Cathay Pacific Haitong: Insurance industry's Q3 research value fell back, and scheduled interest rates remained stable during the year
The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that it is optimistic that interest rates will rise steadily to drive valuation repairs in the insurance sector. On the debt side, the decline in the premium growth phase for new life insurance policies under a high base will not change the trend of strong demand for long-term insurance savings, improving the product term structure to support value growth; focus on insurance's successful start in 2027. On the asset side, the profit stage is under pressure due to fluctuations in the equity market. It is expected that insurance companies will dynamically adjust stock and bond allocation strategies based on the external market environment to promote steady profits and dividends. The current stock price responds to extremely pessimistic investment-side expectations. With interest rates rising steadily, there can be expected room for valuation repair for listed insurers. Maintain the industry's “gain” rating.
Cathay Pacific Haitong's main views are as follows:
Incidents
On November 4, the China Insurance Industry Association issued an announcement. On October 30, it organized a regular meeting of the Personal Insurance Industry Interest Rate Research Expert Advisory Committee for the third quarter of 2026, and proposed that the current research value of the scheduled interest rate for ordinary personal insurance products is 1.90%.
The research value fell 4 bps from the previous quarter, mainly affected by the decline in the 250-day EMA of 10Y treasury bonds
1) The research value of the scheduled interest rate for the third quarter of 2026 was 1.90%, down 4 bps from 1.94% in the second quarter, ending the previous trend of two consecutive quarters of recovery. The 250-day EMA began to decline mainly due to the decline in 10Y treasury bond yields since Q2. 2) The current estimated interest rate research value is mainly based on the 250-day EMA of 10Y treasury bond yields, taking into account tax premiums and coefficient adjustments. By the end of Q3, the 250-day EMA of 10Y treasury bonds was 1.78%, and the estimated interest rate study value was 12 bps higher than the 250-day EMA. 3) As of November 4, the yield on 10-year treasury bonds was 1.61%, corresponding to the 250-day EMA and 750-day EMA of 1.76%, respectively, down about 2 bps and 3 bps from September 30, respectively.
Assuming that 10Y treasury bonds remain at 1.61% during the year, the research value is expected to decline further, but it is still expected to be higher than 1.75%
1) Assuming that 10Y treasury bonds remained at 1.61% during the year, the bank estimates that the 250-day and 750-day EMAs at the end of Q4 were 1.71% and 1.88%, down 7 bp and 11 bps respectively from the end of Q3. However, the research value considered was based on the 250-day EMA, superimposed on tax premiums and coefficient adjustments. The reference Q3 study value was 12 bps higher than the 250-day EMA. It is expected that the Q4 research value will still decline, but it is expected to be higher than 1.75%. 2) Currently, the maximum scheduled interest rate for ordinary personal insurance products is 2.00%, which is 10 bps higher than the research value, and the adjustment threshold of 25 bp has not yet been reached. According to the dynamic adjustment mechanism for research values, if the highest value remains unchanged, the subsequent research value falls to 1.75% and below for two consecutive quarters, which will trigger a reduction mechanism. Therefore, the bank expects the scheduled interest rate for personal insurance to remain stable during the year.
Risk warning: long-term interest rate decline; capital market fluctuations; debt cost control falls short of expectations.