Bottom line: We expect market to react negatively to CPIC’s 1Q25 results, givenetprofit declined 18% yoy olower investment results. Book value declined 10% from4Q24 level, reflecting the impact of a larger decline iliability discount rate ithequarter vs. spot yield. Looking ahead, we see lower book value impact if bond yieldremains stable at current level. However, book value is likely to show yoy decline forFY25 giveweak equity market performance to-date.
　　Life NBV showed strong yoy growth, oboth reported and like-for-like basis, mostlydriveby strong sales ithe bancassurance channel, where first-year premium (FYP)increased 131% yoy. While NBV margiibancassurance channel improved tomid-teelevel iFY24, we believe profitability is more volatile ithis channel, givenbanks have greater bargaining power.
　　We update our estimates to reflect 1Q25 results. Our 12-month SOTP-based targetprices are HK$22.5/Rmb25.0 (vs. HK$23.0/Rmb25.5 previously), implying 0.7X/0.8XFY26E P/B. MaintaiNeutral for CPIC H/A.
　　Key numbers and takeaways:
　　1Q25 net profit was Rmb9.6bn, dow18% yoy, driveby a -23% yoy declinefor life insurance profit. This mainly reflected lower investment results, asannualized/unannualized total investment yield declined 1.2pt/0.3pt yoy to4%/1%.
　　P&C net profit increased by 5% to Rmb2.0bi1Q25, driveby a 0.6ptcombined ratio (COR) improvement to 97.4% during the quarter, likelyreflecting less catastrophe-related losses comparing to same period last year.
　　Excluding underwriting results, investment results was also lower yoy.
　　Shareholders’ equity decreased by 10% qoq to Rmb263.6bi1Q25,reflecting the impact of a larger decline iliability discount rate ithe quarter vs.
　　spot yield. This more thaoffset the 7% increase ibook value i4Q24.
　　Combined, it reflected the impact of the c.40bps decline i10-year bond yieldsince 3Q24.
　　1Q25 Life NBV was Rmb5.8bn, +11% yoy or +39% yoy oa like-for-like basis.
　　The growth was mostly driveby sales volume growth, with FYP up 30% yoy. Inturn, this was driveby strong bancassurance sales, +131% yoy, while agency FYP declined 15% yoy.
　　1Q25 Life & P&C core solvency ratio was 140%/195%, +10pt/12pt qoq.
　　Price Target Risks and Methodology - China Pacific InsuranceWe are Neutral/Neutral rated oCPIC H/A. Our 12-month, SOTP-based target prices areHK$22.5/Rmb25.0, implying 0.7X/0.8X FY26E P/B. We value 1) CPIC Life at 0.9X/1.1XFY26E P/B, based oour ROA projection, and 2) CPIC P&C at 0.9X/1.0X P/B, based onFY26E ROE of 11.4%.
　　Upside risks: agency reform translates into sustained growth icore agent headcount,which cadrive faster-than-expected NBV growth; better-than-expected P&Cunderwriting result, allowing for more capital upstream to the group; a meaningfulrecovery ilong-term bond yields.
　　Downside risks: inability to grow core agent headcount, leading to average orbelow-average NBV growth vs. leading peers; increase iP&C underwriting loss as aresult of increasing competitiofrom medium-sized competitors; lower dividend payoutratio as a result of higher savings product mix and capital consumptioat CPIC Life;decline ilong-term government bond yield.