Record profits coexist with quarterly losses: Where does the "temperature difference" in the insurance industry's annual reports come from?

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Source: Economic Information Daily

The 2025 annual report season for the insurance industry has come to a close, and a string of impressive performance reports has painted a picture of the industry’s overall favorable development trend: the parent-attributable net profits of A-share listed insurance companies all surged year over year. China Life, China Ping An, China Taiping, PICC P&C, and New China Life increased by 44.1%, 6.5%, 19.0%, 8.8%, and 38.3%, respectively. Against the backdrop of a market environment where the long-term interest rate’s central tendency is moving downward, they delivered strong answers.

However, behind the generally rosy performance, the direction of profits in each company’s fourth quarter last year showed a clear “divergence.” Facing the market’s volatility and adjustment in the capital market, some insurers saw pressure on profit within the quarter, while others achieved positive growth. This also reveals the deep underlying “password” behind differences in insurance fund equity investment strategies.

New accounting rules amplify strategy differences

In the fourth quarter of 2025, A-shares and Hong Kong stocks closed out amid market fluctuations. According to Wind data, the CSI 300 Index fell by 0.23%, the ChiNext Index fell by 1.08%, and the Hang Seng Index fell even more sharply by 4.56%. Structural adjustments in the capital markets, like a sudden major exam, tested each insurer’s investment resilience and strategic steadiness.

China Life first released its 2025 financial report, showing that the company’s full-year net profit increased by 44.1% year over year to RMB 154.08B. But due to intensified volatility in the equity and bond markets during the fourth quarter, fair value changes in profit and loss narrowed significantly, and the company recorded a loss in a single quarter. At the earnings release meeting, China Life’s president, Li Mingguang, explained that this “mainly resulted from structural adjustments in the capital markets in the fourth quarter, causing some stocks and funds held by the company to pull back.” He also emphasized that such volatility “reflects changes in the capital markets and does not represent the company’s long-term operating trend.”

Then, in the annual reports released by China Taiping and China Ping An, both companies’ fourth-quarter and single-quarter net profits showed positive year-on-year growth, reaching RMB 7.81 billion and RMB 1.9 billion, respectively. A veteran research analyst in the insurance industry told reporters: “Each company’s equity asset allocation ratio and investment strategy are not the same, so their sensitivity to structural market adjustments naturally differs. This leads to differentiated outcomes where net profit shows a split between positive and negative results, with different decline ranges under the same market environment.”

Tian Lihui, a professor of finance at Nankai University, offered an illustrative analogy to reporters: “The new accounting standards for insurance contracts are like a ‘magnifying glass,’ clearly presenting insurers’ exposure to equity risks and strategy differences in the income statement.”

Specifically, China Life has a larger equity exposure, with more classified as FVTPL (measured at fair value with changes recognized in profit or loss for the period). When the market adjusted in the fourth quarter, fair value losses directly eroded profits. By contrast, China Ping An and China Taiping designated a substantial proportion of high-dividend equity assets as FVOCI (measured at fair value with changes recognized in other comprehensive income). Fair value fluctuations do not affect profit for the period, effectively isolating market shocks.

At the earnings release meeting, Fu Xin, Deputy General Manager and Chief Financial Officer of China Ping An, disclosed detailed figures: 57% of Ping An’s stock classification is FVOCI, with a scale of RMB 541.3 billion. It contributed more than RMB 90 billion in pre-tax floating gains, directly strengthening net assets rather than being recorded in profit. She vividly described these OCI stocks with high dividends and low volatility as the company’s “ballast stone”: “First, because its returns are very stable; second, it contributes a long-term and sustainable value release; third, in the era of low interest rates, it can bring very robust returns and results.”

Equity investments become the “win-or-lose hand”

Although quarterly profit performance diverged, looking across the full year of 2025, the leading listed insurance companies all produced impressive investment performance reports. The insurance giants holding about RMB 16 trillion in investment assets, facing a market environment where the long-term interest rate’s central tendency is falling, all chose—almost in unison—to proactively increase equity allocation to offset the pressure from declining returns on fixed-income investments.

Data show that by the end of 2025, China Life’s publicly disclosed equity investment scale exceeded RMB 1.2 trillion, up more than RMB 450 billion from the beginning of the year. The allocation ratio for stocks and funds rose from 12.18% to 16.89%. China Ping An made a more balanced allocation across dividend-value and technology growth-type equity. PICC P&C increased its net purchases of A-share equities by more than RMB 40 billion, and the proportion of equities in the secondary market rose by 4.3 percentage points.

