Asia's Largest Property and Casualty Insurer Holds Earnings Briefing: Discusses High-Dividend Investment Strategy and Addresses Interest Margin Loss Risk

As of the end of 2025, PICC Property and Casualty Company Limited's total assets reached RMB 860.498 billion, a year-on-year increase of 10.6%.

As Asia's largest property and casualty insurance group, PICC Group's insurance service revenue in 2025 reached RMB 511.594 billion, a year-on-year increase of 5.4%; net profit was RMB 40.377 billion, a year-on-year increase of 25.5%; and return on net assets was 14.7%, a year-on-year increase of 1.7 percentage points.

During the reporting period, PICC P&C achieved premium income of RMB 305.745 billion from motor vehicle insurance, with an underwriting profit of RMB 14.258 billion and a combined ratio of 95.3%. Premium income from accident and health insurance, agricultural insurance, liability insurance, and commercial property insurance were RMB 107.585 billion, RMB 55.947 billion, RMB 38.234 billion, and RMB 17.656 billion, respectively, with year-on-year increases of 6.4%, 1.9%, 1.7%, and 4.4%.

Recently, this property and casualty insurance giant held an investor briefing to address concerns. The "Zishi Tang" column has compiled the key points of the speeches for your reference.

Investment Directions for Insurance Funds in 2026

Insurance funds have long durations and large volumes, possessing rich investment strategies and a diverse toolkit, making them an important source of long-term patient 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" to further optimize asset allocation and construct a long-term, stable, and balanced investment portfolio.

From a strategic asset allocation perspective, fixed-income investment is a crucial means to achieve asset-liability matching and prevent interest rate risk. In 2026, we will further enhance differentiated and refined management on a sub-account basis, considering the distinct liability characteristics of property and casualty insurance and life insurance.

The property and casualty insurance account will focus on maintaining the stability of asset duration, while the life insurance account will manage the asset-liability duration gap and continue to allocate long-duration government bonds.

Equity investment is the decisive factor in stabilizing and enhancing investment performance. We will adhere to a principle of seeking progress while maintaining stability, continue to focus on OCI high-dividend stock allocation, and simultaneously target growth opportunities embedded in the "15th Five-Year Plan." We will strengthen research on key industries and sectors, prudently plan TPL stock allocation, and build an equity investment portfolio that achieves long-term stable performance, possesses market competitiveness, and is more balanced.

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

In terms of alternative investments, PICC Group made breakthroughs in asset securitization and real asset investment in 2025, actively promoting innovation and transformation in alternative investments. The scale of exchange-traded ABS issued throughout the year ranked first among insurance asset management peers.

In 2025, we also successfully established the industry's first "PICC Modern Industrial Fund" focused on the development of new productive forces, with a scale of RMB 10 billion, providing strong financial support for the development of technology enterprises.

How to Effectively Hedge Against the Impact of Declining Interest Rates?

Net investment income is an important cornerstone for the group's stable investment returns, primarily including interest income from fixed-income assets and dividends from equity assets such as stocks, accounting for nearly 70% of total investment income.

In recent years, with the decline in the interest rate center, the yield on 10-year government bonds has fallen from 2.84% at the end of 2022 to 1.85% at the end of 2025, a decrease of nearly 100 basis points over three years, posing significant pressure on insurance fund investments, especially traditional fixed-income asset allocation.

Facing these challenges, the group has continuously optimized its asset allocation and investment strategies, focusing on stabilizing net investment income, which has effectively maintained the group's investment income level.

In 2025, the group achieved a net investment income of RMB 58.7 billion. The average net investment yield over the past three years reached 4.0%, leading the industry, and effectively covered the cost of liabilities during the same period.

We have primarily addressed the impact of the low-interest-rate environment through the following three approaches:

First, strengthening active fixed-income investment management, honing strengths, and striving for excellence. We will further enhance our judgment on medium- to long-term interest rate trends, continuously improve our refined tactical trading capabilities, seize high interest rate points, and increase allocations to long-duration bonds. This will not only narrow the duration gap but also generate stable coupon income, thereby increasing the contribution of fixed-income assets to overall returns.

