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

By the end of 2025, China Property & Casualty Insurance Co., Ltd. had total assets of RMB 860.498 billion, up 10.6% year over year.

As Asia’s largest P&C insurance group, PICC’s insurance service revenue in 2025 reached RMB 511.594 billion, up 5.4%; net profit was RMB 40.377 billion, up 25.5%; and return on net assets (ROE) was 14.7%, up 1.7 percentage points year over year.

During the reporting period, PICC P&C achieved motor vehicle insurance premium income of RMB 305.745 billion, underwriting profit of RMB 14.258 billion, and a combined loss ratio of 95.3%. Premium income for accident and health insurance, agricultural insurance, liability insurance, and corporate property insurance was RMB 107.585 billion, RMB 55.947 billion, RMB 38.234 billion, and RMB 17.656 billion respectively, representing year-over-year growth of 6.4%, 1.9%, 1.7%, and 4.4%, respectively.

Recently, this P&C insurance giant held an industry performance briefing meeting to address investors’ concerns. The key points of the remarks are organized below for the benefit of readers.

2026 Directions for Insurance Fund Investments

Insurance funds have long investment horizons and large scales, and they come with a rich set of investment strategies and diversified investment tools, making them an important source of long-term patient capital. In 2026, PICC Group will adhere to the philosophy of “long-term investment and value investment,” focusing on four principles—“stability, growth, diversification, and innovation”—to further optimize asset allocation and build a long-term, steady, and well-balanced investment portfolio.

From the perspective of investment strategies across major asset classes, fixed-income investment is an important lever for achieving asset-liability matching and mitigating interest-rate risk. In 2026, we will further improve differentiated allocation to sub-accounts and refined management, based on the characteristics of liability funds in property and casualty insurance and life insurance.

The P&C account will focus on keeping the asset duration broadly stable, while the life insurance account will manage the asset-liability duration gap well and continue to do a good job in long-duration government bond allocation.

Equity investments are the key to stabilizing and improving investment performance. We will continue to press ahead steadily, keep a sustained focus on the allocation of high-dividend-yield stocks measured at OCI, and at the same time concentrate on growth opportunities embedded in the “15th Five-Year Plan for the period 2026–2030,” strengthen research in key industries and key sectors, reasonably plan TPL stock allocation, and build a well-diversified equity investment portfolio with solid long-term performance and market competitiveness.

(Editor’s note: High-dividend-yield OCI stocks refer to equity-class assets measured at other comprehensive income and primarily aimed at obtaining stable dividends; TPL stock allocation refers to stock position allocation and structural arrangements viewed from the perspective of the overall investment portfolio.)

In alternative investments, in 2025 PICC Group used asset securitization and tangible asset investment as breakthroughs, actively promoted innovative transformation in alternative investment. For the full year, the 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,” focused on building new quality productive forces, with a scale of RMB 10 billion, to provide strong funding support for the development of technology-based enterprises.

How to effectively hedge the impact of falling interest rates?

Net investment income is an important cornerstone of the Group’s stable investment returns. It mainly includes fixed-income asset interest income, equity assets such as stock dividends, and others, accounting for nearly 70% of total investment income.

In recent years, as the interest-rate policy “center of gravity” has moved downward, the yield on 10-year government bonds fell from 2.84% at the end of 2022 to 1.85% at the end of 2025. Over three years cumulatively, it decreased by nearly 100 basis points, bringing substantial pressure to insurance funds’ investment—especially traditional fixed-income asset allocation.

Facing these challenges, the Group has used stable net investment income as a lever, continuously optimized asset allocation and investment strategies, and thereby managed to better stabilize the Group’s level of investment returns.

In 2025, the Group achieved net investment income of RMB 58.7 billion. Over the past three years, the average net investment yield was 4.0%, placing it at a leading level among peers and enabling effective coverage of the cost of liability funds in the same period.

We primarily take the following three aspects to proactively respond to the impact of a low-interest-rate environment:

First, strengthen active fixed-income investment management, extend our strengths and pursue excellence. We will further enhance our ability to forecast mid- to long-term interest-rate trends and continuously improve our refined and phased trading capabilities; seize interest-rate peaks, increase allocation to long-duration bonds; while narrowing the duration gap, obtain stable coupon income to increase the contribution of fixed-income assets to earnings.

