By WEMONEY Research, Wenxin
In Q3, among the approximately 270 equity-linked insurance asset management products that disclosed returns, 210 posted losses, accounting for 78% of the total. Additionally, 10 products saw quarterly declines exceeding 30%. Insurance asset management products are private offerings; returns and holdings are not required to be disclosed publicly. The 78% figure covers only those with net values available via platforms like Wind.
During the same period, the Shanghai Composite Index fell 6.16%, the Shenzhen Component Index dropped 20.47%, and the ChiNext Index declined by 27.80%. The Semiconductor Materials & Equipment Index fell 33.42%, while the Optical Module Index dropped 21%. While the broader market decline was moderate, growth stocks suffered significantly. Indices reflect style performance, but since public data doesn't disclose specific portfolio losses, we can only conclude that this downturn exhibited clear structural characteristics.
By the end of Q2, life and property insurance companies held approximately 4.1 trillion yuan in stocks, accounting for 10.41% of their total invested assets. Including mutual funds, total holdings reached about 6.4 trillion yuan, with position levels rising quarter-over-quarter for several consecutive quarters. While sector-wide positioning data for Q3 has not yet been released, a specific case illustrates the trend: on 29 of 9, New China Life Insurance increased its stake in Guotai Haitong H-shares by 995.96 shares. Combined with its concert party, its holding rose to 20.24% of the company's H-share capital, making it the first insurer this year to cross the 5% threshold for a securities firm stock.
Product losses have caused sharp fluctuations in insurers' own income statements. The shared pressure stems from falling market prices and asset shrinkage, which strain both product net values and corporate assets. What truly transmits market volatility to the income statement is accounting treatment: trading equity assets are measured at fair value with gains or losses recognized immediately in current earnings. As markets decline, both product net values and company profits come under pressure. Insurers' subsequent buying and selling decisions are first constrained by accounting classification, which determines how much volatility the income statement can absorb. Those that can withstand it still depend on capital allocation approval, which decides who qualifies to continue purchasing. Finally, whether positions can be held depends on whether the performance evaluation cycle allows it.
1. The Loss Ledger: 210 Products, Three Metrics, and Two Common Misinterpretations
Of approximately 270 disclosed samples, 210 showed negative returns, accounting for about 78%, with 10 of them dropping more than 30%. From an institutional perspective, in the third quarter, Taikang Asset Management had around 30 equity products with negative returns, leading the list. Other institutions such as ICBC-AXA, Huatai, Minsheng Tonghui, Ping An, CPIC, and Sunshine also each reported more than 10 products with negative returns. However, there are significant differences in product counts and scale across institutions; the capital represented by 10 small products versus 10 large products varies greatly. The broader the product lineup, the higher the absolute number of products showing negative returns during a market-wide decline.
This 78% is also constrained by sample limitations. Life Insurance Asset Management disclosed over 60 products on Wind, covering fixed-income, equity, and hybrid categories—not all are equity products. These data were last updated as of 31 8, so they were excluded from this round of statistics. Regarding the time frame: quarterly performance was negative for 78%, while year-to-date through 9 10, more than 50 of the 85 products showed negative returns—approximately 60%. Note that the 270 and 85 product sets represent different samples with varying coverage, not the same group; therefore, the discrepancy between 78% and roughly 60% cannot be fully attributed solely to the difference between quarterly and year-to-date periods.
During the same period, the banking sector rose by 14.56%, while growth and technology indices fell even further. This indicates clear market divergence. However, public data does not reveal which specific holdings drove the losses; we can only confirm that this round of losses is concentrated in growth-style assets, without being able to attribute them to individual positions.
Product holdings are not available, but the directions of interest from insurance capital can be seen in research reports. In Q3, 121 insurance institutions conducted a total of 1833 visits, down 15.88% year over year, yet with greater focus on top-tier targets. Among individual stocks, companies listed on the STAR Market were most frequently visited; China Life Pension alone conducted 240 visits, ranking first across the entire industry. The optical module leader Zhongji Xuchuang and the dividend benchmark Jiangsu Bank were the most-visited targets by multiple institutions. The simultaneous pursuit of technology and dividends reflects the areas where insurance capital is focusing amid a structural market rally.
