Profit to the left, net assets to the right: Unpacking the "surface" and "substance" of performance in unlisted life insurance companies

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This is an earnings season full of "illusions".

In 2025, unlisted life insurance companies presented a rather deceptive set of books.

If we look only at net profits, it would seem to be a bumper year long overdue—the total net profit of unlisted insurance companies in 2025 soared to 66.6 billion yuan, up 165% from 25 billion yuan in 2024.

After a period of poor performance and painful transition, many leading and mid-tier insurers posted record-high net profits. Yet, just as investors were ready to celebrate these achievements, the subtleties of the accounts painted a different picture:

In 2025, the median comprehensive investment yield for unlisted insurers suffered a "knee-capping", plummeting from 8.39% last year to 2.73%. Even as net profits doubled, the industry's overall net assets shrank by nearly 10 billion yuan.

Profits are soaring, but the family fortune is thinning.

This is a drama jointly directed by the new financial instrument standards (IFRS9) and a turbulent market environment.

Appearance and Substance

In 2025, the insurance industry appears to be stuck in a structural divergence of “more profits, less capital.”

For a long time, net profits and net assets of insurers tended to move in the same direction, but this pattern is being broken in the era of the new accounting standards.

BOC-Samsung Life is a typical case of this phenomenon.

In 2025, the company achieved net profits of 708 million yuan, a 44.7% year-on-year surge.

For a mid-sized insurer in transition, this performance alone would seem reason enough for management to stand tall. Yet in sharp contrast to the eye-catching profits, its net assets plunged to 670 million yuan, shrinking by almost 90% year-on-year.

This is not an isolated case. In the same period, Everbright Sun Life turned losses into profits, achieving net profits of 110 million yuan, but net assets shrank by 37.7%;

CITIC Prudential Life posted record-high net profits of 5 billion yuan, but net assets shrank by 21.4%;

Lujiazui Cathay Life saw net profits surge 7.5 times to 1.05 billion yuan, while net assets shrank by 35.8%.

According to Xin Feng's statistics, nearly half of unlisted life insurance companies in 2025 showed the feature of “increasing profits but not capital.”

What is behind this extreme divergence of “appearance” versus “substance”?

Multiple senior industry insiders told Xin Feng that this comes from the “chemical reaction” of capital market volatility and the switch of accounting standards.

While insurers enjoyed the “dividend” of profits from rising equity markets, they also had to swallow the “bitter fruit” of shrinking net assets due to bond market fluctuations and reserve revaluation.

Zhou Jin, managing partner for insurance consulting at Pan-China International, noted that the triple-digit profit growth of unlisted life insurers was driven primarily by investments. “The major A-share indices rose about 20% in 2025, plus returns from high dividends—the main contributors to higher investment yields and profits for unlisted insurers.”

Under the new accounting rules, the positive impacts of an equity rally on life insurers may be further amplified.

On one hand, this comes from the way financial assets are categorized.

Under the new rules, financial assets can be put into FVTPL (financial assets measured at fair value through profit and loss) or FVOCI (financial assets measured at fair value through other comprehensive income) accounts.

The former are for short-term trades, with volatility directly flowing into the profit/loss statement; the latter for strategic holdings, with value changes left in the balance sheet.

The former in 2025 are rising stocks, while the latter are sluggish medium- and long-term bonds.

Wang Guojun, professor at the University of International Business and Economics' Insurance School, pointed out that many listed insurers choose to classify equity assets as TPL, so stock price increases directly boost net profits, while declines in bond asset values from lower government bond yields drag down net assets under the new rules.

On the other hand, the new rule's OCI option further accelerates the divergence between profits and assets.

Under the old rules, insurers had to provision reserves according to a 750-day moving average government bond yield curve;

The 750 curve is replaced by spot yields under the new rule, but the new OCI option lets insurers spread liability changes from discount rates into each period’s profit and loss, transferring profit volatility into net asset volatility.

To smooth out performance, many insurers exercise this OCI option, causing net asset volatility in recent years to greatly exceed that of net profit.

In a word, the current phenomenon of “more profits, less capital” is the result of some insurers reporting the joy from equity market gains in the income statement, but hiding the pain from bond market losses and reserve provisioning pressure in the balance sheet.

Research from Soochow Securities and others suggests that insurers will face greater profit and net asset volatility as the new norm. This is no longer just an operational problem, but an ultimate challenge to insurers' asset-liability management skills.

In the future, how to strike a balance between “good-looking financial reports” and a “solid family foundation” will be a test that insurance company executives must face head-on.

The Bond Market Boomerang

If you remove the filter of accounting standards, the essence of the net asset shrinkage is a reckoning for aggressive bond market strategies.

Gains and losses both come from the same source: this is an eternal law of the financial markets.

