A significant loss of nearly 15 billion yuan was reported by China Life Insurance Company Limited for the fourth quarter of 2025, attributed to stock market fluctuations. Last year, insurance capital aggressively entered the capital markets, utilizing stocks to match long-term policy liabilities. This strategy not only leads to profit instability and a rapid decline in solvency adequacy ratios but also harbors systemic risks, necessitating heightened vigilance.
Financial reports from the five major A-share listed insurance companies have been released successively. Overall data indicates substantial growth in both premium income and net profit. Together, these five insurers achieved a combined net profit attributable to parent company shareholders of 425.291 billion yuan last year, a 22.4% increase compared to the previous year. A significant contributor to this profit growth was the substantial investment returns gained from these listed insurers' push to channel medium- and long-term funds into the market.
For the full year, China Life recorded a gain of 132.951 billion yuan from the price differences on the sale of investment assets, whereas it suffered a loss of 4.245 billion yuan in this category during 2024. Ping An Insurance realized net gains, both realized and unrealized, including those from securities trading and fair value changes, amounting to 51.801 billion yuan, marking a 25.9% increase.
Management from several insurance companies expressed a strong emphasis on the allocation value and strategic significance of equity assets within their overall investment portfolios. They indicated active responses to policy guidance encouraging medium- and long-term market participation and a commitment to increasing exposure to the equity market.
However, risks associated with the significant increase in equity investments began to surface as the capital market started adjusting in the second half of last year.
Looking at fourth-quarter earnings, four of the five listed insurers reported losses for the single quarter. China Life's loss was particularly prominent, reaching 13.726 billion yuan on a group basis, the largest among them. Calculated on a company basis, the fourth-quarter loss amounted to 14.88 billion yuan, close to 15 billion.
By the end of 2025, the five listed insurers had invested approximately 3.55 trillion yuan in the capital markets, an increase of 1.41 trillion yuan from 2024. Accompanying the market adjustment, the share prices of these five insurers also experienced a significant correction.
**Heavy Betting on Stocks**
In January 2025, the "Implementation Plan for Promoting the Entry of Medium- and Long-Term Funds into the Market" was published, setting a clear quantitative target for "large state-owned insurers to invest 30% of new premium income in A-shares," issuing an unprecedented strong directive. Subsequently, policies encouraging insurance capital investment in stocks were continuously introduced, with regulators systematically removing obstacles through a series of combined measures.
Coupled with the overall strong performance of the stock market last year—with the Shanghai Composite Index rising 18.41% and the Shenzhen Component Index surging 29.87% for the full year 2025—insurers' enthusiasm for market entry was greatly stimulated.
According to data disclosed by the National Financial Regulatory Administration, the balance of insurance fund utilization reached 38.48 trillion yuan in 2025, an increase of 15.7%. Within this, the balance of stock investments was 3.73 trillion yuan, up 53.81%, and the balance of securities investment funds was 1.97 trillion yuan, up 17.28%.
The combined total for stocks and funds reached 5.7 trillion yuan, accounting for 14.82% of all insurance funds. This represented an increase of 1.6 trillion yuan and a rise of 2.47 percentage points compared to 2024.
Insurance companies publicly announced over 40 significant share acquisitions, solidifying their role as one of the most important institutional investors in the stock market.
Data disclosures from the five major A-share listed insurers show their total investment assets amounted to 20.7 trillion yuan, accounting for 53.79% of the entire industry's investment funds. Their combined investment in stocks and equity funds totaled 3.55 trillion yuan, representing 62.28% of the industry's total investment in these assets.
Ping An Insurance's total investment in stocks and funds last year reached 1.24 trillion yuan, a growth of 117.53%, the highest increase among peers. PICC Group's investment in these two categories amounted to 253.506 billion yuan, a 72.58% increase. China Life's combined investment reached 1.25 trillion yuan, growing by 55.65%.
Liu Hui, Vice President and Chief Investment Officer of China Life, stated at an earnings conference that equity investment in 2025 was the key factor for enhancing returns. China Life actively promoted the entry of medium- and long-term funds into the market, seized favorable market opportunities, and strategically increased its equity allocation ratio by nearly 5 percentage points.
Increased investment in the capital market also brought substantial profits to the insurers.
