Hong Kong/China Insurance: Business quality improvement emerges amid FY25 volatility, industry view remains Attractive

Overview

This report is Morgan Stanley's FY25 marketing package for the Hong Kong/China insurance sector, covering share-price performance and valuation comparisons, the FY25 operating review, life and P&C businesses, investment and capital, and focused analysis of AIA, Ping An, PICC P&C, and CPIC. The core conclusion is that, although the Chinese insurance sector experienced volatility during the FY25 results season, signs of improving business quality are strengthening, and short-term volatility should not change the view of steady and sustainable medium- to long-term growth.

Core views

Morgan Stanley has an Attractive view on the Asia Pacific insurance industry. On life insurance, bancassurance-channel VNB growth stands out: for most large Chinese insurers, bancassurance VNB doubled, while monthly VNB productivity for agents also achieved double-digit growth, indicating better channel quality and efficiency. On P&C, 2025 earnings were strong, and PICC P&C still has room for further combined-ratio improvement. On the investment side, downward pressure on net investment yield remains, with most insurers down 0.3-0.4 percentage points. At the stock level, AIA shows stronger resilience; Ping An is viewed as having robust high-quality growth with the property drag largely behind it; PICC P&C benefits from management stability, healthy 1Q26 CoR, and attractive dividends; and CPIC stands out for valuation and may deliver better 1Q26 earnings than some peers.

Analysis framework

The report combines an industry review, channel segmentation, P&C profitability analysis, investment return and capital assessment, peer valuation comparison, and single-stock case studies. Key indicators include VNB growth, VNB margin, agent productivity, bancassurance contribution, P&C earnings, CoR, net investment yield, P/EV, P/B, dividend yield, southbound flows, and changes in long-term fund holdings.

Methodology notes

• Industry viewMorgan Stanley Analyst Industry View

  Attractive

  Attractive means the analyst expects the covered industry to be more attractive relative to the relevant market benchmark over the next 12-18 months.

• Stock ratingMorgan Stanley Relative Rating System

  Overweight / Equal-weight / Underweight

  Morgan Stanley uses a relative rating system to measure how a stock's risk-adjusted total return over the next 12-18 months compares with the average of the covered universe.

• Insurance valuationP/EV, P/B, VNB multiple, dividend yield

  Insurance company valuation comparison

  The report evaluates insurers' growth quality, capital returns, and valuation attractiveness using P/EV, P/B, new business value multiples, and dividend yield.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• AIA Group Ltd

  Key stock

  Strengths

  Less affected by market volatility, with a share price more resilient than mainland China insurers; investor sentiment has improved since November 2025, and long-term fund holdings have increased.

  Weaknesses

  1.33x 26E P/EV is above peers.

  Comparison

  Compared with mainland China insurers, AIA has been more resilient; the 5.4x VNB multiple is viewed as not excessive.

  Risks

  A relatively high valuation premium remains, and investors should watch whether 1Q26 VNB disclosure can support growth expectations.

• Ping An Insurance Group Co of China Ltd

  Key stock

  Strengths

  Growth in 2026 may be strong and of high quality; property de-risking is in its later stages, and a dividend yield of around 5.3% is attractive.

  Weaknesses

  The stock has previously been weighed down by property-related drag, and the market may still focus on asset-side risks.

  Comparison

  FY26E P/B of 0.88x is viewed as attractive.

  Risks

  The pace of property-risk unwind, asset-side volatility, and market validation of life-insurance growth quality.

• PICC P&C Company Ltd

  Key stock

  Strengths

  The new management team is gradually stabilizing, 1Q26 CoR is expected to be healthy, NEV is improving, autonomous driving is not seen as a major near-term concern, and the dividend yield is above 5.8%.

  Weaknesses

  The share price has been weak since late 2025, and its defensiveness is not obvious amid market uncertainty.

  Comparison

  FY26E P/B of 0.91x, with a dividend yield above some peers.

  Risks

  Market volatility, changes in auto-insurance regulation, sustainability of CoR improvement, and management execution.

• China Pacific Insurance Group Co Ltd

  Key stock

  Strengths

  Lower equity exposure and a higher FVOCI allocation could allow 1Q26 earnings to outperform some peers, and the 0.84x P/B valuation is more attractive.

  Weaknesses

  The stock has underperformed peers since the second half of 2025 due to concerns on both the liability and asset sides.

  Comparison

  Compared with some peers, CPIC's current valuation is lower and its near-term earnings leverage may draw more attention.

  Risks

  Sustainability of liability-side improvement, volatility in asset-allocation returns, and the 1Q26 OPAT disclosure results.

Key data

• Report date2026-04-08Cover time is April 8, 2026 01:54 AM GMT.
• Industry viewAsia Pacific Industry View AttractiveThe report's front page lists the Asia Pacific industry view as Attractive.
• Life insurance channelMost large Chinese insurers doubled bancassurance VNBThe report notes that, compared with the agency channel, bancassurance-channel VNB growth was significant.
• Agent productivityMonthly VNB productivity broadly grew by double digitsThe report says monthly VNB productivity for agents at the major insurers all achieved double-digit growth.
• P&C earnings2025 P&C earnings were strongThe report gives a positive assessment of 2025 P&C earnings.
• Investment yieldNet investment yield declined by 0.3-0.4pptMost insurers saw net investment yields decline.
• AIA valuation1.33x 26E P/EV; VNB 5.4x; FY26E EV growth>10%The report believes AIA's share-price performance is more resilient than that of mainland China insurers; its valuation is above peers, but the VNB multiple is not considered excessive.
• Ping An valuationFY26E P/B 0.88x; dividend yield around 5.3%The report believes Ping An's growth could be strong in 2026 and that the property drag is largely behind it.
• PICC P&C valuationFY26E P/B 0.91x; dividend yield>5.8%The report believes 1Q26 CoR should be healthy and the dividend yield is attractive.
• CPIC valuationP/B 0.84xThe report believes CPIC's valuation is more attractive and 1Q26 earnings may outperform some peers.

Impact & implications

For investors, the report stresses separating the volatility seen in the FY25 results season from improvements in operating quality. If VNB growth, agent productivity, bancassurance contribution, P&C CoR, and capital returns continue to improve, the sector's medium- to long-term valuation re-rating logic may still hold; however, declining investment yields, market sentiment swings, and asset-side risks at individual stocks still need ongoing monitoring.

Risks

• Volatility in the FY25 results season could continue and affect investor sentiment.
• Most insurers saw net investment yield decline by 0.3-0.4 percentage points, so asset-side return pressure still warrants attention.
• Morgan Stanley discloses that it has investment banking, non-investment-banking, or shareholding relationships with several covered companies, and investors should note potential conflicts of interest.
• Stock-level re-rating depends on VNB, CoR, dividends, and capital-return metrics being delivered; if 1Q26 data falls short of expectations, share prices could be pressured.

What to watch

• 1Q26 disclosures of VNB, CoR, OPAT, and EV growth from each insurer.
• Whether the high growth in bancassurance-channel VNB and the improvement in monthly VNB productivity for agents are sustainable.
• Further room for improvement in PICC P&C's combined ratio and changes in auto-insurance regulation.
• Ping An's property de-risking progress and the delivery of high-quality growth.
• Changes in long-term fund holdings in AIA, VNB growth, and whether the valuation premium can be sustained.
• The actual contribution of CPIC's low equity exposure and FVOCI allocation to 1Q26 earnings.