Second, increasing the contribution of high-dividend stocks to net investment income. In 2025, the scale of the group's OCI stock investments increased by 158% compared to the beginning of the year, with its proportion in investment assets rising by 2 percentage points. The average dividend yield of OCI stocks held reached 4.27%, further boosting dividend income's contribution to net investment income. We have also strengthened the long-term investment orientation of equity investments, innovatively establishing a strategic stock investment portfolio to seize long-term investment opportunities in high-quality assets aligned with national strategic directions. The strategic stock portfolio's net value increased by over 40% for the year, laying a solid foundation for achieving stable investment returns that transcend market cycles.

Third, promoting the transformation of alternative investments and establishing a new "growth pole" for stable income. We will focus on solidifying debt investments, strengthening equity investments, and optimizing real asset investments, actively seeking alternative asset investment opportunities that offer stable cash returns. In 2025, innovative projects accounted for 37% of the group's new alternative investments, and several market-first and industry-influential investment projects were successfully implemented.

Judgment on Interest Margin Loss Risk

PICC Life's "Good Start" campaign this year has been generally positive, with significant growth in both first-year and ten-year-plus premium policies. Specifically, the growth rate of first-year premiums ranked first among the "old seven" companies. The sales force has also seen stable growth in numbers and improved quality, with average monthly active individuals increasing by over 10% and average monthly diamond-level individuals increasing by nearly 50%.

In recent years, the industry has taken proactive measures such as reducing liability costs, deepening the "reporting and execution consistency" principle, and promoting the entry of long-term funds into the market. Consequently, interest margin loss risk has been somewhat alleviated. In 2026, PICC Life will leverage new economic growth drivers, focusing on both asset and liability sides to systematically enhance its ability to prevent and mitigate interest margin loss risk, further reducing such risks.

(Editor's note: Interest margin loss risk refers to the risk where investment returns cannot cover liability costs.)

On the liability side, we will continue to optimize the business structure, reduce liability costs, and build a diversified revenue system. First, expand new policy scale to dilute existing costs. Increase the promotion of new policies; through the accumulation of low-cost new policies, reduce the proportion of existing high-cost liabilities. Second, build diversified revenue streams to reduce reliance on interest margins. Increase the supply of floating-rate products, reduce rigid liability costs by utilizing interest rate risk-sharing and profit-sharing mechanisms; strengthen the promotion of protection-type products, improve claims management, and increase mortality and morbidity gains; implement "reporting and execution consistency" and strengthen refined expense management to increase expense margin contributions. Third, strengthen duration matching to build a solid defense against interest margin loss. Dynamically and prudently determine policy guaranteed interest rates, dividends, and universal account interest crediting levels based on market conditions and investment returns; match the duration characteristics of different accounts and strengthen asset-liability duration gap control.

On the asset side, optimize asset allocation, enhance investment returns, and strive to contribute excess returns. First, use asset allocation as a handle, adhere to an absolute return orientation, adapt to market styles for rebalancing, and strive to contribute excess returns through diversified investment strategies and flexible operations. Second, establish a two-level investment research mechanism to strengthen the conversion of achievements. Closely monitor the dynamics of held assets, seize market opportunities in a timely manner, and strive for higher returns. Third, strengthen the penetration management of accounts and formulate targeted allocation and management strategies. Fourth, strengthen investment risk control and firmly adhere to the risk bottom line.

In the future, we will continue to strengthen asset-liability management, reduce liability costs, effectively control the asset-liability duration gap, actively prevent and resolve interest margin loss risks, and resolutely maintain the bottom line of preventing systemic risks.

Considerations for Dividend Policy

PICC has always attached great importance to shareholder returns, maintaining the continuity and stability of cash dividends. In 2025, the group's full-year dividend per share was RMB 0.22, a year-on-year increase of 22.2%; the property and casualty insurance segment's full-year dividend per share was RMB 0.68, a year-on-year increase of 25.9%. The compound annual growth rate of cash dividends for the group and property and casualty insurance over the past three years was 18.8% and 17.9%, respectively. The current dividend policy primarily considers the following factors:

First, comprehensively consider the differences between new and old accounting standards. Currently, regulatory bodies and competent authorities still manage and assess based on the old standards. Our 2025 dividend distribution continues to be based on the old standards, with the group's dividend payout ratio maintained above 30% and the property and casualty insurance segment's dividend payout ratio above 40%.

