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Non-auto CoR better than expected; sustain 40%+ payout in next two years

原文出处: 招银国际   贡献者:研报专业户
中国财险(02328)\r

PICC P&C reported solid underwriting combined ratio(CoR)at97.8%,0.3pctlower than our estimate(98.1%),primarily driven by better-than-expected non-auto CoR at99.1%,0.7pct lower than our forecast(99.8%,link).Within the non-auto segment,both individual and corporate businesses implied optimized CoRby-4.3pct and-3.4pct,respectively.We regard this a result of proactive mgt.ofthe P&C forerunner to refocus on businesses of high underwriting profits tocompensate for the RMB13.3bn net loss from natural catastrophes in3Q23.Theauto CoR was96.9%,same to our forecast,which met the guidance of lowerthan97%.Looking ahead,with a benign competitive landscape and economicrecovery,we expect a lift on auto comprehensive loss ratio and a contractedcomprehensive expense ratio at70.6%/26.1%in FY24E,+0.2pct/-0.4%pct thanthat of FY23(Fig.2).Maintain BUY,with new TP(TTM)at HK$11.9implying1.0x FY24E P/B.\r

Auto in-line;non-auto outperformed by individual A&H.Auto premiumsgrew by5.3%YoY to RMB285.6bn raising the insurance revenue by5.3%YoY to RMB282.1bn,representing a conversion rate at98.8%.Despite severenatural catastrophes in3Q23,the insurer still met the year-beg.guidance onauto CoR(97%),to land at96.9%,+2.4pct YoY given the comprehensive loss+2.1pct YoY to70.4%and comprehensive expense+0.3pct YoY to26.5%.This matched with our Feb preview(link),as we expected the auto expenseratio to drop in2H(-1.0pct),esp.in4Q23under tightened regulations.Giventhe long-run auto premium growth driven by new electric vehicles(NEVs),weexpect the NEV profitability turnaround,namely NEV CoR<100%,will unleasha new round of momentum,whereas now NEV commercial CoR is7pct higherthan that of fuel vehicles.We adjust our long-run auto premium growth to5%.On non-auto front,individual A&H achieved RMB1.0bn underwriting profits infirst year given the CoR-2.8pct to97.7%.The line composed of18%of totalpremiums and25%of non-auto insurance revenue to RMB43.7bn,+23.8%YoY by end2023ranking the highest growth among all lines.We expect A&HCoR further contract to<97%,given improved efficiency on expense savings.\r

Sustain40%+promising payout in next two years.The insurer raised DPSby2.3%YoY to RMB0.489per share by end-2023,implying a resilient payoutto44.2%,for the fifth consecutive year of>40%.The mgt.guided to maintaina robust payout of>40%in next two years.As a P&C forerunner,the insurerenjoys natural advantages on A/L mgt.given shorter durations on liability(~1year)vs longer-dated assets(~5years),and resulted in higher-than-peerstotal investment yield at3.5%in2023.Looking ahead,we expect the FY24Edividend yield to reach5.7%,underpinned by a12.3%FY24E ROE.\r

Maintain BUY.The stock is now trading at0.84x FY24P/B.We continue tovalue the stock as a defensive play against macro headwinds amid prolongedlow interest rates,and reiterate it as our sector top-pick.We modestly guidedown the long-term ROE from13.0%to12.8%concerning investmentvolatilities.The new TP from P/B-ROE is HK$11.9,implying1.0x FY24E P/B.
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