China's Insurance Sector Boasts Solid Fundamentals; Stock Market Rally Boosts Profits

Overview

This Goldman Sachs research report is based on a five-day field study conducted in mainland China from May 25 to 29, 2026, covering banks, insurance companies, securities firms, and online lending platforms. The report focuses on the current state and future prospects of China's insurance industry, noting that despite some short-term challenges, the sector maintains solid fundamentals—especially life insurers' growth potential in bancassurance channels and improved investment returns driven by the stock market rally—leading to anticipated restorative growth in profits and book value.

Core views

Life Insurance: Surveys indicate widespread confidence among life insurers regarding the growth prospects of bancassurance channels. Regulatory tightening on bancassurance fees is expected to benefit large insurers, though short-term impacts may include reduced sales incentives; long-term benefits include enhanced industry standardization and profitability. Additionally, the agent workforce is projected to remain stable, with a shift toward high-quality agents. Investment Strategy: With long-term government bond yields at low levels, insurers are increasingly allocating capital to equity assets, particularly high-dividend stocks, aiming to achieve bond-like returns while maintaining maturity matching. Despite recent strong stock market performance, most insurers plan to maintain a balanced allocation between growth and value stocks. Property Insurance: Auto insurance underwriting results are expected to improve due to stricter fee controls and declining claim frequencies. Advances in new-energy vehicle technology and optimized repair processes further help reduce claims costs. Non-auto insurance segments also benefit from stringent cost management. Solvency Regulation: Updates to China's Risk-Oriented Solvency System (C-ROSS) Phase III are still under discussion, with implementation expected in the second half of 2026 or 2027. Currently, major insurers maintain solvency ratios well above regulatory minimum requirements. Company-Specific Insights: Ping An Insurance continues advancing its multi-channel distribution strategy, steadily increasing the number of partner banks in bancassurance channels. Pacific Insurance strives to balance value contributions across agent and bancassurance channels. China Life anticipates double-digit growth in new business value (VONB) in 2026. Xinhua Insurance focuses on health insurance and long-term products in the first half of 2026. People's Insurance Company of China consistently outperforms peers in auto insurance underwriting outcomes.

Analysis framework

Goldman Sachs conducted in-depth interviews with executives and investor relations teams at numerous Chinese financial institutions during its field research, gathering first-hand data. Combining this information with publicly available market data and industry trends, the report provides a comprehensive analysis across multiple dimensions, including investment strategies, channel development, product innovation, underwriting capabilities, and regulatory environments. Special attention was paid to how changes in bancassurance regulation affect industry dynamics and how stock market volatility influences insurer investment returns, enabling conclusions about future profitability and market performance.

Methodology notes

• Financial Industry-Specific FrameworkNet Interest Margin (NIM) Analysis

  Insurers focus on asset-liability duration and cash flow matching to ensure investment returns cover liability costs.

  This approach emphasizes the need for rational asset allocation to manage liability-side cost pressures, especially in a declining interest rate environment, by holding long-term bonds and high-dividend stocks to stabilize earnings.

• Financial Industry-Specific FrameworkProvision Coverage Ratio/Asset Quality

  Insurers prioritize asset quality management, particularly ensuring adequate provisions have been set aside for real estate-related assets.

  This demonstrates strong resilience against potential credit risks, helping maintain financial stability.

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Tightening regulations on bancassurance fees reduces competitiveness for small and medium-sized insurers, benefiting larger players.

  This supply-demand dynamic gives large insurers a more favorable position in bancassurance channels, facilitating market share concentration and profitability gains.

• Valuation MethodologySOTP Segment Valuation

  Goldman Sachs employs the Sum-of-the-Parts valuation method to assess insurance companies.

  This approach evaluates each business segment—life insurance, property insurance, banking, etc.—separately before aggregating values to arrive at an overall company valuation, enhancing accuracy.

