Asset shortage and low interest rates put dual pressure on insurance asset equity investments, increasing their "silver content"

Ask AI · Why do risk capital firms (insurers) favor a high-dividend strategy in bank stocks under an “asset shortage” environment?

**21st Century Business Herald reporter Ye Maosui ** The 2025 performance reports of five listed insurance companies in A-shares (China Life, Ping An, PICC, Taiping Life, and New China Insurance) have already been fully released. With the stock market rebounding, the five listed insurers’ net profits attributable to shareholders all increased sharply year over year, with total profit exceeding 400 billion yuan.

Behind the impressive performance, last year’s stock market tailwind played a key role. In 2025, all five listed insurers increased their allocation to stock investments. According to Tonghuashun statistics, undervalued and dividend-stable bank stocks are insurers’ “anchor of stability.” Among insurers’ top ten most heavily held stocks, banks hold 7 positions; among the top 15 most heavily held stocks, banks hold 11 positions. Insurers have a “high concentration of banks.”

Risk capital firms increase allocation to equity assets

In 2025, the five listed insurers’ net profits attributable to shareholders totaled approximately 425.29B yuan. Among them, China Life had the highest year-over-year growth rate in net profit attributable to shareholders, up 44.1% to 154.08B yuan; New China Insurance saw net profit attributable to shareholders rise 38.3% year over year to 36.28B yuan; China Taiping, PICC, and Ping An’s net profit attributable to shareholders growth rates were 19%, 8.8%, and 6.5%, respectively.

Insurers’ strong profit growth is inseparable from support from the capital markets. Last year, the five listed insurers all saw their investment return rates rise year over year. Among them, New China Insurance had the highest total investment return rate, up 0.8 percentage points to 6.6%; China Life improved by 0.59 percentage points to 6.09%; China Taiping and PICC increased by 0.1 percentage points each to 5.7%. Ping An disclosed its comprehensive investment return rate, which rose 0.5 percentage points to 6.3%.

With warm market winds blowing frequently, insurers also increased both the amount of investment and the proportion allocated to equity markets. Data shows that by the end of 2025, the stock investment amounts of the five listed insurers all increased year over year, with a combined total of about 2.51 trillion yuan—up sharply 75% compared with the end of 2024.

The stock investment weight of all five listed insurers also increased relative to the end of 2024. Among them, Ping An had the highest stock investment ratio at 14.8%, up 7.2 percentage points versus the end of 2024. New China Insurance’s stock investment ratio has remained at a high level for two consecutive years, at about 11.8% by end-2025.

Analyst Xu Yishan at Founder Securities believes that insurers’ increased equity investments are due to the overall decline in market interest rates. In the context of some pressure on insurers’ net investment yield, to smooth out such pressure, they choose to continue increasing allocations to high-dividend stocks. The proportion of OCI (other comprehensive income) has generally increased versus year-end. It is expected that this trend will continue in the future.

Analyst Tang Liangliang at Industrial Securities said that in 2025, seven listed insurers (besides the five A-share listed insurers mentioned above, also including China Taiping and Sunlight Insurance in Hong Kong) achieved total investment returns (net investment income + gains/losses from buying and selling securities + fair value changes + asset impairment losses, etc.) of 1.0528 trillion yuan, up 19.1% year over year, mainly because the scale of bid-ask spread income increased significantly versus the same period. Comprehensive investment returns (excluding OCI unrealized gains/losses on bonds) were 1.1731 trillion yuan, up 18.8% year over year. In addition, insurers significantly increased allocations to equity assets such as stock funds, while generally reducing allocations to bonds. For the six insurers—China Life, Ping An, Taiping, New China Insurance, PICC, and Taiping—combined FVOCI (basically can be viewed as high-yield dividend stocks) stocks as a share of total stocks rose from 32.2% at the beginning of the year to 39.7%. Currently, within the equity assets of these six insurers, FVOCI stock makes up 7%–35% of equity assets, with Ping An having the highest share at 34.3%. If we refer to Ping An’s allocation ratio, listed insurers still have considerable room to further increase allocations going forward.

However, it is worth reminding that equity investments are a double-edged sword. When the market is doing well, returns can be increased substantially; when the market is volatile, it will also put pressure on insurers’ performance.

