China Life Insurance retraces the trillion-dollar asset balancing act

This is a reporting season full of illusions and divisions.

In 2025, driven by a rebound in the equity markets, some life insurance companies achieved record profits, but due to the combined effects of declining long-term interest rates and new accounting standards, the industry generally faces a “profit growth without capital increase” dilemma characterized by a sharp drop in comprehensive investment yields and shrinking net assets.

But on the other side of the coin, industry leader China Life Insurance delivered a calm and confident report card.

This largest domestic life insurer recorded a net profit attributable to the parent company of 154.078 billion yuan, a 44.1% year-over-year increase on a high base; at the same time, shareholders’ equity attributable to the parent reached 595.205 billion yuan, up 16.8% year-over-year.

At the earnings conference, China Life Chairman Cai Xiliang summarized this dual growth in scale and value as a “full house of red,” emphasizing that the company is continuing a strong growth trend on a “high platform and large scale.”

While financial indicators confirm the strength of the industry leader, what’s more worth exploring is the underlying logic behind the surface:

Are the 154 billion yuan profit generated mainly from China Life’s core business resisting the interest margin cycle to create a temporary alpha, or is it primarily beta gains from the large equity exposure following the capital market’s dividend concentration?

Has the transformation from a reliance on guaranteed returns to a dividend-paying model truly mitigated long-term interest rate risks?

Peering through the financial data, the market sees a giant vessel executing a reconstruction and balancing of the balance sheet across liabilities, assets, and channels.

Reshaping the liability side: continued surge in dividend insurance

Against the macro backdrop of a persistent decline in long-term interest rates, reducing rigid costs has become a consensus in the insurance industry.

In 2025, China Life will fully promote dividend insurance as a core tool to navigate cycles, demonstrating strong execution:

During the reporting period, nearly 50% of China Life’s first-year premium income came from floating-rate products. In its core individual channel, this proportion rose to nearly 60%, becoming the main driver of new business premiums.

This means that the traditional high-expected-interest-rate guaranteed products that once dominated the market are accelerating out, with risk-sharing becoming mainstream.

Dividend insurance fundamentally is a “guaranteed + floating” structure. In periods of asset scarcity and low interest rates, insurers can no longer sustain high-yield guarantees long-term. Switching to dividend insurance effectively reduces the insurer’s liability costs and leaves room for consumers to share in economic recovery and investment returns.

But moving from guaranteed to floating means breaking the long-held expectation of capital preservation. Due to a lack of brand backing, historical performance, and support from shareholders, many insurers find it difficult to push forward with dividend insurance transformation.

China Life’s smooth transition reflects its strategic resilience and comprehensive strength. Relying on a total asset base of 7.59 trillion yuan and a nationwide sales network, China Life successfully guided customers to accept floating yields.

Objectively, in the face of a large existing base, the effect of new business optimization is often a slow variable.

In 2025, China Life’s first-year premium for policies with a ten-year or longer maturity reached 52.197 billion yuan, a strong increase; however, as of the end of the period, the company still held 327 million effective long-term policies, containing a large volume of traditional guaranteed products sold during high-interest periods.

While the overall dilution of rigid costs requires a long cycle, the marginal improvement brought by this switch is already evident from asset-liability management results.

Since the 2013 reform of life insurance rates, the industry has accumulated a large amount of reserves for traditional policies with durations over 20 years. The industry’s asset-liability duration gap widened from 6.57 years to 9.1 years by the end of Q3 2024, with high mismatch risks.

China Life’s management reports that the effective duration gap of new business assets and liabilities has been shortened to about 1.5 years, expanding the expected interest margin while building a safety cushion for cross-cycle operations.

However, the real test lies in future investment realizations.

The dominance of dividend insurance means insurers have partly shifted the interest rate risk they once bore solely onto customers’ expectations for investment returns;

When nearly 60% of new policies are driven by dividend demonstration, their sensitivity to dividend realization rates will increase exponentially.

This pressure is not unfounded.

