20210824-招银国际-中国财险-02328.HK-1H21_performance_in_line_4页

PICC P&C (2328 HK) Summary

Core Content

PICC P&C, a leading player in the Chinese insurance sector, reported its 1H21 performance, showing alignment with expectations. Despite a challenging market environment, the company managed to improve its combined ratio by 10 basis points (bps) to 97.2%, outperforming the industry average of 99.6%. The underwriting profit increased by 1.3% YoY to RMB5.4bn, driven by improvements in non-auto business, particularly in credit guarantee insurance.

Main Points

• 1H21 Performance:

  • Profit growth was 25% YoY, in line with estimates.
  • Combined ratio improved to 97.2% (from 97.3% in 1H20), outperforming the industry.
  • Underwriting profit rose to RMB5.4bn, with non-auto business contributing significantly.

• Auto Insurance Segment:

  • Combined ratio deteriorated by 1.9ppt YoY to 96.7%.
  • Premium income declined by 7.8% YoY due to lower premium rates.
  • Management noted that new policies in 2021 have a combined ratio below 98%, indicating stabilization in auto pricing.

• Non-Auto Insurance Segment:

  • Combined ratio improved by 4ppt YoY to 97.9%.
  • Premiums grew by 14% YoY, with a notable 49ppt reduction in the combined ratio of credit guarantee insurance, boosting underwriting profit by RMB3.2bn.
  • Agricultural insurance saw a 15.8% premium growth and a 1.1ppt increase in underwriting margin, leading to a 75.9% YoY growth in underwriting profit.

• Catastrophe Losses:

  • Estimated NAT CAT losses for 3Q21 amounted to RMB3.6bn, with RMB2.8bn net losses from Henan floods.
  • Losses were primarily recorded in auto and home insurance lines.
  • Management indicated that these losses are manageable and not substantially higher than historical averages.

• Outlook for 2H21:

  • Expected to maintain underwriting profitability and outperform industry average and major peers.
  • Auto insurance growth is anticipated to recover in 4Q21.
  • Non-auto underwriting margin is expected to improve YoY as credit guarantee insurance becomes more profitable.

Key Financial Information

Key Ratios

Analyst Recommendation

• Rating: BUY
• Target Price: HK$9.99
• Up/Downside: +52.1%
• Current Price: HK$6.57

Company Overview

• Market Cap: HK$151,918 million
• Shareholding Structure:
  • PICC Group: 68.98%
  • Free float: 31.02%
• Share Performance:
  • 1-month: 0.4%
  • 3-months: -7.7%
  • 6-months: 15.5%

CMBIS 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
• 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

Disclaimer

• This report is not an offer or solicitation to buy or sell any security.
• CMBIS does not provide individually tailored investment advice.
• The information is for the use of intended recipients only and may not be reproduced, reprinted, sold, redistributed or published without prior written consent.
• Past performance does not indicate future performance. Actual events may differ materially from those in the report.
• The value of investments is uncertain and may fluctuate due to market conditions.