China Pacific Insurance Earnings: P&C Underwriting Margin Beats Expectation

China Pacific Insurance's, or CPIC’s, 2023 net profit contraction widened to 27% year on year from 24% in the first nine months, due to slowing premium growth on suspension of bancassurance sales and weaker investment return on marked-to-market losses of equity investments. We retain our fair value estimate at CNY 26 per A share (HKD 30 per H share). Full-year new business value, or NBV, increased 30% before the economic assumption changes. The P&C combined ratio, or COR, improved 1 percentage point to 97.7% from 2022, attributable to mitigated expense competition and lower catastrophe loss in the fourth quarter. While NBV and COR beat our expectations, we leave our assumptions largely unchanged. We expect NBV to normalize to high-single-digit growth in 2024, off a high base driven by the buying spree of 3.5% traditional life insurance products in 2023. P&C COR is likely to face increasing claim pressures from fast-growing new energy vehicle policies.