For example, during 2022-2023, market volatility in stocks and bonds intensified, long-term interest rates declined, and the core A-share index retreated, putting investment pressure on insurers;

During the same period, the proportion of dividend insurance products with over 100% payout realization rate sharply contracted. By 2024, out of 112 products, the number with over 100% realization rate rebounded to 12 (about 11%), with the highest reaching 138%, but some products still performed poorly.

This indicates that maintaining high dividend levels in volatile markets will become increasingly difficult, and misaligned expectations could trigger surrenders.

Notably, in 2024, amid market fluctuations in stocks and bonds, some dividend insurance products experienced frequent surrenders;

A leading insurer’s popular dividend product saw a surrender rate as high as 20% in 2025, mainly due to overly optimistic sales demonstrations and market volatility causing actual dividends to fall short, disappointing customer expectations.

This means that insurers relying on dividend insurance must carefully balance: managing sales channel expectations on one side, and actual investment returns on the other.

Liability-side yield demands ultimately transmit to the asset side. When fixed income yields decline broadly, large insurers must seek higher returns outside traditional comfort zones to meet client expectations and sustain stable dividends.

This underlying asset-liability linkage is reshaping China Life’s investment landscape in 2025.

Asset “balancing”: equities as the sword, OCI as the shield

The core of asset-liability matching lies in dynamic balancing.

While liability costs are being systematically reduced, China Life has adopted a more aggressive asset strategy:

By the end of 2025, China Life’s investment assets reached 7.42 trillion yuan. While bonds and fixed deposits remain stable as “ballast,” the allocation to stocks and funds surged from 12.18% at the end of 2024 to 16.89%.

During the period, the publicly traded equity investments exceeded 1.2 trillion yuan, a sharp increase of over 450 billion yuan from the start of the year.

This new equity exposure has become a direct engine of profit growth. In 2025, China Life’s total investment income reached 387.694 billion yuan, up 25.8% year-over-year; the total investment yield was 6.09%, an increase of 59 basis points.

At the earnings conference, Vice President Liu Hui attributed this to a combination of “riding the wave” and “strategic maneuvering.”

On one hand, the company strategically increased equity holdings by nearly 5 percentage points during market lows, confidently betting on China’s core assets, especially technology stocks representing new productivity; on the other hand, it seized the high-interest-rate window to allocate long-term bonds and increased investments in high-dividend stocks, building a diversified dividend portfolio.

Beyond maintaining a solid base, China Life’s tactical approach has become more diverse and flexible.

Liu Hui revealed that in alternative investments, China Life has launched new strategies such as S funds and M&A funds, and even conducted the industry’s first gold inquiry transaction, further expanding sources of returns.

The sharp “spear” has temporarily pierced through the gloom of low interest rates, but structural risks remain.

A 44.1% surge in net profit in a single year objectively means that, under the massive 1.2 trillion yuan equity exposure, the profit structure’s sensitivity to market fluctuations is at a historic high;

This high-beta allocation strategy can generate remarkable returns in a one-sided bullish market, but if market expectations shift or systemic corrections occur, the large capital movements will face friction costs, and profit retracements could be more severe than before.

This hidden risk has already appeared in the quarterly data.

In Q4 2025, China Life experienced a temporary loss of up to 13.7 billion yuan.

At the earnings conference, President Li Mingguang admitted this was mainly due to structural adjustments in the capital market and declines in some stock and fund holdings.

He emphasized that life insurance asset-liability management has a long and cross-cycle nature. Short-term market value changes will inevitably reflect on the financial statements, but only by extending the cycle can the company more objectively evaluate its operational effectiveness.

Faced with the inherent risks of high-volatility assets, how to smooth the financial statements under new accounting standards remains a key challenge for insurers’ asset-liability management.

In this regard, FVOCI accounts have become a crucial shield for China Life.

Some insurers, aiming to boost current earnings, often classify large amounts of newly purchased stocks into FVTPL (financial assets measured at fair value with changes recognized in profit or loss);

While this can cause profits to soar with a stock market rally, it also risks significant net asset shrinkage during market corrections or when long-term bond yields decline.

