This earnings season is marked by illusions and divergence. In 2025, buoyed by a recovery in the equity market, some life insurers achieved record-high profits. However, constrained by the dual pressures of declining long-term interest rates and new accounting standards, the industry widely faced the dilemma of "profit growth without asset growth," characterized by a sharp drop in comprehensive investment yields and shrinking net assets.

On the flip side, industry leader China Life Insurance Company Limited presented a composed performance. The nation's largest life insurer reported a net profit attributable to equity holders of the parent company of RMB 154.078 billion, a 44.1% year-on-year increase on a high base. Simultaneously, equity attributable to equity holders of the parent company reached RMB 595.205 billion, up 16.8% year-on-year.

During the earnings briefing, China Life's Chairman, Cai Xiliang, described the results as an "across-the-board success," highlighting both scale and value growth. He emphasized that the company sustained strong growth momentum from a "high base and large scale."

While financial metrics confirm leading strength, the underlying logic behind the figures is more telling: Is the RMB 154 billion profit primarily Alpha generated by China Life's core operations weathering the spread loss cycle, or is it Beta returns captured from its substantial equity exposure amid a capital market upswing? Has the significant shift towards participating insurance on the liability side genuinely mitigated long-term interest rate risk? Scrutinizing the financial data reveals a giant vessel executing a balance sheet restructuring and balancing act across liabilities, assets, and distribution channels.

**Reshaping Liabilities: Participating Insurance Continues Its Surge** Against a macroeconomic backdrop of a trend decline in long-term interest rates, reducing rigid costs has become an industry consensus. In 2025, China Life aggressively promoted participating insurance as its core strategy for navigating cycles, demonstrating strong execution capability. During the reporting period, floating-yield business accounted for nearly 50% of first-year regular premium income. This proportion jumped to nearly 60% in the core individual agency channel, making it the dominant force for new business premiums. This signals the accelerated phase-out of traditional high-guaranteed-rate products, with risk-sharing becoming mainstream.

The essence of participating insurance is a "guaranteed base + floating" structure. In a cycle marked by asset shortages and low interest rates, insurers can no longer sustain high-interest, rigid payouts long-term. Shifting to participating insurance allows insurers to effectively lower their liability costs while offering consumers potential upside from economic recovery and investment returns. However, moving from guarantees to浮动收益意味着打破了长期以来的保本预期. Due to a lack of brand endorsement, historical performance track records, and shareholder support, many insurers struggle with this transition. China Life's successful large-scale shift reflects its strategic resolve and comprehensive strength. Leveraging the credit premium built on its RMB 7.59 trillion in total assets and its nationwide sales network, China Life successfully guided customers to accept the浮动收益 model.

Objectively, the positive impact of new business optimization is often a slow-burn effect against a massive existing portfolio. In 2025, China Life's first-year regular premiums with terms of ten years and above reached RMB 52.197 billion, showing strong growth. However, by the end of the period, the company still held 327 million effective long-term policies, representing a significant volume of traditional guaranteed products sold during previous high-interest eras. While diluting overall rigid costs requires a long cycle, marginal improvements from this shift are already visible in asset-liability management effectiveness. Following the 2013 life insurance pricing reforms, the industry accumulated substantial traditional insurance reserve liabilities with durations exceeding 20 years. The industry's asset-liability duration gap widened from 6.57 years to 9.1 years by Q3 2024, indicating high mismatch risk. China Life's management disclosed that the effective duration gap for its new business has narrowed to about 1.5 years, effectively widening expected interest spreads and building a safety cushion for cross-cycle operations.

