Profit to the left, net assets to the right: Dissecting the "face" and "inside" of non-listed life insurance companies' performance

This is a reporting season filled with “illusions.”

In 2025, non-listed life insurance companies presented a perplexing set of financial statements.

If we only look at net profit as a reference, it seems to be a rare bountiful year—2025 saw the total net profit of non-listed insurers reach 66.6 billion yuan, a 165% surge compared to 25 billion yuan in 2024.

After experiencing sluggish performance and painful transformations, many leading and mid-tier insurers achieved record-high net profits. However, just as investors were to raise a toast to these new achievements, the “inside” of the books revealed a different picture:

In 2025, the median comprehensive investment return rate for non-listed insurers plummeted from 8.39% the previous year to 2.73%; despite net profits doubling, the industry’s total net assets actually shrank by nearly 10 billion yuan.

Profits are soaring, but the underlying assets are shrinking.

This dramatic divergence is orchestrated by the combined effects of the new financial instrument standards (IFRS9) and turbulent market conditions.

Face vs. Reality

In 2025, the insurance industry seems to be caught in a structural divergence of “profit growth without capital increase.”

For a long time, insurers’ net profits and net assets tended to move in tandem, but with the full switch to new accounting standards, this convention is being broken.

China Life-Samsung Life is a typical example of this phenomenon.

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

For a mid-sized insurer in transition, this was a result that could bolster management’s confidence; however, in stark contrast to the impressive profit, its net assets suddenly plunged to 670 million yuan, a nearly 90% decrease year-on-year.

This is not an isolated case. During the same period, Everbright Yongming Life turned losses into gains, posting a net profit of 110 million yuan, but its net assets shrank by 37.7%; CITIC Prudential Life’s record net profit of 5 billion yuan was accompanied by a 21.4% decline in net assets; Lujiazui Guotai Life’s net profit surged 7.5 times to 1.05 billion yuan, while its net assets shrank by 35.8%.

Research by XinFeng found that nearly half of non-listed life insurers in 2025 exhibited the characteristic of “profit growth without capital increase.”

What explains this extreme divergence between “face” and “inside”?

Several industry veterans pointed out that this phenomenon results from a “chemical reaction” between market volatility and the switch in accounting standards.

While insurers enjoy the “dividends” of rising equity markets, they also suffer the “bitter fruit” of bond market fluctuations and reserve revaluations affecting net assets.

Zhou Jin, Partner and Head of Insurance Consulting at Tianzhi International, noted that the core driver behind the triple-digit profit growth of non-listed life insurers is their investment side. “In 2025, major A-share indices increased by about 20%, plus gains from high dividends, which should be the main contributors to the rising investment yields and profits of non-listed insurers.”

Under the new accounting standards, the positive impact of equity market performance on life insurers may be further amplified.

One aspect is the impact of financial asset classification.

According to the new standards, financial assets can be classified into FVTPL (Fair Value Through Profit or Loss) or FVOCI (Fair Value Through Other Comprehensive Income).

FVTPL assets are intended for short-term trading, with fluctuations directly recognized in profit and loss; FVOCI assets are for strategic holdings, with value changes accumulated in other comprehensive income on the balance sheet.

FVTPL includes stocks that exited the upward trend in 2025, while FVOCI includes sluggish medium- and long-term bonds.

Professor Wang Guojun from the Insurance School at the University of International Business and Economics pointed out that many listed insurers choose to classify equity assets as TPL (Trading Portfolio), with stock price increases directly boosting net profit; meanwhile, bond assets, affected by declining government bond yields, see their book value fall, directly reducing net assets under the new standards.

Another factor is the OCI (Other Comprehensive Income) option introduced by the new standards, which further accentuates the divergence between profit and asset trends.

Under the old standards, insurers had to provision reserves based on a 750-day moving average of government bond yields; under the new standards, this is replaced by the current yield, but the new OCI option allows insurers to allocate changes in liabilities caused by discount rate fluctuations across periods, shifting profit volatility into net assets.

To smooth earnings, many insurers exercise the OCI option, resulting in net asset fluctuations that are much larger than net profit in recent years.

In short, behind the appearance of “profit growth without capital increase” today is a scenario where some insurers record stock market gains as profits, while hiding bond market unrealized losses and reserve provisioning pressures on their balance sheets.

Research from Dongwu Securities and others indicates that in the future, all insurers will face increased volatility in net profits and net assets. This is no longer just a management issue but a severe challenge to their asset-liability management capabilities.

Going forward, balancing “attractive financial statements” with “solid underlying assets” will be a critical test for insurance executives.

The Boomerang of the Bond Market

Removing the filter of accounting standards, the core reason for the sharp shrinkage in net assets is a reckoning with aggressive bond market strategies.

Profit and loss share the same source—an eternal rule in financial markets.

