20260504-招银国际-中国财险-02328.HK-Underwriting_resilience_persists_despite_investment_headwinds_6页_770kb

PICC P&C (2328 HK) 1Q26 Company Update Summary

Core Content Overview

PICC P&C, a leading Chinese property and casualty insurer, reported its 1Q26 results, showing resilience in underwriting despite challenges in investment income. The company maintained a strong underwriting performance with a combined ratio (COR) of 94.2%, a slight improvement from 94.5% in 1Q25. However, net profit declined by 23.7% YoY to RMB8.63bn, primarily due to a significant drop in total investment income by 38.4% to RMB4.6bn, which reduced the total investment yield to 0.7% (unannualized), down from 1.2% in 1Q25.

Main Points

• Underwriting Performance:

  • Auto COR improved to 94.2% due to disciplined expense control, slightly below the management's annual target of <96%.
  • Non-auto COR remained stable at 99.9%, with a focus on cost control and profitability across key lines such as A&H, liability, and commercial property.
  • Management expects continued COR improvements from non-auto lines over the next three years, with a potential 0.5pct improvement.

• Premium Income:

  • Auto insurance premium growth was flat at 0.0%, affected by sluggish new vehicle sales and reduced tax incentives.
  • Non-auto insurance premium increased by 2.4% YoY to RMB111.3bn, driven by A&H, liability, and commercial property lines, with agriculture premium declining by 4.3%.

• Investment Income:

  • Total investment income dropped sharply by 38.4% YoY to RMB4.6bn.
  • The insurer is increasing bond allocation to capture long-term yield peaks and is focusing on high-dividend and value stocks to stabilize returns.

• Valuation:

  • The stock is currently trading at 0.91x FY26E P/B, close to its 2-year mean-1STD.
  • Dividend yield stands at 5.7%, with a target price of HK$20, implying 1.36x FY26E P/B.
  • The analyst maintains a BUY rating, with no change in target price.

Key Catalysts for Re-rating

• A rebound in average ticket size for auto insurance.
• Increased new vehicle sales following the rollout of new purchase tax incentives.
• Broader improvements in combined ratio across non-auto insurance lines.

Financial Highlights

• Earnings:

  • Net profit to equity attributable to shareholders was RMB8.63bn in 1Q26, down 23.7% YoY.
  • Profit before tax was RMB10.118bn, down 25.2% YoY.

• Dividend:

  • DPS (dividend per share) is expected to grow to RMB0.72 in 2026E, with a dividend payout ratio of 37.5%.

• ROE:

  • ROE for 2026E is projected at 14.3%, with a slight decline from previous years.

• P/B:

  • P/B (price-to-book) for 2026E is expected to be 0.9x, showing a gradual decline.

Outlook

• Auto premium growth is expected to slow to a low-single digit due to weak new vehicle sales.
• Non-auto insurance is seen as a key driver for premium growth and underwriting profits in 2026E.
• The company is likely to benefit from a convergence of NEV (new energy vehicle) claims ratios to the average level of fuel vehicles.

Share Performance

• 12-month price performance:

  • Absolute: -25.3%
  • Relative: -24.6%

• Market Cap: HK$321,619.3 million

• Average 3-month turnover: HK$509.9 million

• 52-week high/low: HK$19.37 / HK$14.05

Shareholding Structure

• JPMorgan Chase & Co: 9.1%
• Citigroup Inc.: 7.4%

Analyst Certification

• The analyst certifies that all views in the report reflect personal opinions.
• No compensation is tied to the specific views expressed in the report.

CMBIG Ratings

• BUY: Potential return of over 15% over next 12 months.
• HOLD: Potential return of +15% to -10% over next 12 months.
• SELL: Potential loss of over 10% over next 12 months.
• NOT RATED: Stock is not rated by CMBIGM.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Important Disclosures

• The report is not investment advice and should not be relied upon for making investment decisions.
• The information is based on public data and is subject to change.
• CMBIGM is not a registered broker-dealer in the U.S., Singapore, or the U.K. and is not subject to their respective regulations.
• The report is for intended recipients only and cannot be reproduced or distributed without prior consent.