II. The Profit Variance Ledger: China Life's 1344 Billion vs. 576 Billion Figures
In the first half of the year, China Life's net profit attributable to parent company shareholders reached 1344.89 billion yuan, a 228.6% year-over-year increase. Breaking it down: net investment income was 1040.24 billion yuan, gains from trading investment assets were 755.07 billion yuan, and fair value changes amounted to 1358.35 billion yuan. In contrast, fair value changes in the same period last year were only 10.29 billion yuan, representing an approximately 132-fold increase over one year. Combined, gains from asset trading and fair value changes exceeded 2100 billion yuan, surpassing the net profit itself.
At the semi-annual earnings call, China Life disclosed net profit of 576.1 billion yuan after excluding short-term fluctuations in public market equities and other items; the same period last year was 511.3 billion yuan, representing a year-over-year growth of 12.7%. In other words, the reported net profit of 1344.89 billion yuan minus 576.1 billion yuan leaves a difference of approximately 769 billion yuan, corresponding to the impact of short-term fluctuations in public market equities and similar items. After this adjustment, profit growth stands at 12.7%.
New China Life's structure is similar, but the trend has reversed: fair value changes in profit or loss shifted from 102.30 billion yuan in the same period last year to -43.80 billion yuan. Total investment income for the first half of the year was 575.25 billion yuan, up 27% year over year. The bulk of this growth came from "gains on trading of investment assets," which reached 382.34 billion yuan, a 247.2% increase. Net investment income was approximately 233.32 billion yuan, down 3.2% year over year, with an annualized net investment yield of only 2.6%. Bonds accounted for 51.3% of the portfolio, yet interest, dividends, and distribution income from financial investments declined by 3.7% year over year, indicating that coupon income was not the primary driver of the profit surge.
In Q1, a reversal was already evident: China Life's investment income for the quarter reached 455.07 billion yuan, up 203.28 billion year over year. However, fair value changes resulted in losses of as much as 428.62 billion yuan, nearly offsetting the current-period earnings from this line item. Net profit attributable to parent company shareholders declined by 32.3% year over year, placing it last among the five listed insurance companies. After a clear market pullback in Q3, some non-bank analysts projected that single-quarter pre-tax profits for listed insurers may face temporary pressure, with the average year-over-year decline in pre-tax profits for the first three quarters potentially ranging between 27% and 73%.
Viewing the first two quarters together reveals a consistent logic: Q1 recorded a fair value loss of 428.62 billion yuan; in Q2, as equity markets recovered, this pushed the semi-annual fair value gain/loss to 1358.35 billion yuan, directly boosting profits. However, with market corrections in Q3, this line item may face pressure—the specific impact will only be confirmed after the Q3 report is released. The same type of mark-to-market equity assets can amplify the same income statement in opposite directions. Nevertheless, China Life and New China's investment portfolios do not correspond one-to-one with those 210 underperforming products; therefore, fluctuations in company profits cannot be directly attributed to product losses. Both simply exposed themselves to the same market conditions.
3. The Constrained Ledger: What Drives Insurers' Buy-or-Hold Decisions
First, equity assets classified as financial assets at fair value through profit or loss (FVTPL) recognize unrealized gains and losses directly in the income statement. Sino Life Insurance's combined holdings of stocks and funds accounted for 25.6% in the first half of the year, up 4.4 percentage points from the end of the previous year. According to broker estimates based on data as of the end of 2025, approximately 81% of its stock portfolio was classified as FVTPL, rising to about 90% when including funds—this is the source of both "flexibility" and "volatility." In the first half of 2026, the average allocation ratio of trading stocks and funds among listed insurers reached a historical high of 13.0%.
This is why insurers are proactively increasing the proportion of assets measured at fair value through other comprehensive income (OCI), as explicitly noted in New China Life's semi-annual report. For these equity instruments, dividends are recognized in current-period profit, while market value fluctuations are recorded in OCI, avoiding direct impact on current earnings. This represents the practical application of "long-term holding" under accounting standards and explains the additional appeal of high-dividend assets to insurance capital.
