Investment once pulled Xiaokang Life back from the brink of collapse; this summer, it was again investment that pushed the company to the top of the loss rankings. In the first half of 2026, 58 non-listed life insurance companies posted a combined net profit of RMB 61.688 billion, up 108.48% year-on-year, with 51 companies profitable and 14 turning from losses to profits. The only company to swing from profit to loss was Xiaokang Life: it recorded a net loss of RMB 508 million in the first half, with a single-quarter loss of RMB 601 million in the second quarter, and a net profit decline of 418.82% year-on-year, ranking first in losses.
The investment side also reversed sharply. In the first quarter, the company ranked third in the first tier among 72 life insurance companies with an investment yield of 1.97%; one quarter later, its comprehensive investment yield fell to -7.30%, ranking last among the 58 non-listed life insurance companies. While the entire industry was making money, Xiaokang Life became the only loser. Losing RMB 500 million is just the result; what really needs to be asked is why it lost money and how it plans to move forward.
The Turnaround Relied on Investment, and the Risk Also Lies in Investment
Xiaokang Life's predecessor, China Life Insurance, had a solvency adequacy ratio of -15,561.31% at the end of 2019, a level so negative that the company was essentially unable to operate normally. In 2020, its insurance business revenue was RMB 68,500 — note the unit is ten-thousand yuan, not hundred-million yuan — meaning business had basically ground to a halt. At the end of 2020, industrial capital including Hongshang Group, CATL, and Tsingshan Holding took control, increasing registered capital from RMB 200 million to RMB 3 billion. After the significant capital injection, the company cleared its debts, repaid RMB 325 million in principal and interest on shareholder loans, and was renamed Xiaokang Life the following year.
The company completed its "blood transfusion and restructuring" and was revived. The new management first pushed for scale. In 2022, insurance business revenue surged to RMB 3.111 billion, driven mainly by increasing premium whole life insurance. In November of the same year, the former CBIRC Life Insurance Department reported that the investment return assumptions in the profit tests for two of its increasing premium whole life products deviated significantly from actual operations, and the products were suspended for rectification. Over the following two years, premiums fell from RMB 3.111 billion to RMB 1.833 billion and then RMB 622 million, with losses for two consecutive years.
After the scale-pushing approach was halted, investment took over. In 2024 and 2025, investment returns were RMB 1.061 billion and RMB 1.223 billion respectively, exceeding insurance business revenue for two consecutive years, allowing the company to turn profitable. Relying on investment to make money is not inherently wrong — in the first half of 2026, the net profits of the 58 non-listed insurers doubled, also driven mainly by investment returns.
The problem is not investment itself, but the investment structure. Xiaokang Life leans heavily toward equity positions, which accounted for 38.45% of total assets at the end of 2025, about 16 percentage points higher than the industry average. The key point is that these equity assets are clearly skewed toward overseas markets. The second-quarter solvency report shows overseas equity price risk at RMB 615 million, while overall equity price risk is RMB 715 million, with overseas exposure accounting for about 86%. For a small-to-medium insurer with total assets of about RMB 15.5 billion, this concentration is clearly too high.
The heavier the position, the more sensitive it is to capital market fluctuations, and the deeper the drawdown. The result showed in the first half of 2026: the simple average comprehensive investment yield for the 58 companies was 2.22%, while Xiaokang Life's was -5.24%, significantly underperforming the industry. With its equity positions heavily weighted toward overseas assets, Xiaokang Life failed to fully benefit from the A-share rally, and instead suffered a major investment-side drawdown due to fluctuations in overseas equity market values.
The quality of profits also does not hold up to close scrutiny. Of the RMB 1.223 billion in investment returns in 2025, "gains from disposal of financial instruments" accounted for RMB 924 million, or about three-quarters. In other words, the profits were mainly supported by one-time gains from selling stocks, bonds, and funds, rather than stable recurring investment income such as bond interest and stock dividends. Even for companies that also rely on investment, Manulife-Sinochem Life saw its comprehensive investment yield go from -0.2% in the first quarter to 4.38% in the second, ranking first and completing a turnaround in one quarter. Xiaokang Life's positions were not adjusted in time, leaving its second-quarter comprehensive investment yield at the bottom.
Capital Buffer Thinning
In the second quarter, the investment yield was -1.06% and the comprehensive investment yield was -7.30%, a gap of more than 6 percentage points. The actual loss was not that large — most of the losses have not been realized yet, merely "on the books." But unrealized losses directly reduce actual capital, which in turn affects solvency. The solvency adequacy ratio equals actual capital divided by minimum capital, multiplied by 100%.