Xin Feng notes that the median comprehensive investment yield of unlisted life insurers dropped from 8.4% in 2024 to 2.7% in 2025. Some companies that topped the yield tables in 2024 are now leading the losers list in 2025.

Perhaps the most typical example is Tongfang Global Life.

Looking back at 2024, the company boasted a stellar 17.93% investment yield, easily ranking at the top of the industry. But by 2025, that figure had dropped to -1.13%.

Such a swing from nearly 18% positive to negative yields is not just a numerical jump, but a sign of strategic failure.

Likewise, Sino-Dutch Life and Heng An Standard Life experienced roller-coaster rides—with the former’s yield falling from 14.42% to -2.26% and the latter from 15.57% to 0.83%.

Behind the dramatic data swings is the backlash from their strategies.

During the one-sided bull market for bonds in 2024, many insurers took extreme duration extension strategies to boost returns, resulting in impressive book profits as rates fell.

But there is no myth of bonds that only ever go up. A high-beta strategy can perform miracles in a tailwind, but is deadly poison in a headwind.

When rates began to swing upward in 2025 or market sentiment shifted, the large unrealized gains on bonds quickly turned into losses.

There was also a one-off impact from the switch in accounting standards.

Zhou Jin pointed out that some life insurers, to prepare for the new standards, reclassified their bond investments in 2024, releasing large historical gains which dramatically inflated that year’s investment yields, even topping 10%.

“But when bond yields rose in 2025, and bond portfolios had to be marked down, this lowered the overall investment yield, leading to dramatic year-on-year swings,” Zhou said.

Still, the market didn’t collapse across the board. Amid bond market volatility and diverging equity performance, equity investing showed a clear “K-shaped divergence”, with some insurers even managing to buck the overall trend.

Xin Feng’s stats show that in 2025, eight life insurers—including Xiaokang Life, Junlong Life, Allianz Life, and Great Wall Life—still achieved comprehensive investment yields above 5%.

Take Great Wall Life as an example. Ratings from China Chengxin and United Credit show that it increased allocation to equities in 2024, but shifted to mainly fixed-income allocations in the first three quarters of 2025, reducing its equity exposure.

As of the end of Q3 2025, the company’s allocations were 71.25% fixed income and 17.54% equity.

In the secondary market, Great Wall Life made four major share purchases in 2025—targeting China Water Affairs, Datang Renewable, Qinhuangdao Port, and Xintian Green Energy—in an effort to achieve long-term yields with high-quality dividend assets.

Zhou Jin notes that despite strong market gains in 2025, international and domestic uncertainties could lead to short-term corrections, so risk should be closely watched. He points out that the “dividend strategy” will still dominate the industry—seeking “quasi-fixed income” steady returns via dividends and boosting yields through appreciation of equity holdings.

The Elephant Turns

Notably, in the dual context of low rates and high volatility, the relationship between asset size and investment yield is complex:

Scale remains the “ballast stone” for weathering risk, but also demands far greater efficiency in capital utilization.

Xin Feng notes that in 2025, investment strategies of unlisted insurers diverged notably, with the top ten by assets maintaining average investment yields in a steady range around 2.5%.

For example, Postal Life (with over 680 billion yuan in assets), CCB Life, and ABC Life (each with over 300 billion) had yields of 0.74%, 1.94%, and 1.65%, respectively.

By contrast, Xiaokang Life, with less than 16 billion yuan in assets, achieved over 11.6% yield for two years running—demonstrating strong aggressiveness.

This contrast is not a failure of the large insurers, but a natural divergence driven by the nature of capital.

Behemoths with trillions in assets must allocate massive amounts of government and high-grade bonds as base positions to match long-term liabilities. With long-term rates at historic lows, big money has to settle for the market's beta, with far less room for error than smaller players.

But flexibility helps small and mid-sized insurers find alpha in non-standard assets, private bonds or select equity strategies.

This doesn’t mean scale is worthless. Rather, it means the focus of competition has shifted: for giants, the contest is no longer on individual assets, but on strategic asset allocation and fine management.

Yet whether winning through nimble assaults or steady advances, all insurers will face the same ultimate test.

When the tide recedes, cosmetic harmony achieved via accounting choices, or short-term blasts driven by aggressive betting, will ultimately pass. The insurance industry will return to its essence—a competition of time, not short-term power, but the balance sheet’s resilience across cycles.

In the long game, only those companies able to balance “face” in current profits and “substance” in net assets will survive to see the next spring.

Risk Disclosures and DisclaimerThe market involves risks, and investment needs caution. This article does not constitute personal investment advice, nor does it consider individual users’ investment aims, financial situations or needs. Users should consider whether the opinions, views, or conclusions in this article fit their specific situations. Any investment decisions are made at users' own risk. ```