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

Reporter Xiang Jiaying

The 2025 insurance industry annual report season has come to a close. A stack of impressive results draws a clear picture of the industry’s overall positive momentum: A-share listed insurers saw their net profits attributable to shareholders surge across the board. China Life, Ping An, CPIC, PICC, and New China Insurance recorded year-on-year increases of 44.1%, 6.5%, 19.0%, 8.8%, and 38.3%, respectively. In a market environment where the long-term interest rate policy range continues to trend downward, they delivered a solid set of answers.

However, behind the industry’s overall bright performance, the direction of profits in each company’s fourth quarter last year showed a clear “divergence.” Faced with the same market turbulence and adjustment, some insurers experienced profit pressure in a single quarter, while others achieved positive growth. This also unveils a deeper password behind differences in insurers’ equity investment strategies.

New Accounting Standards Amplify Strategy Differences

In the fourth quarter of 2025, both A-shares and Hong Kong stocks ended the period amid market volatility. Wind data shows that the CSI 300 index fell 0.23%, the ChiNext index dropped 1.08%, and the Hang Seng Index fell as much as 4.56%. Structural adjustments in the capital market—like an unexpected final exam—test the investment resilience and strategic steadiness of insurers.

China Life first released its 2025 financial report, showing that its full-year net profit rose 44.1% year on year to RMB 154.08B. But due to intensified volatility in the equity and bond markets in the fourth quarter, gains and losses from changes in fair value narrowed significantly, and the company posted a loss in a single quarter. At a results briefing, China Life’s president Li Mingguang explained that this was “mainly because in the fourth quarter, the capital market experienced structural adjustments, leading to pullbacks in some of the company’s held stocks and funds.” He also emphasized that such volatility “reflects changes in the capital market and does not represent the company’s long-term operating trend.”

In the China Taibao and Ping An annual reports that followed, both companies’ net profits in the fourth quarter increased positively, reaching RMB 7.81 billion and RMB 1.9 billion, respectively. A senior insurance-industry researcher told the reporter: “Each company’s equity asset allocation ratio and investment strategy are not the same, so their sensitivity to structural market adjustments naturally differs. As a result, under the same market conditions, they show differentiated outcomes where net profits swing positive or negative and the magnitude of declines varies.”

Tian Lihui, a professor of finance at Nankai University, offered a vivid analogy: “The new insurance contract accounting standards are like a ‘magnifying glass,’ clearly exposing insurers’ equity risk exposure and strategy differences on the income statement.”

Specifically, China Life has a larger equity exposure and more of its assets are classified as FVTPL (measured at fair value through profit or loss). Market adjustments in the fourth quarter caused direct erosion of profit through fair value losses. Meanwhile, Ping An and China Taibao designate a substantial proportion of high-dividend assets as FVOCI (measured at fair value through other comprehensive income). Fair value fluctuations do not affect current-period profit, effectively isolating market shocks.

At a results briefing, Ping An’s deputy general manager and chief financial officer Fu Xin disclosed detailed data: 57% of Ping An’s stocks are classified as FVOCI, with a scale of RMB 541.3 billion, contributing over RMB 90 billion in pre-tax unrealized gains, directly thickening net assets rather than being recognized in profit. She vividly referred to these OCI stocks with high dividends and low volatility as the company’s “ballast”: “First, because the returns are very steady; second, they contribute a long-term, continuously realizable value release; third, in a low-interest-rate era, they can deliver very solid returns and results.”

Equity Investments Become the Decisive Factor

Although quarterly profit performance diverged, looking across the full year of 2025, leading listed insurers all delivered impressive investment results. With insurance giants holding roughly RMB 1.6 trillion in investment assets, facing a market environment where the long-term interest rate policy range continues to trend downward, they all, more or less, chose to proactively increase equity allocation—offsetting the pressure from falling returns on fixed-income investments.

