Core Viewpoint - The article discusses the impact of declining interest rates on insurance companies' net assets and profits, highlighting the differences between the new and old accounting standards in terms of reserve requirements and profit distribution [1][3][5]. Summary by Sections Impact of New Accounting Standards - In 2024, 17 life insurance companies implementing the new accounting standards reported a net profit of 295.8 billion yuan, while their net assets increased by only 62.3 billion yuan, indicating that reserve increases outpaced the rise in FVOCI assets [1]. - Conversely, 23 life insurance companies not implementing the new standards reported a net profit of 10.4 billion yuan and a net asset increase of 57.1 billion yuan, where the rise in net assets exceeded net profit due to the appreciation of available-for-sale financial assets [3]. Reserve Assessment and Interest Rates - The assessment of insurance reserves is influenced by market benchmark interest rates, particularly the 10-year government bond yield, which has been declining [3][5]. - The decline in interest rates leads to increased reserve requirements, posing challenges to insurance company profitability, although it does not alter the ultimate payout obligations of insurance contracts [5]. Profit Distribution Mechanism - The article presents a simplified model to simulate profit distribution under varying interest rates, suggesting that while reserve increases may depress current accounting profits, they do not affect the ultimate profit of insurance policies [5][20]. - The assessment rate for reserves is based on the current risk-free yield curve, adjusted for tax and liquidity premiums, which reflects the fair value of liabilities [8]. Scenarios of Investment Yield Changes - Three scenarios regarding potential changes in investment yields are discussed: 1. **Investment Yield Unchanged**: If the investment yield remains stable, changes in assessment rates will only affect the timing of profit recognition without impacting ultimate profits [32]. 2. **Investment Yield Decline**: A decline in investment yield due to lower market rates could negatively affect ultimate profits if equity investments also perform poorly [33][37]. 3. **Investment Yield Increase**: If equity investments perform well, it could offset declines in fixed-income yields, potentially increasing overall investment returns [38][41]. Conclusion - The article concludes that while changes in assessment rates primarily affect the timing of profit distribution, the ultimate profit of insurance policies is influenced by the actual investment yield, which may be pressured in a prolonged low-interest-rate environment [42].