China Insurance:2Q26 insurance funds: Total scale hit RMB40tn;equity exposure continued to rise on stock rally

2Q26insurance funds: Total scale hit RMB40tn;equity exposure continued to rise onstockrally The NFRA reported2Q26insurance fund investments. Total insurance fundstoppedRMB40.8tn, up3.5% QoQ/12.7% YoY, sustaining a streak of double-digit rise for12consecutivequarters,at a pace in line withthe growth of the industry’s total assets(+11.8% YoY).Theindustry’s total assets/net assetsgrew6.2%/11.1%from year-startor 3.3%/7.7% QoQ, with the net asset growthstaying more robustmainlydrivenby theuptrend in fair value ofbonds and equitiesin our view,i.e.China’s 10yrgovt.bond yieldwas down8.1bpsin2Q26(vs-3.9bps in 1Q26)withtheCSI 300 indexup12% in 2Q26(vs.-3.9% in 1Q26).Insurance funds from personal life/P&CcompaniestotalledRMB36.9tn/RMB2.5tn (90.3%/6.2% mix), up6.4%/4.9% fromyear-start. Ontheasset allocation front, we seehighlightsof1)risingexposure incoreequitiesto 16.2%by 1H26, up 0.7pct QoQalongside the market rally, withpositionsinequity fundsrising10.9% QoQmainly driven by the increase fromP&Cinsurers;2) bonds remainingthe ballast ofinsurancefund,making upoverhalf oftheexposure(50.5%);3)long-term equity(LTE)and bank deposit growthdecelerationin 2Q for bothlifeandP&Cpeers; and 4)other assets(i.e.non-standardassets)returningto low single-digit QoQgrowth. In 2Q26,lifecore/comprehensivesolvencywas119.6%/169.7%, +1.5pct/-1pct QoQ,largely stable led by the industrytop peers. China Insurance Sector Nika MA(852) 3900 0805nikama@cmbi.com.hk Recent reports: 1.ChinaInsurance-Offshoreinsurance tax sell-off likely overdone,Aug 7, 2026 (link) 2. China Insurance-1Q26 insurancefunds: Core equities sustained mid-teensshare;Life core solvencyrebounded, May 22, 2026 (link) 3.China Insurance-1-3M26:Lifegrowth resilient and P&C marginallyrecoveredin March,Apr 28,2026(link) 4.China Insurance-1-2M26:Lifesustained double-digitrise; P&C autopremiums dipped for two consecutivemonths,Apr 2, 2026 (link) Better fair valueequitygains in 2Qlikely reflected in TPL stocks and funds.Total insurance fundsamounted toRMB40.8tn in 1H26, up 3.5 QoQ/12.7% YoY,markinga streakof double-digit increasefor12consecutivequarters supportedby robust premium growth.In 1H26,the industrytotal premiums/net assets/totalassetsgrew 3.2%/8.4%/11.8% YoY, with theweakeningpremium growthin 2Qmainlydragged by a highbasefroma pull-forward demand prior to the PIR cutsin Sep2025.Net assetsrose 11.1% from year-start,outpacing total assets(+6.2%),driven bythe fair valuegains frombothbonds and equities.In2Q26,high-yield and defensive stocks lagged in performance, astheCSI Dividend/CSIDividend Low Volatility index dipped12%/13% (Fig.9), leavingthefair valueequity gainsmainlycomingfrom TPLstocksandequityfunds, in our view,whichcouldboost the insurers’1H netearnings. 5.China Insurance-SunshineInsuranceFY25:StrongNBVmomentum; One-off tax gain lifted netprofit, Mar 182026 (link) 6.China Insurance-Dec Life andP&C premiums marginally improved,Feb 4,2026 (link) 7. China Insurance-Easing solvencyrisk factors to steer insurance fundsinto long-term stockholdings, Dec 8,2025 (link) Coreequity exposure roseto 16.2%amidthe market rally.In1H26,coreequities amounted to RMB6.4tn, up8.3% QoQ,making up 16.2% of investmentassets, up 0.7pct QoQ.Positions in stocksincreased 6.9% QoQ to RMB4.1tn(10.4% mix, up 0.3pct QoQ),and equity fundsgrewmore notably by 10.9% QoQto RMB2.3tn (5.8% mix, up 0.4pct QoQ) driven by a rebound in demandfromboth life and P&Cinsurers.We expect core equityallocationsof major listedinsurerstocontinue to rise in 2H26E while upside could becapped,givenconcernsaroundcore solvencyand heightenedvolatilitiesofnetprofitand NAV. 8.中国保险-股票投资风险因子拟再优化，险资长钱加速入市可期,May 8,2025 (link) 9.China Insurance: Raised cap forinsurer’s equity asset allocation couldunleashmax.RMB 1.7tn to stockmarket, Apr 9,2025 (link) 10.China Insurance-4Q24 insurancefunds: industry financial rate of returnextended rally in a five-quarter streak,Feb 25, 2025 (link) Bonds remained the ballastofinvestmentand stayed flat QoQ.In 1H26,bond investments totalledRMB19.9tn, up3.6% QoQ,making up50.5% of totalinsurance fund investments,stayingflat QoQ. For life and P&C insurers, bondinvestmentsgrew3.8%/1.4% QoQ to RMB18.9/1.0tn in 1H26,indicatinga mixof 51.2%/40.5%.Wethink theincrease in bond investmentsmet life peers’demand forasset-liability duration matchagainst the backdropofaprolongedlow-interestrateenvironmentand shortage ofqualityhigh-yield assets. 11.ChinaInsurance-11/12MMonthly: Life sales diverged duringthe jumpstart; P&C softened by non-auto slowdown, 21 Jan, 2025 (link) Life core solvencystayedrobust led byindustrytop-runners.As of 2Q26,life core/comprehensivesolvency ratio was 119.6%/169.7%,+1.5pct/-1.0pctQoQ(1Q26:+3.1pct/1.4pct QoQ). Life core solvencyratio maystabilizeamongkey peers, i.e. China Life and Ping An Life, while industry-wide pressuremay stillrestrictsmall-andmedium-sized insurers’capital allocationtocoreequities, inour view.By 2Q26,P&C core/comprehensive solvencyratiowas 214.3%/247