The CSI 300 Index surged 17.9% in Q3, driving up profits for listed insurers. However, the shift in accounting standards has quietly amplified performance volatility.
By October 2025, the resonance between asset and liability sides in China's insurance sector has significantly strengthened. Major insurers, including China Life Insurance and New China Life Insurance, have released preliminary earnings reports for the first three quarters, with profit growth ranging between 40% and 70%, drawing widespread market attention.
Behind the impressive figures lies a combination of capital market recovery and the amplifying effect of new accounting standards. As market volatility intensifies, concerns mount over the sustainability of this growth.
**Investment Returns Drive Earnings as Insurers Boost Equity Exposure** Since October, listed insurers have reported strong Q3 earnings. China Life Insurance projected net profit attributable to shareholders at RMB 156.79–177.69 billion for the first nine months of 2025, up RMB 52.26–73.17 billion year-on-year. Analysts attributed this to the company's "aggressive equity investment strategy amid favorable market conditions."
New China Life Insurance also delivered robust results, with estimated net profit of RMB 29.99–34.12 billion, a year-on-year increase of RMB 9.31–13.44 billion. Even traditionally stable property insurers joined the high-growth club, as PICC Property & Casualty forecasted a 40%–60% profit rise.
The surge in earnings was largely fueled by investment gains. The Shanghai and Shenzhen Composite Indices rose 15.84% and 29.88%, respectively, during the period, creating an ideal environment for insurers. Equity holdings by insurers expanded sharply, with stock investments reaching RMB 3 trillion by Q2 2025—up 8.92% quarter-on-quarter and 47.57% year-on-year, according to financial regulator data.
Insurers adopted proactive equity strategies: China Life "aggressively increased equity exposure," New China Life "prioritized high-quality defensive assets," and PICC "moderately raised allocations to long-term value equities." By mid-2025, listed insurers' equity holdings hit RMB 1.8 trillion, accounting for 9.3% of total investments—a decade high.
Moreover, insurers intensified their market participation, with 32 listed companies receiving stake increases by insurers as of October 19, surpassing the 2024 total. Banks and utilities remained favored sectors.
The expansion of long-term equity investment pilot programs further facilitated flexible asset allocation. Approved quotas rose from RMB 50 billion to RMB 162 billion, with participating insurers doubling to eight.
Morgan Stanley noted that the CSI 300's 18% Q3 rally, coupled with insurers' higher equity allocations, was pivotal to profit growth.
**New Accounting Standards Magnify Volatility** The stellar numbers mask the "magnifying glass" effect of new accounting rules.
2025 marks the full implementation of the new insurance contract accounting standard (IFRS 17), which has heightened profit fluctuations since its 2023 adoption. A key change involves classifying more assets as Fair Value Through Profit and Loss (FVTPL), meaning unrealized gains/losses now directly impact earnings.
For example, China Life's stock portfolio reached RMB 620.14 billion by mid-2025, with RMB 560 billion classified as FVTPL. A 10% market rise would thus book RMB 56 billion in profits—nearly triple the impact under old rules.
FVTPL proportions vary among insurers: New China Life (81.2%), China Life (77.4%), CPIC (66.2%), PICC (53.6%), and Ping An Insurance (34.7%). Analysts warn this structure could exacerbate earnings volatility during market downturns.
**Sustainability Concerns: Can Insurers Deliver Alpha When Beta Fades?** The market questions whether such growth is sustainable, given its heavy reliance on capital markets. While some analysts expect steady premium growth (~10%) during the annual sales rush, others caution that cyclical investment gains cannot perpetually fuel high earnings.
On the liability side, insurers are optimizing product mixes by boosting sales of floating-rate products (e.g., dividend policies) and reducing interest-sensitive offerings. CPIC Life and New China Life reported 10.9% and 19% premium growth, respectively, for the first nine months.
In property insurance, stricter pricing regulations ("报行合一") may cut combined ratios by 0.2–0.9 percentage points post-November 1.
**Navigating the New Normal of Volatility** Performance divergence is becoming the norm. In Q1 2025, PICC and China Life posted 43.4% and 39.5% profit growth, while Ping An Insurance saw a 26.4% decline. By mid-year, Ping An remained the only listed insurer with negative growth (-8.8%).
Strategies vary: Ping An shields 67% of equity gains in Other Comprehensive Income (OCI), whereas New China Life booked one-time gains by reclassifying Hangzhou Bank shares as long-term investments.
Midsize insurers face greater regulatory challenges but are exploring countermeasures—introducing strategic investors, divesting non-core assets, or adopting digital tools.
To mitigate volatility, insurers are increasing FVOCI (Fair Value Through Other Comprehensive Income) allocations. The top five insurers raised FVOCI ratios by 14 percentage points on average from 2023 to mid-2025, signaling a shift toward active risk management.
Policy tailwinds persist, with regulators encouraging long-term equity investments and patient capital strategies.
In October, New China Life and PICC led sector gains, rising over 12% and 10%, respectively. As accounting rules and intrinsic values collide, balancing short-term volatility with long-term stability will test every market participant.