PICC P&C’s Underwriting Profitability Was Pressured by Natural Disasters in 3Q

PICC P&C’s third-quarter results were mixed, in our view. Auto insurance business continued to deliver strong profitability despite the negative impact from the Henan flood, while nonauto insurance business saw broad-based underwriting losses on the occurrence of natural disasters during the third quarter and intensified competition. Net profit growth for the first three quarters slowed to 15.3% year on year from 25% in the first half of 2021. As expected, the declining net profit growth was primarily attributable to increased claims related to the Henan flood in the third quarter that is estimated to be a net loss of CNY 2.8 billion. Growth in the first three quarters net earned premium was largely steady, down 2.1% year on year, versus a 2.4% decline in the first half. As the results were largely in line with our forecast, we retain our fair value estimate of HKD 9 per share for PICC P&C. The results again reflect PICC P&C’s strong cost control and better-than-peer expense management, thanks to its large scale, deep understanding of its vast customer base and distribution strength.