. After experiencing a two-year trough period, Xinhua showed a steady trend. It coincided with the 30th anniversary of the establishment of Xinhua. Its “Special Dividend Account” created a multi-dimensional allocation system of “fixed storage, enhanced equity, and global allocation.” Taibao and Xinhua are the only companies among the four that operate insured dividend products. The dividend differences between companies were further narrowed under the “height limit order,” and eventually dividends became a means of differentiation. The average realization rate of Taibao's incremental dividend in the current period was 70%; at the end of the year, the average realization rate of dividends was 56%. The average realization rate of the Xinhua incremental dividend was 151.6%; the average final dividend was 77.8%.

Universal Insurance settlement interest rates fell first and then stabilized, and are currently still “bottoming out”

The average annual settlement interest rate for a total of 1,164 universal insurance models in the industry in May 2026 was 2.70%, down about 8 bps from the May 2025 average (2.78%). Looking at the horizontal comparison of the settlement interest rate levels of the old seven universal insurance companies, Xinhua is relatively the highest of 2.83%, and Taiping Life is relatively the lowest. The overall difference is not significant. According to the latest data (May 2026), the universal insurance settlement interest rate level of key companies is 4 bps lower than the average universal insurance settlement interest rate of non-key companies. Leading companies maintain relative “restraint”. The bank mainly expects: 1) regulation and insurance companies need a balance between product competitiveness and comprehensive debt costs. The current universal insurance settlement interest rate level is lower than the customer income level after the dividend insurance limit is higher (3.2%); 2) the 2024 September 24 market brought rich spreads and floating profits, which also supported the bottom level of settlement interest rates to a certain extent.

Risk warning: The dividend insurance transformation fell short of expectations. There is a risk of deviations in the estimation of the impact of predetermined interest rates, demonstration interest rates, and distribution ratios for each company at different times and account products on dividend levels. Large fluctuations in the equity market can cause insurance companies' investment returns to be adversely affected.