Insight Spotlight | New China Insurance delivers its best-ever performance report, but the dividend ratio has decreased

Viewpoint.com. Recently, Xinhua Insurance released its 2025 annual performance results and held a 2025 annual earnings conference on March 30.

In the reporting period, Xinhua Insurance’s total assets were approaching 19 trillion, reaching RMB 18,994.84 billion, up 12.2%; full-year original insurance premium income was RMB 195.871 billion, up 14.9%; net profit attributable to shareholders of the parent company was RMB 36.284 billion, up 38.3% year over year; and new business value for the year was RMB 9.842 billion, up 57.4% year over year.

At the earnings conference, Yang Yucheng, chairman of Xinhua Insurance, said: “Our total assets, total premiums, embedded value, net profit attributable to the parent, the total amount of proposed dividends and distributions, and other figures have all hit record highs, delivering the brightest performance report since the company was founded.”

But the secondary market did not respond. In the first trading day after the earnings were released, Xinhua Insurance opened down at RMB 62.81, traded in fluctuations all day and fell, closing at RMB 61.93, down RMB 1.39 from the previous trading day, a decline of 2.20%. During the day, the intraday high reached RMB 63.87, while the low dipped to RMB 61.41.

During the March annual report window, institutions’ assessments of Xinhua Insurance showed a clear split.

Guangfa Securities maintained an “Buy” rating for A/H shares, believing that equity assets have relatively large upside sensitivity; Soochow Securities maintained a “Buy” rating, noting that the investment side reduced its allocation to bonds, and that the proportion of core equities was significantly higher than that of peers. It also stated that NBV growth at the bank-insurance channel is strong, headcount remains stable, and per-capita productivity saw a substantial year-over-year increase. JInjin Securities also maintained a “Buy” rating, stating that the overall investment return rate performed impressively, while at the same time it also pointed out that Q4 net profit year over year fell by -38.2%, affected by a pullback in the equity market.

Of note, at the end of March, UBS further lowered its target price for Xinhua Insurance’s H shares from HKD 50.50 to HKD 48.50, maintaining a “Neutral” rating, to reflect the equity market pullback since the fourth quarter.

In an earlier report, UBS emphasized that Xinhua Insurance is the largest beneficiary of tailwinds from the stock market, with its equity stock and equity fund allocation ratio being the highest among listed insurers. This high-sensitivity strategy amplifies gains when the market is rising, but when the market pulls back, pressure on the investment side is also amplified in parallel.

Investment breaks through 100 billion

Yang Yucheng summarized Xinhua Insurance’s 2025 operating results as: “strong performance, superior structure, rising value, stable returns, full of vitality, and strong resilience.”

On the liabilities side, Xinhua Insurance’s long-term insurance first-year premium for the full year was RMB 57.782 billion, up 48.9%. Of this, premiums for single-pay/interim payment (期交) were RMB 37.2 billion, up 36.7%, accounting for 64.4% of first-year premiums for long-term insurance.

“Over the past three years, Xinhua Insurance’s new business value achieved approximately RMB 3 billion, RMB 6.3 billion, and RMB 9.8 billion, respectively, with growth rates of approximately 25%, 107%, and 57%.” At the earnings meeting, Xinhua Insurance’s president and CFO, Gong Xingfeng, said such growth is truly rare, and emphasized that “the company has always been practicing the concept of high-quality development driven by intrinsic value, and has implemented a series of reform and development measures to lay the foundation, build for the long term, and build momentum for future strength.”

Of note, Xinhua Insurance’s 13-month lapse/persistency rate for individual life insurance continued at 97.1%, up 1.4% year over year; the 25-month persistency rate was 93.3%, up 7.1%; and the lapse/termination rate for policies was only 1.5%, down 0.4% year over year, the best level in the past five years.

Facing challenges in a low-interest-rate environment, Xinhua Insurance has made the transformation of dividend-paying insurance a key strategic task. At the press conference, Yang Yucheng specifically pointed out: “We fought and won the tough battle of transforming dividend-paying insurance.” The company achieved first-year premium for long-term dividend-paying insurance of RMB 11.9 billion, up nearly 12 times year over year. In the fourth quarter, the proportion of dividend-paying insurance in overall premium for period-paid business reached 77%.

