Guotai Haitong: Bonds Still Serve as the Stabilizer, Equity Allocation Significantly Increased

CITIC Securities Finance APP has learned that Guotai Haitong released a research report stating that the combined influence of internal and external factors on the asset side is expected to drive insurance companies’ profitability improvement. Since 2016, long-term interest rates have generally ranged between 1.79% and 1.90%. The bank believes that the stabilization and rebound of long-term interest rates, along with moderate upward expectations for the equity market, combined with insurance companies optimizing asset management and balancing allocation/trading strategies, will jointly promote the improvement of insurance companies’ profitability. It is expected that the favorable internal and external factors on the asset side will jointly drive profit improvement, maintaining an “overweight” industry rating.

Guotai Haitong’s main points are as follows:

Event

On February 12, the Financial Regulatory Administration released the fourth quarter of 2025 insurance company fund utilization report.

Robust growth in premium income drives steady increase in insurance fund utilization balance in 2025

By the end of 2025, the insurance industry’s fund utilization balance was 38.5 trillion yuan, up 15.7% from the beginning of the year; among them, life insurance was 34.7 trillion yuan, up 15.7%; property insurance was 2.4 trillion yuan, up 8.8%. The bank expects this mainly due to strong insurance savings demand and the growth in premiums contributing stable cash flow. In 2025, the insurance industry’s premiums increased by 7.1% year-on-year, with life insurance up 8.3%, and property insurance up 3.9%.

Bond allocation remains steady, equity allocation significantly increased in 2025

1. As of the end of Q4 2025, the insurance industry (life + property insurance, same below) allocated a total of 5.70 trillion yuan in stocks and funds, an increase of 1.60 trillion yuan from the beginning of the year. The proportion was 15.4%, up 2.6 percentage points from the start of the year. Among them, stock assets reached 3.73 trillion yuan, up 1.31 trillion yuan from the beginning of the year, and increased by 0.11 trillion yuan compared to Q3 end; the proportion was 10.1%, up 2.5 percentage points from the start of the year, remaining stable compared to Q3 end. Fund assets totaled 1.97 trillion yuan, up 0.29 trillion yuan from the beginning of the year, and decreased by 34 billion yuan compared to Q3 end; the proportion was 5.3%, up 0.1 percentage points from the start of the year, and decreased by 0.2 percentage points compared to Q3 end. The bank expects that on one hand, insurance funds responding to the guidance of “long-term funds entering the market” will increase equity asset allocation, and on the other hand, benefiting from the equity market recovery in 2025, which led to a rise in the market value of financial assets, with the Shanghai Composite Index up 18.4% from the beginning of the year. 2) The bond allocation ratio in the insurance industry was 50.4%, up 0.9 percentage points from the start of the year, and increased by 0.1 percentage points compared to Q3 end. The bank expects bonds to remain the “ballast stone” of insurance asset allocation, and in the environment of interest rate fluctuations, insurance companies will flexibly adjust bond allocation/trading strategies. 3) The bank deposit allocation ratio was 8.2%, down 0.9 percentage points from the start of the year, but increased by 0.3 percentage points compared to Q3 end. With current deposit interest rates still low, the bank expects the proportion of bank deposits to continue declining. 4) The allocation ratio of other assets (mainly non-standard assets) in the insurance industry was 18.4%, down 2.7 percentage points from the start of the year, remaining stable compared to Q3 end. The bank expects that with the maturity of existing non-standard assets and the emergence of new high-quality non-standard assets amid an “asset shortage,” the proportion of other assets will further decrease.

Risk warning: Decline in long-term interest rates; volatility in capital markets; less-than-expected improvement in liability costs.