Ping An's interim report has landed squarely within market forecasts, with the company raising its mid-year dividend distribution to RMB 0.98 per share. This comes at a time when the dividend low-volatility index has been under significant pressure, falling 11.2% in the first half of the year, including a sharp 12.8% decline in the second quarter alone, marking the steepest quarterly drop since Q1 2020. The weakness stems partly from substantial holdings of insurance stocks by the China Securities Finance Corporation, while high-dividend equities favored by insurers have also struggled, dragging the entire insurance sector lower during the period.

Some observers attribute this to policymakers steering investors away from traditional value stocks toward technology and new economy names. However, a more compelling explanation is that this represents an extreme pricing of growth-style equities amid abundant liquidity, mirroring the dividend rally of H1 2024. Interestingly, when overseas markets turned hawkish in July, the dividend low-volatility index actually surged over 11% in a single month, while the ChiNext and STAR boards both fell more than 20%. It all comes down to cyclicality. Since August, we've seen renewed oscillations between growth and dividend styles, but some dividend low-volatility stocks are now showing compelling value. Based on liquidity expectations and fundamental analysis, the next two quarters could present an attractive window for building positions in dividend low-volatility names, with Ping An Insurance (Group) Company Of China, Ltd. (601318) potentially approaching a fresh mid-term buying opportunity.

Short-Term Liability Pressures Don't Alter Life Insurance Growth Trajectory

While life insurance maintained steady performance in H1, PING AN's (HK2318) property and casualty business posted a combined ratio of 95.1%, improving 0.1 percentage points year-on-year. The banking segment kept its net interest margin and non-performing loan ratio stable, though interest income's contribution to revenue declined. Shareholders' operating profit attributable to the group reached RMB 84.196 billion, up 8.3% year-on-year, while total revenue grew 12.6% to RMB 615.351 billion.

New business value from life and health insurance hit RMB 24.847 billion in H1, a year-on-year increase of 11.2%, driving contract service margin growth of 18.3%. However, the new business value margin, calculated on standard premiums, slipped 1.4 percentage points to 29%, reflecting the shift toward participating products as the primary offering. Contract service margin amortization declined year-on-year, meaning interim life insurance profits relied heavily on investment service performance and short-term investment volatility for growth. Looking ahead, life insurance profitability may enter a period of consolidation.

Ping An's traditional agency workforce has shrunk to 325,000, the lowest mid-year level since the company's life insurance reform began. Combined with the strategic pivot toward participating products, agency channel new business value growth has slowed to 5.4%, with participating products contributing over 90% of new business value during the period. By product line, participating policy premiums surged 143% to RMB 121.5 billion, lifting universal life products as well, while traditional life and accident insurance volumes contracted in line with industry trends.

Encouragingly, the proportion of long-premium policies in the agency channel rose 6 percentage points, and agent activity rates improved to 55.5%, the best half-year level since the reform initiative began. Still, there remains room for improvement compared with peers like AIA, and whether the activity rate gain is partly attributable to reduced headcount warrants monitoring. The bancassurance channel delivered 18% new business value growth to RMB 7.05 billion. The deceleration was anticipated, as bancassurance now must rely on internal efficiency gains once network coverage matures. The notable decline in bancassurance new business value margin appears to be a one-off impact. Community financial services saw effective comprehensive financial contracts rise 17% from the start of the year. Together, bancassurance and community finance now contribute nearly 40% of the group's new business value, up 3.8 percentage points year-on-year.

According to the 2026 Allianz Global Insurance Development Report, China's insurance penetration stands at just 4.4% of GDP, placing it in the middle tier within Asia. Over the next decade, life, property and casualty, and health insurance are projected to grow at annualized rates of 7.6%, 6.3%, and 8.1% respectively, with life and health expected to outpace global averages. Yet actual premium growth has fallen short of these projections. In H1, China's total original insurance premiums reached RMB 3.86 trillion, up 3.3% year-on-year. Property and casualty insurers collected RMB 984.6 billion, up 2.1%, while life insurers wrote RMB 2.8716 trillion, up 3.6%. The slower premium growth reflects the high comparison base from last May's pricing rate adjustments. In March, the financial regulator issued a notice on strengthening cost management in bank agency channels, requiring compliance with the "report-action alignment" framework within company assessments and accountability mechanisms, with non-compliant products to be removed by end-June. This caused some temporary friction in bancassurance during Q2.