Gong Xingfeng added: “2025 is only a starting point. In 2026, we will continue to deepen the transformation of dividend-paying insurance. The focus will be to broaden product types, increase the sales of dividend annuities, and strengthen product innovation.”

In the past, the bank-insurance channel was often viewed as a representative of “scaling first.” But in 2025, Xinhua Insurance’s bank-insurance business underwent a transformation. Against the implementation of the “one-branch-one-line and one reporting system” (报行合一) policy, the company elevated it to a strategic level, optimized its channel layout, and strengthened refined management of grassroots outlets.

Premium income from the bank-insurance channel was RMB 72.1 billion, up 39.5%; first-year premiums for long-term insurance were approximately RMB 37.9 billion, up 52.3%; and new business value (NBV) for the year was nearly RMB 5.3 billion, up 110.2% year over year. For the first time, the value contribution exceeded that of the individual insurance channel (approximately RMB 4.542 billion), occupying the company’s “half of the market” in terms of business.

Premium income from the individual insurance channel was RMB 120.6 billion. First-year premiums for long-term insurance were approximately RMB 19.0 billion in period-paid (期交) premiums, up 43.8% year over year. Per-capita productivity improved by 43% year over year, and the number of agents exceeded 130,000.

The investment side’s performance is the biggest highlight of this annual report. In 2025, Xinhua Insurance’s total investment returns for the full year were RMB 104.3 billion, up 30.9%, for the first time surpassing the RMB 100 billion mark. Total investment return rate was 6.6%, up 0.8 percentage points year over year. After excluding the impact of fair value changes of other debt investments, the comprehensive investment return rate reached 6.9%. The scale of investment assets surpassed RMB 1.84 trillion, up 13% from the end of the previous year.

Of note, Xinhua Insurance significantly increased its holdings of stocks and funds. During the reporting period, the year-over-year increases in allocation to stock assets and fund assets were 19.7% and 36.6%, respectively, and the incremental amounts were RMB 35.657 billion and RMB 46.25 billion, respectively.

In addition, Xinhua Insurance actively responded to the policy encouraging medium- and long-term capital to enter the market, and jointly established three phases of Honghu (Swan) pilot funds (private funds). Total capital contribution was RMB 46.25 billion.

As a benchmark product for insurance capital to enter the market, the Honghu Fund has become an “iron magnet” for China’s insurance funds. According to disclosures in China Life’s 2025 annual report, the fund manager Guofeng Xinghua’s total scale under the Honghu Fund officially exceeded RMB 100 billion at the end of 2025.

Chen Yijiang, president of Xinhua Asset Management, introduced at the earnings meeting that the pilot fund “starts counting from March 2024 and, today, is exactly two years. From the past two years, the three phases of the pilot fund have achieved a double win in both social and economic benefits.”

According to Viewpoint New Media, in terms of specific operations, Phase 1 of the Honghu Fund locks in large-cap blue-chip stocks and high-dividend targets. As of June 2025, total assets reached RMB 57.112 billion, and net profit for the first half of the year was RMB 9.68 billion. Phase 2 has already newly become a top-10 shareholder of companies such as China National Petroleum, China Shenhua, and others. Phase 3’s investment scope locks in large listed companies that meet the requirements among the constituent stocks of the CSI A500 Index. The stock-selection criteria include “good governance, stable business operations, relatively stable dividends, better liquidity,” and other hard indicators.

The annual report shows that as of the end of 2024, the scale of Honghu Zhiyuan assets recorded RMB 53.376 billion. By the end of 2025, it further increased to RMB 58.906 billion. The fund’s investment return rate for 2025 was close to 9%.

In the alternative investment space for real estate, Xinhua Insurance, through its hundred-million-level real estate fund, “Kunhua (Tianjin) Equity Investment Partnership Enterprise,” has appeared in at least 14 Wanda Plaza projects, including in Beijing, Nanjing, Yangzhou, Chengdu, and others.

Since the beginning of 2025, Xinhua Insurance has continued to take over five Wanda Plaza projects in Xuancheng, Tongling, Anyang, Siping, and Yangzhou. According to incomplete statistics, since 2023, the number of Wanda Plazas sold cumulatively by Wanda Group has exceeded 80. Among them, insurance capital institutions such as Xinhua Insurance, Sunlight Life, and Dajia Insurance have acquired 24 plazas, accounting for nearly one-third.