Nevertheless, the real test lies in future investment performance. The dominance of participating insurance means insurers have partially transferred interest rate risk they once solely bore into customer expectations for investment returns. When nearly 60% of new customers are attracted by illustrated dividends, their sensitivity to the dividend fulfillment ratio will increase exponentially. This pressure is not unfounded. For instance, during the heightened volatility in China's stock and bond markets in 2022-2023, pressured by falling long-term rates and A-share index declines, insurer investments were generally under strain. Concurrently, the proportion of China Life's participating products achieving a fulfillment ratio over 100% saw a significant temporary contraction. By 2024, among 112 products, the number achieving over 100% rebounded to 12 (approximately 11%), with the highest ratio reaching 138%, though some products remained low. This indicates the immense difficulty of maintaining high dividend levels in volatile markets, where misaligned expectations can easily trigger surrender waves. Notably, in 2024, investment yield fluctuations from market volatility led to frequent concentrated surrenders of participating products within the industry. One leading insurer saw the surrender rate for a popular participating product reach 20% in 2025, largely due to overly optimistic sales illustrations coupled with lower actual dividends from market swings, disappointing customer expectations. This implies that with participating insurance as the mainstay, insurers must walk a tightrope:一端是销售渠道克制的预期管理,另一端是真金白银的投资兑现. The liability side's thirst for returns ultimately transmits forcefully to the asset side. With fixed-income yields generally low, massive insurance funds must venture beyond traditional comfort zones to seek higher-yielding assets to meet customer expectations and maintain stable dividends. This fundamental asset-liability linkage logic is also reshaping China Life's investment strategy for 2025.

**Asset "Balancing Act": The Spear of Equities and the Shield of OCI** The core of asset-liability matching lies in dynamic balance. While steadily reducing liability-side costs, China Life adopted a more aggressive strategy on the asset side. By the end of 2025, China Life's investment assets reached RMB 7.42 trillion. Fixed-income investments like bonds and term deposits remained stable, acting as a "ballast." However, the allocation to stocks and funds surged significantly from 12.18% at end-2024 to 16.89%. During the period, the scale of China Life's public market equity investments exceeded RMB 1.2 trillion, a sharp increase of over RMB 450 billion from the start of the year. This massive new equity exposure became the direct engine for the profit surge. In 2025, China Life achieved total investment income of RMB 387.694 billion, up 25.8% year-on-year, with a total investment yield of 6.09%, an increase of 59 basis points.

Liu Hui, Vice President overseeing investments, attributed this to combining "riding the trend" with "shaping the strategy." On one hand, the company strategically increased its equity allocation by nearly 5 percentage points at market lows, firmly investing in core Chinese assets, particularly technology stocks representing new productive forces. On the other hand, it capitalized on high-interest rate windows for cross-cycle long-bond allocations and increased investments in high-dividend stocks, building a diversified dividend portfolio. Beyond stabilizing the core, China Life's tactical operations became more diverse and agile. Liu Hui revealed that in alternative investments, the company created new strategies like S funds and M&A funds, and even executed the insurance industry's first gold price inquiry transaction, further diversifying income sources.

The sharp "spear" temporarily pierced the gloom of low rates, but structural concerns remain. A 44.1% surge in annual net profit objectively indicates that, with a massive RMB 1.2 trillion equity exposure, the profit structure is highly sensitive to capital market volatility—a historical high. This high-Beta strategy can generate staggering returns in a structural bull market. However, even slight expectation adjustments or a systemic correction could entail significant friction costs for repositioning such vast funds, and the test of profit retraction would be more severe than ever. This concern is already hinted at in quarterly data. In Q4 2025, China Life experienced a temporary loss of up to RMB 13.7 billion. President Li Mingguang acknowledged this was mainly due to structural adjustments in the capital market and corrections in some equity and fund holdings. He stressed that life insurance asset-liability management is long-term and cross-cycle by nature. Short-term market value changes inevitably affect the financial statements, and only a long-term view allows for an objective assessment of an insurer's performance.