This strategy adjustment is directly reflected in investment yield. China Life achieved its best investment performance in recent years, with a total investment return rate of 6.09%. New China Life’s total investment return rate rose by 0.8 percentage points year over year to 6.6%. China Ping An’s insurance fund investment portfolio’s comprehensive investment return rate was 6.3%. China P&C and China Taiping’s total investment return rates were both 5.7%.

At the earnings release meeting, Liu Hui, Vice President of China Life, summarized the investment strategy as: “Equity investment is the decisive hand for improving returns; fixed-income investment is the ballast stone for stabilizing returns; and alternative investment is the growth pole for enriching returns.” She said the company strategically increased its equity proportion by 5 percentage points in 2025, focusing on new productive forces and high-dividend high-quality assets. At the same time, in the fixed-income space, it had already accumulated RMB 3 trillion in long-term high-quality assets, which it continues to strengthen as a base holding under a low interest-rate environment.

Cai Zhiwei, Vice President of PICC P&C, shared the company’s investment insights: “In 2025, the investment scale of the group’s OCI stocks increased by 158% compared with the beginning of 2025. Its share in investment assets rose by two percentage points. The average dividend yield of the OCI stocks held reached 4.27%.” He also specifically mentioned the strategic stock investment portfolio that PICC P&C set up innovatively: “Last year’s net asset value growth rate exceeded 40%, which also laid a solid foundation for us to achieve stable investment returns across cycles.”

Asset-liability matching in 2026 becomes the main thread

At the start of 2026, challenges facing insurance funds remain severe. The low interest-rate environment continues, and high-quality fixed-income assets are scarce. Asset-liability matching remains a common challenge for insurance companies. How to continue to tap the potential of equity investment while controlling risk has become an important issue facing investment managers.

At the earnings release meetings, management teams from multiple insurers said that strengthening asset-liability management is not only a regulatory requirement, but also a need for the company to forge cross-cycle and long-cycle operating and management capabilities. In the face of the low interest-rate environment, coordinating and considering scientific management of liability duration and flexible control of asset duration has become industry consensus.

Looking ahead to 2026’s equity investment layout, Cai Zhiwei revealed the investment thinking of PICC P&C: on one hand, it will continue to focus on the allocation of OCI high-dividend stocks; on the other hand, it will focus on growth-oriented investment opportunities embedded in the “15th Five-Year Plan and beyond” period, strengthen research on key industries and key industrial fields, and reasonably plan TPL stock allocation.

In the alternative investment space, Cai Zhiwei said that in 2026 it will continue to increase efforts to develop and allocate innovative alternative products such as asset securitization. It will use the funds already established by the group and the private equity funds it plans to set up as key vehicles, focusing on national key strategic initiatives and insurance-related investment areas. “Our new PE fund is also being prepared and planned.”

China Life, meanwhile, will continue to leverage its advantages as long-term capital and patient capital, increase product innovation and strategy innovation, and build an alternative investment ecosystem spanning all product categories and all life cycles. Liu Hui disclosed that the company’s overall alternative investment scale has already exceeded RMB 1 trillion, opening up room for long-term growth.

In response to the challenges of the low interest-rate environment, Cai Zhiwei shared PICC P&C’s three-pronged response: first, strengthen active investment management for fixed income and seize high points in interest rates to increase allocation to long-duration bonds; second, increase the contribution of high-dividend stocks within net investment returns; third, promote a transformation in alternative investments—focus on stabilizing debt, strengthening equity, and optimizing tangible assets—actively explore alternative investment opportunities with stable cash returns.

Multiple industry insiders believe that in 2026, insurance fund equity investment will show two major trends: first, the allocation proportion of FVOCI-type assets with high dividends and low volatility will continue to rise to smooth fluctuations in the income statement; second, around national strategies and new productive forces, the focus will be on uncovering structural opportunities with long-term growth potential. Under the main thread of asset-liability matching, insurers’ investment strategies are shifting from simple scale expansion to more refined structural optimization and risk management.

As Li Mingguang said, life insurance companies have long-cycle and cross-cycle operating characteristics, and it is recommended that the market “reduce excessive interpretation of quarterly profits.” For insurance funds, the real test is not how to respond to short-term volatility, but dynamic balance of assets and liabilities and value creation from a long-cycle perspective. The investment chessboard for 2026 has already been laid out—how insurance funds will make their moves is worth continued attention.

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