XinFeng observed that the median comprehensive investment return rate for non-listed life insurers in 2025 dropped from 8.4% last year to 2.7%. Some companies that maintained top-tier yields in 2024 are now among the biggest decliners in 2025.

The most typical example is Tongfang Global Life.

In 2024, it boasted a comprehensive investment return of 17.93%, ranking first in the industry; but by 2025, its return had fallen to -1.13%.

From nearly 18% positive return to negative, this drastic reversal reflects not just numbers but a failure of strategy.

Similarly, China-Holland Life and Heng An Standard Life experienced rollercoaster rides: the former’s investment return dropped from 14.42% to -2.26%, the latter from 15.57% to 0.83%.

Behind these volatile figures lies the backlash of aggressive strategies.

During the 2024 bond bull market, many insurers adopted extreme duration strategies to boost yields, generating impressive book gains when rates declined.

But bonds don’t only go up; they can also fall. The “high Beta” strategy, which worked well in a rising market, becomes deadly in a falling one.

When interest rates began to oscillate upward in 2025, the huge unrealized gains on bonds suddenly turned into unrealized losses.

This is also partly due to the one-time impact of switching accounting standards.

Zhou Jin explained that some life insurers reclassified bond investments in 2024 to cope with the new standards, releasing large amounts of unrealized gains from their existing bond holdings, significantly boosting their investment returns that year—sometimes exceeding 10%.

“But in 2025, rising bond yields led to bond revaluation losses, pulling down overall investment returns, causing sharp fluctuations compared to previous years,” Zhou Jin said.

However, the market is not entirely bleak. Amid bond market volatility and stock market divergence, some insurers have shown a clear “K-shaped” differentiation in equity investments, with some even managing countercyclical breakthroughs.

XinFeng statistics show that in 2025, eight life insurers—including Xiaokang Life, Junlong Life, Allianz Life, and Great Wall Life—achieved comprehensive investment returns above 5%.

For example, Great Wall Life, based on ratings from China Chengxin International and United Ratings, increased its equity holdings in 2024. In the first three quarters of 2025, it mainly focused on fixed income assets, reducing its proportion of equity assets.

As of the end of Q3 2025, its fixed income and equity assets accounted for 71.25% and 17.54%, respectively.

In the secondary market, Great Wall Life completed four equity purchases in 2025, targeting China Water Affairs, Datang New Energy, Qin港股份, and New Sky Green Energy, aiming to boost long-term yields through quality dividend assets.

Zhou Jin pointed out that although the stock market saw significant gains in 2025, uncertainties stemming from international and domestic economic conditions mean a short-term correction is possible. Therefore, market fluctuations and risk management should be closely monitored.

He emphasized that “dividend strategies” will remain the main asset allocation approach in the industry—obtaining stable “quasi-fixed income” returns from dividends, supplemented by equity appreciation to enhance overall gains.

The Elephant Turns

It’s important to note that under the dual context of low interest rates and high volatility, there is a complex tension between asset size and investment returns:

Size remains the “ballast” for risk resistance but also demands more rigorous capital utilization.

XinFeng observed that in 2025, the investment performance of non-listed insurers shows clear strategic differentiation. The top ten insurers by asset size maintained an average comprehensive investment return around 2.5%, relatively steady.

Among them, China Post Life, with over 680 billion yuan in assets, and China Construction Bank Life, with over 300 billion yuan, had returns of 0.74%, 1.94%, and 1.65%, respectively.

In contrast, Xiaokang Life, with less than 16 billion yuan in assets, maintained an exceptionally high return of 11.6% for two consecutive years, showing a highly aggressive stance.

This contrast is not due to the failure of large insurers but is a natural consequence of their capital attributes.

Insurance giants with hundreds of billions or trillions in assets need to allocate massive amounts of interest-bearing and high-grade credit bonds as their core holdings to match long-term liabilities. In a low long-term interest rate environment, large funds can only passively accept market Beta, with limited tolerance for errors.

Meanwhile, smaller insurers, with more agility, can seek Alpha through non-standard assets, private debt, or specific equity strategies.

This does not mean that scale is ineffective; rather, it signifies a shift in competitive dimensions: the competition among top insurers is no longer just about individual assets but about strategic asset allocation and refined management capabilities.

Regardless of whether they rely on flexible “light cavalry” tactics or steady “heavy armor,” all insurers will ultimately face the same ultimate test.

When the tide recedes, the superficial calm created by accounting standards manipulation and short-term bursts from aggressive strategies will fade. The insurance industry will return to its fundamental essence—a race against time, where the real contest is the resilience of their asset-liability structure across cycles.

In long-term battles, only those companies that can maintain both the “face” of current profits and the “inside” of solid net assets will truly survive to see the next spring.

Risk Warning and Disclaimer

Market risks exist; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should evaluate whether any opinions, viewpoints, or conclusions herein are suitable for their particular circumstances. Investment carries responsibility.