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 Company Limited’s total assets reached RMB 860.49 billion, up 10.6% year over year.

As the largest P&C insurance group in Asia, PICC’s insurance service revenue in 2025 was RMB 511.59 billion, up 5.4% year over year; it recorded net profit of RMB 40.38 billion, up 25.5% year over year; and achieved a return on net assets (ROE) of 14.7%, up 1.7 percentage points year over year.

During the reporting period, PICC Property and Casualty achieved motor vehicle insurance premium income of RMB 305.75 billion, underwriting profit of RMB 14.26 billion, and a combined ratio of 95.3%. Premium income for accident and health insurance, agricultural insurance, liability insurance, and corporate property insurance was RMB 107.59 billion, RMB 55.95 billion, RMB 38.23 billion, and RMB 17.66 billion, respectively, increasing year over year by 6.4%, 1.9%, 1.7%, and 4.4%, respectively.

Recently, this P&C insurance giant held an industry performance briefing meeting, responding to investors’ concerns. The following is a整理 of the key points of the remarks by Zishitang for the benefit of readers.

2026 direction for insurance funds investment

Insurance funds have long maturities and large scale, and they have a rich set of investment strategies and diversified investment toolkits, serving as 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, sound, and balanced investment portfolio.

From the perspective of asset class investment strategies, fixed-income investment is an important lever for doing a good job of asset-liability matching and guarding against interest rate risk. In 2026, we will further improve differential allocation to sub-accounts and fine-grained management based on the characteristics of liability funds of property and casualty insurance and life insurance.

For the property and casualty insurance account, we will focus on keeping the asset duration broadly stable. For the life insurance account, we will manage the duration gap on the asset-liability side, and continue to do a good job with long-duration government bond allocation.

Equity investments are the key to stabilizing and improving investment performance. We will keep to steady progress, continuously track OCI high-dividend stock allocation, and at the same time focus on growth opportunities embedded in the “15th Five-Year Plan period into the 2025–2030 period” (the “14th Five-Year Plan”?), strengthen research on key industries and sectors, plan TPL stock allocation reasonably, and build an equity investment portfolio that delivers long-term, steady performance, is competitive in the market, and is more balanced.

(Editor’s note: “OCI high-dividend stocks” refers to equity-type assets measured at fair value through other comprehensive income, mainly for obtaining stable dividends; “TPL stock allocation” refers to stock position allocation and structural arrangement from the perspective of the overall investment portfolio.)

In alternative investments, in 2025 PICC Group used asset securitization and real-asset investment as breakthroughs, and actively promoted innovative transformation in alternative investment. Throughout the 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,” focusing on building new-quality productive forces and with a scale of RMB 56.27B, providing strong funding support for the development of technology and innovation-driven 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 interest income from fixed-income assets, dividends from equity assets such as stocks, etc., accounting for nearly 70% of total investment returns.

In recent years, with the downward shift in the interest-rate center, 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 the three-year period, it declined by nearly 100 basis points, creating considerable pressure on insurance funds’ investment—especially on allocation to traditional fixed-income assets.

In response to the challenges above, the Group uses stable net investment income as a key lever, continuously optimizes asset allocation and investment strategies, and has done well to stabilize the Group’s investment return level.

In 2025, the Group achieved net investment income of RMB 58.7 billion. Over the past three years, the average net investment income yield reached 4.0%, placing it at a leading level among peers, and it can effectively cover the cost of liability funds for the same period.

We mainly address the impact of the low-interest-rate environment proactively from the following three aspects:

First, strengthen active fixed-income investment management, and “build the long board and refine it to perfection.” We will further enhance our judgment of the medium- and long-term interest rate trends, continuously improve our capability for fine-grained, phased timing of trades, capture interest-rate highs, increase allocation to long-duration bonds, and while narrowing the duration gap, obtain stable coupon/interest income to enhance the contribution to fixed-income asset returns.

