Investment business "Great Ambitions"! NCI executives "appear" at the performance meeting to interpret the performance of the Honghu Fund, investment portfolio, and the transformation of dividend insurance

On the afternoon of August 29, NCI held a mid-term performance briefing.

The appearance of NCI's executives attracted particular attention due to the company's investment style in stocks, which is among the most "aggressive" representatives among large listed insurance companies. This is closely related to its business structure—NCI's main business is life insurance.

The funding sources for life insurance business are stable and have a longer duration, making it naturally suitable for withstanding higher volatility, thus providing NCI with greater equity investment space. NCI's annualized total investment return rate for the first half of this year is 5.9%, and the annualized comprehensive investment return rate for the first half is 6.3%, leading among listed insurance companies.

In the first half of the year, NCI achieved operating revenue of 70.041 billion yuan, a year-on-year increase of 25.99%; the net profit attributable to the parent company was 14.799 billion yuan, a year-on-year increase of 33.53%. Regarding the context behind the above performance, NCI's management responded to market concerns.

ZhiShiTang summarizes the key points of the performance briefing as follows for readers.

The Honghu Phase II has completed its position building

Under the overall goal of maintaining the long-term stability and development of the capital market and serving the optimization of the company's asset allocation, starting from early 2024, NCI, under the guidance of the National Financial Regulatory Administration, jointly invested with peers to establish a pilot private equity fund. Since 2024, the pilot fund has consistently adhered to legal and compliant operations, with a stable operating mechanism and orderly governance processes, laying a foundation for the unity of functional goals and market-oriented operations.

As of mid-2025, the Honghu Phase I fund has completed its position building tasks and achieved good returns; by the end of the second quarter of this year, the Phase II fund has completed its main position building, basically achieving its position building goals.

The Phase III fund officially launched in early July and is currently progressing smoothly. If implemented as planned, NCI's cumulative planned investment scale will be 46.25 billion yuan (Phase I, Phase II, and Phase III funds), with the fund size and allocation rhythm matching its functional positioning, providing ample "patient capital" support for subsequent long-term operations.

The investment scope of the Phase III fund is positioned in large listed companies that meet the criteria in the CSI A500 index constituents. The selection of targets adheres to strict standards of "good governance, stable operations, relatively stable dividends, and good liquidity," strengthening the synergy between shareholder returns and fundamental support, ensuring that the portfolio has sustainable dividend cash flow and reallocation space.

[Editor's Note: The full name of the Honghu Phase I Fund is Honghu Zhiyuan (Shanghai) Private Investment Fund Co., Ltd., which officially began position building and investment at the end of February 2024. The manager is Guofeng Xinghua (Beijing) Private Fund Management Co., Ltd., a private platform jointly established by China Life and NCI for investment in A-shares and H-shares, serving as a pilot model for insurance institutions to increase stock market investments. According to ZhiShiTang's research on NCI's semi-annual report, the asset appreciation of the Honghu Phase I Fund currently transferred (meeting relevant accounting standards) is at least 5.684 billion yuan, with profits exceeding 11%.]

Honghu Fund's returns exceed the benchmark

In more than a year of practice, the investment research team of the Honghu Fund has significantly improved its strategy allocation concepts and target selection capabilities, laying a solid foundation for continuous investment and dynamic optimization in subsequent batches From the performance in the first half of this year, the risk indicators of the Honghu Phase I Fund are below the benchmark, and the return indicators are above the benchmark, achieving excess returns while managing volatility and controlling drawdowns, resulting in a "double harvest" of functional and profitability goals. This result reflects the effectiveness of combining long-term capital attributes with disciplined investment, and also verifies the ability to capture multidimensional allocations and structural opportunities under established boundary conditions.

Looking ahead, the pilot fund will adhere to the original policy intention, leveraging the advantages of "long money and long-term investment, patient capital," continuously uphold strict investment discipline, deepen investment research, optimize allocations, and coordinate the dynamic balance between "long-term holding and trading strategies," striving to achieve a higher level of unity between functionality and profitability. Based on the current portfolio structure and the quality of the targets, the company maintains full confidence in the long-term resilience of the pilot fund's performance.

[Editor's Note: On May 22 and July 4, 2025, NCI signed contracts to invest 10 billion yuan and 11.25 billion yuan respectively to subscribe for shares of the Guofeng Xinghua Honghu Zhiyuan Phase II and III No. 1 private securities investment fund established by Guofeng Xinghua Private Equity. Combined with the investment amount from China Life, the total asset scale of the Honghu Fund across three phases has now reached 100 billion yuan.]

Transformation of Dividend Insurance

In terms of dividend insurance, facing the challenge of long-term sales experience deficiency, the company has specially established a risk transformation leadership group and created a dedicated team for promoting dividend insurance sales and account management, facilitating coordinated development between front and back lines. In the first half of the year, the company clarified the positioning of dividend insurance in the customer lifecycle, strengthened the connotation of wealth management, and restructured the training system for the sales team, significantly enhancing the team's knowledge reserves and sales skills. At the same time, a new model of combined sales and multi-dimensional promotion has been formed, with significant results.

Data shows that since the second quarter, the proportion of regular premium income from dividend insurance in the individual insurance channel has exceeded 70%, and the proportion of regular premium income in the bank agency channel has gradually increased to over 30%.

With the reduction of the preset interest rate, the company will position dividend insurance as a mainstream product, continuously deepen the product development of dividend insurance, enhance product competitiveness, and continuously innovate in sales training, customer service, investment management, and ecological construction.