At the end of the second quarter, the core solvency adequacy ratio fell 33.95 percentage points in a single quarter to 231.46%, while actual capital decreased by RMB 724 million in the quarter. Unrealized losses are rapidly eating away at the company's capital buffer, and the trend has not yet stopped. The company itself predicts that by the end of the third quarter, both indicators will fall further to 198.23% and 213.07%. At 231.46%, it is still safely above the regulatory red line of 50%, but on the core solvency adequacy ratio ranking of the 58 non-listed insurers at the end of the second quarter, this figure ranks 51st, placing it in the lower tier.
As the foundation thins, cash on hand is also tightening. Xiaokang Life's liquidity indicators have clearly deteriorated. In a stress scenario that does not consider asset liquidation, the 3-month liquidity coverage ratio fell from 103.68% to 27.95%, and the 12-month liquidity coverage ratio fell from 53.94% to 11.09%. The liquidity ratio measures whether the company's liquid assets on hand can cover upcoming expenses; only above 100% is considered safe. The company has already stated in its report that it will enter a period of concentrated maturity benefit payouts over the next year, which will increase cash flow pressure. In 2025, its net cash flow was -RMB 569 million.
Weakness on the Liability Side
The investment side can rely on market conditions, but the liability side can only rely on time. Xiaokang Life's liability-side foundation is weak: as of the end of the second quarter, it had only two branches in Beijing and Hunan, with just 66 individual agents. Premiums rely almost entirely on the bancassurance channel — of the RMB 791 million in signed premiums in the first half, the bancassurance channel contributed RMB 711 million, accounting for nearly 90%, while the individual agency and group channels contributed zero. The bancassurance channel typically sells savings-type, investment-replacement policies, which are easy for building scale but generate thin profits and low value. In the first half, new business value was RMB 19.56 million, with a new business margin of only 4.81%.
Xiaokang Life is not alone — "weak liability management capability" is a common shortcoming among many small-to-medium insurers. Falling interest rates compress spreads, and regulatory window guidance has uniformly lowered the cap on participating policy illustrative rates from 3.9% to 3.5%. The entire industry is shifting from fixed-income products to floating-income products, competing on liability management capability. Xiaokang Life's pivot has not been slow: participating policy premium income reached RMB 324 million in 2025, compared to just RMB 60,000 in 2024. In 2025, all 14 participating policies achieved dividend realization rates of no less than 100%, with an average of 120.57% and the highest reaching 166%. This is the company's only solid positive in the past three months, but whether it can be sustained depends on whether it can truly fill the liability-side gap.
Management Turmoil
The general manager position has been vacant for nearly a decade since the former general manager of China Life Insurance, Tang Rongrong, left in 2016 — a situation with no precedent in the life insurance industry. In May this year, management changed again. Huo Kang, the key figure on the investment side — dubbed the "investment wizard" in the industry and serving as executive director, chief financial officer, and chief investment officer — stepped down from management. Around the same time, Luo Zhenhua, former general manager of Huagui Life, returned to Xiaokang Life under the title of "interim person in charge." As of mid-September, no public information confirms his formal appointment qualification has been approved. How long Luo Zhenhua, born in 1965, can remain in this position in "extended service" has already been publicly questioned in recent reports.
The impact of the long-term vacancy is real. Scholars have pointed out that a prolonged general manager vacancy leads to inefficient decision-making, a lack of strategic continuity, and serves as a deduction item in comprehensive risk ratings. Backfills are underway: the chief actuary position, vacant for nearly a year, has been filled by Sun Xiaoyu, and the chief investment officer role has been filled by internally promoted Yuan Qingsong, expanding the executive team from four to six members. The company's strategic language has also shifted from "investment-driven" to "asset-liability dual-wheel drive." Luo Zhenhua's publicly stated view is that the difficulties faced by life insurance companies across all channels are, at a deep level, asset-liability management challenges.
The equity side is also unsettled. The fourth-largest shareholder, Guizhou Guixing, plans to liquidate its 7% stake, and the shareholder qualification of the transferee, Xizang Junjie, is still awaiting approval from the Shanghai regulator. Additionally, this 7% stake is currently fully pledged. The four major shareholders come from the mining, new energy, steel, and auto sales sectors, with no actual controller. While such a shareholder structure can provide capital, it lacks unified strategic consensus, leaving the governance foundation unstable.
Xiaokang Life's current situation is, in essence, an insurer trying to compensate for its inherent liability-side weakness with a "single-leg jump" on the investment side. Looking ahead, the question truly worth asking is not where it lost money this time, but rather, as the industry collectively shifts from "asset-driven" to "asset-liability dual-wheel drive," what can those small-to-medium insurers that have neither channel depth nor governance stability rely on to survive the next cycle?
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