Asian insurance industry under IFRS-18 Report Interpretation

Overview

The report examines how IFRS-18 will reshape Asian insurers’ profit presentation and disclosures from 2027. J.P. Morgan expects the main investment implications to center on operating-profit volatility, the reliability of alternative performance measures, and dividend and holding-company cash capacity.

Core views

IFRS-18, issued in April 2024 to replace IAS 1, does not change insurance accounting recognition or measurement under IFRS-17/9. Instead, it restructures the income statement and expands disclosure requirements. Hong Kong, Singapore, South Korea and Malaysia are scheduled to adopt from 1 January 2027, with comparatives from 1 January 2026; Taiwan and Thailand move to 2028. Mainland China will transition in phases: dual-listed companies from 2027, A-share companies from 2029 and unlisted companies from 2030. Japan does not require IFRS adoption but may permit voluntary IFRS-18 adoption from 2027. J.P. Morgan expects first visible effects in 1Q27 or 1H27 reporting and sees divergent implementation schedules as a near-term obstacle to cross-market comparability. The new standard classifies income and expenses into operating, investing, financing, income tax and discontinued-operations categories, and introduces a standardized operating-profit subtotal. For insurers, liability-driven investment income and net finance income or expense from insurance and reinsurance contracts should sit in operating activities because investing policyholder funds is integral to the insurance business. Equity-accounted associates, joint ventures and unconsolidated subsidiaries belong in investing, while borrowings and bond interest expense fall under financing. This structure should help investors separate operating, investment and financing drivers more consistently across peers. J.P. Morgan believes life insurers will be affected more than non-life insurers and reinsurers because their liabilities have longer duration and their investment assets are larger relative to capital. Macro-driven asset valuation changes and liability-reserve movements may therefore pass more directly through standardized operating profit, making it more volatile in a manner resembling net-profit swings already observed at Chinese life insurers. The report argues that earnings revisions and P/E multiples may consequently become less reliable as standalone valuation anchors; dividend yield and shareholder-return policy should receive greater emphasis. It also expects insurers with guidance or dividend policies linked to operating-profit growth, OPAT per share or DPS growth to revisit those frameworks during 2027. IFRS-18 formalizes management performance measures, defined as management-selected income-statement subtotals communicated publicly but not specifically required by IFRS. Potential insurance-sector MPMs include OPAT, adjusted operating profit, free surplus, new business value, underlying loss ratio and capital-adjusted measures. Previously voluntary and often non-uniform, these metrics will need clear definitions, reconciliations to statutory line items, tax and non-controlling-interest effects, and explanations of material modifications or discontinuations; they will also be subject to audit review. J.P. Morgan expects this to improve transparency, comparability and discipline, although renamed or recalculated measures may interrupt clean historical time series. It notes that AIA, FWD and Ping An Group currently use non-identical OPAT definitions despite each excluding short-term equity-market volatility. For shareholder-return analysis, the report places increased weight on holding-company cash-balance movements alongside solvency disclosures, especially for multinational life insurers and insurance-centric financial holding companies. It prefers Ping An-H, citing a FY27E dividend yield of 7% and improving holding-company cash supported by stronger profitability at major subsidiaries. China Life-H trades at 5x FY27E P/E with a 4% yield; J.P. Morgan sees potential for a year-end dividend rebase after its 50% year-on-year interim-dividend increase in 1H26. The report cites 12.7% year-on-year 1H26 core-earnings growth excluding equity-market volatility, and notes that China Life’s RMB67.5bn new-business CSM exceeded RMB35.2bn of CSM release, producing 5.8% half-on-half growth in its June 2026 CSM balance. Samsung Life trades at 0.6x FY27E P/B with a 3% yield; a stronger shareholder-return policy, value-up disclosure and a possible special dividend from Samsung Electronics could improve its investment case. For Hong Kong-listed AIA and FWD, J.P. Morgan expects OPAT naming and calculation changes but no material change in reported financial numbers.

Analysis framework

J.P. Morgan compares IFRS-18’s new income-statement structure with existing IFRS-17/9 reporting, then assesses how the classification of insurance-related investment activity affects life-insurer earnings, valuation anchors and shareholder-return frameworks. It combines jurisdiction-by-jurisdiction adoption timelines, company disclosures, valuation comparisons, dividend-yield forecasts, CSM movements and holding-company cash trends.

