Zhixin Finance and Economics App learned that Guolian Securities released research reports stating that in the sales environment at the beginning of 2025, there are bullish factors on both the supply and demand sides. On the demand side, under the background of residents' low risk preferences, savings-type insurance products will still be favored by customers due to their redemption attributes. On the supply side, against the backdrop of continued reductions in deposit interest rates, the increasing interest whole life insurance with a scheduled interest rate of 2.5% and the dividend insurance with a scheduled interest rate of 2.0% still have a certain competitive advantage. With the continuous improvement in agent capacity and the ongoing regulatory guidance for the industry to lower scheduled interest rates and optimize business structure, NBV Margins of various life insurance companies are expected to further improve, thereby supporting positive growth in NBV.

Why is the beginning of the year so important?

From a historical perspective, life insurance companies' premiums in January and Q1 are mainly contributed by the beginning of the year. From 2015 to 2023, the premiums of major life insurance companies in January and Q1 accounted for more than 1/5 and over 1/3 of the annual total, respectively. In terms of NBV share, in 2023, Ping An Life Insurance and China Pacific Life Insurance's Q1 NBV accounted for around 1/3 of the annual total. Therefore, if insurance companies can perform well during the beginning of the year, the probability of achieving annual performance targets is also expected to increase. To boost agent enthusiasm, insurance companies tend to allocate relatively more expenses during the beginning of the year. From 2013 to 2022, the overall proportion of Q1 commission and fee expenditures of listed insurers was around 1/3 of the annual total.

What makes the beginning of 2025 different?

In terms of underwriting methods, under the continuous guidance and regulation by the authorities, it is expected that during the beginning of 2025, life insurance companies will transition from the original "prepayment" to "pre-recording" of insurance policies. Premiums of "pre-recorded" policies during the beginning of the year are expected to be collected uniformly on January 1 of the following year. In terms of flagship products, the main products for life insurance companies continue to be pension insurance, whole life insurance, and other savings-type insurance policies. However, in terms of product forms, to reduce liability costs and mitigate potential interest spread risks, during the beginning of 2025, life insurance product forms are generally shifting from traditional insurance types to focus more on dividend-type insurance products.

Investment recommendation: Maintain the insurance industry's 'outperform market' rating.

Looking ahead, with regulatory guidance continuing to reduce industry leverage costs, the NBV Margin of each insurance company is expected to improve significantly, thereby driving positive growth in NBV. In terms of valuation levels, the current valuation of the insurance sector is still at historically low levels, with potential for further recovery in the future. Stock-specific recommendations focus on China Pacific Insurance (601601.SH) with leading performance on the liability side and relatively superior fundamentals, China Life Insurance (601628.SH) with a more robust liability side, Ping An Insurance (601318.SH) showing significant improvement in agent quality, New China Life Insurance (601336.SH) with a more pronounced increase in new business value rates, and the People's Insurance (601319.SH).

Risk Warning: Economic recovery falls short of expectations; increased volatility in capital markets; regulatory policy shifts.