Company Reports

PICC Group's interim profit growth rebounded to 38% year on year from a 31% contraction in the first quarter, driven by the domestic equity market recovery and an improved combined ratio, or CR.

PICC Group's first-quarter revenue contracted 5% and profit fell 31% due to a volatile stock market and slower premium growth. The total combined ratio improved 0.3 percentage points to 94.2%.

PICC Group's 2025 net profit decelerated to 9% from 29% for the first nine months due to a CNY 176 million loss in fourth-quarter profit as investment return contracted and premium growth slowed.

PICC Group seeks to evolve from a leading property-casualty insurer into a comprehensive one-stop shop for financial services. However, we anticipate pressures on P&C underwriting margins and the underperforming productivity of its agent force.

PICC Group seeks to evolve from a leading property-casualty insurer into a comprehensive one-stop shop for financial services. However, we anticipate pressures on P&C underwriting margins and the underperforming productivity of its agent force.

PICC Group held an investor day on Nov. 7, highlighting its recent developments and outlook for the nonauto and health insurance business and overseas expansion plan.

PICC Group seeks to evolve from a leading property-casualty insurer into a comprehensive one-stop shop for financial services. However, we anticipate pressures on P&C underwriting margins and the underperforming productivity of its agent force.

PICC Group's nine-month 2025 net profit accelerated to 29% year on year, driven by respective 51% and 41% growth in the P&C and health insurance segments, and 37% growth in investment income.

PICC Group's interim net profit rose 14% year on year, driven by respective 39% and 50% growth in the P&C and health insurance segments, while life insurance fell 30% on rising underwriting costs.

PICC Group seeks to evolve from a leading property-casualty insurer into a comprehensive one-stop shop for financial services. However, we anticipate pressures on P&C underwriting margins and the underperforming productivity of its agent force.

PICC Group seeks to evolve from a leading property-casualty insurer into a comprehensive one-stop shop for financial services. However, we anticipate pressures on P&C underwriting margins and the underperforming productivity of its agent force.

PICC Group's first-quarter net profit rose 43% year on year, driven by 93% and 60% growth in the property-casualty and health insurance segments, while life insurance profit fell 4% on rising bond yields.

PICC Group aims to transform from a leading property-casualty insurer into an integrated one-stop shop for financial services. However, we see significant headwinds, given growing pressures on P&C underwriting margin and its lackluster agent-force performance.

We increase our fair value estimate for PICC Group to HKD 4.80 per share from HKD 3.8 per share after the Group reported 88% growth in 2024 net profit driven by 86% increase in investment income. The valuation change factors in 50-80 basis points declines to P&C combined ratio assumptions and 100-200 basis points reductions to life and health loss ratios during our forecast period, driven by management’s higher P&C margin guidance, better-than-expected life and health margins in 2024, and potential regulatory tailwinds in 2025. P&C, life, and health insurance represented 77%, 11%, and 5% net assets of the group. Our fair value implies 1.1, 0.3, and 0.3 times 2025 price/book ratios for P&C, life, and health business, respectively, and a 40% conglomerate discount, which is due to market concerns about the value-dilutive effect of its non-P&C insurance business and lower flexibility in the dividend payout ratio. We believe the stock is undervalued at 0.6 2025 price/book and we now prefer PICC Group over PICC P&C, as the latter is fairly valued.

We retain our fair value estimates for Chinese insurers after a recent regulatory announcement that establishes a dynamic adjustment mechanism for the pricing rate on life insurance products. The current pricing rate remains unchanged, as the latest published reference rate did not trigger the adjustment mechanism. While market concerns over insurers’ spread loss risks are likely to persist, the pricing adjustment mechanism, coupled with recent central bank warnings about risks in China’s overheated bond market—where long-term yields have reached record lows—should help support long-term rates and enhance insurers’ liability cost management.

We maintain our fair value estimate for PICC Group at HKD 3.8 per share, following steady year-to-date insurance revenue growth of 6% and a significant 77% rise in net profit in its third-quarter results. These results align largely with our expectations. Currently, the stock appears fairly valued, trading at 0.6 times 2024 book value and offering a dividend yield of over 4%. This lower valuation compared with peers, which typically trade at 0.7 to 0.9 times book, can be attributed to the value-dilutive effect of PICC's non-property-and-casualty insurance business, which has delivered an average return on equity of 6% over the past three years, versus 13% from its core P&C insurance segment. Nonetheless, we have seen accelerated growth in value of new business, or VNB, over the past two years, driven by favorable industry trends and a low base. A potential upward rerating will likely depend on the group's ability to continue exceeding market expectations in VNB and auto underwriting margins.

PICC Group aims to transform from a leading property-casualty insurer into an integrated one-stop shop for financial services. However, we see significant headwinds, given growing pressures on P&C underwriting margin and its lackluster agent-force performance.

We retain our fair value estimate for PICC Group at HKD 3.8 per share following its 6% and 4% year-on-year growth in insurance revenue and net profit. These results are in line with our full-year forecast of 6.5% and 17% growth for these metrics. The first-half growth in value of new business, or VNB, for life and health insurance exceeded our expectations, surging 91% and 159% year on year. Life VNB growth accelerated from the 82% growth in the first quarter, despite a high base in the second quarter of 2023 driven by last-batch sales of 3.5% pricing insurance products. The bancassurance channel was the key growth driver, with a 250% increase and contributing 49% of life VNB, compared with 33% growth and 50% VNB contribution from the agent channel. Although we expect this strong momentum to continue into 2024, future growth is likely to gradually normalize to levels more in line with peers, as the one-off VNB margin boost from the regulatory commission rate cut in late 2023 will diminish and further rapid growth from a larger base will be challenging. PICC Life and Health's total VNB reached nearly CNY 7 billion, about 1.8 times that of New China Life and 77% of China Pacific Insurance's VNB. We maintain our view that PICC Group's past strong performance was driven by expanding bancassurance sales and favorable change in product mix from a low base, while its agent sales channel still needs time to improve productivity. The stock is undervalued, trading at 0.5 times 2024 book value and offering nearly a 6% dividend yield. Future upward re-rating will depend on whether the company's life VNB can continue to exceed market expectations.

We expect China’s life insurers under our coverage to report a double-digit increase in second-quarter net profits versus the year-on-year contraction in the first quarter. While we expect their new business value growth in the first half will slow from 20%-50% in the first quarter, growth should stay healthy at 10% to 25% thanks to margin improvement and resilient demand for savings products as the deposit rate continues to trend down. We also expect property-casualty underwriting margin to improve from the first quarter, helped by reduced catastrophe losses. Despite the earnings improvement, we expect industrywide headwinds, including falling asset yield, potential commission rate cut in the agent channel, and uncertainty in catastrophe losses, will continue to weigh on investor sentiment.

New China Life, PICC Group, and PICC P&C reported larger-than-peer contractions in first-quarter net profits of 29%, 24%, and 38% year on year, respectively. This was partly due to the high base a year ago as a result of strong investment income for NCI and a record-low combined ratio for PICC P&C. We believe the results are largely in line to achieve our 2024 net profit growth of 19%, 22%, and 20% for PICC P&C, PICC Group, and NCI.