In this aspect, China Life has demonstrated stronger strategic resolve.

With a long-term capital pool, the company does not pursue short-term profit realization blindly but instead accumulates high-dividend, dividend-oriented quality assets into FVOCI (financial assets measured at fair value with changes recognized in other comprehensive income).

By the end of 2025, the FVOCI assets accounted for 4.28% of total investments, an 85% increase in absolute amount from the start of the year, with the proportion rising by 1.68 percentage points.

From a long-term asset-liability matching perspective, exploiting OCI high-dividend opportunities and the core of long-term bonds has become a key approach for insurers to expand allocation space—providing steady cash dividends to meet the liquidity and yield needs of dividend insurance, while also effectively converting fair value appreciation of dividend assets into asset growth, avoiding shocks to profit and loss.

The simultaneous growth of profits and net assets also suggests that China Life’s OCI account may still hide considerable unrealized gains.

Capacity contraction: manpower at a low point and value breakthrough

The strategic repositioning on the investment side has gained insurers room to cross cycles, but the complex asset operations and large fund pools ultimately rely on continuous premium cash flow from the front end.

This directly hits the most profound structural pain point in recent years—the ongoing shrinkage of traditional agency force.

Looking back, China Life’s individual agent force once exceeded one million at its peak, but by the end of 2025, this number had settled at 587,000, with a downward trend still evident.

The traditional mass recruitment and extensive expansion are now a thing of the past.

What’s remarkable is that despite a significant reduction in total manpower, China Life’s new business value in 2025 reached 45.752 billion yuan, a 35.7% increase year-over-year, hitting a recent high growth rate.

Manpower has hit a low, but value has surged—this stark contrast signals the initial completion of capacity restructuring; the gap created by manpower reduction is being filled by increased individual productivity, new channel ecosystems, and underlying technology.

In its core individual channel, China Life achieved a 40% year-over-year increase in high-performing agents, effectively offsetting the decline in total manpower and stabilizing the high-value policy base.

In the bancassurance channel, with stricter enforcement of “integrated sales and operation” regulations, the industry’s past fee margin was thoroughly squeezed out, ending the era of vicious fee competition.

At this point, China Life leveraged its brand and comprehensive service advantages to deeply integrate channel resources, with bancassurance premiums surpassing 100 billion yuan in 2025, new policies issued at 77,000 outlets, and first-year premiums up 41.0% year-over-year.

On the operational backend, technological empowerment has become a key cost-reduction tool.

The financial report shows that 30% of China Life’s AI-assisted coding, over 24% of digital underwriters, and some regions achieving over 60% of full-process automation without manual intervention.

The full adoption of digital staff has diluted management and operational costs for this large insurer, serving as a foundational infrastructure for profit support.

However, the quality upgrade of the sales force still faces significant challenges.

Analyzing the 587,000-strong team reveals that 371,000 are marketing agents, while 216,000 are dedicated to client development;

The large client development team underscores the company’s focus on servicing and developing existing policies, but also means that as product lines shift toward dividend, health, and complex financial services, the professionalization of the sales force faces unprecedented pressure.

The marginal benefits of extensive manpower reduction are clearly diminishing.

AI can efficiently handle underwriting and coding but cannot replace the deep trust built through human relationships in wealth management planning;

Expecting agents accustomed to simple savings-type insurance to quickly explain complex dividend logic and asset allocation to high-net-worth clients creates a huge professional gap.

Rebuilding the fundamental gene of the sales team will be a long-term battle for large insurers in the coming years.

As the old era of scale dividends gradually fades, a profound internal revolution is underway within insurers.

For China Life, the 154 billion yuan profit is not the end of the cycle but the starting point of a new game;

In an uncertain macro environment, maintaining the balance between volatile capital markets and clients’ long-term return expectations—between assets and liabilities, promises and fulfillment—will be the ultimate challenge in the long run.

Risk warning and disclaimer

Market has risks, 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 consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Invest accordingly at your own risk.