UBS has released a research report announcing an upgrade to its investment rating for China Reinsurance (Group) Corporation (01508) from "Neutral" to "Buy," while also raising the target price from HK$1.70 to HK$1.75.

The brokerage forecasts the company's net profit after tax for the first half of the year will increase by 10% year-on-year to 6.9 billion yuan, primarily driven by comprehensive growth in insurance service performance rather than investment income.

UBS has raised its earnings per share (EPS) forecasts for China Re for the years 2026 to 2028 by 8%, 13%, and 7%, respectively, to 0.30 yuan, 0.34 yuan, and 0.35 yuan.

For the first half, UBS estimates property and casualty reinsurance premiums will grow by 2% year-on-year, with domestic premiums increasing by 3%. This growth is supported by a higher proportion of non-auto insurance business, which is expected to outperform the industry, while overseas premiums are anticipated to remain largely stable.

The bank expects China Re's domestic combined ratio to remain roughly stable year-on-year at about 96%, while its overseas combined ratio is projected to improve by 4.5 percentage points year-on-year to 82.5%, primarily due to natural disaster losses being at their lowest first-half level since 2020.

In the life reinsurance segment, UBS anticipates a recovery in insurance service performance, benefiting from the contraction of savings-type business and the release of additional contractual service margins resulting from the early termination of certain contracts.