Net profit is expected to increase by more than 60% in the first three quarters. Will PICC Group's performance growth rate hit a ten-year high?

Boosted by the current A-share market, PICC Group (601319.SH) is expected to achieve a nearly 10-year high in net profit growth for the first three quarters.

On October 15th, PICC Group announced that it is expected to achieve a net profit attributable to shareholders of 33.83-37.931 billion yuan for the first three quarters, with a year-on-year growth range of 65-85%.

Net profit growth of over 60% is not common in the history of PICC Group.

Since 2014, only in 2019 did it achieve a 76.3% net profit growth for the first three quarters, as well as a 66.55% full-year net profit growth.

This indicates that PICC Group is approaching a new high in performance growth in nearly 10 years.

Regarding the performance for the first three quarters, PICC Group stated in the announcement that the high profit growth is closely related to cost reduction and efficiency improvement in the past, as well as the current A-share market.

Firstly, the optimization of business structure and effective risk control in the first three quarters have led to significant cost reduction and efficiency improvement;

Secondly, a substantial year-on-year increase in total investment income has driven profit growth.

The performance of each quarter can indirectly verify the above statements.

Based on the announcement data, the net profit growth for the first three quarters of PICC Group is -23.5%, 68.19%, and 169.15-235.08% respectively.

It can be seen that the net profit growth in the third quarter under the current A-share market is the fastest, and the second quarter also saw a high growth rate.

The second quarter's earnings may have benefited from cost reduction and efficiency improvement.

In the first half of the year, the comprehensive cost ratio of PICC Group's auto insurance decreased by 0.3 percentage points year-on-year, and the overall comprehensive cost ratio excluding the impact of major disasters decreased by 0.5 percentage points.

The significant growth in the third quarter is inseparable from the boost of the A-share market.

At the end of the first half of the year, PICC Group had a total stock asset of 44.987 billion yuan, accounting for a 2.9% decrease in the proportion of investment assets year-on-year.

This proportion is not high among A-share listed insurance companies, but it still brings considerable returns.

PICC Group stated, "While consolidating the operational foundation, the group has achieved a substantial year-on-year increase in total investment income due to the impact of the capital market recovery, resulting in a significant increase in net profit compared to the same period last year."

For the topic of equity asset allocation, PICC Group's Vice President Cai Zhiwei once stated at the performance release conference, "Fixed income is the ballast, and equities are the game-changer."

"Equity investment is an important component of the total investment portfolio. The company's proportion of publicly traded equity assets is at a leading level in the industry." Cai Zhiwei said, "In the future, we will focus on new productive forces. We will better grasp the relationships between absolute and relative returns, current and long-term returns, value investment and growth investment."

In horizontal comparison, due to the lower net value and proportion of stock assets in PICC Group, the expected net profit growth for the first three quarters is lower than that of Xinhua Insurance (601336.SH) during the same period.

However, the liability side still maintains a relatively fast growth.

PICC Property and Casualty Insurance premiums increased by 4.6% year-on-year to 428.33 billion yuan, with liability insurance, health insurance, and cargo insurance growing by 11.8%, 8%, and 7.5% respectively; PICC Life Insurance premiums increased by 5.9% to 96.623 billion yuan, with periodical and renewal premiums increasing by 22.4%.

Based on the data for August, it is expected that both the property and life insurance growth rates of PICC Group will be in the middle range among peers.

Regarding the pre-disclosed performance for the first three quarters, PICC Group stated that there are no significant uncertain factors that may affect the accuracy of this performance forecast.

However, due to the impact of capital market fluctuations in the future, whether there will be fluctuations in the full-year profit growth rate remains to be observed