In 2025, China Life's net profit attributable to shareholders was 154.078 billion yuan, an increase of 44.1%. New China Life Insurance reported a net profit of 36.248 billion yuan, growing 38.3%.
In terms of investment returns, China Life's total investment yield was 6.09%, up 0.59 percentage points from 2024. New China Life Insurance achieved the highest total investment yield among the five insurers at 6.6%, an increase of 0.8 percentage points from 2024.
The share prices of all five companies also rose, with their combined market capitalization increasing by 666.4 billion yuan. Specifically, Ping An Insurance's share price rose 35.88% for the year, adding 327 billion yuan in market cap; China Life's share price increased 10.38%, adding 121.1 billion yuan; China Pacific Insurance rose 25.26%, adding 80.4 billion yuan; PICC Group rose 21.27%, adding 69.4 billion yuan; and New China Life Insurance surged 46.3%, increasing its market cap by 38.5 billion yuan.
**Caution Against Amplified Systemic Risk**
However, betting on the capital market inherently increases the volatility of returns. This was particularly evident in the fourth quarter when stock market adjustments severely impacted insurers' profits. Especially under the new financial instrument accounting standards, more financial assets are classified as Fair Value Through Profit or Loss (FVTPL). This means price increases in these assets are immediately reflected in current period profits and losses, leading to significantly enhanced profit volatility for insurance companies.
In the fourth quarter of 2025, China Life's net profit attributable to parent company shareholders on a group basis was -13.726 billion yuan. On a company basis, the loss was even greater at 14.88 billion yuan, nearly 15 billion.
PICC Group also reported a loss of 176 million yuan for the fourth quarter, a decrease of 102.69%. While Ping An Insurance and New China Life remained profitable, their profits declined by 74.11% and 38.24%, respectively. Only China Pacific Insurance managed an increase, with profit growing 17.37%.
The share prices of all five companies underwent a deep correction in 2026. China Life's stock price fell 20.13%, wiping out 258.9 billion yuan in market capitalization, not only erasing the previous year's gains but resulting in a net loss of 137.8 billion yuan from the peak. PICC Group's share price declined 18.77%, reducing its market cap by 74.3 billion yuan.
Regarding the fourth-quarter 2025 loss, Li Mingguang, President of China Life, explained that the negative net profit was primarily due to a structural adjustment in the capital market during that quarter, which caused a correction in some of the stocks and funds held by the company. However, he also expressed the view that most of this volatility is temporary, reflecting capital market fluctuations rather than indicating a change in the company's long-term operational trend. Li Mingguang emphasized that, unlike other industries, life insurers operate over long and cross-cyclical periods. This unique characteristic requires asset-liability management that is also cross-cyclical and long-term, with investments focused on value and long-term horizons. Therefore, he suggested the market should avoid overinterpreting single-quarter profit figures.
Nevertheless, the capital market experienced another significant decline in March, with the Shanghai Composite Index falling below 3900 points and even breaching the 3800 point level temporarily. This development raises concerns about the potential impact on insurance companies.
In 2023, China Life's net profit decreased significantly by 34.2%, mainly due to the persistently low performance of the stock market affecting investment returns. The full-year gain/loss from price differences on the sale of investment assets showed a substantial loss of 7.478 billion yuan. Particularly in the third quarter of 2023, China Life's single-quarter net profit was only 53 million yuan, a dramatic decrease of 99.1%. Ping An Insurance's full-year 2023 net profit fell 22.8%, with a 19.6% drop in the third quarter. New China Life Insurance's net profit for the third quarter of 2023 plummeted by 120.2%.
The essence of insurance companies directing funds into the stock market is using liability funds for equity investments. Liabilities are rigid, but assets are volatile. Insurance liabilities have long durations and require stable returns, whereas the stock market is characterized by uncertain returns and high volatility. Using stocks to match long-term policy liabilities can lead to unstable cash flows. Furthermore, a higher proportion of stocks leads to greater capital consumption, resulting in a rapid decline in the solvency adequacy ratio.
Using high-volatility assets to cover "rigid liabilities," if not managed properly, can not only cause profit instability but also amplify systemic risks.
What insurance companies need is stability that can endure through cycles, not merely high returns.
Comments