Shenwan Hongyuan Group: Maintains "buy" rating on PICC P&C (023238) Investment-driven profit growth is impressive.

Shenwan Hongyuan Group released a research report stating that they maintain a "buy" rating for PICC P&C (023238), and have raised profit forecasts. The company's performance in both assets and liabilities in the first three quarters exceeded expectations, leading to an upward adjustment of net profit forecasts for 2025-2027 to 481.16/498.83/572.17 billion yuan (previously forecasted at 368.52/408.99/471.24 billion yuan). The company's cost control has continued to show results, with the auto insurance COR remaining low despite major disasters, and the non-auto insurance COR showing better-than-expected improvement. The positive impact of new energy vehicle insurance regulations and the integration of non-auto insurance policies is expected to benefit the liability side of underwriting performance in the future. Key points from Shenwan Hongyuan Group: Double-driving force of assets and liabilities, better-than-expected profit performance The company's net profit for the first three quarters year-on-year increased by 50.5% to 40.268 billion yuan, slightly higher than the central point of the performance forecast (which predicted a net profit year-on-year increase of 40%-60%); in the third quarter, quarterly net profit increased significantly by 91.5% year-on-year to 15.813 billion yuan; optimization of the liability side COR year-on-year, driving a high increase in underwriting profit, benefitting from the rising capital market on the asset side, and the optimized configuration structure amplifying the positive effects of market growth, with a significant increase in total investment income (84.02 billion yuan year-on-year for the first three quarters). COR improvement exceeds expectations, underwriting profit year-on-year increased by 183% The company's original insurance premium income for the first three quarters year-on-year increased by 3.5% to 443.182 billion yuan, while insurance service income increased by 5.9% to 385.921 billion yuan, showing stable performance. Under a favorable structure, cost reduction, and risk control, the comprehensive cost rate for the first three quarters decreased year-on-year by 2.1 percentage points to 96.1%, performing better than expected (the company predicted a decrease of 1.8 percentage points year-on-year), with an improvement in year-on-year increase compared to the first half of 2025 by 0.7 percentage points. The increase in quantity and price together effectively boosted the underwriting profit for the first three quarters year-on-year by 130.7% to 14.865 billion yuan. Continued increase in underwriting profit for auto insurance The company's auto insurance service income for the first three quarters year-on-year increased by 3.7% to 227.632 billion yuan, and the comprehensive cost rate improved year-on-year by 2.0 percentage points to 94.8%, continuing to show strong performance. With a favorable trend in quantity and price, the underwriting profit increased year-on-year by 64.8% to 11.729 billion yuan; in the third quarter, the underwriting profit increased year-on-year by 56.7% to 3.003 billion yuan. Better-than-expected improvement in non-auto insurance COR The company's non-auto insurance service income year-on-year increased by 9.3% to 158.289 billion yuan for the first three quarters, with the comprehensive cost rate improving year-on-year by 2.5 percentage points to 98.0%; the underwriting profit turned from a loss to a profit year-on-year to 3.136 billion yuan (compared to a loss of 0.676 billion yuan in the first three quarters of 2024 due to disasters), exceeding the company's expectations. Impressive investment performance While continuously increasing the proportion of equity allocation, the company has effectively seized equity market investment opportunities, with the annualized total investment return rate for the first three quarters year-on-year increasing by 0.8 percentage points to 5.4%, showing impressive performance. As of the end of September, the company's financial assets classified as AC/FVOCI/FVTPL assets reached 1478.84/2756.55/1412.37 billion yuan (slightly different from the disclosure in the interim report), with proportions of 26.2%/48.8%/25.0%, changing by -0.6%/- 0.9%/+1.5% compared to the previous period.