CPIC reported 13.5% YoY growth in OPAT, translating to 17.3% YoY growth in 2H22. CPIC Life’s positive quarterly VNB growth sustained into 4Q22 with 30% YoY growth (vs +2.5% YoY in 3Q22), on the back of stable scale of high- productivity agent team and improving productivity. During the analyst briefing, the management indicated that the positive trends of life business sustained into 2M23. On P&C front, overall combined ratio (CoR) declined by 1.7pts YoY to 97.3%, outperforming the industry average (99.0%) and major peers (97.6% of PICC P&C and 100.3% of Ping An P&C), due to better underwriting (UW) performance of non-auto business. The capital position remained sound under C-ROSS 2.0. Looking into FY23, we expect CPIC to record positive VNB growth for FY23, and believe the turnaround in VNB growth and sustainable growth in DPS will support upward re-rating. Reiterate BUY.
　　Life: Positive VNB growth sustained into 4Q22. Thanks to the ongoing　agency upgrade, CPIC Life saw the headcount of high-productivity agents stabilized in 2022, along with 31.7% YoY growth in the productivity of core agency team in terms of FYP. And first-year commission income of core agents grew 10.3% YoY in FY22. The improving productivity and stable core agency team underpinned 13.5% YoY growth of VNB in 2H22, translating into 30% YoY growth in 4Q22. Looking forward, we expect the positive VNB momentum to sustain in FY23.
　　P&C: Both auto and non-auto segments were UW profitable, with non-　auto CoR at 98.1% (vs. 100.6% of PICC P&C and 110.1% of Ping An P&C) and auto CoR at 96.9% (vs. 95.6% of PICC P&C and 95.8% of Ping An P&C). The outperformance of non-auto segment was primarily driven by improved UW margin and premiums growth of agricultural insurance.
　　Dividend payout ratio rose to 39.9% in FY22. Following a reduction of　dividend payout ratio from 50.9% in FY20 to 35.9% in FY21 due to the implementation of CROSS-2.0, CPIC Group raised the payout ratio in FY22, hence DPS increased 2% YoY to RMB1.02 per share in FY22. We expect the payout ratio may further recover after the issuance of capital replenishment tools, i.e. perpetual bonds.
　　Valuation. CPIC-H is trading at 0.3x P/EV FY23E and 0.7x P/BV FY23E, with over 6% dividend yield and 12%+ ROE expected. Looking forward, we believe the turnaround in VNB growth and sustainable growth in DPS will support upward re-rating. Maintain BUY.