J.P. Morgan: Chinese insurers’ third-quarter earnings fluctuate, while solvency remains resilient

Why does solvency remain resilient despite sharp earnings fluctuations?

Some insurers swung to a loss in the third quarter of 2026, contrasting with profit growth in the first half. The losses also depleted retained earnings and weighed on core capital accumulation. For the first three quarters, net profit fell year on year by 47% at China Life, 27% at Ping An Group and 32% at New China Life.
At the end of September, the average core solvency adequacy ratio of major life insurers was up 2 percentage points from the end of the previous quarter, while that of major property and casualty insurers fell by an average of 9 percentage points. JPMorgan believes overall capital remains adequate: the decline in asset values caused by a weaker stock market was broadly offset by valuation gains from falling bond yields.
The core solvency adequacy ratio measures core capital coverage relative to minimum capital requirements. Capital changes are also affected by dividends and financing: CPIC Life paid nearly 3 billion yuan in dividends to its group in September, while New China Life issued 10 billion yuan in perpetual bonds in July.

Minimum capital requirements at major life insurers rose by an average of 2% quarter on quarter in the third quarter, mainly due to higher insurance risk. Market risk declined as the stock market weakened and risk exposures decreased.
JPMorgan noted that China Life and Ping An Life, which manage assets and liabilities more prudently, reduced their interest-rate risk, while this measure deteriorated at peers more focused on premium growth. Business growth and the interest-rate risk assumed do not have the same outcome for every company.
Given earnings volatility and existing balance-sheet leverage, the bank is cautious about insurers increasing equity allocations further from current levels.

In the first three quarters of 2026, trends in life insurers’ value of new business diverged: China Life grew 13% year on year, and New China Life also achieved positive growth; Ping An Life and CPIC Life fell 13% and 6.5%, respectively.
The bancassurance channel was affected by Document No. 65, which regulates irrational competition on expenses. China Life’s management said the industry was under pressure from July to August and rebounded strongly year on year in September. In third-quarter results discussions, major insurers said sales had begun to recover in August and expected new business sales to rebound rapidly in the fourth quarter.
Whether the recovery can continue into the 2027 start-of-year sales campaign still depends on the bancassurance channel’s performance. CPIC Group’s value of new business fell year on year in the first three quarters, but it still plans to achieve positive growth for the full year through a multichannel strategy.

Major insurers reiterated their commitment to stable dividends and emphasized growth in core earnings excluding short-term stock market fluctuations. Ping An Group and CPIC Group link their dividend policies to operating profit after tax, which rose year on year by 8% and 6%, respectively, in the first three quarters of 2026.
China Life’s adjusted net profit rose 16% year on year in the first three quarters. Management said this measure, which excludes short-term equity fluctuations, would be an important reference for the year-end dividend; however, the acceleration in the measure in the third quarter partly came from one-off dividend income.
JPMorgan considers the sector’s dividend yield of around 5%–8% attractive and expects supportive policies for pensions, long-term care and health insurance may be introduced by year-end, including potential tax incentives. The bank’s top picks are Ping An Insurance H shares and China Life H shares.