NCI is currently "establishing first and breaking later."

In 2024, Xinhua Insurance, which is expected to "double its performance," successfully extended its growth trend into 2025.

After a collective surge under the "bull market in both stocks and bonds," Xinhua Insurance's revenue and net profit in the first quarter of 2025 grew by 26.15% and 19.02%, respectively, making it the only company outside of China Life Insurance to achieve "double growth."

Breaking it down, Xinhua Insurance performed well on both the investment and liability sides:

First, the investment portfolio withstood market volatility pressure, achieving a 1.1 percentage point increase in total investment return;

Second, the results of liability-side reforms were realized, with premium income growing nearly 30% against the backdrop of a "black opening" in the life insurance sector in the first quarter.

From various core data, Xinhua Insurance has gradually emerged from the shadow of profit growth pressure after 2020;

However, looking further, opportunities also hide challenges such as low underwriting profits. The traditional insurance-dominated product structure continued in the first quarter may bring asset-liability matching pressure in the future.

President Gong Xingfeng summarized the company's dilemma in product selection as a choice between "breaking" and "establishing."

He stated that it is necessary to "establish first and then break," and after increasing market share through traditional insurance business, the company's product center will gradually shift to dividend insurance in the second quarter.

Investment Side "Top Pressure"

The core supporting the "double growth" of Xinhua Insurance's revenue and profit remains considerable investment returns.

The new accounting standards have extended the confirmation period for insurance income, resulting in nearly 30% increase in premiums in the first quarter not contributing significantly to revenue;

According to Xinfeng's calculations, Xinhua Insurance's current underwriting profit (calculated as: insurance service income - insurance service expenses) increased by only 6.38%, placing it in the middle tier among listed peers, with investment income still driving its profit growth.

In the first quarter, Xinhua Insurance's total investment return increased by 1.1 percentage points to 5.7%, with both the return and growth rate ranking among the top in the industry;

Among them, investment income turned around with an increase of 11.491 billion yuan, while fair value changes shrank by 5.005 billion yuan. The combination of the two still resulted in a year-on-year increase of 6.5 billion yuan, directly driving high profit growth.

In the first quarter, where stock-bond differentiation and volatility intensified, it was not easy to "withstand pressure."

In terms of the stock market, the H-share Hang Seng Index and the Hang Seng Technology Index rose by 15.3% and 20.7%, respectively, in the first quarter;

However, the bond market experienced a significant pullback, with the 1-year government bond, 10-year government bond, and 10-year policy bank bond rising by 45, 14, and 11 basis points, respectively.

The stock-bond seesaw differentiation allowed insurance companies to enjoy the growth of equity assets while also facing the high volatility of the bond market.

For example, China Life and Ping An, which had a higher bond position during the period, saw their total investment returns decline by 0.48 and 0.3 percentage points, respectively.

In contrast, Xinhua Insurance's ability to stabilize returns amid market volatility can be attributed to two reasons:

First, timely increase in equity assets, with a bond proportion lower than that of peers.

As early as the beginning of 2024, the company's chairman Yang Yucheng stated that "the Chinese capital market is undergoing a new round of adjustment, and the company believes that the A-share and H-share markets have investment value."

He expressed: "We are optimistic about high dividends and high coupon types, while also focusing on high-tech, industry leaders, new energy, high technology, and large consumption, including resource and mineral categories." This strategy has been maintained subsequently.

NCI has become the A-share insurance company with the largest increase in equity assets in 2024, and its stock position at the end of the year is also the highest among its peers.

Benefiting from this, NCI, whose performance was not impressive before the "924 market," achieved a "doubling" of profits in 2024, maintaining performance growth into the first quarter of 2025.

At the same time, NCI's bond allocation is overall relatively low, and there was no significant increase in 2024;

This made the changes in the bond market in the first quarter have a smaller impact on NCI.

After 2024, NCI continues to maintain a high level of attention to equity assets:

For example, since 2025, NCI has successively increased its stake in the H-shares of Hangzhou Bank and Beijing Enterprises, and has continued to increase its holdings;

Recently, it announced an investment of 10 billion yuan to subscribe to the Honghu Fund jointly initiated with China Life, aimed at investing in the capital market and the real economy.

In addition to differences in investment portfolios, the distinction in the proportion of OCI account assets under the new accounting standards has led to greater fluctuations in NCI's investment income portfolio compared to its peers in the first quarter.

According to the new standards for financial assets based on measurement methods, changes in the market price of OCI accounts are not included in the current profit and loss; when the market value declines, the losses do not appear in the current profit and loss statement, and the same applies to increases.

Xinfeng noted that the proportion of stocks and bonds included in NCI's OCI accounts is lower than that of its peers;

This may lead to NCI's asset portfolio being more sensitive to market feedback, showing greater changes in investment performance.

For example, in early April, during the global stock market "Black Monday" triggered by U.S. tariff trade frictions, NCI may face greater fluctuations in book profit and loss than its peers.

Liability Side "Establish First, Break Later"

Compared to its listed peers, NCI's liability side has been a shortcoming in recent years.