Asset mapping & comparison

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

• Ping An Insurance (2318.HK, 601318.SS)

  Benefiting from a multi-channel distribution strategy and a stable agent workforce

  Strengths

  Diversified business portfolio and robust capital strength

  Weaknesses

  Potential investment losses in banking and asset management operations

  Comparison

  Compared to other insurers, Ping An excels in technological applications and integrated financial services

  Risks

  Stock market downturns, CSM decline, deteriorating sales structure

• Pacific Insurance (2601.HK, 601601.SS)

  Benefiting from balanced agent and bancassurance channel value contributions along with strict cost control

  Strengths

  Strong cost-control capabilities and a stable agent team

  Weaknesses

  Sluggish agent growth could lead to NBV growth rates lower than leading peers

  Comparison

  In the context of bancassurance reforms, Taibao's balanced strategy gives it strong adaptability

  Risks

  Challenging agent growth, rising property insurance underwriting losses, declining dividend ratios

• China Life (2628.HK)

  Benefiting from robust new business value growth and margin expansion

  Strengths

  Extensive customer base and strong brand influence

  Weaknesses

  Weak sales growth in lower-tier cities

  Comparison

  As an industry leader, China Life maintains a commanding position in market share and profitability

  Risks

  Stock market weakness, lower-than-expected agent productivity, declining long-term government bond yields

• Xinhua Insurance (1336.HK)

  Benefiting from rising investment returns driven by A-share market rallies

  Strengths

  Effective cost-control measures and sustained NBV growth

  Weaknesses

  High proportion of savings-type products resulting in significant capital consumption

  Comparison

  Xinhua adopts a more flexible investment strategy, better adapting to market changes

  Risks

  Stock market downturns, ROE growth below expectations, less aggressive dividend policies

• People's Insurance Company of China (2328.HK)

  Benefiting from improved auto insurance underwriting results and advances in new-energy vehicle technology

  Strengths

  Excellent risk pricing capabilities and internal cost management

  Weaknesses

  Increased claims due to natural disasters

  Comparison

  In the property insurance space, PICC continues to hold a leading position thanks to its scale and expertise

  Risks

  Lack of additional shareholder return initiatives, underperforming underwriting results, rising natural disaster claims

• China Taiping (0966.HK)

  Benefiting from core life insurance solvency improvements and increased capital injections

  Strengths

  Strong capital position and improved non-insurance business operations

  Weaknesses

  Stagnant new policy sales leading to continued decline in CSM balances

  Comparison

  Taiping's presence in the Hong Kong stock market provides unique competitive advantages

  Risks

  Weaker-than-expected investment outcomes, stagnant new policy sales, declining dividend ratios

Key data

• Ping An Insurance Target Price75.0 HKD / 77.0 RMBBased on SOTP valuation, corresponding FY27EP/B ratios are 1.1X/1.3X
• China Life Target Price28.5 HKD / 42.0 RMBBased on ROA valuation, corresponding FY27EP/B ratios are 1.0X/1.7X
• Pacific Insurance Target Price38.0 HKD / 39.0 RMBBased on SOTP valuation, corresponding FY27EP/B ratios are 0.9X/1.1X
• Xinhua Insurance Target Price37.0 HKD / 49.0 RMBBased on ROA valuation, corresponding FY27EP/B ratios are 0.8X/1.2X
• China Taiping Target Price21.0 HKDBased on SOTP valuation, corresponding FY27EP/B ratio is 0.6X
• People's Insurance Company of China Target Price19.6 HKDBased on ROE valuation, corresponding FY27EP/B ratio is 1.2X

Impact & implications

Goldman Sachs believes that China's insurance industry maintains solid fundamentals. Life insurers' substantial growth potential in bancassurance channels, coupled with improved investment returns from the recovering stock market, will drive restorative growth in both profits and book value. Meanwhile, gradual improvements in regulatory policies enhance overall industry standardization and transparency, creating a more favorable environment for high-quality insurers. However, short-term concerns remain regarding stock market volatility, interest rate trends, and natural disasters impacting insurer operating performance.

Risks

• Further stock market weakness reducing insurer solvency and limiting dividend capacity
• 10-year government bond yields falling below 2%
• Weak insurance sales growth in lower-tier cities
• Agent productivity growth lagging behind peers

What to watch

• Further refinement of bancassurance regulatory policies and their impact on market dynamics
• Adjustments in insurer investment strategies, particularly shifts in equity asset allocations
• Changes in underwriting outcomes for auto and non-auto insurance sectors
• Specific implementation timelines and detailed rules for C-ROSS Phase III
• New business value growth and margin changes across major insurers