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 annual reporting season for the insurance industry has come to an end. A series of impressive scorecards outline a generally improving development trend across the sector: A-share listed insurers’ attributable net profits all surged. China Life, Ping An, China Pacific Insurance, PICC People’s Insurance, and New China Life saw year-on-year growth of 44.1%, 6.5%, 19.0%, 8.8%, and 38.3%, respectively. Against a backdrop of a market in which the long-term interest rate midpoint has been falling, they delivered a solid set of answers.

However, behind the overall strength in results, the profit trajectory in each company’s fourth quarter last year showed “divergence.” Facing the same volatility and adjustment in capital markets, some insurers saw pressure on single-quarter profits, while others achieved positive growth. This also reveals a deeper set of secrets behind differences in insurers’ equity investment strategies.

New standards amplify differences in investment strategies

In the fourth quarter of 2025, A-shares and Hong Kong stocks ended the year amid market turbulence. According to Wind data, the CSI 300 Index fell 0.23%, the ChiNext Index fell 1.08%, and the Hang Seng Index fell even more sharply by 4.56%. Structural adjustments in capital markets are like an unexpected big exam, testing each insurer’s investment resilience and strategic resolve.

China Life was the first to release its 2025 financial report. The company’s full-year net profit rose 44.1% year over year to RMB 154.078 billion. But due to heightened volatility in the equity and bond markets in the fourth quarter, the gains and losses from fair-value changes narrowed significantly, leading to a loss in the single quarter. At the earnings release conference, China Life President Li Mingguang explained that this was “mainly because the capital markets underwent structural adjustments in the fourth quarter, causing a pullback in some of the stocks and funds the company holds.” He also emphasized that this volatility “reflects changes in the capital market and does not represent the company’s long-term operating trend.”

In the China Pacific Insurance and Ping An annual reports that followed, both companies recorded positive year-on-year growth in single-quarter net profits in the fourth quarter, reaching RMB 7.81 billion and RMB 1.9 billion, respectively. A senior insurance-industry research analyst told the reporter: “Each company’s equity-asset allocation ratios and investment strategies differ, so their sensitivity to structural market adjustments naturally varies. As a result, under the same market environment, there are differentiated outcomes—net profit turning positive or negative, with differing declines.”

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

Specifically, China Life has a relatively large equity exposure and more of it is classified as FVTPL (measured at fair value through profit or loss). The market adjustment in the fourth quarter leads to fair-value losses directly eroding profits. By contrast, Ping An and China Pacific Insurance designate a substantial proportion of high-dividend assets as FVOCI (measured at fair value through other comprehensive income), so fair-value fluctuations do not affect current-period profits, effectively isolating market shocks.

At the earnings release conference, Ping An Deputy General Manager and Chief Financial Officer Fu Xin disclosed detailed figures: 57% of Ping An’s stock classifications are FVOCI, totaling RMB 541.3 billion in scale, contributing pre-tax unrealized gains of over RMB 90 billion. These directly strengthen net assets instead of being recognized in profit. She vividly described these OCI stocks with high dividends and low volatility as the company’s “ballast stone”: “First, because the returns are very steady; second, it contributes a long-term, sustainably released value; third, in the low-interest-rate era, it can deliver very solid returns and results.”

Equity investment becomes the “decider”

Although quarterly profit performance diverged, looking across the full year of 2025, top listed insurers all turned in impressive investment scorecards. Insurance giants holding about RMB 16 trillion in investment assets, facing a market environment where the long-term interest rate midpoint keeps falling, unanimously chose to proactively increase their equity allocation to offset the pressure of declining fixed-income investment returns.

Data show that by the end of 2025, China Life’s open-market 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%. Ping An increased a balanced allocation between dividend value-type and technology growth-type equity. PICC People’s Insurance added net purchases of over RMB 40 billion in A-shares, and the proportion of equity in the secondary market rose by 4.3 percentage points.

This strategic adjustment is directly reflected in investment yield. China Life achieved what is arguably 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 0.8 percentage points year on year to 6.6%. Ping An’s insurance-funds investment portfolio achieved a comprehensive investment return rate of 6.3%. The total investment return rates for PICC People’s Insurance and China Pacific Insurance were both 5.7%.

At the earnings release conference, Liu Hui, Vice President of China Life, summarized the investment strategy as “Equity investment is the decider for enhancing returns; fixed-income investment is the ballast stone for stabilizing returns; and alternative investment is the growth engine for enriching returns.” She said the company strategically increased its equity proportion by 5 percentage points in 2025, focusing on new quality productive forces and high-dividend-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-interest-rate environment.

Cai Zhwei, Vice President of PICC People’s Insurance, shared the company’s investment insights: “In 2025, the investment scale of the Group’s OCI stocks grew by 158% compared with the beginning of 2025. Their share in investment assets rose by two percentage points. The average dividend yield of the OCI stocks we hold reached 4.27%.” He also specifically mentioned PICC People’s Insurance’s innovative establishment of a strategic stock investment portfolio: “Last year’s full-year net asset value growth rate exceeded 40%, which also provides a solid foundation for us to capture investment returns that can go through market cycles and remain stable over the long term.”

2026 asset-liability matching becomes the main line

At the start of 2026, challenges for insurance funds remain severe. The low-interest-rate environment is expected to persist; high-quality fixed-income assets are scarce; and asset-liability matching has become a common challenge faced by insurers. How to continue tapping the potential of equity investments while controlling risk has become an important issue facing investment managers.

Many insurers’ management teams stated at earnings release conferences that strengthening asset-liability management is not only a regulatory requirement, but also a need for the company to build cross-cycle and long-cycle operating and management capabilities. In the face of the low-interest-rate environment, coordinating scientific management of liability duration and flexible control of asset duration has become industry consensus.

Regarding the equity investment layout for 2026, Cai Zhwei disclosed PICC People’s Insurance’s investment thinking: on one hand, it will continue to focus on allocating OCI high-dividend stocks; on the other hand, it will center on growth investment opportunities embedded in the “15th Five-Year Plan” and the “15th Five-Year Plan period” (“十五五”), strengthen research on key industries and key industrial areas, and rationally plan TPL stock allocation.

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

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

In the face of challenges from the low-interest-rate environment, Cai Zhwei shared PICC People’s Insurance’s three-pronged response: first, strengthen active investment management of fixed income, and seize rate “high points” to increase allocations to long-duration bonds; second, increase the contribution of high-dividend stocks within net investment returns; third, promote the transformation of alternative investments, focusing on making debt more stable, strengthening equity, optimizing tangible assets, and proactively exploring alternative investment opportunities that offer stable cash returns.

Many industry insiders believe that in 2026, insurance funds’ equity investments 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 income-statement volatility; second, based on national strategies and new quality productive forces, structural opportunities with long-term growth potential will be uncovered. 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 insurance companies have operating characteristics that span long cycles and multiple cycles. He suggests the market “reduce excessive interpretation of profits in a single quarter.” For insurance funds, the true test is not how to respond to short-term volatility, but rather the dynamic balance of assets and liabilities and value creation from a long-cycle perspective. The investment chess game for 2026 is already underway. How insurance funds will make their moves is worth continued attention.

(Editor: Qian Xiaorui)

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