Since 2019, the growth rate of life insurance premiums has declined, and the past land-grabbing strategy is no longer sustainable, with a continuous drop in the scale of agents, leading the industry into a deep transformation phase.

NCI, with its customer base concentrated in third- and fourth-tier cities, is particularly affected.

At the 2022 performance press conference, Gong Xingfeng, who had not yet taken over as president at that time, stated that the company's business and agent scale had both been impacted.

"Rationally, we encourage long-term products, but the frontline feedback is exactly the opposite," Gong Xingfeng said. "Our main customers are those in third- and fourth-tier cities, who are most affected by the pandemic and feel the least certainty; they cannot accept insurance with ten or twenty years of premiums." "The company is very concerned about agents, but no business means no income, and the loss of the team is significant," said Gong Xingfeng.

Adding to the troubles, the management of NCI has frequently changed during this critical transformation period.

In 2019, Liu Haoling, Deputy General Manager of Central Huijin, became Chairman of NCI, and by the end of the following year, he entered the management of China Investment Corporation and exited NCI;

In 2021, Xu Zhibin, the newly appointed Deputy General Manager of Central Huijin, took over as Chairman of NCI, but resigned in September of the following year;

In 2022, President Li Quan, who had previously partnered with Liu and Xu, became Chairman, but left early after less than a year due to reaching retirement age.

Amidst the turbulent personnel changes, NCI frequently adjusted its products, until the new Chairman Yang Yucheng initiated a new round of liability-side reforms in 2023.

In 2024, NCI launched the "XIN Generation" project for the construction of a special agent team, adjusting more than half of the branch heads and expanding the organizational structure adjustments at the third and fourth levels, focusing on the Yangtze River Delta, Guangdong-Hong Kong-Macao, and Chengdu-Chongqing economic circles.

That year, NCI achieved the largest profit growth among A-share insurance companies in a "dual bull" market for stocks and bonds;

However, the growth rate of premiums on the liability side still ranked last among peers, lagging 4.39 percentage points behind the top-ranked Ping An.

By the first quarter of 2025, the effects of the reforms finally began to materialize.

During this period, NCI achieved a premium growth rate of 28% amidst an overall decline of 2.63% in the life insurance industry, far exceeding other listed peers.

Gong Xingfeng believes that the sales strategy dominated by traditional insurance products is currently "establishing first and breaking later."

"In the first quarter, our strategy was to deepen and penetrate traditional insurance, enhancing market penetration and coverage," said Gong Xingfeng.

However, NCI still faces challenges in terms of profits, structure, and other aspects.

According to calculations by Xinfeng, NCI's underwriting profit (insurance service income - insurance service expenses) improved in the first quarter, but the growth rate did not lead the industry.

In the first quarter, commission and fee expenses increased by 50% year-on-year, significantly raising business costs.

NCI stated that the company strictly implements the integration of reporting and operations and has not actively increased commissions.

"The changes in fees are mainly due to the significant growth in business," NCI said, adding that "the company's regular and lump-sum payment businesses both saw substantial growth in the first quarter, which is the main reason for the increase in fees."

Seizing the Dividend Insurance Market

NCI's product structure faces certain challenges.

Since the life insurance industry fully entered the "2 era" in October 2024, the market's attitude towards insurance has undergone subtle changes:

On one hand, the 2% guaranteed interest rate no longer has a significant advantage compared to large deposits;

On the other hand, the recovery momentum in the capital market has diverted funds from the wealth management market.

In this trend, insurance companies have begun to promote dividend insurance, reducing the proportion of guaranteed returns while enhancing competitiveness and promoting asset-liability matching;

Several leading insurance companies have publicly stated that they expect the proportion of dividend insurance in their companies to be around 50% in the future However, the "Glory Xinxiang Zhi Ying Version," a product that will be launched by NCI in 2025, is still a fixed-income increasing whole life insurance product.

The strategy of going against the trend has raised questions among investors regarding NCI's product structure and trends during the performance meeting.

President Gong Xingfeng admitted, "In the first quarter, the company still faces tremendous pressure from the transformation of dividend insurance."

The coverage, payment methods, and dividend mechanisms of dividend insurance products are more complex than traditional insurance products.

The ability to distribute dividends highly depends on the operating conditions of the insurance company, and the explanation of product characteristics and risks places higher demands on the agent team;

From understanding to acceptance, the market requires a certain buffer time.

Gong Xingfeng stated, "Our strategy in the first quarter is to seize the development momentum of the sales team and build up strength. Starting from the second quarter, the transformation of dividend insurance will be an important direction."

NCI may already have the foundational capability to shift towards dividend insurance.

"Firstly, since April, dividend insurance has become the main force of NCI's marketing channels, and secondly, sales agents have been continuously closing large deals." Gong Xingfeng said, "Now the team, training, and products are all in place."

In terms of asset-liability matching requirements for personal insurance, dividend insurance is already an inevitable trend, but the difficulties in the promotion process are also unavoidable;

After officially positioning dividend insurance as the company's "main promoted" product, whether NCI can maintain high growth on the liability side remains to be seen over time