Industry analysts point out that the real estate investment cycle is relatively long, which matches the duration profile of insurance funds. It can align with long-term liabilities and optimize asset allocation. Xinhua Insurance also allocates to real estate through multiple channels such as REITs and credit plans. Against the backdrop of “asset scarcity,” it locks in long-term, stable returns.

Warm and Cold Alternation

The warm and cold alternation on the investment side is the most direct footnote to the year’s performance fluctuations.

Xinhua Insurance maintained a relatively high exposure to the equity market. By year-end, stocks and funds together accounted for 21.2% of investment assets, keeping it leading among peers. This certainly brought strong investment returns in the first half of the year, but the equity market’s staged pullback in the fourth quarter directly hit quarterly profit—net profit attributable to the parent company fell 38.3% year over year, dragging down the full-year earnings growth rate.

The continued decline in net investment yield reflects concerns about the underlying earning power. Although the 6.6% total investment return rate is quite impressive, the net investment yield has fallen from 3.2% in 2024 to 2.8%, down 0.4% year over year, placing it at a relatively low level among major listed insurers.

As existing high-yield assets mature one after another, new capital faces lower market yields. This trend will continue to squeeze profit space.

The scale of Xinhua Insurance’s non-standard assets has decreased from RMB 95.128 billion at the end of last year to RMB 65.541 billion, and the proportion has fallen to 3.6%—the supply of traditional high-yield assets is shrinking rapidly.

At the press conference, Yang Yucheng said: “The yield on 10-year government bonds is still at a low level, and the financial investment attributes in areas such as non-standard, fixed-type, and real estate have clearly weakened. After a large influx of premiums, how to transform them into long-term returns that can survive market cycles, beat volatility, and be delivered to policyholders imposes higher requirements on the operating and investment capabilities of life insurers.”

Of note, Xinhua Insurance’s dividend turned out to be below expectations. For full-year 2025, it planned to distribute cash dividends of RMB 8.516 billion, with a dividend payout ratio of only 23.5%, down 6.6% from 30.1% in 2024; dividends per share were RMB 2.73, up 7.9% year over year.

With a backdrop of a large increase in profits, the dividend payout ratio actually decreased. Investors did not see an actual return that rose in sync with performance growth, which inevitably raises questions in the market about shareholder returns.

The “double-edged sword” effect of transforming dividend-paying insurance is also worth attention. As an important tool to prevent the risk of spread losses, dividend-paying insurance has a lower value rate than traditional insurance products. At the earnings meeting, Gong Xingfeng said clearly: “In terms of value rate, indeed it has been slightly reduced compared with traditional insurance.”

A research report from China Renaissance Securities also pointed out that the growth rate of new business value from individual insurance products is far lower than the growth rate of new policy sales. “This may reflect a decline in the new business value rate, or it may be affected by the increased share of dividend-paying insurance products.”

This means that under the rapid increase in the share of dividend-paying insurance, achieving the same magnitude of value growth would require a larger amount of premium growth to support it.

At the same time, sales of dividend-paying insurance also set higher standards for the team’s professional capabilities. Gong Xingfeng said: “In 2026, we need to broaden product types, strengthen product suitability management, and insist on selling appropriate products to appropriate customers. We will resolutely avoid sales misguidance.”

On solvency, Xinhua Insurance’s comprehensive solvency adequacy ratio fell from 217.55% at the end of 2024 to 210.47%. When management responded to concerns from small and medium investors, it explained that: “Due to objective pressure from the sustained downward movement of the 750-day moving-average government bond yield curve, the company’s solvency adequacy ratio experienced some period-end pressure.”

To address this, Xinhua Insurance has planned to proceed with issuing perpetual capital bonds of no more than RMB 10 billion to supplement capital. At the same time, it will “strengthen endogenous capital replenishment by using refined expense control and improving operational efficiency, and continuously enhance comprehensive profitability.”

Disclaimer: The contents and data in this article are compiled by Viewpoint based on publicly available information and do not constitute investment advice. Please verify before use.

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