Second, rising equity positions and expanding business scale are both consuming solvency: as of the end of 6, New China Life's core solvency adequacy ratio was 126.21% and its comprehensive solvency adequacy ratio was 195.74%, a decrease of 8.90 and 14.73 percentage points, respectively, compared to the end of the previous year. The minimum capital requirement for equity price risk is higher, and the capacity to add positions varies across institutions—well-capitalized top-tier firms have room to continue allocating, while smaller and mid-sized institutions operating close to regulatory thresholds face tighter constraints.
According to widely cited estimates in securities research reports and other industry publications, the duration of life insurance liabilities typically ranges from 10 to 20 years. This mismatch with shorter investment evaluation cycles is the root cause of "long-term funds being used for short-term purposes." Policy adjustments are already underway: starting in fiscal year 2025, the Ministry of Finance has replaced performance metrics such as return on net assets and capital preservation and appreciation rates for state-owned commercial insurers with a combined assessment model of "30% in the current year, 50% over three years, and 20% over five years." Executives at some leading insurers have also publicly stated they are extending evaluation periods from "current year" to "three-year" and "five-year" horizons. Though subtle, these changes directly determine whether funds can be held steady despite floating losses.
Behavioral changes also align: Statistics show that only 5 insurers made a total of 9 block purchases this year, less than 30% of the 2025 insurers making over 30 block purchases in the same period last year; yet stock and fund balances are rising. Money hasn't necessarily left, but fewer block purchases don't directly prove a sector-wide shift to strategic allocations—investment balances are naturally affected by price fluctuations. What we can observe are isolated cases: New China Life participated in Huike Shares' strategic allocation this year, and the China Insurance Investment Fund appeared on IPO allocation lists for multiple listed companies; Taikang also made a block purchase via Hong Kong IPO cornerstone investment in Jinke Smart in 2020. These cases confirm the channel exists but do not indicate a change in investment approach across the industry.
New China Life reported a first-half annualized total investment return of 6.7%, up 80 basis points year over year, but its annualized net investment return was only 2.6%. Under the dynamic adjustment mechanism for assumed interest rates, the research value for ordinary life insurance products in the second quarter of 2026 is 1.94%, with an upper limit of 2.0%; the cap for participating policies is 1.75%. Note that 2.6% represents the net investment return of New China Life's entire portfolio, while 2.0% is merely the upper limit for new policy assumed interest rates—not the actual liability cost of existing policies—and the two figures cannot be directly subtracted. The underlying pressure stems from the asset side: the yield on 10-year government bonds has remained around 1.7% for an extended period. With bonds comprising more than half of the portfolio, if maturing bonds can only be reinvested at lower rates, coupon income faces downward pressure.
The liability side is also being adjusted in parallel, with a focus on shifting investment volatility outward. In the first half of 2026, dividend insurance premiums written by life insurers reached 10126 billion yuan, representing a 94.4% year-over-year increase. The maximum prescribed interest rate for dividend insurance was set at 1.75%, which is 2.0% lower than that of traditional products, enabling clients and companies to share investment outcomes. This represents both a transformation in product structure and a liability-side solution amid pressure from negative spread losses.
In Q3, nearly 80% of products posted negative returns, dragging down investment performance due to both realized and unrealized losses, compounded by expenses. Four key signals to watch next: first, whether the net investment yield will fall below the cost of liabilities.
Second, changes in the composition of OCI assets—non-trading equity instruments designated at initial recognition as measured through OCI do not affect current profit or loss due to fair value fluctuations; however, economic losses from stock price declines and volatility in net assets remain.
Third, the proportion of participating insurance policies and the dividend realization rate.
Fourth, will insurance capital reduce positions at market lows? If so, it could stem from liquidity needs, insurance payouts, stop-loss triggers, or strategy adjustments—with performance metrics and capital constraints being just one factor.
