How to Seek Stability in a Low-Interest-Rate Era? Analyzing the Offensive and Defensive Strategies of the Four Major Accounts in Investment-Linked Insurance

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As a composite financial product that combines insurance protection with an investment function, unit-linked insurance (investment-linked insurance) fundamentally allows policyholders to allocate their premiums into different investment accounts with varying risk-and-return profiles based on their own risk preferences. With increasing volatility in China’s domestic financial markets and the ongoing low-interest-rate environment, how to scientifically understand and effectively use the multi-account tools of unit-linked insurance has become key for investors to achieve steady asset growth. This article systematically reviews the account types and their characteristics of unit-linked insurance products in China, conducts an in-depth analysis of the investment value and risk-return performance of each account type, and—on that basis—provides investors with strategy recommendations from the perspectives of individual risk preferences, dynamic adjustments to changing market conditions, and long-term risk management, with the aim of helping investors make more reasonable asset-allocation decisions in complex market environments.

1. Account Categories and Characteristics of Unit-Linked Insurance Products in China

Unit-linked insurance (hereinafter “unit-linked insurance”) is a product that blends insurance protection and an investment function. Its core feature is allocating premiums to multiple investment accounts with different risk-and-return characteristics—typically four types: money market, bond-tilted, balanced, and equity. These accounts differ in investment objectives, asset allocation, and risk characteristics.

Money-market accounts, which carry the lowest risk among unit-linked insurance accounts, mainly invest in high-credit short-term fixed-income financial instruments. These accounts primarily invest in government bonds, policy bank bonds, corporate bonds, central bank bills, short-term financing bills, bank deposits, bond repurchase agreements, money market funds, and other fixed-income instruments with remaining maturities of up to 397 days. Taking HSBC Life’s “Money Fund Investment Account” as an example, it mainly invests in money market funds, short-term bonds, and fixed-income instruments such as reverse repurchase agreements. It focuses on short-term interest-rate trends, aiming for stable account value growth. The core characteristics of money-market accounts are maintaining high liquidity while pursuing stable returns. As a feature of a conservative investment tool, it is suitable for parking short-term funds and for risk-averse investors.

Bond-tilted and balanced accounts fall into the medium-risk category. Bond-tilted accounts invest mainly in fixed-income assets such as bonds and bond funds, and allocate a small portion to equity assets to enhance returns. Taking China UnionLife’s “Steady Income Investment Account” as an example, its investments are allocated so that the proportion in bank deposits, bonds, money market instruments, and bond funds is controlled at 25% or above, and the allocation to non-standardized bond products such as infrastructure debt investment plans is controlled at no more than 75%. In the first half of 2025, the bond-tilted accounts’ weighted average return was 1.0%. Balanced accounts adopt a more evenly distributed asset-allocation strategy, with the proportion of equity assets and fixed-income assets roughly equal. A typical representative of this account type is AIA’s “Preferred Balanced Portfolio Investment Account,” where the total investment proportion in stocks and stock-type securities investment funds is the highest, not exceeding 70%, and the minimum allocation proportion to fixed-income assets is 30%. In the first half of 2025, the weighted average return across 47 balanced investment accounts was 1.4%. The differences in balanced-account returns are relatively large; while pursuing higher returns, they also take on corresponding risks.

Equity and innovation-type accounts are the highest-risk portion of unit-linked insurance, with the most potential upside. Equity accounts mainly invest in equity assets such as stocks and stock-type funds, aiming for long-term asset appreciation. Taking AIA’s “Growth Portfolio Investment Account” as an example, its stock and stock-type securities investment funds have an investment proportion of at least 50% and up to 90%, while fixed-income assets are allocated between 10% and 50%. In the first half of 2025, the weighted average return of equity accounts reached as high as 4.8%, significantly higher than other account types.

Table 1: Comparison of Characteristics and Risk-Return Profiles of Different Unit-Linked Insurance Account Types in China

2. Analysis of Investment Value of Different Unit-Linked Insurance Accounts in China

There are significant differences among unit-linked insurance product investment accounts in terms of return performance, risk characteristics, and the environments in which they are suited. Conducting an in-depth analysis of the investment value of each account type helps investors make more reasonable asset-allocation decisions based on their own needs and market conditions. Based on market data from the first half of 2025, the overall unit-linked insurance investment accounts’ weighted average return was 2.5%, but performance diverged clearly across different account types, reflecting their distinct risk-return characteristics and market adaptability.

Return performance and market adaptability of different account types show clear “step-like” characteristics. Money-market accounts, as a safe haven for investors with low risk preferences, have the lowest returns among all account types, but also the highest stability. In a low-interest-rate environment, these accounts face pressure from ongoing downward trends in returns, but their core value lies in protecting principal safety and providing liquidity—not in pursuing high returns. Bond-tilted accounts’ average return is higher than that of money-market accounts, but internal differences are substantial. This large disparity mainly comes from different strategies across accounts in choosing bond types, managing duration, and exposing credit-risk, as well as differences in the allocation ratio to equity assets. Balanced accounts achieve a relatively good trade-off between risk and return by using a balanced allocation of stocks and bonds. In the first half of 2025, their weighted average return was 1.4%, striking a good balance between risk and return. As the highest-risk and potentially highest-return category within unit-linked insurance products, equity accounts recorded a weighted average return of 4.8% in the first half of 2025, which was significantly higher than other accounts. AIA Tianjin-Hong Kong-Macao Greater Bay Area Focused Investment Account ranked first among equity-type accounts with a return rate of 13.2%, demonstrating the advantages of a professional investment team in selecting equity assets. However, within equity-type accounts, about 1/5 of the accounts also had negative returns, with the maximum loss reaching -5.2%, fully revealing that high returns come with high risk.