Second, increase the contribution of high-dividend-yield stocks to net investment income. In 2025, the Group’s OCI stock investment scale grew by 158% from the beginning of the year, and the share in investment assets increased by 2 percentage points. The average dividend yield of the OCI stocks held reached 4.27%, further boosting the contribution of dividend income to net investment income. We also further strengthened the long-term investment orientation of equity investments, and innovatively established a strategic stock investment portfolio to capture long-term investment opportunities for high-quality assets in line with national strategic directions. The strategic stock portfolio’s annual net value growth rate exceeded 40%, laying a solid foundation for achieving returns that can ride through cycles and remain stable over the long term.

Third, promote a shift in alternative investment, building a new “growth engine” to secure stable returns. Focus on making debt investments steady, strengthening equity, and improving tangible assets. Proactively identify opportunities for alternative asset investments with stable cash returns. Among the Group’s new alternative investments in 2025, the proportion of innovative projects reached 37%, and multiple market-first investment projects with industry influence were implemented.

Assessing risk of negative spread (loss)

This year, PICC Life’s “open-door red” business overall performed well. First-year single premium and ten-year and above single-premium policies all achieved relatively rapid growth, with first-year single premium growth ranking first among the “old seven” peers. The sales team also achieved growth in both volume and quality: the year-over-year increase in average monthly effective individual manpower exceeded 10%, and the year-over-year growth in average monthly diamond manpower was nearly 50%.

In recent years, through measures such as reducing liability costs, deepening “unified reporting and payment compliance,” and promoting the entry of medium- and long-term funds into the market, the risk of negative spread losses has been somewhat mitigated. In 2026, PICC Life will leverage new drivers of economic development, starting from both asset and liability sides, systematically enhance the capability to prevent and resolve spread-loss risks, and further reduce the risk of negative spread.

(Editor’s note: The risk of negative spread losses refers to the risk that investment returns cannot cover liability costs.)

On the liability side: continuously optimize the business structure, drive down liability costs, and build a diversified system of sources of profit. First, expand the scale of new business to dilute existing costs. Increase efforts to drive new business, and reduce the proportion of existing liabilities with high costs through the accumulation of low-cost new business. Second, build diversified profit sources to reduce reliance on spread. Increase the supply of products with floating returns; by leveraging mechanisms for shared interest-rate risk and profit-sharing, reduce the rigid cost of liabilities; strengthen the promotion of protection-type products and reinforce claims payment management to increase contributions from “critical illness spread profits”; implement “unified reporting and payment compliance” and strengthen detailed expense management to enhance expense spread contributions. Third, strengthen duration matching to build a solid defense line against spread. Based on market conditions and investment return performance, dynamically and prudently determine product guaranteed interest rates, dividend levels, and universal account interest-crediting levels; match the duration characteristics of different accounts, and strengthen control over the asset-liability duration gap.

On the asset side: optimize asset allocation to improve investment returns and strive to contribute excess returns. First, use asset allocation as the lever, adhere to an absolute return orientation, and rebalance well by capturing market style through diversified investment strategies and flexible execution to strive for excess returns. Second, establish a linked first- and second-tier investment research mechanism to strengthen research results conversion. Closely monitor the dynamics of held assets, seize market opportunities in a timely manner, and strive for higher returns. Third, strengthen account-level look-through management and develop targeted allocation and management strategies. Fourth, strengthen investment risk control and firmly keep the risk bottom line.

In the future, we will continue to strengthen asset-liability management, reduce the cost of liabilities, effectively manage the asset-liability duration gap, proactively prevent and mitigate negative spread loss risks, and resolutely uphold the bottom line of preventing systemic risk.

Considerations for dividend policy

PICC places great importance on shareholder returns, maintaining the continuity and stability of cash dividends. In 2025, the Group’s full-year dividend per share was RMB 0.22, up 22.2%; PICC P&C’s full-year dividend per share was RMB 0.68, up 25.9%. Over the past three years, the Group’s and PICC P&C’s cash dividend compound annual growth rates were 18.8% and 17.9% respectively. The current dividend policy mainly considers the following factors:

First, overall consider the differences between new and old accounting standards. At present, regulators and competent authorities still manage and assess according to the old standards. In 2025, our dividends continued to follow the old standards as the basis. The Group’s dividend payout ratio will be maintained at 30% or above, and PICC P&C’s dividend payout ratio will be maintained at 40% or above.