Although Ping An's bancassurance new business value growth has moderated, investment and healthcare needs will continue to drive China's insurance market expansion. Hong Kong life insurers like Prudential and BOC Life currently have higher bancassurance penetration than Ping An, but with tighter tax treatment and cross-border capital flow oversight for Hong Kong policies, some capital seeking higher returns there is likely to return to mainland life insurers. This suggests Ping An's bancassurance new business value contribution still has room to rise. China's per capita original premiums reached EUR 527 in 2025, surpassing many developing nations but still trailing developed Asian economies considerably. With one-year deposit rates now below 1% amid falling real interest rates, life insurance's long-term returns are increasingly attractive.

Goldman Sachs' June report on China macro asset allocation noted that at the 2021 property market peak, real estate constituted 67% of Chinese household assets, cash deposits 16%, and other financial assets 15%. By Q1 this year, those proportions had shifted to 52%, 25%, and 20% respectively. Direct equity holdings rose marginally from 5% in 2021 to 6% in Q1 this year. Given that equity market valuations have climbed notably since 2021, the trend toward increased stock allocation is not particularly evident. Cash deposits, however, have demonstrably increased their share. As real estate's financial characteristics diminish and the "housing for living, not speculation" principle takes hold, household leverage has been declining since 2024. With few attractive alternatives for household assets, many investors continue holding substantial deposits despite falling rates. Japan, which shares similar cultural practices, maintained deposit ratios above 30% for decades following its property bubble burst in the 1990s. This suggests Chinese households still have room to increase low-risk asset allocations. Given older demographics' preference for low-risk investments, Goldman Sachs projects savings insurance will be a key beneficiary of this household asset reallocation wave. Compared with the UK, Japan, Taiwan, and the US, Chinese households allocate only 6% of assets to insurance and stocks, significantly below those markets. Any increase in these allocations would benefit insurance companies. Ping An and other major insurers are also introducing scarce insurance-plus-healthcare-elderly care services, strengthening demand from mass-affluent clients in an aging society.

Commercial Insurance Necessity Grows Amid Medical Insurance Cost Controls

Multiple institutions project that with rising elderly population share, the health services industry could reach RMB 16 trillion by 2030, while the silver economy could hit RMB 30 trillion by 2035. The healthcare and elderly care sectors represent a long, snow-covered slope. By end-June, Ping An Insurance (Group) Company of China Ltd. had established five general hospitals, two rehabilitation specialty hospitals, and one cardiovascular specialty hospital. Peking University International Hospital has 1,388 operational beds, with outpatient visits reaching 680,000 in H1, continuing year-on-year growth. Through its external collaboration network, Ping An's domestic partner hospitals for claims services exceed 38,000, achieving 100% coverage of China's top 100 hospitals and Class 3A hospitals. The company also partners with 245,000 pharmacies. Its AI physician system covers over 11,300 disease types with 96% diagnostic accuracy. Corporate health management clients now enjoy seamless payment at medical facilities, scanning QR codes for out-of-pocket portions after insurance settlement, eliminating advance payments and claims filing.

In elderly care, Ping An's premium community projects have launched in five cities. Shanghai's and Shenzhen's flagship locations are operational with over 700 rooms combined, and more than 320,000 clients have qualified for home-based care services. Some may question the need for commercial insurance given that China's medical insurance annually adds innovative drugs and supports cross-region use and account pooling. While the basic system is robust, for mass-affluent individuals, relying solely on public insurance under DRG cost-control reforms creates practical difficulties. Outpatient clinics now emphasize pre-existing condition matching, impose stricter limits on per-visit prescriptions, and patients may face challenges obtaining original-brand drugs. Even in second-tier cities, hospital bed shortages mean waits of a month or more. Post-admission, departments manage performance metrics, often discharging patients within a week, which may not allow sufficient recovery time. If certain medications are unavailable, patients may face delays awaiting intra-hospital redistribution. For treatments heavily using Category C drugs or supplies, out-of-pocket ratios can reach 65%-70%. Commercial insurance faces none of these constraints.

