Fangzheng Securities: Maintains a strong buy rating for PICC P&C, expects the annual premium and COR to continue the trend of improvement

According to the Zhitong Finance APP, Founder Securities has released a research report stating that it maintains a strong buy rating for PICC P&C (02328). The company's premium growth is steady, the combined ratio (COR) continues to improve, and the effectiveness of risk reduction governance is significant, with the operational level on the liability side continuously enhancing; the company's high proportion of OCI stocks actively seizes structured market opportunities, and the investment side is also continuously improving, with asset-liability resonance driving ROE and valuation increases. It is expected that the company's net profit attributable to shareholders will be 45.2 billion, 47.5 billion, and 49.8 billion yuan from 2025 to 2027, with year-on-year growth of +40.6%, +5.0%, and +4.9%, respectively. The current stock price corresponds to a P/B of 1.30/1.20/1.12 times for 2025-2027E. The main points of Founder Securities are as follows: Event: On October 16, PICC P&C released a performance forecast announcement for the third quarter. It is expected that the net profit attributable to shareholders for the first three quarters will increase by 40% to 60% year-on-year. 9M25 profit scale exceeds the total profit for 2024 and sets a historical high According to the company's announcement, the net profit attributable to shareholders for 9M25 is estimated to be between 37.45 billion and 42.8 billion yuan, with a year-on-year increase of 40% to 60%; among them, the net profit attributable to shareholders for 3Q25 is estimated to be between 13 billion and 18.35 billion yuan, with a year-on-year increase of 57.3% to 122.1%. The cumulative profit scale has reached a historical high, and the profit for the first three quarters of 2025 has already exceeded the total profit for 2024 (32.16 billion yuan); based on the net assets for 1H25, the static ROE for the first three quarters is estimated to be between 13.5% and 15.4%, with a simple annualized ROE for 2025E of 17.9% to 20.5%. High profit growth is expected to benefit from COR improvement and rising equity markets The rapid growth of PICC P&C's net profit is expected to benefit from two aspects: ① Significant improvement in underwriting profit: The risk of major disasters in 3Q25 has weakened year-on-year, the impact of the integration of auto insurance reporting and pricing has become apparent, and the effectiveness of risk business governance is significant. It is expected that the COR will significantly improve year-on-year (the estimated COR for 3Q24 is 102.1%), combined with steady premium growth, which is expected to drive high growth in underwriting profit (the company's underwriting profit for 1H25 increased by 44.6% year-on-year). ② Rising equity markets driving an increase in investment income: The company's stock TPL proportion is relatively low (only 25.6% in 1H25), but the proportion of stocks and funds in investment assets reaches 14.5% (with stocks accounting for 9.2%), indicating a high proportion of equity. Combined with the company's optimization of allocation structure, this jointly drives an increase in the scale of investment income. It is expected that the annual premium and COR will continue to improve ① Premium growth is expected to warm up in 4Q25: In the short term, from January to August 2025, the premium income of property insurance companies is 1.22 trillion yuan, with a year-on-year increase of 4.7% (with August's single-month year-on-year increase of 0.9%). The decline in growth rate is expected due to the high base from the previous year, combined with the short-term integration of non-auto insurance reporting and pricing, which may put pressure on growth; however, the company's risk business governance rhythm is ahead of schedule, and product rates are relatively low, combined with the low base of agricultural insurance in 4Q25, it is expected that premium growth may warm up in 4Q25. ② The trend of COR improvement may continue: The weakening of major disaster risks reduces the loss ratio, and the gradual improvement of expense ratios due to the integration of reporting and pricing for various products continues to promote the upward trend of COR, driving underwriting profits to continue to increase Risk Warning: Volatility in the equity market, sudden natural disasters, and underperformance in non-auto insurance sales