Second, fully consider capital constraints. Since the implementation of the new standards, increased volatility in net profits of listed insurance companies has become a common operational characteristic across the industry. The group's dividend funds are primarily derived from profit distribution by subsidiaries. Currently, there are significant profit differences between insurance subsidiaries under the new and old standards. If we simply use net profit under the new standards as the basis for dividends, it will directly affect the core capital strength and solvency adequacy levels of insurance subsidiaries, ultimately impacting 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 consistently pursue. We will deepen our core insurance business, continuously improve quality and efficiency, strengthen asset-liability management, and enhance performance evaluations. By exerting synchronous efforts on both the liability and investment sides, we will strive for continuous and stable profit growth, repaying the trust and support of our investors.

Strategic Plan for PICC Health

In 2025, PICC Health's premium scale surpassed the RMB 50 billion mark, achieving premium income of RMB 56.266 billion, a year-on-year increase of 15.5%. Net profit under the new accounting standards was RMB 8.182 billion, an increase of 42.8% from the previous year. ROE under both new and old standards has remained in double digits for three consecutive years. The company's profitability remains at a good level, primarily due to the following reasons and practices:

First, continuous optimization of business structure. We have consistently adhered to the core of protection-based insurance. The business scale of long-term medical insurance and other protection-oriented products accounts for a high proportion, and their profitability is relatively stable. In 2025, the proportion of protection-based business exceeded 78%, making it relatively less affected by capital market fluctuations. Insurance service performance contributed over 80% to profits.

Second, continuous upgrading of products and services. We have strengthened the construction of three product innovation laboratories in collaboration with China Re P&C, Swiss Re, and Intact Health, establishing a health insurance product system covering all age groups and life cycles. We developed 69 new products throughout the year, including the "Good Doctor · Long-term Medical (Flagship Edition)" which has been comprehensively upgraded in terms of hospital network, drug and medical device coverage, and health management services, playing an industry-leading role. Internet channels acquired 5.65 million new customers annually, solidifying the foundation for sustainable development.

Third, continuous deepening of technological innovation. We have accelerated the company's digital transformation, closely integrating technological innovation with application scenarios, strengthening the intelligent application of internet insurance, and enhancing digital empowerment in areas such as customer acquisition, product development, online claims settlement, customer service, and customer mining.

Fourth, continuous improvement in cost reduction and efficiency enhancement. In the past five years, the comprehensive claim payment ratio for short-term insurance has continuously improved, decreasing by a cumulative 6.61 percentage points. We have continuously strengthened cost awareness, persistently reduced non-rigid expense expenditures, and compressed fixed costs such as office spaces. While continuously increasing the income of grassroots employees, management expenses ratio and comprehensive expenses ratio in 2025 decreased by 0.6 and 0.3 percentage points respectively compared to the previous year. We have strengthened technological empowerment, using robots to replace manual labor, resulting in an average premium per employee exceeding RMB 10 million, a significant year-on-year increase, maintaining a cost-leading advantage.

Fifth, continuous strengthening of asset-liability management. In the fourth quarter of 2025, the quantitative score for asset-liability management (82 points) showed a steady increase compared to the previous year. The duration gap was lower than the industry average, and liquidity was reasonably ample. The company seized market opportunities, realizing gains by timing bond market interest rate lows and equity market highs.

Why Establish a Health Management Subsidiary?

The health management subsidiary is a core component of PICC Group's integrated health and eldercare ecosystem construction, and a critical initiative for professional health insurance companies to achieve "managed care." On August 21, 2025, the China National Administration of Financial Regulation approved the establishment of a health management company, which is the first health management company approved since the establishment of the China National Administration of Financial Regulation.

In the future, PICC Health will leverage the professional health management company as a key driver to better fulfill its dual functions of "health protection + health promotion." It will focus on strengthening its layout in the three major areas of medical care, pharmaceuticals, and rehabilitation nursing, further promoting the transformation of the health insurance business model from traditional expense reimbursement to managed care, meeting diverse customer health needs, and reducing claims costs by playing a risk mitigation role in health management. This will achieve the group's strategic requirement of "building a first-class health insurance company with effective functions, prominent health management advantages, and leading scale and quality."