According to Zhito Finance APP, Guolian has released a research report stating that with the implementation of the personal insurance channel's "reporting and operation integration," the continued reduction of product reserve interest rates, and active adjustments of product structures by insurance companies, the NBV Margin is expected to further improve in 2025, thus supporting the continuous positive growth of NBV. Under the background of strict regulation, the execution of vehicle insurance's "reporting and operation integration" is expected to continue to strengthen, and the expense ratio of property insurance is anticipated to continue improving in 2025. Meanwhile, regulatory authorities have repeatedly proposed deepening the comprehensive reform of car insurance, and it is expected that future electric vehicle insurance will be a key focus of this reform. As the self-pricing coefficients and pure risk premiums of electric vehicle insurance become more market-oriented, the claims ratio of electric vehicle insurance is expected to significantly improve.

Guolian Securities' main points are as follows:

Review: Both stock prices and performance have shown impressive results.

Since 2024, improvements in the asset environment and better-than-expected performance have driven the rise of the insurance index. As of December 24, 2024, the insurance index and the CSI 300 Index have increased by 44.8% and 16.1%, respectively. The insurance index has achieved positive absolute and relative returns. The performance of listed insurance companies in the first nine months of 2024 has been impressive. From the liability side, an improvement in the NBV Margin of life insurance in the first nine months of 2024 has driven high growth in NBV; although there is a divergence in the COR of property insurance, leading property insurance companies have still achieved underwriting profitability. From the asset side, a recovery in the equity market has significantly improved the investment returns of insurance companies, which in turn supports a substantial year-on-year increase in net income.

Outlook for life insurance liability: An increase in value rate is expected to support the ongoing improvement of NBV.

From the perspective of new single premiums, amidst a relatively low risk appetite among residents, savings-type insurance products are expected to continue being favored by customers due to their guarantee characteristics. Benefiting from this, life insurance new single premiums in 2025 are expected to remain relatively stable. From the perspective of NBV Margin, with the implementation of the personal insurance channel's "reporting and operation integration," the continued reduction of product reserve interest rates, and active adjustments of product structures by insurance companies, the NBV Margin in 2025 is expected to further improve, thus supporting the continuous positive growth of NBV. Considering that the cost of life insurance liabilities is expected to marginally improve, the risk of spread loss is expected to be continuously resolved.

Outlook on liabilities in the Property and Casualty Insurance sector: Stricter regulations are expected to help leading insurance companies expand their advantages.

In the context of strict regulation, the enforcement of "reporting and operating as one" in auto insurance is expected to continue strengthening, and the expense ratio for Property and Casualty Insurance in 2025 is likely to improve. At the same time, regulators have repeatedly proposed to deepen the comprehensive reform of auto insurance, and it is anticipated that future insurance for Electric Vehicles will be a key focus of this reform. As the pricing coefficient and pure risk premium for Electric Vehicle insurance become more market-oriented, the claims ratio for Electric Vehicle insurance is expected to improve significantly. Against this backdrop, the underwriting profitability of the Property and Casualty Insurance industry is expected to marginally improve. Leading Property and Casualty Insurance companies, leveraging advantages in pricing and risk control, are likely to maintain the industry's leading underwriting profitability level.

Outlook on the asset side: Bonds and high dividend Stocks are expected to remain a focus for insurance capital allocation.

In the context of declining long-term interest rates and the execution of new regulations, the pressure on asset allocation for insurance companies has significantly increased. To alleviate the pressure of asset-liability matching and to mitigate the risks of interest spread losses, it is anticipated that in 2025, insurance companies may: 1) increase allocation to Bonds: an increase in the proportion of Bonds will help insurance companies lengthen the duration of their assets, thereby narrowing the duration gap between assets and liabilities to ensure relative stability of Net Assets. 2) increase allocation to high dividend Stocks: an increase in the proportion of high dividend Stocks will help enhance the investment income of insurance companies, thereby alleviating the downward pressure on investment returns and reducing fluctuations in the income statement.

Investment recommendation: Maintain the insurance industry's 'outperform market' rating.

Currently, the valuation of the insurance sector remains relatively low historically, providing a safety margin. Looking forward, the NBV of life insurance is expected to continue to improve, and the profitability level of Property and Casualty Insurance is likely to steadily increase. Meanwhile, as favorable policies continue to strengthen, the equity market is expected to recover, and real estate risks are likely to be systematically resolved. Against this background, the investment returns of insurance companies are expected to see improvement, further supporting the valuation recovery of the sector. Maintain the insurance industry rating as "outperforming the market."

Key stock recommendations: New China Life Insurance (601336.SH) (greater asset-side flexibility, larger NBV Margin improvement), China Life Insurance (601628.SH) (more stable liabilities, greater asset-side flexibility), China Pacific Insurance (601601.SH) (leading performance on the liabilities side, relatively superior fundamentals), Ping An Insurance (601318.SH) (more benefitted from improvements in the asset environment), PICC P&C (02328) & The People's Insurance (601319.SH) (scarcity in commercial model).

Risk warnings: Economic recovery may underperform expectations; continued decline in long-end interest rates; intensified fluctuations in the equity market; natural disasters exceeding expectations.