Ping An's insurance-plus-healthcare-elderly care benefits are upgraded annually, with comprehensiveness leading comparable groups. The entry-level healthcare entitlement package, available from single premiums of RMB 200,000, offers particularly thorough care navigation. H1 medical insurance premium income grew 4.9% year-on-year to over RMB 43 billion. Compared with deposits and wealth management products that offer only returns, insurance provides more certain yields while granting access to scarce medical and elderly care resources, attracting continued capital flows from mass-affluent households into life insurance. Ping An disclosed for the first time that clients with investable assets exceeding RMB 500,000 grew 2.6% since year-start, outpacing the 0.9% growth in overall individual clients. These high-value clients predominantly favor asset appreciation products, suggesting the full appeal of healthcare and elderly care offerings to mass-affluent demographics has yet to materialize. In H1, over 11.51 million clients used Ping An's medical and elderly care services, a 24% penetration rate versus 38.5% at end-2023, roughly flat on an annualized basis, indicating untapped potential. The interim report reveals compelling data: clients using medical and elderly care services showed a 5.9 percentage point increase in policy renewal rates, while single-premium amounts for new life policies rose 2.6 times for clients with medical coverage, 9.7 times for those with home-based care benefits, and an extraordinary 48.8 times for clients with premium elderly care entitlements. The multiplier effect of healthcare and elderly care on the core life insurance business presents significant upside potential.

Cost Structure Advantages Favor Ping An

The interim report shows Ping An's comprehensive financial services reduce customer acquisition costs by 35%-45% compared with external channels. This advantage gives Ping An the lowest new business value breakeven yield among comparable insurers at 1.48%, explaining why the company hasn't aggressively pursued investment yield elasticity. Since Q2 2022, insurance funds under management have grown from under RMB 25 trillion to over RMB 38 trillion by end-2025, with life insurance groups managing over RMB 30 trillion. Insurers must satisfy embedded value assumptions while ensuring investment safety, controlling capital consumption, and avoiding significant profit volatility, making high-dividend equities an increasingly necessary allocation.

Ping An has responded to policymakers' call for long-term equity market participation by increasing holdings of high-dividend stocks and select FVTPL equities, laying a solid foundation for the participating product transition. Following substantial FVTPL additions in H2 last year, the company began realizing gains while continuing to accumulate high-dividend positions. While attention focuses on 中国人寿's (601628) trading in兆易创新, Ping An's asset allocation capabilities deserve equal recognition. The interim report shows a non-annualized comprehensive investment return of 2.1%, down 1 percentage point year-on-year, primarily due to lower deposit interest and bond coupons. However, fair value gains on equities added over RMB 57 billion. With expectations of increased equity market volatility over the next six months, preserving these gains will be important.

China's insurance industry has enjoyed multiple favorable policy developments since 2020. In late 2021, regulators permitted insurers to lend securities for securities lending. Last year, a pilot program allowed major life insurers to invest in gold, filling the commodity investment gap. In April last year, the financial regulator raised the equity allocation ceiling for insurance funds to 50% and included insurers in strategic investor eligibility for private placements. In July, the Ministry of Finance adjusted performance assessments for state-owned commercial insurers to weight current-year results with three and five-year cycles, with long-term factors comprising 70%. This year, major life insurance groups including Ping An received approval for southbound bond connectivity, adding to the accumulating policy support for long-term insurance investment. Regulators have also become more forward-looking in adjusting pricing rates, learning from developed market experience. The current 10-year government bond yield is now relatively close to participating product pricing ceilings, reducing concerns about spread losses. Additionally, under C-ROSS Phase II implementation, insurance groups have reduced property investments, non-transparent deep-tier assets, and cash holdings. In recent years, I've consistently recommended that Ping An divest legacy economy associates and joint ventures to optimize its asset structure and enhance investment returns. The interim report indeed shows a streamlined list of associates and joint ventures, with limited remaining room for further optimization under current accounting standards.

