Orient: How much additional equity assets can be allocated to insurance?

Orient released a research report stating that listed insurance companies still have a significant theoretical room from the regulatory upper limit of equity assets, and the continuous improvement of the long-term capital entry system framework is helpful in enhancing the market's attention to the insurance funds' equity allocation ability and asset-side flexibility. The current downward trend of insurance companies' liability costs, gradual optimization of the long-term assessment mechanism, and the potential for value enhancement in equity assets, especially in high dividend, low valuation, and stable cash flow assets allocation. It is recommended to focus on top insurance companies with steady liability value growth, sufficient solvency, ample equity allocation space, and outstanding investment capabilities. The main points of Orient are as follows: Listed insurance companies still have a significant theoretical room from the regulatory upper limit of equity assets, with a potential increase allocation space estimated at about 4.1 trillion yuan. Based on the calculations of the total assets, equity assets scale, and comprehensive solvency ratio of listed insurance companies by the end of 2025, the combined equity assets of the top 7 listed insurance companies are about 560 billion yuan, with equity assets accounting for about 18.0% of total assets, leaving a theoretical increase allocation space of about 4.0766 trillion yuan from the regulatory limit of equity allocation. Among them, Ping An Insurance, China Pacific Insurance, China Life Insurance, and CHINA TAIPING have relatively higher theoretical increase allocation spaces of approximately 2.4217/ 0.7799/ 0.2932/ 0.2816 trillion yuan, respectively. The solvency and equity allocation limit overall are still in an optimal range, supporting the equity allocation capabilities of listed insurance companies. By the end of 2025, the comprehensive solvency ratios of the major listed insurance companies are generally above 150%, with most companies corresponding to an equity allocation limit of 30% of total assets, and China Pacific Insurance has reached a 40% equity allocation limit due to its high solvency ratio. In terms of actual allocation, the proportion of stock and fund allocation of listed insurance companies in 2025 has generally increased, with China Life Insurance, Ping An Insurance, China Pacific Insurance, New China Life Insurance, The People's Insurance, CHINA TAIPING, SUNSHINE INS stock and fund allocation as a percentage of total assets reaching 17.0%/ 20.4%/ 13.8%/ 21.2%/ 13.3%/ 16.6%/ 14.9%, showing a clear upward trend in equity asset allocation compared to 2023-2024. The continuous improvement of the long-term capital entry system framework makes equity increase allocation more likely to be carried out in a stable and phased manner. The steady increase in insurance fund utilization provides a scale foundation for equity asset allocation; at the same time, long-term investment reform pilot projects, adjustments to the equity allocation limit, and optimization of the long-term assessment mechanism help to alleviate short-term profit fluctuations constraints and guide insurance funds to improve the stability of equity asset allocation. However, from the perspective of asset-liability matching, bonds remain the core asset allocation of insurance funds, and equity increase allocation still needs to consider solvency, accounting classification, profit fluctuations, dividend asset supply, and the capital market environment. It is expected that the subsequent equity allocation by insurance funds will not simply aim to achieve the proportion limit but will lean more towards assets with high dividends, low valuations, stable cash flows, and the ability to match the downward trend of long-term liability costs. Risk warnings include unexpected downward trends in long-term interest rates, increased volatility in the capital markets, slower than expected pace of equity asset allocation, decreased solvency affecting equity allocation space, slower than expected growth in sales and new business value on the liability side of insurance companies, regulatory policy change risks, and differences between the calculation methods and actual regulatory methods.