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<Research>G Sachs: Core Solvency Ratio of CN Life Insurers Declines More Than Expected w/ Limited Room for Further Equity Investment Growth
Recommend 11 Positive 17 Negative 5 |
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Goldman Sachs summarized the quarterly results of CHINA LIFE (02628.HK), CPIC (02601.HK), NCI (01336.HK), PICC GROUP (01339.HK) and PICC P&C (02328.HK) noting that, driven by stock investment profits, most insurers experienced strong profit growth on a high base from the same quarter last year. Despite large equity gains, the core solvency ratio of life insurers declined by 2-33 ppts, representing a magnitude of impact larger than it expected for most life insurers, mainly due to a significant increase in the minimum capital requirements for equity risk, the broker added. Given that the reference liability discount rate will be further reduced in 4Q25 and 2026, Goldman Sachs believed that there is limited room for increased equity investment allocation from 3Q25 levels, unless capital requirements are further relaxed. Moreover, given the one-off nature of equity investment gains and the larger-than-expected decline in core solvency ratio, the broker anticipated management to focus on absolute DPS growth rather than dividend payout ratio. However, the net investment yield continued to decline, with PING AN (02318.HK) and CPIC dropping by 0.3 bps each. The yield trend continued to drag on the growth of book value and solvency capital generation, posing a medium- to long-term challenge for yields. AASTOCKS Financial News Website: www.aastocks.com |
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