A recent research report from CITIC SEC indicates that despite significant near-term performance volatility and divergence within the insurance sector, its long-term upward trajectory remains unchanged, with investment strategy focusing on high-dividend leaders.
The report notes that market style has evolved to extremes, leading to substantial divergence in insurers' first-half 2026 results. It anticipates overall profit growth pressure in the second half, with high-beta stocks potentially facing significant share price adjustment pressure. The investment strategy should therefore prioritize high-dividend, quality stocks. The long-cycle upward trend for the industry is unaltered, with a focus on the resource advantages and service capability development of leading companies, which are expected to become core competitive strengths. Monitoring the local piloting and nationwide rollout of policies coordinating commercial and social health insurance is crucial, as this could drive sustained growth in health insurance.
Analysis of Short-Term Performance and Long-Term Drivers
CITIC SEC's key views are as follows. The significant divergence in insurer performance in H1 2026 is expected to shift market focus in H2 towards earnings stability and dividend sustainability. Short-term performance differences primarily stem from notable variations in equity allocation levels, portfolio styles, and accounting methods among companies, leading to different quarterly profit volatility. The extreme tech stock style of Q2 2026 is already fully reflected in results. The brokerage expects the sector to face pressure from a high year-on-year base and potential market style shifts in H2. Short-term attention should return to the long-term sustainability of asset-liability matching, the stability of core capital and equity positions, liability cost control, improvement in policy value rates, and new business value growth on the liability side.
Long-term prospects are established, with key indicators like new premium, new business value, total investment assets, and total assets expected to maintain double-digit growth rates. The core long-term drivers include the relative yield advantage of products like participating insurance in a low-interest-rate environment, coupled with stricter regulation accelerating market share concentration towards leading insurers. Tight regulation and anti-internal competition are intensifying product homogenization, with little differentiation in product yields and expense ratios.
Against a backdrop of population aging and fiscal pressure, large insurers are shifting their competitive moat from product yields to integrated service capabilities by deeply participating in public service systems like healthcare and elderly care. This trend is expected to last 3-5 years. Concurrently, declining liability costs and prudent asset-side allocation, such as increasing allocations to long-term government bonds and high-dividend stocks, and participation in the Southbound Bond Connect scheme, ensure spread sustainability, giving leading companies highly certain profitability. The shift of savings deposits and market share concentration are poised to sustain double-digit growth for industry metrics like new premium and total assets.
Catalyst: Coordination Between Commercial and Social Health Insurance
Progress in coordinating commercial health insurance with social medical insurance is becoming a catalyst for the health insurance segment and the broader sector. Since 2026, China's policy framework for this coordination has accelerated, with top-level design and practical implementation advancing simultaneously.
Strategically, the State Council issued the "National Health '15th Five-Year' Plan" on July 13, 2026, outlining the construction of a life-cycle health service system, strengthening medical-medical insurance-disease control collaboration, and vigorously developing the health industry, providing programmatic guidance for a multi-tiered medical security system. Operationally, the National Healthcare Security Administration released the 2026 drug catalog adjustment plan on May 31, marking the second round of coordinated "dual catalog" adjustments following the initial commercial insurance innovative drug catalog's implementation in 2025. This plan emphasizes filling gaps, optimizing structure, and encouraging innovation, strengthening the synergistic effect between strategic social insurance purchasing and commercial insurance supplementary coverage.
Beijing and Shanghai have pioneered differentiated implementation models with potential for nationwide推广. In February 2026, nine Beijing departments jointly issued measures to support high-quality commercial health insurance development, focusing on system linkage and保障 gradient construction. Key points include promoting integrated medical-commercial insurance services, replicating the nationwide first "medical insurance + commercial insurance" clearing and settlement center, and upgrading the "Beijing Inclusive Health Insurance" product. It also aims to remove barriers for innovative drug hospital access by establishing a platform connecting insurers and drugmakers, and creating a replicable model for national multi-tiered medical security.
Shanghai has shifted from system building to payment闭环 implementation, accelerating data sharing, innovative payment, and drug access mechanisms. Measures issued in July 2025 formed a "data empowerment + innovative payment闭环" model, optimizing mechanisms for using personal medical insurance account balances to purchase commercial insurance, exploring industry co-insurance pools, and deepening data sharing under security protocols. In 2026, Shanghai moved to the implementation phase, expanding the "Hu Hui Bao" product's domestic specialty drug list and achieving comprehensive access for the first commercial insurance innovative drug catalog in municipal hospitals.
Key Risk Factors
Risk factors include insurer profits potentially turning负增长 due to stock market volatility and high base effects; a decline in policy sales growth as base effects rise; and a medium-to-long-term sustained decline in interest rates.