[Editor's Note: Dividend insurance is a product that not only provides protection but also allows policyholders to share in the investment returns of the insurance company (i.e., the insurance enterprise itself). The dividend amount is not fixed but can provide value-added space in the long term. In an environment of declining interest rates and reduced attractiveness of fixed income, the importance of dividend insurance has become prominent and has become a key development direction for many insurance companies.]

Challenges of Insurance Products in a Declining Interest Rate Environment

NCI attaches great importance to addressing the challenges posed by the declining interest rate environment, having established a dynamic adjustment mechanism for product profitability since the beginning of the year, strengthening the linkage between assets and liabilities, promoting diversification and structural optimization of product supply, and enhancing overall competitiveness to support high-quality business development.

Specifically, the company constructs a diversified product matrix, strengthens product portfolio strategies and scenario-based marketing models, and accurately meets the diverse insurance needs throughout the customer lifecycle. At the same time, it actively explores the integration model of "insurance + service," focusing on directions such as "insurance + pension," "insurance + health," and "insurance + financial services," to create one-stop solutions and continuously enhance customer experience In terms of product direction, the company is firmly promoting the transformation of risk and protection-type products, satisfying customers' long-term financial planning and retirement protection needs through increasing amount life insurance, pension annuities, and other insurance types, while also increasing the supply of protection-type products, deeply exploring personalized and differentiated risk protection needs, and providing customers with solutions that cover the entire life cycle.

[Editor's Note: Increasing amount life insurance is a type of life insurance where the coverage amount increases year by year, providing death protection while also having a long-term savings function; pension annuities are insurance types that allow customers to receive regular pension payments after the payment period ends, helping to achieve stable cash flow after retirement.]

Investment Side: Balancing Fixed Income + High Dividend

On the investment side, the company achieved good performance in the first half of the year. This achievement is attributed to the company's accurate judgment of market trends and effective asset allocation. In fixed income, the company continues to maintain strategic determination, strengthening the cross-cycle matching of ultra-long-term bonds, while actively enhancing the trading capabilities of fixed income investments, capturing trading opportunities through a combination of multiple varieties and strategies, striving to enhance overall returns under the "fixed income +" model.

In equity investment, the company places greater emphasis on the allocation value of high dividend stocks. Against the backdrop of declining interest rates, high-quality high dividend stocks not only provide stable cash flow and net investment returns but also smooth profit fluctuations under the new accounting standards by being included in the OCI account, and regulatory policies are encouraging long-term funds to increase their market entry efforts.

[Editor's Note: OCI is the abbreviation for "Other Comprehensive Income" in accounting. The benefit of placing high dividend stocks in OCI is that short-term fluctuations in stock prices do not immediately affect the income statement, allowing insurance companies to receive dividends while making their financial statements appear more stable.]

At the same time, the company is actively laying out "new quality productivity" that aligns with national strategies, supporting the development of strategic emerging industries and future industries.

Regarding the market's high concern about the "stake acquisition" issue, the company stated that it will comprehensively consider factors such as the macro environment, the long-term value of the target, liability matching, and strategic synergy, and make decisions prudently.

Rapid Growth of New Business Value

In recent years, the company's new business value has maintained a rapid growth trend. In 2023, new business value increased by 24% year-on-year, and in 2024, it achieved a significant increase of 106%. In the first half of 2025, it continued to show strong momentum with a year-on-year growth of 58.4%.

Behind this growth are a series of reform measures implemented by the company, including the rapid enhancement of brand influence, continuous improvement of the investment management system, significant enhancement of product competitiveness, the expansion of the marketing team, comprehensive upgrades of the service ecosystem, as well as the comprehensive advancement of talent development, business quality control, and financial technology empowering customer experience.

Specifically, in the first half of the year, new single premium income increased by 65% year-on-year, with a 13-month continuation rate reaching 96.2%, an increase of 1.2 percentage points year-on-year; the 25-month continuation rate showed even more significant improvement, increasing by 6.9 percentage points year-on-year to reach 92.5%. These quality improvements provide strong support for value growth

[Editor's Note: "New Business Value" (NBV) refers to the long-term net profit that insurance companies can generate from new policies sold in the current year, after deducting various costs, discounted to today's value. Simply put, it reflects how much money the new orders received by the insurance company this year can earn in the future. The higher the new business value, the better the quality of the new policies sold, the higher the customer retention, and the stronger the company's ability to make profits in the future.]

Linkage Between Assets and Liabilities

On the liability side, the company uses a dynamic adjustment mechanism for the predetermined interest rate as a core strategy to firmly control the source of liability costs. The predetermined interest rate is a key factor in determining liability costs, and the company continuously adjusts the level of the predetermined interest rate to reduce the guarantee costs of new business.

On the asset side, the company optimizes allocation and enhances investment capabilities as core strategies, fully leveraging the characteristics of insurance funds as "long-term capital and patient capital." On one hand, it continuously improves the professional capabilities of the investment team, flexibly employs multiple strategies for asset allocation, seizes structural opportunities in the capital market, continuously allocates high-quality assets, and establishes a robust equity base to gradually address past shortcomings.

Especially in the long-term allocation areas such as OCI equity assets and unlisted equity, the company actively enriches its base with high-quality equity assets to hedge against interest spread loss risks, achieving a strategic deployment for stable returns.

Asset-liability management is a dynamic and proactive process, and it is a core element in preventing interest spread losses. The company will continue to promote the optimization of the linkage between assets and liabilities, making risk prevention an important strategic direction for the company's development