Second, fully consider capital constraints. Since the implementation of the new standards, increased volatility in net profits of listed insurance institutions has become a common operating characteristic across the industry. The Group’s dividend funds mainly come from profit distributions of subsidiaries. Under the new and old standards, the profit differences for insurance subsidiaries are significant. If dividends were simply based on net profit under the new standards, it would directly affect the subsidiaries’ core capital strength and the sufficiency level of solvency, and ultimately impact the long-term stability and sustainability of the dividend policy.

Third, strive to achieve long-term stable growth in dividends per share. This is a goal we have always pursued. We will deepen our work in our core insurance business, continuously improve quality and efficiency, strengthen asset-liability management, and reinforce performance-based assessment. By working in the same direction on both the liability side and the investment side, we will strive to achieve continuous and stable growth in profitability, and return the trust and support of our investors.

Strategic planning of PICC Health

In 2025, PICC Health’s premium scale reached the RMB 50 billion platform. Premium income was RMB 56.266 billion, up 15.5%; net profit under the new standards was RMB 8.182 billion, up 42.8% year over year; and ROE under both new and old standards has remained at double-digit levels for three consecutive years. The company’s profitability has continued to remain at a good level. The main reasons and practices are as follows:

First, the business structure continues to be optimized. The company consistently adheres to safeguarding the core of protection. The business mix of protection-type products such as long-term medical insurance has a high proportion, and profitability is relatively stable. In 2025, the share of protection-type business exceeded 78%, and was relatively less affected by fluctuations in the capital markets. The contribution of insurance service performance to profit exceeded 80%.

Second, product and service upgrades continue. Strengthen the construction of three product innovation laboratories in cooperation with China Reinsurance Life, Reinsurance Group of New York, and Inseon Health. Build a health insurance product system covering all people and all life-cycle stages. During the year, 69 new products were developed. Among them, “Good Health Insurance · Long-Term Medical (Flagship Edition)” was comprehensively upgraded across dimensions including hospital network, medical supplies coverage, and health management services, demonstrating an industry-leading role in setting an example. The number of new customers added via the internet channel reached 5.65 million, consolidating a foundation for sustainable development.

Third, deepen technological innovation. Accelerate the company’s digital transformation; keep technological innovation closely linked with application scenarios; strengthen intelligent internet insurance applications. In areas including customer reach, product development, online claims, customer service, and customer acquisition, strengthen digital empowerment.

Fourth, continue to improve cost reduction and efficiency enhancement. In the past five years, the combined claims-and-expense ratio for short-term insurance has continued to improve, cumulatively declining by 6.61 percentage points. Continuously enhance cost-awareness, steadily reduce spending on non-rigid expenses, and cut fixed costs such as office premises. On the basis of continuously increasing income for frontline employees, in 2025 the management expense ratio and the comprehensive expense ratio both decreased by 0.6 and 0.3 percentage points, respectively, compared with the previous year. Strengthen technology empowerment by using robots to replace human labor. The average premium per employee for full-time employees exceeded RMB 10 million, up significantly year over year, maintaining a cost leadership advantage.

Fifth, continue to strengthen asset-liability management. In the fourth quarter of 2025, the quant score for asset-liability management (82 points) was stable or slightly higher than last year; the duration gap was below the industry average level, and liquidity was reasonably ample. The company seized market opportunities and crystallized returns opportunistically at the interest-rate trough in the bond market and at the highs in the equity market, respectively.

Why establish a health management subsidiary?

A health management subsidiary is a core link in PICC Group’s ecosystem of “large health and large aging,” and it is a key initiative for professional health insurance companies to achieve “managed healthcare.” On August 21, 2025, the National Financial Regulatory Administration approved and agreed to establish a health management company. This is the first health management company approved after the establishment of the National Financial Regulatory Administration.

In the future, PICC Health will use the professional health management company as a lever to better play the dual roles of “health protection + health promotion.” It will focus on laying out three major areas: medical services, medicines, and rehabilitation care, to further push the commercial model of health insurance from the traditional fee-reimbursement type to a managed healthcare model, meeting customers’ diverse health needs. By leveraging the risk reduction effect of health management, it will reduce claims-related cost expenditures, so as to meet the Group’s strategic requirements of “effective play of the business-building function, prominent advantages in health management, and becoming a first-class health insurer that ranks among the top in both quantity and quality.”

Risk disclosures and exemption clauses

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