Data shows that by the end of 2025, China Life’s publicly traded equity investments totaled more than RMB 1.2 trillion, up over RMB 450 billion from the beginning of the year. The allocation ratio for stocks and funds rose from 12.18% to 16.89%. Ping An increased its balanced deployment of dividend-value equity and technology growth equity. PICC increased net purchases of A-shares by more than RMB 40 billion, and the proportion of equities in the secondary market rose by 4.3 percentage points.

This strategic shift is directly reflected in investment yield. China Life achieved what is among the best investment performances in recent years, with total investment return at 6.09%. New China Insurance’s total investment return increased by 0.8 percentage points year on year to 6.6%. Ping An’s insurance fund investment portfolio achieved a comprehensive investment return of 6.3%. China PICC and China Taibao both recorded total investment returns of 5.7%.

At a results briefing, Liu Hui, deputy general manager of China Life, summarized the investment strategy as: “Equity investment is the decisive factor for improving returns. Fixed-income investment is the ballast for stabilizing returns. Alternative investments are the growth engine for enriching returns.” She said the company strategically increased its equity ratio by 5 percentage points in 2025, focusing on new quality productive forces and high-dividend high-quality assets. At the same time, in the fixed-income space, it has accumulated RMB 3 trillion in long-term high-quality assets, continuously strengthening its base holdings in a low-rate environment.

Cai Zhwei, deputy general manager of PICC, shared the company’s investment approach: “In 2025, the investment scale of the Group’s OCI stocks grew by 158% compared with the beginning of 2025. The share of investment assets increased by two percentage points. The average dividend yield of the OCI stocks held reached 4.27%.” He also specifically mentioned PICC’s innovative strategic stock investment portfolio: “The net asset value growth rate for the full year last year exceeded 40%, which also lays a solid foundation for us to capture long-term, stable investment returns across cycles.”

Asset-Liability Matching in 2026 Becomes the Main Line

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

Multiple insurers’ management teams stated at results briefings that strengthening asset-liability management is not only a regulatory requirement, but also a need to build the company’s capability to manage operations across cycles and over long cycles. In the low-interest-rate environment, coordinating the scientific management of liability duration and the flexible control of asset duration has become industry consensus.

Looking ahead to the 2026 equity investment layout, Cai Zhwei revealed PICC’s investment thinking: on one hand, it will continue focusing on the allocation of OCI high-dividend stocks; on the other, it will concentrate on growth-oriented investment opportunities embedded in the “Fifteenth-Five” plan, strengthen research on key industries and key sectors, and plan the allocation of TPL stocks in a reasonable manner.

In the alternative investment space, Cai Zhwei said that in 2026, the company will continue to increase efforts to develop and allocate innovative alternative products such as asset securitization. Using the funds already established by the Group and the private equity funds that will be set up, the company will focus on national key strategies and insurance-related investment areas. “Our new PE fund is also under incubation and planning.”

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

In response to the challenges of the low-interest-rate environment, Cai Zhwei shared PICC’s three-pronged response strategy: first, strengthen active investment management for fixed income and, by capturing periods when interest rates are high, increase allocation to long-duration bonds; second, increase the contribution of high-dividend stocks to net investment returns; third, promote the transformation of alternative investments, focusing on stabilizing debt, strengthening equity, and optimizing tangible assets, and proactively explore alternative asset investment opportunities that provide stable cash returns.

Many industry participants believe that in 2026, insurance funds’ equity investments will show two major trends: first, the allocation share of FVOCI-type assets with high dividends and low volatility will continue to rise, to smooth volatility in the income statement; second, around national strategies and new quality productive forces, the focus will be on uncovering structural opportunities with long-term growth potential. Under the main line 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 insurers have long-cycle and cross-cycle operating characteristics, and it is suggested that the market “reduce excessive interpretation of a single quarter’s profit.” For insurance funds, the real test is not how to respond to short-term volatility, but the 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 choose their moves is worth continued attention.

(Edited by: Qian Xiaorui)

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