Cathay Pacific Haitong: Q2 personal insurance research values have rebounded for two consecutive quarters, and reservation interest rates are expected to stabilize during the year

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that the insurance base for the third quarter may affect short-term growth performance on the debt side. In the long run, it is expected to be driven by strong demand for residents' insurance savings, and the debt side of listed insurers will continue to grow steadily. The bank expects that the semi-annual results and dividend expectations of listed insurers will become the short-term focus of the market. The long-term valuation center is still affected by interest rates and asset balance levels. The 10-year treasury bond yield implied by current stock prices is significantly lower than the actual treasury bond yield level. It is recommended to focus on insurance stock valuation repair opportunities and maintain the industry's “gain” rating.

Cathay Pacific Haitong's main views are as follows:

Incident: On July 20, the Insurance Industry Association organized a regular meeting of the Life Insurance Industry Liability Reserve Assessment Interest Rate Expert Advisory Committee for the second quarter of 2026. The study found that the current research value of the predetermined interest rate for ordinary personal insurance products is 1.94%.

The regulation guides the scheduled interest rate for personal insurance products to be adjusted according to the market interest rate. 25Q3 has guided the adjustment of the reservation interest rate for traditional insurance to 2.0%

According to the Financial Supervisory Authority's “Notice on Matters Relating to Establishing a Mechanism for Linking Predetermined Interest Rates to Market Interest Rates and Dynamic Adjustment Mechanisms”, the Insurance Industry Association will publish predetermined interest rate research values every quarter in conjunction with changes in market interest rates such as LPR for 5 years or more, 5-year fixed deposit benchmark interest rates, and 10-year treasury bond interest rates. When the highest predetermined interest rate value of ordinary personal insurance products sold by insurance companies is 25 basis points or more higher than the planned interest rate research value for 2 consecutive quarters, the maximum scheduled interest rate for new products should be lowered in a timely manner. The predetermined interest rate research values announced by the Insurance Industry Association on 1/10/25/4/21/25/25/10/29/26/4/20, 2026/4/20 were 2.34%/2.13%/1.99%/1.90%/1.89%/1.93%, respectively, and triggered a predetermined interest rate adjustment mechanism in 25Q3. Insurance companies generally adjusted traditional insurance reservation rate/dividend insurance guarantee rate/universal insurance minimum guaranteed interest rate of 2.0%/1.75%/1.0% .

The value of the latest scheduled interest rate study increased by 1 bps month-on-month. In the context of long-term interest rate stabilization, it is expected that personal insurance reservation interest rates will stabilize in the short term

1) In July '26, the Insurance Industry Association announced that the value of the latest scheduled interest rate study was 1.94%, up 1 bps from 1.93% in April '26. 2) As of July 21, 2026, the 10-year treasury bond yield was 1.74%, and the 10Y treasury bond 250-day EMA/750-day EMA was 1.80%/2.05%, respectively, rising steadily from +5bp/-18bps at the beginning of the year. Refer to the current upper limit of predetermined interest rates for personal insurance products and the predetermined interest rate adjustment rules. If the subsequent research value continues to fall below 1.75% for two quarters, it will trigger the predetermined interest rate reduction mechanism. The bank expects that if the market interest rate is relatively stable, it will not trigger another reduction in the scheduled interest rate in the short term.

Asset liability resonance is expected to drive improvements in insurance interest spreads

On the debt side, considering that the maximum interest rate for ordinary personal insurance products has continued to be lowered to 2.0% in the past three years, compounded by the transformation of floating income products, it is expected that the decline in the cost of rigid debt for new orders will gradually drive an improvement in stock debt costs; on the asset side, the stabilization of long-term interest rates and superposition insurance companies to optimize asset allocation structures and increase the allocation of high-quality equity assets, which is beneficial to stable return on investment. The bank believes that interest rates are still the core factor affecting the negative operation of insurance funds and the valuation of insurance stocks.

Risk warning: long-term interest rates declined; equity market fluctuations; debt costs improved less than expected.