PICC P&C Highlights Strong Improvement in Underwriting Margin in Q3 Earnings Alert

PICC P&C’s brief third-quarter earnings alert reported 25% to 30% year-on-year growth in net profits for the first nine months. This indicates 70% to 99% growth in third-quarter net profits, a significant increase from 15% growth in the first half. Our fair value estimate of HKD 11 per share for PICC P&C is unchanged as we believe the company is on track to deliver our full-year forecast net profit growth at around 22% for 2022. We attributed accelerating growth to lower natural disaster-related claims in the third quarter compared with the year-ago period, and improved underwriting margins on reduced traffic and related claims during coronavirus lockdowns. We believe the shares remain undervalued, trading at 0.7 times the 2022 price/book ratio. The stock is the top pick for Chinese insurers due to the favorable industry trend and the company’s strong competitive position in the property and casualty insurance market.