Second, increase the contribution of high-dividend stocks to net investment income. In 2025, the Group’s OCI stock investment scale grew by 158% compared with the beginning of the year. Its share in investment assets increased by 2 percentage points. The average dividend yield of held OCI stocks reached 4.27%, further increasing the contribution of dividend income to net investment income. We will also further reinforce the long-term investment orientation of equity investment by innovatively establishing a strategic stock investment portfolio to capture long-term investment opportunities in high-quality assets aligned with national strategic directions. The strategic stock portfolio’s full-year net value growth rate exceeded 40%, laying a solid foundation for obtaining investment returns that can “go through the cycle” and remain long-term and stable.

Third, promote the transformation of alternative investments and build a new “growth engine” to obtain stable returns. We will focus on making debt assets more stable, strengthening equity, and improving real-asset investments, and proactively explore investment opportunities in alternative assets that provide stable cash returns. Among the Group’s newly added alternative investments in 2025, the share of innovative projects’ scale reached 37%, and multiple market-first projects with industry impact have been implemented.

Assessment of risk of loss from interest spread

This year, PICC Life’s performance in the “opening-for-success” period is generally in good shape. Both first-year single-premium (or first-year premium) and premium due terms of 10 years and above achieved relatively fast growth, with the growth rate of first-year premium placing first among the “top seven” peers. The sales force also achieved stable volume with improved quality: the year-over-year growth rate of individual group average monthly effective manpower exceeded 10%, and the year-over-year growth rate of monthly diamond manpower was nearly 50%.

In recent years, the industry has eased the risk of interest spread loss to some extent through proactive measures such as reducing liability cost, deepening “commission and notice only” (报行合一), and promoting medium- and long-term funds to enter the market. In 2026, PICC Life will leverage new drivers of economic development, starting from both the asset and liability sides, to systematically enhance capabilities to prevent and resolve interest spread risk, and further reduce the risk of interest spread loss.

(Editor’s note: “Risk of loss from interest spread” refers to the risk that investment returns cannot cover liability costs.)

On the liability side, we will continue to optimize business structure, promote the reduction of liability costs, and build a diversified source-of-profits system. First, expand the scale of new business to dilute existing costs. Increase efforts to drive new business: by accumulating low-cost new business, reduce the proportion of existing high-cost liabilities. Second, build diversified sources of profits to reduce reliance on interest spread. Increase the supply of products with floating-return characteristics; by leveraging mechanisms for shared interest-rate risk and profit sharing, reduce the rigid cost of liabilities; strengthen the promotion of protection-type products, reinforce claims payment management, and enhance mortality illness spread benefits (profit); implement “commission and notice only,” strengthen fine-grained expense management, and improve the contribution from fee spreads. Third, reinforce duration matching and firmly build the interest spread defense line. In light of the market environment and investment return conditions, dynamically and prudently determine product assumed interest rates, dividend levels, and universal insurance account settlement levels; match the duration characteristics of different accounts and strengthen management of the asset-liability duration gap.

On the asset side, we will optimize asset allocation, improve investment returns, and strive to contribute excess returns. First, use asset allocation as the key lever, uphold an absolute return orientation, grasp market style for rebalancing, and strive for excess returns through diversified investment strategies and flexible operations. Second, establish an integrated investment research mechanism linking primary and secondary levels to strengthen results transformation. Closely monitor the dynamics of held assets, promptly seize market opportunities, and strive to achieve higher returns. Third, strengthen account-level look-through management and formulate targeted allocation and management strategies. Fourth, strengthen investment risk management and firmly keep the risk bottom line.

In the future, we will continue to strengthen asset-liability management, reduce the cost of liabilities, effectively control the asset-liability duration gap, proactively prevent and mitigate interest spread loss risk, and resolutely keep the bottom line of ensuring that no systemic risk occurs.

Considerations for the dividend policy

PICC has always attached great importance to shareholder returns and maintains the continuity and stability of cash dividends. In 2025, the Group’s total dividend per share for the full year was RMB 0.22, up 22.2%. For property and casualty insurance, the full-year dividend per share was RMB 0.68, up 25.9%. Over the past three years, the Group’s and property and casualty insurance’s cash dividend compound annual growth rates were 18.8% and 17.9%, respectively. The current dividend policy mainly considers the following factors:

First, coordinate and consider differences between new and old accounting standards. Currently, regulators and competent authorities still manage and assess under the old standards. For our 2025 dividends, we will continue to follow the old standards as the basis. The Group’s dividend payout ratio will remain at 30% or above, and the property and casualty insurance company’s dividend payout ratio will remain at 40% or above.