For example, in the first three quarters of 2025, China Life’s net profit attributable to shareholders was approximately 167.8 billion yuan, higher than the 25.1k yuan profit for the whole of last year. This means China Life incurred a loss in the fourth quarter of 2025.

At China Life’s earnings release meeting, China Life’s President Li Mingguang said: “The company’s profit in the fourth quarter of 2025 is negative, reflecting the net difference between full-year results and the results of the first three quarters. The main reason is that there were structural adjustments in the capital markets, causing some of the stock funds the company holds to decline in the fourth quarter of 2025.”

Li Mingguang said that most of this volatility is phase-specific and reflects changes in the capital markets. Life insurance companies have business characteristics spanning long cycles and across cycles. He suggested that people reduce over-interpretation of single-quarter profit.

Banks take seven seats among the top ten most heavily held stocks

So which specific stocks did insurers invest in last year?

According to Tonghuashun data, as of April 7, based on listed companies whose 2025 annual reports have already been disclosed, there are 170 A-share listed companies whose shares were heavily held by insurers. Among them, banks are the industry with the most shares held by insurers; in addition, industries such as transportation and public utilities also received attention.

Measured by the market value of shares held, as of the end of last year, among insurers’ current top 10 most heavily held stocks, 7 are bank stocks. After excluding Ping An’s holdings of Ping An Bank and China Life Group’s holdings of China Life, the remaining seven bank stocks are, respectively, China Merchants Bank, Agricultural Bank of China, Shanghai Pudong Development Bank, Industrial Bank, Huaxia Bank, China Minsheng Bank, and Postal Savings Bank of China. The other three in the top ten are China Unicom, Ping An, and China Telecom. If the scope is expanded to the top 15, then also making the list are Industrial and Commercial Bank of China, CITIC Bank, Zheshang Bank, and Bank of Communications.

“Insurers’ ‘bank concentration’ was very high last year. First, bank stocks have relatively low valuations. Although they have risen continuously over the past two years, they are still widely trading below net asset value. Second, dividend yields of bank stocks have long held a clear advantage. For more than half of bank stocks, dividend yields exceed 4%. In a context of falling interest rates, bank dividend yields can to a certain extent offset the configuration challenges caused by falling market interest rates.” Liu Youhua, Director of Research at PaiPaiWang Wealth, said.

Insurers’ preference for bank stocks had already been reflected earlier last year. Last year, insurers made 41 cumulative “stake-taking” (increasing holdings to a certain threshold) rounds; bank stocks accounted for nearly four-tenths. For some bank stocks such as China Merchants Bank, Agricultural Bank of China, and Zhengzhou Bank, the number of stake-taking actions was even more than once.

In Lin Jinluo’s view, Chief Analyst at Dongxing Securities for the banking sector, the insurance funds have increased equity allocation efforts in recent years, especially favoring bank stocks that both offer high dividends and low volatility. This is an inevitable choice under the pressure of reinvestment/reallocation as interest rates in the bond market keep falling and as existing high-yield off-balance-sheet instruments gradually mature.

However, high dividend yield is only the “superficial reason” for insurers entering. Wu Zewei, a special research fellow at Susong Bank, pointed out: “The core driver behind insurers’ frequent stake-taking in Hong Kong-listed bank H shares is to address the ‘asset shortage’ in a low interest rate environment, along with changes in accounting standards. With long-end interest rates falling in the current market, they are now persistently below the predetermined interest rates for insurance products, which increases the risk of insurers’ spread loss. This is why bank stocks with high dividends and low volatility have become high-quality, interest-like assets for hedging risk.”

At New China Insurance’s earnings release, Qin Hongbo, Vice President of the company, said the company is firmly optimistic about the medium- to long-term development prospects of China’s capital markets. It will mainly focus on three main lines: industries with improving business conditions and continuously optimized performance; industries aligned with the direction of national strategies; and especially areas related to new quality productive forces. It will also continue to promote high-dividend investment strategies in a low interest rate environment.

At PICC’s earnings release, Cai Zhiwei, Vice President of the company, said that equity investment is the deciding factor for stabilizing and improving investment performance. The company will continue to pay attention to high-dividend stock allocations of OCI (fair value changes recognized in other comprehensive income), while also focusing on growth opportunities contained in the “15th Five-Year Plan and beyond” (the “15th five-year period” framework). It will strengthen research on key industries and key segments, and build a long-term equity investment portfolio that is steady in performance, has market competitiveness, and is more balanced.