20220329-招银国际-中国财险-02328.HK-Expect_CoR_improvement_in_FY22_6页

PICC P&C (2328 HK) Company Update Summary

Core Content Overview

PICC P&C (2328 HK) is a leading player in the Chinese insurance sector, with a focus on property and casualty (P&C) insurance. The report highlights the company's financial performance, underwriting improvements, and future outlook, particularly in the context of the upcoming C-ROSS 2.0 regulatory regime. The stock is currently rated as BUY, with a target price of HK$11.54, indicating a potential upside of +47.4% from the current price of HK$7.83.

Key Financial Highlights

Earnings Summary

Financial Summary

• Gross Written Premiums: Showed consistent growth, with a 3.8% increase in FY21 and expected 10.0% growth in FY22 and FY23.
• Net Profit: Increased by 3.8% in FY21, with a projected 16.7% growth in FY22.
• ROE: Maintained a stable performance, with 11.7% in FY20A and 13.8% in FY24E.
• Core Solvency Margin Ratio: Rose to 266% in FY21, indicating improved financial health.

Key Insights

Auto Insurance

• Combined Ratio: Improved to 97.3% in FY21, outperforming the industry average of 101%.
• Underwriting Profitability: Auto insurance has shown consistent improvement, with the combined ratio decreasing by 0.5ppt in 2H21 and 0.1ppt in 4Q21.
• Premium Growth: Auto business experienced a rebound in premium growth, reaching 13.6% in 2M22.
• NEV Insurance: Launched in Dec 2021, NEV business shows promising underwriting profitability with a combined ratio of 97% in 1Q22, comparable to traditional auto insurance.

Non-Auto Insurance

• Combined Ratio: Increased slightly in FY21, but management expects improvement in FY22.
• Underwriting Challenges: Non-auto business was impacted by higher NAT CAT losses and policy changes in liability insurance, but is expected to improve with a focus on cost control and risk assessment.
• NAT CAT Losses: Expected to normalize in FY22, with potential for floods and droughts in different regions of China.

Investment and Dividend Policy

• Dividend Policy: PICC P&C maintains a progressive dividend policy, with a 40% payout ratio in FY21.
• Capital Position: Despite the impact of C-ROSS 2.0, the company expects sufficient capital to support its dividend policy.

Stock Performance

• Market Cap: HK$150,806 million
• Shareholding Structure: PICC Group holds 68.98%, with 31.02% free float
• Share Performance:
  • 1-month: -1.9%
  • 3-months: -4.1%
  • 6-months: -7.6%
• 12-month Price Performance: Not available in text format, referenced via image.

Analyst Ratings

• CMBIGM Rating: BUY
• Target Price: HK$11.54
• Potential Return: Over 15% over next 12 months

Risk and Disclaimer

• The report is not a recommendation and does not provide individually tailored investment advice.
• It is based on publicly available information and is subject to change.
• There are risks involved in trading any securities, and actual results may differ materially from the report.
• CMBIGM is not liable for any loss, damage, or expense resulting from reliance on this report.
• The report is for the intended recipients only and cannot be reproduced or distributed without prior consent.

Analysts

• Gigi Chen, CFA: Contact: (852) 3916 3739, gigichen@cmbi.com.hk
• Nika Ma: Contact: (852) 3900 0805, nikama@cmbi.com.hk

Regulatory and Legal Notes

• The report is subject to legal and regulatory requirements in various jurisdictions, including the UK, US, and Singapore.
• In the US, the report is intended for major institutional investors only.
• In Singapore, CMBISG is responsible for the legal compliance of the report's distribution.

Conclusion

The report indicates that PICC P&C is well-positioned for improvement in both auto and non-auto insurance underwriting performance in FY22. The company's strong financial position, combined with a progressive dividend policy and expected growth in premium income, supports a BUY rating. The stock is undervalued with a 5.7x P/E and 0.7x P/BV for FY22E, and the recovery in auto insurance and improvement in non-auto business are expected to drive a re-rating of the stock.