Methodology notes

• Financial-sector metricsEmbedded Value (EV) and New Business Value (NBV)

  Contractual service margin and new-business CSM analysis

  The report uses new-business CSM, CSM release and the ending CSM balance to assess the future earnings base and dividend-supporting capacity of life insurers.

• Valuation methodsDividend Yield Valuation

  Dividend-yield and shareholder-return analysis

  J.P. Morgan argues that dividend yield and shareholder-return policy may become more useful valuation reference points as standardized operating profit becomes more sensitive to macro scenarios.

Asset mapping & comparison

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

• Ping An Insurance Group - H (2318.HK)

  Preferred Asian life insurer under the IFRS-18 transition.

  Strengths

  FY27E dividend yield of 7% and an improving holding-company cash balance supported by stronger subsidiary profitability.

  Weaknesses

  Current dividend-growth guidance is broadly tied to company-adjusted operating-profit growth, a framework that may need review under IFRS-18.

  Comparison

  The report sees an attractive yield relative to regional alternatives.

  Risks

  IFRS-18 could require changes to the operating-profit metric linked to dividend guidance.

• China Life Insurance - H (2628.HK)

  Preferred Asian life insurer with potential dividend-rebase upside.

  Strengths

  A strong balance sheet, 12.7% year-on-year 1H26 core-earnings growth, and new-business CSM above CSM release.

  Weaknesses

  The stated 4% yield does not yet reflect the dividend rebase J.P. Morgan considers possible.

  Comparison

  A year-end dividend rebase could narrow its yield gap versus Ping An-H.

  Risks

  The expected dividend rebase and ongoing core-earnings support are not guaranteed.

• Samsung Life Insurance (032830.KS)

  Preferred Korean life insurer.

  Strengths

  Trades at 0.6x FY27E P/B with a 3% yield; enhanced shareholder-return policy and value-up disclosure could help.

  Weaknesses

  The investment case depends partly on prospective policy and disclosure improvements.

  Comparison

  Potential yield upside from a sizeable Samsung Electronics special dividend could strengthen the case.

  Risks

  Potential special-dividend and shareholder-return-policy benefits may not materialize.

Key data

• IFRS-18 effective date in Hong Kong, Singapore, South Korea and Malaysia1 January 2027Comparative periods begin 1 January 2026.
• Taiwan and Thailand IFRS-18 adoption1 January 2028Comparative periods begin in 2027.
• Ping An-H FY27E dividend yield7%Cited as a key support for J.P. Morgan's preference.
• China Life-H FY27E valuation and yield5x P/E; 4% yieldJ.P. Morgan sees scope for a dividend rebase.
• China Life 1H26 core earnings growth12.7% year-on-yearBased on company disclosure excluding equity-market volatility.
• China Life 1H26 new-business CSM and CSM releaseRMB67.5bn; RMB35.2bnNew-business CSM exceeded release, supporting 5.8% half-on-half CSM growth.
• Samsung Life FY27E valuation and yield0.6x P/B; 3% yieldPotential shareholder-return enhancement is identified as a catalyst.

Impact & implications

The report expects IFRS-18 to improve disclosure discipline but initially complicate historical comparisons and cross-market peer analysis. It argues that investors should increasingly assess dividend policy, holding-company cash and solvency alongside reported operating profit and company-defined non-GAAP metrics.

Risks

• Different IFRS-18 adoption dates across Asian markets may reduce the near-term comparability of earnings disclosures.
• Standardized operating profit may become more volatile for life insurers as asset and liability valuation movements flow through the income statement.
• Revised definitions or discontinuation of management performance measures may impair historical comparability.
• Shareholder-return policies linked to non-GAAP operating measures may need to be revised after IFRS-18 takes effect.

What to watch

• Pro forma disclosures in upcoming 1H27 reports, including system readiness, accounting-policy choices and expected P&L effects.
• Whether insurers redefine operating-profit, OPAT, free-surplus or other management performance measures and reconcile them to statutory results.
• Updates to progressive dividend policies, DPS-growth frameworks and holding-company cash balances.
• The implementation path for Mainland China’s phased transition and the resulting cross-market reporting comparability.