Asia's largest property and casualty insurance group's earnings presentation: Discussing high-dividend investment strategies and directly addressing interest rate spread loss risks

Ask AI · How does PICC High Dividend Strategy resist downward pressure on interest rates?

As of the end of 2025, China People’s Property Insurance Co., Ltd. has total assets of 860.5B yuan, a year-on-year increase of 10.6%.

As Asia’s largest property insurance group, PICC’s insurance service revenue in 2025 reached 511.59B yuan, a year-on-year increase of 5.4%; net profit was 40.38B yuan, up 25.5% year-on-year; return on net assets was 14.7%, an increase of 1.7 percentage points compared to the previous year.

During the reporting period, PICC Property & Casualty Insurance achieved motor vehicle insurance premium income of 305.75B yuan, underwriting profit of 14.26B yuan, and a comprehensive cost ratio of 95.3%. Premium income for accident injury and health insurance, agricultural insurance, liability insurance, and corporate property insurance were 107.58B yuan, 55.95B yuan, 38.23B yuan, and 17.66B yuan respectively, with year-on-year growth rates of 6.4%, 1.9%, 1.7%, and 4.4%.

Recently, this property insurance giant held a performance briefing, responding to investor concerns. The key points from the briefing are summarized below for readers.

2026 Insurance Fund Investment Directions

Insurance funds have long-term, large-scale assets, rich investment strategies, and a diversified toolbox, serving as an important source of patient, long-term capital. In 2026, PICC Group will adhere to the philosophy of “long-term investment, value investment,” focusing on the four principles of “stability, growth, diversification, and innovation,” further optimizing asset allocation, and building a long-term, stable, and balanced investment portfolio.

From a macro asset investment strategy perspective, fixed income investments are crucial for matching assets and liabilities and preventing interest rate risks. In 2026, we will further differentiate and refine account-specific allocations and management based on the different liability characteristics of property and casualty insurance and life insurance.

The property insurance account will focus on maintaining a relatively stable asset duration, while the life insurance account will manage the asset-liability duration gap carefully, continuing to allocate long-duration government bonds.

Equity investments are key to stabilizing and enhancing investment performance. We will pursue steady progress, continue to focus on OCI high-dividend stocks, and explore growth opportunities embedded in the “14th Five-Year Plan.” We will strengthen research on key industries and sectors, reasonably plan TPL stock allocations, and build a long-term, steady, market-competitive, and more balanced equity investment portfolio.

(Editor’s note: OCI high-dividend stocks refer to equity assets measured by other comprehensive income, mainly for stable dividend income; TPL stock allocation refers to stock position and structural arrangements from the perspective of the overall investment portfolio.)

In alternative investments, in 2025, PICC Group took asset securitization and physical asset investments as breakthroughs, actively promoting innovative transformation in alternative investments. The annual issuance scale of exchange-traded ABS ranked first among insurance asset management peers.

In 2025, we also successfully established the industry’s first “China PICC Modernization Industry Fund,” focusing on new quality productivity construction, with a scale of 56.27B yuan, providing strong financial support for sci-tech innovation enterprises.

How to effectively hedge the impact of declining interest rates?

Net investment income is a key foundation for the group’s stable investment returns, mainly including interest income from fixed income assets and dividends from equity assets, accounting for nearly 70% of total investment income.

In recent years, with the downward trend of the interest rate center, the yield on 10-year government bonds dropped from 2.84% at the end of 2022 to 1.85% at the end of 2025, a cumulative decline of nearly 100 basis points over three years, putting significant pressure on insurance fund investments, especially traditional fixed income asset allocations.

In response to these challenges, the group has focused on stabilizing net investment income, continuously optimizing macro asset allocation and investment strategies, and has effectively maintained the group’s investment income level.

In 2025, the group achieved a net investment income of 58.7 billion yuan, with an average net investment yield of 4.0% over the past three years, leading the industry and effectively covering the cost of liabilities during the same period.

