Zhongtai: Maintain "buy" rating for PICC P&C (02328), non-auto insurance "report row unity" opens the second curve of underwriting profitability.

Zhongtai released a research report stating that it maintains a "buy" rating for PICC P&C (02328), with unchanged profit forecasts. It is expected that the net profit attributable to the parent company for the years 2025-2027 will be 33.09, 35.38, and 36.93 billion yuan, with year-on-year growth rates of 2.8%, 6.9%, and 4.4% respectively. The company possesses characteristics of high dividend dividends and an upward trend in business conditions, and valuation multiples are expected to further increase. The implementation of the "combined underwriting and claims settlement" for non-auto insurance will open up a second curve of underwriting profitability. The report points out that the company is actively promoting the integration of underwriting and claims settlement for non-auto insurance, and is early on laying out key work, such as: at the beginning of 2025, guided by the China Insurance Industry Association, a symposium was held in Xiamen hosted by PICC P&C and attended by ten insurance companies organized by People's Insurance Company of China, during which the company proposed to implement the self-discipline requirements of the non-auto insurance industry and explore the integration of underwriting and claims settlement in key areas, striving to create a fair, regulated, and orderly competitive market environment. The company is participating in the development of demonstration products in the first and third-party liability insurance industries, initiating the early stage of non-auto insurance product transformation, and fully launching cost control measures for non-auto insurance. The non-auto insurance combined ratio of PICC P&C in the first half of 2025 was affected by major disasters, leading to a slight decrease compared to the same period last year, down by 0.1 percentage points to 95.7%. Specifically, except for travel insurance (COR: 101.8%) and liability insurance (COR: 103.6%) which suffered underwriting losses, most other major non-auto insurance categories achieved underwriting profits. By optimizing the underwriting strategy for liability insurance, enhancing business risk control for high-risk products, and improving cost efficiency, the company aims to maintain profitability in the non-auto insurance sector. The bank believes that this will further solidify the guidance update for underwriting profitability for commercial non-auto insurance at the beginning of the year. At the 2024 annual performance conference, the company's management adjusted the target combined ratio for auto insurance from around 97% to under 96%, with a target of achieving a combined ratio under 100% for new energy vehicles; the target for commercial non-auto insurance was adjusted from break-even underwriting to under 99%. Assuming the implementation of the "Notice", the bank projects a one percentage point decrease in the comprehensive underwriting expense ratio for non-auto insurance business apart from agricultural insurance and export credit insurance, which could add approximately 1.351 billion yuan in underwriting profits for 2024, representing around 3.6% of pre-tax profits. The bank will continue to monitor the sustainability of improvements in underwriting performance driven by subsequent changes in underwriting rates and actual expense ratios.