Zhongtai Securities issued a research report maintaining a "buy" rating on PICC P&C (02328) with unchanged profit forecasts. The firm expects net profits attributable to parent company for 2025-27 to reach 330.90, 353.89, and 369.38 billion yuan respectively, representing year-over-year growth rates of 2.8%, 6.9%, and 4.4%. The company combines characteristics of high dividend yields and rising business momentum, with valuation multiples expected to expand further. The implementation of non-auto insurance "report-practice compliance" opens a second growth curve for underwriting profits.
The report indicates that the company actively promotes non-auto insurance "report-practice compliance" and has made advance preparations for key initiatives. For example, in early 2025, under the guidance of the Insurance Association of China and hosted by PICC P&C, a symposium of ten property insurance companies was held in Xiamen. The company advocated for implementing non-auto insurance industry self-discipline requirements, exploring "report-practice compliance" in key areas, and striving to create a fair, standardized, and orderly competitive market environment.
The company participated in developing industry demonstration products for shipping insurance and safety liability insurance, proactively initiated non-auto insurance product transformation work, and comprehensively launched non-auto insurance expense management initiatives.
In the first half of 2025, PICC P&C's non-auto insurance combined ratio (COR) was affected by major disasters and decreased compared to the same period, falling 0.1 percentage point year-over-year to 95.7%. Analysis shows: 1) Except for accident and health insurance (COR: 101.8%) and liability insurance (COR: 103.6%) which recorded underwriting losses, other major non-auto insurance lines achieved underwriting profits; 2) The company optimized liability insurance operating strategies, strengthened risk management for high-risk products, and improved expense utilization efficiency.
Currently, the company's underwriting profits are mainly contributed by auto insurance. The implementation of non-auto "report-practice compliance" opens a second growth curve for underwriting profits. This development is expected to further solidify the updated guidance on commercial non-auto insurance underwriting profitability from early this year.
At the 2024 annual results conference, company management adjusted the auto insurance COR target from the previous "around 97%" to "within 96%", with new energy vehicle COR targeted at "within 100%". The commercial non-auto insurance target was adjusted from the previous "break-even" to "within 99%".
The firm assumes that after implementing the Notice, the combined ratio for non-auto insurance businesses (excluding agricultural insurance and export credit insurance) could decrease by 1 percentage point, which would statically correspond to an increase of approximately 13.51 billion yuan in underwriting profits for 2024, accounting for about 3.6% of pre-tax profits. Attention should be paid to the sustainability of improvements in underwriting performance from subsequent premium rates and actual expense ratios.