Pacific Securities: Maintains "Buy" Rating on PICC P&C, Underwriting Profit Significantly Improved, Investment Income Increased Substantially

According to the Zhitong Finance APP, Pacific Securities has released a research report maintaining a "Buy" rating for PICC P&C (02328), expecting the company's operating revenue for 2025-2027 to be 530.717 billion, 565.113 billion, and 602.317 billion yuan, with net profit attributable to shareholders of 40.153 billion, 43.929 billion, and 48.456 billion yuan, and net asset per share of 12.50, 13.53, and 14.66 yuan. The company's performance in the first half of the year was strong, with rapid profit growth driven by both underwriting and investment. With the continuous deepening of the "integration of reporting and operation" policy, the competitive landscape of the industry is expected to further optimize, and the company's leading position will become more solid.

Event: PICC P&C released its 2025 interim report, achieving original insurance premium income of 323.282 billion yuan in 2025H1, a year-on-year increase of 3.6%; insurance service income of 249.040 billion yuan, a year-on-year increase of 5.6%; and net profit attributable to shareholders of 24.454 billion yuan, a year-on-year increase of 32.3%. It plans to distribute an interim dividend of 0.24 yuan per share.

The main points of Pacific Securities are as follows:

Steady premium growth, continuous optimization of channel structure

The company's original premium income increased by 3.6% year-on-year, maintaining a market share of 33.5%, leading the industry. The premium income from auto insurance increased by 3.4% year-on-year to 144.07 billion yuan, while non-auto insurance, including health insurance (+7.9%) and corporate property insurance (+5.7%), showed rapid growth, whereas agricultural insurance slightly decreased by 3.9% year-on-year due to policy rhythm impacts. In terms of channel structure, the importance of direct sales channels continues to rise, with premium income increasing by 11.3% year-on-year, accounting for an increase of 3.0 percentage points to 43.5%; the proportion of agency channels has decreased, reflecting the company's strategic adjustments in channel transformation and cost reduction. The company is vigorously promoting the "car + everything" service model, with the penetration rate of personal non-auto insurance business accompanying vehicles increasing by 3.4 percentage points year-on-year to 77%, indicating good progress in cross-selling strategies.

Improvement in underwriting profit, significant effectiveness in cost control

In the first half of 2025, the company's COR improved by 1.4 percentage points year-on-year to 94.8%, achieving the best level in nearly a decade for interim report data. The improvement in COR was mainly driven by the expense side, with the comprehensive expense ratio significantly decreasing by 3.1 percentage points year-on-year to 23.0%, while the comprehensive loss ratio increased by 1.7 percentage points year-on-year to 71.8% due to changes in business structure and other factors. The auto insurance COR decreased by 2.2 percentage points year-on-year to 94.2%, achieving underwriting profit of 8.73 billion yuan, a year-on-year increase of 67.7%, which is the main source of the company's underwriting profit. Against the backdrop of an increase in the proportion of new energy vehicles and rising injury compensation standards leading to a year-on-year increase of 1.9 percentage points in the loss ratio, the company has ensured the improvement of business profitability through strict cost control, significantly reducing the expense ratio by 4.1 percentage points. The overall COR for non-auto insurance was 95.7%, a slight decrease of 0.1 percentage points year-on-year; the profitability improvement of non-auto insurance was differentiated, with corporate property insurance performing the best, as the impact of major disasters in the first half of the year decreased year-on-year, leading to a significant decrease in COR by 9.5 percentage points to 90.1%. Agricultural insurance business remained stable, with COR decreasing by 0.6 percentage points year-on-year to 88.4%, while health insurance and liability insurance saw an increase in loss ratios due to changes in business structure, with CORs of 101.8% and 103.6%, respectively Significant Growth in Investment Income, Actively Allocating Equity Assets

In the first half of 2025, the company achieved a total investment income of 17.26 billion yuan, a year-on-year increase of 26.6%; the total investment return rate (not annualized) was 2.6%, an increase of 0.2 percentage points year-on-year. The growth in investment income was mainly due to the company's effective grasp of the structural market trends in the A-share market, which enhanced equity investment returns through flexible trading operations, while also strengthening active management to improve bond spread income. The company has been more proactive in asset allocation, with equity investment assets totaling 186.05 billion yuan at the end of the reporting period, accounting for 26.1% of total investment assets, an increase of 1.0 percentage points from the beginning of the year; among them, the stock allocation amounted to 65.32 billion yuan, with a proportion increase of 1.9 percentage points to 9.2% compared to the beginning of the year