CITIC Securities: Reshaping the business logic and market pattern of the insurance industry, leading insurance companies are expected to continue to consolidate their advantages
The Zhitong Finance App learned that CITIC Securities released a research report saying that the release of the new regulations is the cornerstone of the insurance industry's system for shifting from large-scale expansion to high-quality development. In the short term, capital pressure diverged from good fundamental performance in the first half of the year. Currently, PB valuations and dividend yields provide a margin of safety; in the medium to long term, the industry's opportunity is that the cycle reversal brought a double blow to valuation and fundamentals. It is recommended to focus on leading insurance companies.
CITIC Securities's main views are as follows:
matters
On August 20, 2026, the State Financial Services Administration officially issued the “Measures for the Management of Insurance Companies' Assets and Liabilities”, which will take effect on January 1, 2027.
1) The new regulations set out three major management goals and four basic principles. Three major management goals: matching the term structure to prevent interest rate risks and reinvestment risks; matching costs and benefits to prevent the risk of interest spreads and losses; matching liquidity to prevent liquidity risks. The four basic principles: comprehensive coverage, reasonable matching, prudence, and coordination, require that all assets and liabilities of ordinary accounts be managed as a whole, while taking into account the differentiated allocation of the characteristics of different types of liabilities.
2) The new regulations are accompanied by the publication of regulatory indicators and monitoring index documents for financial insurance and personal insurance.
① Financial insurance: Three regulatory indicators are set: deposit capital coverage rate (≥ 100%), income coverage rate (sum of insurance service income and comprehensive investment income for the past 3 years ÷ comprehensive cost for the past 3 years, ≥ 100%), and liquidity coverage (≥ 100%). The four monitoring indicators include interest spread 1, interest spread 2, and interest rate spread 1 under two pressure scenarios.
② Personal insurance: Set four regulatory indicators: interest rate risk hedging rate (50%-150%, inflow sensitivity is not less than 5% when below 50%), comprehensive investment return coverage rate (sum of comprehensive investment income over the past 5 years ÷ sum of debt capital costs over the past 5 years, ≥ 100%), net investment return coverage rate (net investment income over the past 3 years ÷ guarantee cost of debt for the past 3 years, ≥ 100%), and liquidity coverage rate (≥ 100%). The eight monitoring indicators include effective long-term gap, base point value change rate, interest spread 3, interest spread 4, profit cost difference under various pressure scenarios, and liquidity matching ratio.
3) Changes in the official draft compared to the previous draft for comments: The official draft of this new regulation reduces the gap in the validity period of personal insurance from a regulatory index to a monitoring index, abolishes the ± 5 year hard threshold; and upgrades the interest rate risk hedging ratio to a regulatory index. For insurance companies that do not meet regulatory standards, a 3-year transition period is permitted.
Impact of the new regulations: The business logic shifts to full-chain collaboration, and the comparative advantage of leading insurance companies is expected to expand
It is expected that the implementation of the new regulations will push the industry to strengthen long-term management capacity building, and the traditional growth model of high-cost liabilities and high-risk assets adopted by some companies in the past will completely withdraw from the historical stage. With multiple investment channels and professional teams, large insurance companies can more easily achieve cost and benefit matching; can reverse design debt products according to asset-side capabilities; and have the capacity to coordinate information systems to support the monitoring of complex indicators. Small and medium-sized insurance companies also need to make up for shortcomings in departmental independence, data governance, model tools, and third-party verification. The pressure to invest in compliance and adjust business structures is relatively greater. Looking at the industry as a whole, the mandatory requirement of cost and benefit matching will curb the disorderly expansion of products with high debt costs, the goal of matching the term structure will promote the corresponding allocation of long-term debt and long-term assets, and dual-track supervision of liquidity coverage will enhance the industry's resilience to risk. Compliance costs and capacity thresholds will accelerate industry integration, and the trend of concentrating resources at the top will be further strengthened.
The logical impact of investment: the new regulations will reshape the insurance stock valuation framework from three dimensions
1) Mitigating the risk of interest spreads and losses brings about valuation repairs. One of the core reasons why insurance stock valuations have been under pressure for a long time is that the market is concerned about the risk of interest spreads and losses. The new regulations include cost-benefit matching and interest rate risk hedging ratios as mandatory regulatory indicators, which means that insurance companies must actively control debt costs and optimize long-term asset matching. The return on investment of large listed insurance companies has a strong ability to cover the cost of debt, and the subside of concerns about interest spreads and losses will drive the recovery of PEV.
2) Independence in asset liability management requires accelerated industry differentiation and expansion of leading premiums. Listed insurance companies are significantly more capable of investing in organizational structures, talent reserves, and information systems than small and medium-sized insurance companies, and can complete the establishment of independent departments and cross-departmental coordination mechanisms more quickly. This difference in compliance capabilities will be directly reflected in business expansion space and regulatory ratings, which in turn will lead to differentiation in market share and profitability.
3) Allocation shift under the asset-liability linkage logic. With stronger brand credit and capital scale, listed insurance companies have obvious advantages in the fields of alternative investments, long-term interest rate bonds, infrastructure debt plans, etc., and can better match the term structure. At the same time, the asset-liability linkage logic will also curb dependence on short-term products with high cash value, promote the transformation of the business to a guaranteed type and long-term savings type, and improve the value ratio of new businesses.
Risk factors:
Interest rates are trending downward in the medium to long term; large fluctuations in the stock market lead to investment losses; premium growth is sluggish or lower than expected in stages.