20221031-招银国际-中国财险-02328.HK-Continual_UW_margin_improvement_5页_734kb

PICC P&C (2328 HK) Summary

Core Content Overview

PICC P&C (2328 HK) has demonstrated significant improvements in its underwriting (UW) profit margins and overall financial performance. The company's net profit increased by 30% YoY to RMB25.9bn in the third quarter of 2022, translating to a 98% YoY profit growth in the third quarter alone. The UW profit growth was even more substantial, rising by 246% YoY in the first nine months of 2022, compared to a 53% YoY increase in the first half. This growth is attributed to a declining combined ratio and robust premium growth, with the combined ratio decreasing by 2.4ppt YoY in 9M22 and by 4.7ppt YoY in 3Q22.

Main Points and Key Information

Underwriting Profit Improvements

• Net Profit Growth: Increased by 30% YoY to RMB25.9bn in 9M22.
• UW Profit Growth: Rose by 246% YoY in 9M22, driven by a 3Q22 UW profit turning positive with a QoQ increase of RMB2.85bn compared to a RMB2.2bn loss in 3Q21.
• Combined Ratio: Declined to 96.5% in 9M22 (from 98.9% in 9M21) and to 97.5% in 3Q22 (from 102.1% in 3Q21), indicating strong underwriting performance.
• Premium Growth: Increased by 10% YoY in 9M22 and 11% YoY in 3Q22.

Auto Insurance Performance

• Growth Momentum: Auto business growth improved, with a 8.0% YoY increase in 3Q22.
• Combined Ratio: Dropped to 94.4% in 3Q22 (from 98.8% in 3Q21) and to 95.1% in 9M22 (from 97.4% in 9M21).
• Factors: Strong pricing and service capabilities, along with improved performance in the auto segment.

Non-Auto Insurance Performance

• Profitability: Non-auto business turned profitable in 9M22, with a combined ratio declining to 98.4% (from 101.3% in 9M21).
• Improvement Drivers: Centralized claims management system for agricultural insurance and proactive reductions in high-loss segments like commercial property and liability insurance.
• Agricultural Insurance: UW margin increased by 6.3ppt YoY to 4.9%.
• Commercial Property Insurance: UW margin improved by -10.8ppt YoY on loss and -10.7ppt YoY on combined ratio.

Valuation and Key Risks

• P/E Ratio: Trading at 4.8x P/E FY23E.
• P/BV Ratio: At 0.6x P/BV FY23E.
• Dividend Yield: Approximately 9%.
• ROE: Around 14.4%.
• Target Price: Increased to HK$12.74 from HK$12.62.
• Earnings Forecast: FY22E–24E EPS forecast increased by 8–12%, driven by rebound in premium growth and underwriting margin improvements.

Financial Highlights

Share Performance

Stock Data

Shareholding Structure

Analyst Recommendation

• Rating: BUY (Maintain)
• Target Price: HK$12.74
• Current Price: HK$7.45
• Upside Potential: +71.0%

Auditor

• Auditor: Deloitte

Recent Reports

1. PICC P&C 1H21 performance in line
2. PICC P&C Auto growth pick up; Nonauto UW to improve
3. PICC P&C Expect CoR improvement in FY22
4. PICC P&C CoR improvement in 1Q22
5. PICC P&C Strong beat in 1H22

CMBIG Ratings

• BUY: Stock with potential return of over 15% over next 12 months
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark over next 12 months

Important Disclosures

• The report is not tailored investment advice and should not be relied upon without independent evaluation.
• CMBIGM is not a registered broker-dealer in the United States and the report is intended for major US institutional investors only.
• In Singapore, CMBISG is an exempt financial adviser and may be subject to legal responsibility for the contents of the report to certain investors.