Facing the inherent risks of high-volatility assets, smoothing financial statements under new accounting standards is a crucial challenge for asset-liability management. Here, the FVOCI account has become China Life's key shield against volatility. Some insurers, to boost current earnings, often classify new equity investments into FVTPL (Fair Value through Profit or Loss), which directly impacts the income statement. While this can make profits soar with a rising market, it can also cause significant net asset erosion during market corrections or coupled with falling long-bond yields. In this regard, China Life demonstrated stronger strategic discipline. Leveraging its ultra-long-term capital pool, the company avoided blindly chasing short-term profit recognition. Instead, it allocated massive amounts of high-dividend, quality assets to the FVOCI (Fair Value through Other Comprehensive Income) account, which bypasses the income statement. By end-2025, FVOCI assets accounted for 4.28% of total investment assets, with the absolute amount growing 85.0% and the proportion increasing by 1.68 percentage points since the start of the year. From a long-term asset-liability matching perspective, tapping into the high-dividend opportunities of OCI equities and the core fixed-income base is becoming the key lever for insurers to expand allocation space—providing a steady stream of cash dividends to meet the liquidity and return needs of participating insurance, while allowing the fair value appreciation of dividend assets to bolster the balance sheet without impacting the income statement. The simultaneous growth in profits and net assets also suggests that China Life's OCI account may harbor substantial unrealized gains.

**Productivity Leap: Workforce Nadir and Value Breakthrough** Maneuvers on the investment side create room for insurers to navigate cycles, but complex asset operations and managing a huge capital pool ultimately rely on a steady stream of premium cash flow from the front end. This coincides with the most profound structural pain point in the life insurance industry in recent years—the continued shrinkage of the traditional agent force. Historically, China Life's individual agency force once far exceeded one million at its peak. By end-2025, this number stood at 587,000, with a continuing downward trend. The era of mass recruitment and extensive expansion is彻底成为历史. Remarkably, against this backdrop of significant workforce reduction, China Life's one-year new business value for 2025 reached RMB 45.752 billion, a substantial 35.7% year-on-year increase, hitting a new high in recent growth rates. Plummeting headcount coupled with a strong value rebound creates a stark contrast, signaling the preliminary completion of productivity restructuring. The scale gap left by workforce reduction is being forcibly filled by a leap in individual agent productivity, new channel ecosystems, and underlying technology.

In the core individual agency channel, China Life achieved a breakthrough in per-capita productivity through "quality recruitment and cultivation." In 2025, quality recruits in the individual channel increased 40% year-on-year, effectively offsetting the decline in total headcount and stabilizing the base of high-value policies. In the bancassurance channel, with strict regulatory enforcement of "unified reporting and conduct," the historical excesses in commission rates have been squeezed out, ending vicious competition based solely on fees. Here, China Life leveraged its brand and comprehensive service advantages to deeply integrate channel resources. Its bancassurance total premium surpassed the RMB 100 billion mark in 2025, with new policy issuance points reaching 77,000, and first-year regular premium growing 41.0% year-on-year. On the back-end, technology empowerment became a key tool for cost reduction. The financial report shows that AI-assisted programming accounted for 30% of code, digital underwriter processing rates exceeded 24%, and fully automated processing rates exceeded 60% in some regions. The comprehensive adoption of digital employees has diluted management and operational expenses for this large insurer, forming the foundational support for profit release.

However, the qualitative leap in the sales force still faces deep challenges. Analyzing the structure of the 587,000-strong force reveals 371,000 in the marketing team and a significant 216,000 in the policyholder service and development team. The large service team underscores the company's focus on servicing existing policies and secondary development, but it also implies immense pressure for professional transformation as product lines shift entirely towards complex financial services like participating insurance and health/elderly care. Furthermore, the红利 from shedding unproductive人力 has diminishing marginal returns. AI can efficiently handle underwriting and coding but cannot replace the deep trust built through interpersonal relationships in wealth management planning. Bridging the vast professional competency gap required for agents accustomed to selling simple savings products to explaining complex participating insurance logic and asset allocation to high-net-worth clients in a short time is a monumental task. Reshaping the fundamental DNA of the sales force will be a protracted battle large insurers must face in the coming years.

As the scale红利 of the old era fades, a profound internal revolution is underway within insurers. For China Life, the RMB 154 billion profit is not the finish line for navigating cycles but the starting point of a new game. In an uncertain macroeconomic environment, maintaining the delicate balance between assets and liabilities, and between promises and delivery, amid sharp capital market fluctuations and the rigid demand for long-term customer returns, will be its ultimate long-term challenge.