Ping An's Dividend Predictability Suggests Potential for Banking-Style Long Bull Run

Many investors place great emphasis on dividend yield metrics. However, it's important to note that dividend safety margins aren't reliable if fundamentals continue deteriorating. Only companies in policy-neutral or moderately favorable industries with potential for rising mid-to-long-term dividend yields warrant long-term holding, and Ping An fits this profile. The interim dividend of RMB 0.98 per share represents a 3.2% year-on-year increase. Based on the May 20 closing price of RMB 52.14 for A-shares, Ping An's dividend yield stands at approximately 5.23%, placing it in the top tier of A-share listings. Ping An's payout ratio of about 36% compares favorably with other domestic life insurance groups, which typically distribute below 25%. Under the new accounting standards, insurers with higher FVTPL proportions include unrealized fair value gains in current net profits. Should indices experience a drawdown like July's ChiNext decline, insurers with substantial first-half gains could face more pronounced profit volatility in the second half. Until the A-share market establishes a sustainable bull trend, beta-dependent insurers may hesitate to continuously raise payout ratios. Insurance funds should prioritize asset allocation, with trading profits being merely supplementary.

The recent record highs in ICBC and CCB shares, despite unchanged banking fundamentals, suggest insurers are again accumulating high-dividend positions. Long-term capital is broadly increasing holdings of high-dividend names, and cross-shareholding among insurance groups is becoming common. Ping An, with the strongest dividend predictability, may well replicate the long bull market pattern of the major banks. As expected, China Life increased its position in H1, while China Securities Finance reduced holdings, consistent with broader blue-chip reductions. Risk factors deserve attention as well. Even without interim earnings previews from insurance groups, Q2 index performance suggests profits should be solid. However, typhoon frequency in Q3 will likely push property and casualty combined ratios higher quarter-over-quarter and year-over-year. Q3 is traditionally not a strong sales season, and with equity market volatility, sequential profit fluctuations could be meaningful. Recent extreme concentration has pushed the top 5% of A-share stocks beyond the 45% historical crowding threshold, approaching levels seen at the 2007 and 2021 market peaks. Based on forward-looking global liquidity analysis, a style rotation appears underway. Given these factors, insurance stocks are more likely to form a composite bottom rather than a V-shaped recovery, and leveraged long-term investors should carefully manage their capital deployment pace.

Regarding optimal entry points, individual investment horizons, experience, and balance sheet positions differ, so I'll offer my subjective views: First, Ping An's 13-month policy continuation rate improved to 97.3%, up 0.4 percentage points year-on-year, while the 25-month rate reached 95.8%, up 0.8 percentage points, both representing best levels since the life insurance reform began. The interim lapse rate of 0.64% declined 0.23 percentage points from the prior year, reducing the negative impact of surrenders on contract service margin. Second, new business value is the primary driver of contract service margin growth. Traditional agency headcount appears to be forming an L-shaped bottom, and bancassurance network coverage enables rapid new business value expansion, though improving specialist productivity will be gradual. Mid-term average outlet productivity growth of 24% is respectable, and bancassurance new business value growth will likely moderate from initial highs. The interim contract service margin balance did rise 1.7% from year-end, but what if pricing rates decline further? Third, while capital consumption increases with higher equity allocation, policy support measures offset this, creating a neutral overall impact, with no pressing need for frequent substantial capital raises. Ping An's core life insurance solvency ratio improved in the interim report. Fourth, Goldman Sachs projects Ping An's asset management profits will turn positive by 2027, and the negative factors are largely exhausted. H1 asset management net profit more than doubled to RMB 9.658 billion, largely confirming Goldman's thesis. Fifth, while the 10-year government bond yield trend remains downward, pricing rate adjustments have been timely. However, given macro uncertainties, Ping An's embedded value multiple may not return to 2x before the insurance-plus-healthcare transformation fully succeeds. A range of 1.3-1.4x would be satisfactory (current market cap to group embedded value is approximately 0.6x, and to life insurance embedded value about 0.97x).

In conclusion, Ping An's current position is far superior to 2022 when life insurance reform was in its deepest phase amid simultaneous A-share and property market downturns. The previous bottom ranged from RMB 30-35 (pre-adjusted). Should this cycle's composite bottom arrive in the RMB 40-45 range, it would represent a diamond-bottom opportunity. That said, the June adjustment low of RMB 46-50 also offers excellent long-term risk-reward for patient investors.