We mainly address the impact of low interest rates from the following three aspects:

First, strengthen proactive fixed income investment management, enhance long-term capabilities, and pursue excellence. Further improve judgment of medium- and long-term interest rate trends, continuously enhance fine-tuned tactical operations, seize high interest rate points, increase allocation to long-duration bonds, and narrow the duration gap while obtaining stable coupon income to boost fixed income asset returns.

Second, increase the contribution of high-dividend stocks to net investment income. In 2025, PICC’s OCI stock investment scale increased by 158% compared to the beginning of the year, accounting for 2 percentage points higher in the investment asset mix. The average dividend yield of OCI stocks held was 4.27%, further increasing dividend income’s contribution to net investment income. We also further strengthen the long-term investment orientation of equity investments, innovatively establish a strategic stock portfolio, and seize long-term investment opportunities in high-quality assets aligned with national strategic directions. The strategic stock portfolio’s net value grew by over 40% throughout the year, laying a solid foundation for achieving long-term, stable investment returns across cycles.

Third, promote the transformation of alternative investments, building a new “growth pole” for stable income. Focus on stable debt, strengthen equity, and optimize physical assets, actively exploring alternative investment opportunities with stable cash flows. In 2025, innovative projects accounted for 37% of new alternative investments, with several market-first and industry-influential investment projects successfully implemented.

Judgment of interest spread loss risk

PICC Life’s opening performance this year is generally good, with rapid growth in first-year premiums, 10-year and above premiums, among the top seven in the industry. The sales team also achieved steady growth in volume and quality, with monthly effective personnel in the individual segment increasing by over 10% year-on-year, and monthly diamond personnel nearly 50% year-on-year.

In recent years, the industry has alleviated interest spread loss risks through measures such as reducing liability costs, deepening “reporting and settlement integration,” and promoting medium- and long-term funds into the market. In 2026, PICC Life will leverage new economic growth drivers, systematically enhancing its ability to prevent and resolve interest spread loss risks from both assets and liabilities, further reducing such risks.

(Editor’s note: Interest spread loss risk refers to the risk that investment income cannot cover liability costs.)

On the liability side, continuously optimize business structure, promote liability cost reduction, and build a diversified interest source system. First, expand new business scale to dilute existing high-cost liabilities. Increase new business efforts, accumulate low-cost new policies, and reduce the proportion of high-cost liabilities. Second, build diversified interest sources to reduce reliance on interest spreads. Increase supply of floating-yield products, leverage risk-sharing and profit-sharing mechanisms, and lower rigid liability costs; promote protection-type products, strengthen claims management, and increase profit margins from mortality and morbidity differences; implement “reporting and settlement integration,” strengthen detailed expense management, and improve expense margin contributions. Third, strengthen duration matching to build a solid interest spread defense line. Dynamically and prudently determine product guaranteed interest rates, dividend and universal life interest levels based on market conditions and investment returns; match the duration characteristics of different accounts and strengthen asset-liability duration gap management.

On the asset side, optimize asset allocation, improve investment returns, and strive to contribute excess returns. First, use asset allocation as a key, adhere to absolute return orientation, grasp market style, and rebalance accordingly through diversified investment strategies and flexible operations to seek excess returns. Second, establish a top-down and bottom-up research mechanism, closely monitor asset positions, and seize market opportunities to achieve higher yields. Third, strengthen account penetration management, develop targeted allocation and management strategies. Fourth, reinforce investment risk control, firmly guard against risks.

In the future, we will continue to strengthen asset-liability management, reduce liability costs, effectively manage asset-liability duration gaps, actively prevent and resolve interest spread loss risks, and firmly guard against systemic risks.

Considerations on dividend policy

PICC always attaches great importance to shareholder returns, maintaining continuity and stability in cash dividends. In 2025, the group paid a dividend of 0.22 yuan per share, an increase of 22.2% year-on-year; property insurance paid 0.68 yuan per share, up 25.9%. Over the past three years, the compound annual growth rate of cash dividends for the group and property insurance was 18.8% and 17.9%, respectively. The current dividend policy mainly considers the following factors:

First, overall consideration of differences between old and new accounting standards. Currently, regulators and authorities still manage and assess based on the old standards. In 2025, our dividend distribution continued based on the old standards, with the group’s dividend payout ratio maintained above 30%, and property insurance above 40%.

