Shenwan Hongyuan has released a research report indicating that the phase of positive profit alerts for the insurance sector has concluded. Due to a high base effect and the impact of the new bancassurance "unified reporting" regulations, year-on-year performance for assets and liabilities may face temporary pressure. This has enhanced the relative attractiveness of some previously oversold stocks. As some of these stocks are constituents of the CSI 300 index and are currently significantly underweighted, they possess strong upward potential if market sentiment shifts or concerns over liquidity ease.
Shenwan Hongyuan Group Co., Ltd. outlines its key viewpoints as follows:
Second-Quarter 2026 Assumed Rate Study Value Increases Sequentially to 1.94%, Marking Two Consecutive Quarters of Growth
On July 20, the Insurance Association convened the second-quarter 2026 meeting of its expert advisory committee on life insurance industry interest rates. The committee proposed that the current study value for the assumed interest rate of ordinary life insurance products is 1.94%, marking a sequential increase of 1 basis point. This represents the second consecutive quarter of growth, with a total increase of 5 basis points from its lowest point.
According to a notice issued by the financial regulatory authority titled "Notice on Establishing a Mechanism for Linking and Dynamically Adjusting Assumed Interest Rates with Market Rates," the maximum assumed interest rate for ordinary life insurance products on sale must be promptly lowered if it exceeds the study value by 25 basis points or more for two consecutive quarters. The current study value of 1.94% is 6 basis points below the upper limit for traditional insurance products, which stands at 2.0%. This gap is far from meeting the trigger condition, so the upper limit for traditional insurance assumed interest rates remains unchanged.
Maintains Forecast of No Annual Adjustment for Traditional Insurance Assumed Rates, Projects Third-Quarter Study Value at 1.93%
The assumed interest rate study value is anchored to long-term rates such as the 5-year Loan Prime Rate, 5-year fixed deposit rates, and the 10-year government bond yield. Its calculation involves long-cycle algorithms like 250-day and 750-day moving averages. Assuming the 5-year LPR, 5-year fixed deposit rate, and 10-year government bond yield remain stable at current levels, the projected study values for the third and fourth quarters of 2026 are 1.93% and 1.88%, respectively. While these represent slight sequential declines influenced by earlier volatility in long-term rates, they maintain a substantial safety margin from the 25-basis-point trigger line relative to the upper limit. The firm maintains its previous forecast of no adjustment to the annual assumed interest rate for traditional insurance this year. The surge in sales driven by previous expectations of rate adjustments is unlikely to be repeated in the short term. The pace of business promotion is expected to return to normal, though the high performance base from the third quarter of 2025 may pose some challenges to liability growth in the upcoming third quarter.
Potential for Differentiated Adjustment to Dividend Insurance Assumed Rates in the Medium Term Remains Uncertain, Expected to Stay Stable Short-Term
Following the asymmetric downward adjustment of assumed interest rates in September 2025 and the steady advancement of insurance capital entering the markets, the relative attractiveness of participating insurance products has significantly increased. Referring to solvency reports, participating insurance premiums accounted for 48% of the total premium from the top five products of 54 life insurers in the first quarter of 2026, ranking first. Participating insurance has officially taken over from increasing whole life insurance as the main product, and insurers are expected to gradually increase their focus on the refined management of these products.
In December 2025, the draft "Insurance Company Asset-Liability Management Measures" released by the financial regulatory authority explicitly mentioned that the liability cost of funds for the participating account includes guaranteed costs and policyholder dividends. Concurrently, some insurers, based on the substance of their operations, have shifted their assessment of participating insurance liability costs from a rigid cost basis further towards a comprehensive "rigid plus floating" cost basis. Some insurers have previously launched participating insurance products with an assumed interest rate of 1.25%, actively exploring differentiated business strategies during the high-quality development phase.
Risk Warnings: Potential for regulatory policy impacts exceeding expectations, increased market volatility, decline in long-term interest rates, and catastrophe effects surpassing expectations.