Second, fully consider capital constraints. Since the implementation of the new standards, increased net profit volatility among listed insurance institutions has become a common operating characteristic across the industry. The Group’s dividend funds mainly come from profit distributions by subsidiaries. Under both the new and old standards, there are clear differences in profit for insurance subsidiaries. If we simply use the net profit measure under the new standards as the basis for dividends, it will directly affect the subsidiaries’ core capital strength and adequacy of solvency, and ultimately affect the long-term stability and sustainability of the dividend policy.

Third, strive to achieve long-term stable growth in dividend per share. This is a goal we have always pursued. We will focus on the core insurance business, continuously improve quality and efficiency, strengthen asset-liability management, and reinforce performance evaluation and accountability. We will work in the same direction on both the liability side and the investment side to strive for continuous, stable growth in profitability, and to repay and earn the trust and support of investors.

Strategic planning of PICC Health

In 2025, PICC Health’s premium scale surpassed the RMB 50 billion platform, achieving premium income of RMB 8.18B, up 15.5%. It achieved net profit under the new standards of RMB 8.182 billion, up 42.8% from the previous year. ROE under both the new and old standards remained at double-digit levels for three consecutive years. The company’s profitability has continued to remain strong. The main reasons and approaches are as follows:

First, the business structure has been continuously optimized. We have always adhered to the “protection-oriented” core. For business lines such as long-term medical insurance, protection-type products have a high share and a relatively stable profit level. In 2025, the share of protection-type business exceeded 78%, and it is relatively less affected by volatility in the capital markets. The contribution of insurance service performance to profit exceeds 80%.

Second, product and service upgrades have continued. We strengthen the construction of three product innovation labs in cooperation with China Re Life, Reinsurance (Hong Kong) Corporation, and Insure Health. We have established a health insurance product system covering all population segments across the full life cycle. During the year, we developed 69 new products. Among them, “Good Health · Long-Term Medical (Flagship Edition)” has been comprehensively upgraded across dimensions including hospital network, medical device protection, and health management services, playing an industry-leading exemplary role. The internet channel added 5.65 million new customers during the year, laying a solid foundation for sustainable development.

Third, technology innovation has been continuously deepened. We accelerate the company’s digital transformation, tightly integrate technology innovation with application scenarios, and strengthen intelligent internet insurance applications to enhance digital empowerment in areas such as customer reach, product development, online claims, customer service, and customer acquisition.

Fourth, cost reduction and efficiency improvement have continued to improve. In the past five years, the comprehensive claims-and-benefit ratio for short-term insurance has continued to improve, declining cumulatively by 6.61 percentage points. We continuously strengthen cost awareness, steadily reduce non-rigid expense spending, and cut fixed costs such as workplace expenses. On the basis of continuously improving compensation for frontline employees, in 2025 the management expense ratio and the combined expense ratio decreased by 0.6 and 0.3 percentage points, respectively, compared with the previous year. We strengthen technology empowerment by replacing labor with robots. The average premium per employee for full-time staff exceeded RMB 10 million, increasing significantly year over year, maintaining a cost-leading advantage.

Fifth, asset-liability management has continued to be strengthened. In the fourth quarter of 2025, the quantitative score for asset-liability management (82 points) increased steadily compared with last year, and the duration gap was below the industry average, with reasonable and ample liquidity. The company seized market opportunities and realized returns at opportune times in both the bond market at interest-rate lows and the equity market at interest-rate highs, respectively.

Why establish a health management subsidiary?

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

Going forward, PICC Health will take the professional health management company as a key vehicle to better leverage the dual functions of “health protection + health promotion.” We will focus on laying out three major areas: medical care, pharmaceuticals, and rehabilitation nursing. We will further promote the transformation of the commercial model of health insurance from the traditional expense reimbursement type to managed medicine, meet customers’ diverse health needs, and reduce claims-related cost expenditures by leveraging the risk reduction effect of health management. This will help meet the strategic requirements of PICC Group to ensure that “the construction function plays an effective role, the strengths in health management stand out, and the quantity and quality rank among the top-tier health insurance companies.”

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