PICC P&C delivered robust 3Q25 results with net profit reaching RMB15.8bn, up91.5% YoY, inline with the range in profit alert of 57%-122% (CMBI est). Theimprovement was driven by both enhanced underwriting performance and robustinvestment income. In 3Q25, insurance service results surged 3.3x YoY to RMB5.3bn, up 3.28x YoY, and net investment results amounted to RMB 16.6bn, rising61% YoY. CoR improved 2.1pct YoY to 96.1%, with auto/non-auto CoR improvedby 2.0pct/2.5pct YoY to 94.8%/98.0% respectively. Underwriting profit rose 130.7%YoY to RMB14.9bn in 9M25, reaching our full-year estimate (RMB 15bn), with 3QUWP turning positive to RMB 1.85bn (vs. 3Q24: an UW loss of RMB 2.6bn). Theimproved UW profitability in auto and non-auto lines can be largely attributable tothe insurer’s stringent expense control, and we expect in both lines the drop inexpense ratio to more than offset the increase in claims ratio. Total investment yield(unannualized) was 5.4% in 9M25, up by 0.8pct YoY. Considering stronger-thanexpectedinvestment results and improved expense management, we raise ourFY25-27E EPS forecasts by 11%/6%/6% to RMB 1.86/1.94/2.17 (previous: RMB1.68/1.83/2.04) and lift our TP based on P/B-ROE to HK$23.6. Maintain BUY.
Auto CoR improved by stringent cost control. In 9M25, auto CoR fell 2.0pctYoY to 94.8%, with auto insurance revenue edging up 3.7% YoY to RMB 227.6bn. We estimate the auto CoR in 3Q to be 96.1%, slightly higher than the year-starttarget of <96%. Mgmt. mentioned in call that auto CoR improved as the drop ofexpense ratio (-2.7pct) more than offset the rise of claims ratio (+0.7pct). Autounderwriting profit grew 65% YoY to RMB 11.7bn in 9M25, translating into a 57%YoY uptick to RMB 3.0bn in 3Q25. Auto premiums grew 3.1% YoY to RMB 220bn,and mgmt. guided the segment’s premium increase should largely align with theretail auto sales growth at ~3% over years. NEV CoR improved with robust UWprofitability from household vehicles (1H25: 73.4% mix) and strengthenedrepricing on operating/commercial vehicles. Given proactive expense ratiocontrol and optimized UW structure, we adjust our estimates on auto CoRto 95.1% (prev. 95.8%), and trim auto premium growth to 3.2% (prev. 4%).
Non-auto UWP turned positive. Non-auto CoR was 98%, down 2.5pct YoY in9M25, thanks to reduced catastrophic losses on top of a high base and enhancedunderwriting structure. The segment’s UWP reached RMB 3.1bn in 9M25 (vs. aUW loss of RMB 676mn in 9M24). Non-auto premiums grew 3.7% YoY to RMB43.8bn in the quarter, and premiums of A&H, agricultural, liability and commercialproperty lines rose 11.5%/1.3%/0.5%/3.4% YoY. The new regulation on non-autoexpense ratio control from November 1 could be a catalyst for non-auto CoRimprovement in 4Q25E/FY26E, and we estimate the full-year non-auto CoR tobe 99.0%/98.1% in FY25/26E, largely unchanged.
Strong equity market rally strengthened TII. In 9M25, total investment incomeamounted to RMB 35.9bn, rising 33% YoY. Total investment yield (unannualized)edged up 0.8pct YoY to 5.4%, which can be attributable to an increasing scaleand share of the insurer’s equity investment exposure. As of 1H25, the mix in TPLstocks/funds/OCI stocks was at 2.4%/4.6%/6.8% of total investment assets, withTPL equities (7.0%) relatively lower than most peers. Looking ahead, we believethe insurer has ample headroom to enhance its TPL stock allocation vs. equityfunds and OCI stocks, steering the portfolio into a more balanced direction.
Valuation: raise TP to HK$23.6; maintain BUY. The stock is trading at 1.35xFY25E P/B with 3yr forward ROE at 15% and a yield of >4%. Considering theimproved UW structure and upbeat investment performance, we raise our FY25-27E EPS estimates by 11%/6%/6% to RMB 1.86/1.94/2.17 (vs. previous: RMB1.68/1.83/2.04). Maintain BUY, we raise our TP to HK$23.6 based on P/B-ROE,implying 1.7x FY25E P/B.
Downside risks: 1) full-year CoR deteriorates due to worse-than-expectedcatastrophic claims; 2) slower-than-expected auto and non-auto premium growth; 3)the new regulatory action on non-auto expense ratio control takes longer tomaterialize; 4) significant interest rate shock; and 5) heightened stock marketvolatilities, etc.