BOCOM INTL: Multiple positive factors drive continued improvement in sector profits, focus on top insurance institutions for investment opportunities.

BOCOM INTL released a research report stating that the overall valuation of the insurance industry in Hong Kong is still at historically low levels. Since 2026, it has been supported by net inflows of funds from Southbound investments. In January-February 2026, leading insurance companies have accumulated significant gains, outperforming the overall Hong Kong stock market. With the combined effect of performance certainty in 2026 and valuation recovery logic, as the insurance industry consolidates in the near term, the sector is expected to still have some upward potential, with a focus on opportunities for allocation in top institutions. It is recommended to pay attention to the full year performance disclosures of leading insurance companies, including China Life Insurance (02628 / Buy) and New China Life Insurance (01336 / Buy). The main views of BOCOM INTL are as follows: Outlook for the insurance sector The Hong Kong insurance industry, with its composite characteristics of "low valuation + high dividend yield", has defensive and offensive value in a volatile market environment. Supported by multiple favorable factors, the profits of the insurance sector continue to improve, coupled with the current low valuation level and liquidity support, we expect the sector to still have some upward potential, with a focus on opportunities for allocation in top institutions. Leading insurance companies are expected to release their full year 2025 performance announcements from March 19-28, and we will continue to track the subsequent disclosures of relevant individual stocks. On February 13, the China Banking and Insurance Regulatory Commission released the major regulatory indicators for the insurance industry in the fourth quarter of 2025. The total assets of the insurance industry have maintained a growth of over 10% for three consecutive years, with premium income increasing by 7.4% year-on-year, further accelerating from 2024. Combining the overall situation of the industry and the operating performance of some insurance companies in the first three quarters of 2025, it is expected that the profit side of leading insurance companies in Hong Kong will continue to maintain a high growth rate. The improvement in profitability of the insurance industry is supported by multiple favorable factors. 1) Improvement in assets and liabilities simultaneously: The warming of the capital market and the increase in the allocation of equity assets by insurance funds help to increase investment income on the asset side, while in a downward interest rate cycle, the cost pressure on the liability side is expected to be somewhat relieved; 2) Continuous innovation and cost reduction: With life insurance driving an accelerated growth in premium income and property insurance helping to slow the growth of claims expenses, overall, income growth is always faster than expenditure growth.