PICC P&C’s full-year CoR missed, yet FY25E guidance beat. FY24 net profit amounted to RMB 32.2bn, up by 30.9% YoY, in line with our forecast (link). Full- year CoR was worse off to 98.8%, +1.0pct YoY due to a rise of loss ratio (+2.4pct) more than offset an optimized expense ratio (-1.4pct) to 73%/25.8% respectively. Auto CoR was 96.8%, down 0.1pct YoY, meeting the <97% year-start guidance, thanks to a better expense ratio (-2.3pct) offsetting the climb of claims (+2.2pct). Non-auto CoR missed the year-start guidance of <100% to 101.9%, +2.8pct YoY with 2H/4Q-implied CoR at 107.4%/123.6% per CMBI, up by 3.6pct/3.3pct YoY. The mgmt. mentioned in the post-earnings call that in FY24, net claims amounted to RMB 15.6bn, 51.2% higher than the recent 5-year average of RMB 10.3bn and grew 32% YoY compared to FY23. Underwriting profit dropped 44% YoY to RMB 5.7bn, with 4Q ending up in a UW loss at RMB 730mn. During the call, the mgmt. shed light on a strong FY25E CoR guidance, with auto/non-auto CoR expected to be <96%/<99%, a beat. DPS was RMB 0.54 per share, up by 10.4% YoY, with RMB 0.208 from interim dividend and RMB 0.332 for final dividend, indicating a payout at 37.3%. Looking ahead, we are positive about the insurer’s cost-effective CoR mgmt. and sufficient reserves to absorb impact of potential catastrophes. Driven by improved CoR composition, we revise up our FY25-27E EPS forecasts by 6%/11%/18% to RMB 1.58/1.74/1.93, and roll-forward to FY25E net book value to derive the new TP at HK$15.8. Maintain BUY.
　　FY24 pressured underwriting caused by surging claims. In FY24, total insurance revenue was RMB 485.2bn, up 6.1% YoY with auto/non-auto ISR each enhanced by 4.5%/8.8% YoY. P&C CoR was 98.8% in FY24, +1.0pct YoY due to the drag of an increase in loss ratio (+2.4pct) more than offset a lowered expense ratio (-1.4pct). 2H/4Q-implied CoR was worse off to 101.3%/100.6% per CMBI, +1.6pct/+3.1pct YoY. We attribute this to the rise up of non-auto CoR led by heightened catastrophic claims throughout the year. Commercial property/agriculture/A&H’s CoR was up 9.6pct/3.9pct/1.8pct YoY to 113.4%/ 105.2%/99.5%, undertaking a UW loss or close to a breakeven. Auto CoR was better off in 4Q24 to 97.1% (vs 3Q: 97.4%) probably due to effective cost control, and non-auto CoR further deteriorated in 4Q to 123.6% (CMBI est). The mgmt. guided to improve auto/non-auto CoR to less than 96%/99% in FY25E, better than that of the last two year to be less than 97%/100%. We expect FY25E CoR at 97.2% with narrowed expenses to compensate for potential claims hikes.
　　Investment income surged with fair value gains. Total investment income surged 68% YoY to RMB 34.9bn, implying a yield of 5.5%, primarily driven by the fair value gains from allocations to FVTPL equities (up RMB 12.8bn YoY). FVOCI stocks grew 40.4% YoY to RMB 39.2bn, making up to 6% of insurance fund portfolio. Bond investments amounted to RMB 141.3bn, up by 49% YoY. Dividends from FVOCI stocks grew 6.7% YoY to RMB 4.1bn, supported by the insurer’s high-yield stock strategy. The net-off impact on fair value changes in A/L to NAV was 1.9%, up 1.2pct YoY, better performed than most listed peers.
　　Valuation: The stock is trading at 1.09x FY25E P/B, with avg. 3-yr forward ROE at 13.5% and a yield at 4.7%. Considering CoR improvements, we revise up FY25-27E EPS estimates to RMB 1.58/1.74/1.93, +6%/+11%/ +18% YoY, and roll-forward to FY25E net book value to derive a new TP at HK$15.8 (prev. HK$14.0). Maintain BUY. The new TP implies 1.19x FY25E P/B (prev. 1.09x).