Second, full consideration of capital constraints. Since the implementation of new standards, net profit fluctuations among listed insurance companies have become a common feature. The group’s dividend funds mainly come from subsidiary profits. Currently, profit differences under old and new standards are significant for insurance subsidiaries. If dividends are simply based on net profit under the new standards, it will directly impact the core capital strength and solvency adequacy of insurance subsidiaries, ultimately affecting the long-term stability and sustainability of dividend policies.

Third, striving for long-term stable growth of per-share dividends. This has always been our goal. We will deepen insurance core business, continue to improve quality and efficiency, strengthen asset-liability management, and enhance performance evaluation. By aligning efforts on liabilities and investments, we aim for sustained, stable profitability and to reward investors’ trust and support.

PICC Health’s Strategic Planning

In 2025, PICC Health’s premium scale will reach 50 billion yuan, with premium income of 8.18B yuan, a year-on-year increase of 15.5%; net profit under new standards will be 8.182 billion yuan, up 42.8% from the previous year; ROE under both new and old standards has maintained double digits for three consecutive years. The company’s profitability remains strong, mainly due to the following reasons:

1. Business structure continues to optimize, always prioritizing core protection. Long-term medical insurance and other protection-oriented products account for a high proportion, with stable profitability. In 2025, protection-type business accounted for over 78%, with relatively less impact from capital market fluctuations. Insurance service performance contributed over 80% to profits.

2. Product and service upgrades continue, strengthening cooperation with China Re Life, Reinsurance, and Insee Health in three product innovation labs, establishing a comprehensive health insurance system covering all populations and life cycles. Throughout the year, 69 new products were developed, including the “Good Medical Insurance · Long-term Medical (Flagship Version),” which was comprehensively upgraded in hospital network, drug and device coverage, and health management services, demonstrating industry leadership. The internet channel added 5.65 million new customers annually, laying a solid foundation for sustainable development.

3. Technology innovation deepens, accelerating digital transformation. Technology applications are closely integrated with scenarios, strengthening digital empowerment in internet insurance, product development, online claims, customer service, and customer insights.

4. Cost reduction and efficiency improvement continue. Over the past five years, the comprehensive claims ratio for short-term insurance has steadily improved, decreasing by a total of 6.61 percentage points. Cost awareness is enhanced, non-rigid expense spending is continuously reduced, and fixed costs such as office expenses are compressed. While increasing basic staff income, management expense ratio and comprehensive expense ratio in 2025 decreased by 0.6 and 0.3 percentage points respectively compared to the previous year. Technology empowerment, such as using robots to replace manual work, has led to per-employee premiums exceeding 10 million yuan, significantly improving cost leadership.

5. Asset-liability management continues to strengthen. In Q4 2025, the asset-liability management score was 82 points, slightly higher than last year. The duration gap was below the industry average, and liquidity was reasonably sufficient. The company seized market opportunities, realizing gains at low bond interest rates and high equity market points.

Why establish a health management subsidiary?

The health management subsidiary is a core part of PICC Group’s big health and elderly care ecosystem and a key measure for realizing “managed healthcare” as a professional health insurance company. On August 21, 2025, the China Financial Supervision and Administration approved the establishment of a health management company, the first such approval after the establishment of the regulator.

In the future, PICC Health will leverage the professional health management company to better play the dual roles of “health protection + health promotion,” focusing on strengthening the layout in medical, pharmaceutical, and rehabilitation care sectors. It will further promote the transformation of health insurance business models from traditional expense reimbursement to managed healthcare, meet diverse customer health needs, and reduce claims costs through health management’s risk mitigation effects, aiming to build a “top-tier health insurance company with effective functions, prominent health management advantages, and leading quality and quantity” as part of the group’s strategic goals.