The Zhitong Finance App learned that Zhongtai Securities released a research report stating that it is concerned about defense opportunities for non-banks with good chip structures. This new disclosure standard achieves everything from net profit to operating profit, and market investors will reprice the quality of profit. The current PEV valuation of insurance stocks has returned to a historically low level, and pessimistic expectations are high. Focus on layout opportunities after the three-quarter report boots are launched.
From net profit to operating profit, the new IFRS18 disclosure standard does not change net profit data, but the mandatory new indicator of “operating profit” will restructure the market's ranking of insurers' profit quality. The Ministry of Finance issued the revised CAS 30 (Accounting (2026) No. 11) in July 2026. The first batch of A+H listed insurers will be implemented on January 1, 2027. 1Q27 will need to show comparative data for the same period in 2026. The 2026 annual report has in fact become a “shadow comparison period.” The new standard divides current profit and loss into five categories: operating, investment, fund-raising, income tax expenses, and termination of operations. Two intermediate indicators of “operating profit” and “operating and investment profit” have been added, which mainly affect the reporting of investment income of joint ventures and joint ventures in long-term equity and equity accounting.
From net profit to operating profit: profit quality repricing. Since insurers invest in specific assets as one of their main businesses, the vast majority of income generated from investment assets is still included in “operating investment income,” and only gains and losses on specific assets such as long-term equity investments and investment real estate are cut out to investment profit and loss projects; on the funding side, “underwriting financial gains and losses are transferred to management, interest on sale and repurchase is funded, and interest on rental liabilities must be listed separately.” After the divestiture of financing expenses, “operating and investment profits” eliminated differences in capital structure and were more comparable than the current “operating profit”. We have established the long-term investment contribution ratio, operating profit to investment profit contribution ratio, insurance service revenue contribution ratio, and operating profit loss ratio of listed insurers.
Pay attention to the differences in the long-term stock investment presentation. First, the proceeds of joint ventures under the Equity Law are classified as investments. Second, CAS No. 22 tightens confirmation requirements under the Long-term Equity Investment Equity Law: holding less than 20% of shares must simultaneously meet the four conditions of strategic purpose, continuous board membership, substantial participation in decision-making, and access to financial data. Collaborative small-value participation by banks, asset management, etc. is under pressure to re-measure according to FVTPL. Third, the benefits of cheap purchases must be listed separately. Of Xinhua Insurance's non-operating income in 2025, “the investment cost for an enterprise to acquire a joint venture is less than the net impact of the fair value of the invested unit's identifiable net assets when obtaining the investment” reached 3.04 billion yuan (this difference is already part of this difference).
Analysis of changes affecting A-share listed insurers. 1) China Life Insurance: Investment income supports the basic operating market, and the performance contribution of joint ventures and joint ventures has shrunk in recent years. 2) Xinhua Insurance: Operating profit is highly dependent on investment income, and fair value fluctuations are sensitive to the impact on profit and loss. 3) China Taibao: The profit structure is balanced, there is little disturbance in investment profit and loss, and the difference in the impact of long-term stock investment reporting is almost negligible. 4) China People's Insurance: Insurance service revenue contributes the highest proportion of total operating income, long-term stock investment contributes more revenue, and investment real estate is measured at fair value.
Analysis of the impact on insurance company valuations. 1) “Operating profit” will replace “operating profit” as a comparable measure of insurers' performance, and China Taibao, which has more stable operating profit, may be favored by valuation increases; 2) Operating profit (OPAT) must disclose calculation details and adjustment tables in notes in accordance with MPM requirements. Taibao and China Life Insurance's operating profit details are expected to be made public, and the trustworthiness of dividend anchors is a bonus item.