Record-high performance coexists with quarterly losses: Where does the "temperature difference" in the insurance industry's annual reports come from?

Pan Yue Cartography

The 2025 annual reporting season for the insurance industry has come to an end. One standout performance report after another depicts an overall industry outlook trending positively: listed insurance companies on the A-share market saw their attributable net profits all surge year over year. China Life, China Ping An, China Pacific Insurance, PICC, and New China Life increased by 44.1%, 6.5%, 19.0%, 8.8%, and 38.3%, respectively. In a market environment where the long-term interest rate mid-point has been falling, they delivered impressive results.

However, behind the industry’s overall red-hot performance, the direction of profits in each company’s fourth quarter last year showed clear “divergence.” Facing the same market turbulence and adjustment, some insurers came under pressure on single-quarter profits, while others achieved positive growth. This also reveals the deeper “secret” behind differences in insurers’ equity investment strategies for insurance funds.

New Standards Amplify Differences in Investment Strategies

In 2025’s fourth quarter, A-shares and Hong Kong stocks closed the period amid market volatility. According to Wind data, the CSI 300 index fell 0.23%, the ChiNext index dropped 1.08%, and the Hang Seng Index declined as much as 4.56%. Structural adjustments in capital markets—like an unexpected major exam—tested insurers’ investment resilience and strategic resolve.

China Life first released its 2025 financial report, showing that its net profit for the full year grew 44.1% year over year to RMB 154.078 billion. But due to intensified volatility in the stock and bond markets in the fourth quarter, gains and losses from fair value changes were significantly squeezed, and the company posted a loss in the quarter. China Life’s President Liming Guang explained at the earnings briefing that this “was mainly due to structural adjustments in the capital markets in the fourth quarter, causing a pullback in some of the company’s held stocks and funds.” He also emphasized that this kind of volatility “reflects changes in the capital markets and does not represent the company’s long-term operating trend.”

In the annual reports subsequently released by China Pacific Insurance and China Ping An, both companies’ single-quarter net profits in the fourth quarter grew positively, reaching RMB 7.81 billion and RMB 1.9 billion, respectively. A senior insurance industry researcher told a reporter, “Each company differs in its equity asset allocation ratios and investment strategies, so their sensitivity to structural market adjustments naturally varies. As a result, under the same market environment, they show differentiated outcomes: net profit turning positive or negative, and different patterns of drawdown.”

Tian Lihui, a professor of finance at Nankai University, gave an illustrative analogy to the reporter: “The new accounting standard for insurance contracts is like a ‘magnifying glass,’ clearly exposing equity risk and strategy differences of insurers on the income statement.”

Specifically, China Life has a larger equity exposure and more of it is classified as FVTPL (measured at fair value with changes recognized in profit or loss for the period). Market adjustments in the fourth quarter led to fair value losses directly eroding profits. By contrast, China Ping An and China Pacific Insurance designated a substantial portion of high-dividend assets as FVOCI (measured at fair value with changes recognized in other comprehensive income). Their fair value fluctuations do not affect profit for the period, effectively insulating the impact from market shocks.

At the earnings briefing, Fu Xin, Vice President and Chief Financial Officer of China Ping An, disclosed detailed figures: 57% of Ping An’s stock classifications are FVOCI, with a scale of RMB 541.3 billion, contributing more than RMB 90 billion of pretax “unrealized gains in floating” and directly strengthening net assets rather than being recognized in profit. She vividly called these OCI stocks with high dividends and low volatility the company’s “ballast stone”: “First, because the returns are very stable; second, it contributes a long-term, sustainable release of value; third, in a low-interest-rate era, it can bring very solid returns and results.”

Equity Investments Become the Deciding Factor

Although quarterly profit performance diverged, looking across the full year of 2025, the leading listed insurance companies all delivered standout investment performance reports. With insurance giants holding around RMB 16 trillion in investment assets, in an environment where the long-term interest rate mid-point is falling, they all, almost without exception, chose to actively increase equity allocation to offset the pressure from declining returns on fixed-income investments.

Data show that as of the end of 2025, China Life’s publicly traded market equity investments exceeded RMB 1.2 trillion, increasing by 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 increased a balanced layout of dividend-value and technology-growth equities. PICC’s A-share net additions exceeded RMB 40 billion, and the equity proportion in the secondary market increased by 4.3 percentage points.

This strategy adjustment is directly reflected in investment yield. China Life achieved what appears to be the best investment performance in recent years, with a total investment yield of 6.09%; New China Life’s total investment yield rose by 0.8 percentage points year over year to 6.6%; China Ping An’s insurance fund investment portfolio generated a composite investment yield of 6.3%; and both PICC and China Pacific Insurance had total investment yields of 5.7%.

At the earnings briefing, Liu Hui, Vice President of China Life, summarized the investment strategy as “equity investment is the deciding factor for enhancing returns; fixed-income investment is the ballast stone for stabilizing returns; 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 high-quality assets. Meanwhile, 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 Zhiwei, Vice President of PICC, shared the company’s investment insights: “In 2025, the investment scale of the Group’s OCI stocks increased by 158% compared with early 2025. Its share in investment assets rose by two percentage points. The average dividend yield of the OCI stocks we hold reached 4.27%.” He specifically noted that PICC’s strategically established strategic stock investment portfolio “recorded a net asset value growth rate of over 40% for the whole of last year. This also lays a solid foundation for us to obtain investment returns that can cross cycles and remain stable over the long term.”

2026 Asset-Liability Matching Becomes the Main Thread

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

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

Looking ahead to 2026’s equity investment allocation, Cai Zhiwei disclosed PICC’s investment approach: on one hand, it will continue to focus on the allocation of OCI high-dividend stocks; on the other, it will concentrate on the growth-oriented investment opportunities embedded in the “15th Five-Year Plan and the 5-year plan for 15th Five-Year period” period—intensifying research into key industries and key industrial sectors—so as to reasonably plan TPL stock allocation.

In alternative investments, Cai Zhiwei said that in 2026 it will continue to increase the development and allocation efforts for innovative alternative products such as asset securitization. Using the funds the group has already set up and the private equity funds that are about to be established as a starting point, it will focus on national key strategic priorities and investment areas related to insurance. “Our new PE fund is also being planned and prepared.”

China Life will continue to leverage its advantages as a provider of long-term capital and patient capital, increasing product innovation and strategy innovation, and building an alternative investment ecosystem spanning all product types and all life cycles. 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 response to the challenges of the low-interest-rate environment, Cai Zhiwei shared PICC’s three-pronged response strategy: first, strengthen active investment management of fixed income and seize periods of high interest rates to increase allocation to long-duration bonds; second, increase the contribution of high-dividend stocks within net investment returns; third, promote a transition in alternative investments, focusing on stabilizing debt, strengthening equity, and optimizing tangible assets—actively exploring alternative asset investment opportunities with stable cash returns.

Many industry insiders believe that in 2026, insurance funds’ equity investments will show two major trends: first, the allocation ratio of FVOCI-type assets with high dividends and low volatility will continue to rise, smoothing income-statement volatility; second, driven by national strategies and new quality productive forces, it will uncover structural opportunities with long-term growth potential. Under the main thread of asset-liability matching, insurers’ investment strategies are shifting from simple scale expansion toward more refined structural optimization and risk management.

As Liming Guang said, life insurance companies have the operating characteristics of long cycles and cross cycles. He suggests the market should “reduce excessive interpretation of profits in a single quarter.” For insurance funds, the real test is not how to deal with 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 will make their moves is worth continued attention.