The recent news of "listed insurers collectively reporting strong earnings" has sparked enthusiasm in the industry and markets. In the first three quarters of 2025, the five A-share listed insurers achieved a combined net profit attributable to shareholders of RMB 426.039 billion, a year-on-year increase of nearly 34%. Notably, China Life Insurance and New China Insurance saw single-quarter net profit growth rates of 91.5% and 88.2%, respectively, in Q3. However, as the excitement subsides, a deeper question emerges: Can net profit alone fully capture a company’s true value? If not, what metrics should investors prioritize?
**Understanding the Net Profit Metric** The latest quarterly reports reveal that investment gains were the primary driver behind insurers’ soaring net profits. In Q3 2025, the capital market rebounded significantly, with the Wind All-A Index rising approximately 19.46%, fueling discussions of a "slow and steady bull run." Against this backdrop, insurers’ increased allocation to equity assets yielded strong returns. For instance, PICC reported total investment income of RMB 86.25 billion in the first three quarters, up 35.3% year-on-year, while China Life’s investment income surged 41% to RMB 368.551 billion.
However, such profit growth, reliant on unrealized investment gains, is inherently volatile. Market fluctuations can swiftly impact earnings, as seen in 2024 when rebounding equity markets boosted insurers’ profits, contrasting with the downturn in 2023. This volatility stems partly from the adoption of new accounting standards in 2023, which require more financial assets to be measured at fair value, with changes directly reflected in current profits. Thus, while rising markets lift net profits, downturns drag them down.
Net profit volatility is also influenced by insurers’ liability-side dynamics. Industry experts note that business cycles and the timing of liability-side profit recognition play a role. For example, insurance sales are highly seasonal, with Q1 "New Year promotions" often accounting for over 40% of annual premium targets. Yet, due to the long-term nature of insurance contracts, profits from premiums are recognized gradually over the policy term, based on actuarial assumptions. This lag explains why some insurers reported robust premium growth in Q3 without corresponding net profit surges.
**Beyond Net Profit: A Holistic Valuation Framework** Given the long-term nature of the insurance industry, relying solely on net profit risks overlooking insurers’ intrinsic value. A more comprehensive evaluation system is needed.
**New Business Value (NBV)** While net profit reflects past performance, NBV projects future profitability by estimating the present value of after-tax profits a new policy may generate for shareholders. Sustained NBV growth signals a company’s ability to expand markets and achieve organic growth. SUNSHINE INS (阳光保险) stands out in this regard, with NBV consistently rising from RMB 3.02 billion in 2022 to RMB 5.15 billion in 2024, reaching RMB 4.01 billion in mid-2025. Its ability to maintain positive NBV growth amid industry-wide transformation underscores its long-term profitability.
**Contractual Service Margin (CSM)** Introduced under IFRS 17, CSM represents the unearned "profit reservoir" of life insurance contracts, reflecting future earnings to be recognized over time. Unlike net profit, CSM is less susceptible to short-term market swings, offering a clearer view of core business profitability. China Life and Ping An lead in CSM scale, while PICC and SUNSHINE INS show rapid growth. SUNSHINE INS reported a 10.3% increase in life CSM to RMB 56.08 billion in mid-2025.
Notably, discrepancies between NBV and CSM trends may indicate pressure on new business profitability or overly optimistic past assumptions. In contrast, SUNSHINE INS’s parallel growth in both metrics highlights robust new business contributions.
**Non-Financial Metrics** Customer satisfaction, market share, R&D investment, and corporate governance, though hard to quantify, are critical to long-term value. SUNSHINE INS exemplifies this through initiatives like customer segmentation upgrades and service enhancements. Its life insurance arm saw a 20.5% rise in high-value clients, while its P&C unit achieved customer satisfaction scores above 9/10 and expanded cross-selling penetration to 60.9% among auto insurance clients.
**Conclusion** As insurers face challenges like lower premium rates and regulatory changes, the limitations of investment-driven growth models are becoming apparent. True value lies not in quarterly profit spikes but in sustainable profitability and business models. For investors, a multi-dimensional approach is key to identifying resilient, long-term assets beyond the noise of net profit fluctuations.
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