Investment strategies and asset allocation performance in different environments directly affect the investment value of each account. In a low-interest-rate environment, insurance asset-management institutions generally respond to the dilemma of declining fixed-income asset yields by adopting strategies such as extending duration, locking in yields in advance, and increasing the weight of dividend-type assets in their allocation. Against this backdrop, unit-linked insurance accounts that can flexibly adjust asset allocation and actively seek return enhancement have greater investment value. In periods when the securities market performs well, equity accounts fully leverage their advantage in high equity allocation to achieve substantial returns. It is worth noting that some unit-linked insurance products use a fund-of-funds (FOF) fund investment model: by constructing portfolios through selecting equity fund strategies with stringent internal controls, clear investment strategies, and strong stock-picking capabilities, they improve return stability while controlling risk and enhancing sustainability.

The fee structure’s impact on investment returns is an important dimension in analyzing the investment value of unit-linked insurance. Different unit-linked insurance accounts differ significantly in fee structure, which directly affects investors’ net returns. Taking China UnionLife’s unit-linked accounts as an example, the annual management fee rates for its steady-type, balanced-type, and aggressive-type accounts are 1.5%, 2%, and 2%, respectively. In addition to management fees, unit-linked insurance may also charge initial fees, account conversion fees, and surrender (policy termination) fees. Some unit-linked insurance products specify an entry-account handling fee of 1–1.5%, with investment management fees up to 1.5%. Converting accounts has no fee. If the policyholder holds the policy for more than 5 years, withdrawals are also not charged. This clear and relatively reasonable fee structure helps reduce investors’ holding costs and improves long-term investment returns. When selecting unit-linked insurance accounts, investors should not only look at historical return rates, but also carefully consider how the fee structure erodes long-term returns. They should prioritize products with transparent fees, reasonable levels, and that match the account’s strategy.

3. Investment Implications from Unit-Linked Insurance Products in China

In today’s environment of low interest rates and increased volatility in capital markets, making reasonable allocations to unit-linked insurance accounts requires not only understanding product features, but also combining individual financial circumstances, risk tolerance, and changes in market cycles to develop systematic investment strategies.

A account-selection strategy based on an individual’s risk preference is the primary principle of unit-linked insurance investing. The risk level of unit-linked insurance accounts is typically between medium risk and high risk, and investors should choose appropriate account types based on their own risk tolerance and investment objectives. For investors with lower risk tolerance, money-market and bond-tilted accounts are relatively suitable choices. Although these accounts generally offer lower returns, they have lower volatility, higher principal safety, and are suitable for short-term fund management and value preservation needs. For investors with medium risk tolerance, balanced accounts provide a balance point between risk and return. Through balanced allocation of stocks and bonds, their weighted average return reached 1.4% in the first half of 2025. They participate in capital market growth opportunities while buffering part of the risk through fixed-income assets. For investors with higher risk tolerance, equity accounts provide a choice to pursue higher returns. While these accounts experience greater volatility, their long-term return potential is also more significant, with a weighted average return of 4.8% in the first half of 2025. Investors can allocate these accounts in appropriate proportions to capture excess returns.

Dynamic adjustment of market conditions and account allocation is key to improving unit-linked insurance investment performance. One notable advantage of unit-linked insurance is that investors can flexibly switch among accounts with different risk characteristics based on changes in market conditions, and typically the first few conversions do not charge fees or have lower fee rates. This feature enables investors to adjust asset allocation under different market environments and enhance investment returns. In a bull market environment in the securities market, the allocation proportion to equity accounts can be increased; while in periods of market decline, investors can shift toward bond-tilted or money-market accounts to avoid risk. When market volatility increases or during downturns, reducing the proportion of equity accounts and increasing allocations to balanced or bond-tilted accounts can effectively control asset drawdowns.

Long-term investing and risk management are important aspects that should not be ignored in unit-linked insurance investing. Unit-linked insurance products are suitable for medium- to long-term investing. It is recommended to hold them for 3 years, even 5 years or more. This long-term holding strategy helps smooth out risks caused by short-term market volatility, while also benefiting from the effects of compounding growth. When choosing unit-linked insurance products, investors should fully understand their fee structure and long-term holding requirements to avoid being forced to bear unnecessary losses due to short-term cash needs. In risk management, investors need to recognize that even unit-linked insurance accounts managed by professional institutions may incur investment losses. In the first half of 2025, in the bond-tilted accounts, there were two unit-linked insurance accounts whose investment return rates were below -28%, which fully demonstrates the riskiness of unit-linked insurance investing. Investors should diversify across accounts to diversify risk and avoid over-concentrating funds in a single account or in the products of a single insurance company.

Unit-linked insurance products in China provide investors with a rich set of asset-allocation tools through diversified account types. Investors should fully understand the characteristics and risk-return profiles of each account type, develop reasonable account-selection and dynamic adjustment strategies based on their own circumstances and market environment, and achieve a balance between asset safety and return through long-term investing and scientific risk management.

About the author:

Jieyu Li, Professor at Tianjin Business Vocational College;

Xijun Zhao, Associate Research Fellow at the Institute of Science and Technology Strategy Consulting, Chinese Academy of Sciences.

This article is a phased achievement of the National Social Science Fund Project (24BJY010).