Pacific Securities: Maintain a "buy" rating for PICC P&C (02328) Significant improvement in underwriting profit and significant increase in investment income

The Pacific Securities has issued a research report stating to maintain a "buy" rating on PICC P&C (02328), with forecasted operating income of 5307.17, 5651.13, and 6023.17 billion yuan for the years 2025-2027, net profit attributable to shareholders of 401.53, 439.29, and 484.56 billion yuan, and net assets 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 profits achieving high-speed growth driven by underwriting and investment. With the continuous deepening of the "integration of banking and insurance" policy, the competitive landscape of the industry is expected to further optimize, and the company's leading position will be more solidified. Event: PICC P&C released its 2025 interim report, achieving an original insurance premium income of 3232.82 billion yuan in 2025H1, an increase of 3.6% year-on-year; achieving insurance service income of 2490.40 billion yuan, an increase of 5.6% year-on-year; achieving attributable net profit of 244.54 billion yuan, an increase of 32.3% year-on-year. A proposed interim dividend of 0.24 yuan per share. Key points from The Pacific Securities are as follows: Steady growth in premiums, continuous optimization of channel structure The company's original premium income grew by 3.6% year-on-year, maintaining a leading market share of 33.5% in the industry. Motor insurance premium income grew by 3.4% year-on-year to 144.07 billion yuan, with faster growth in health insurance (+7.9%) and commercial property insurance (+5.7%) in non-motor insurance, while agricultural insurance saw a slight decrease of 3.9% year-on-year due to policy impact. In terms of channel structure, the importance of direct sales channel continued to increase, with premium income growing by 11.3% year-on-year and the proportion increasing by 3.0 percentage points to 43.5%; the proportion of agency channels decreased, reflecting the company's strategic adjustment in channel transformation and cost reduction. The company vigorously promoted the "car + everything" service model, with the penetration rate of individual non-motor insurance business associated with cars increasing by 3.4 percentage points year-on-year to 77%, demonstrating good progress in cross-selling strategies. Improved underwriting profit, significant cost control effectiveness In the first half of 2025, the company's combined ratio (COR) improved by 1.4 percentage points to 94.8% year-on-year, achieving the best level of interim data in nearly ten years. The improvement in COR was mainly driven by costs, with the comprehensive expense ratio decreasing significantly by 3.1 percentage points to 23.0% year-on-year, while the comprehensive loss ratio increased by 1.7 percentage points to 71.8% due to factors such as changes in business structure. The COR for motor insurance improved by 2.2 percentage points to 94.2% year-on-year, achieving underwriting profits of 8.73 billion yuan, a year-on-year increase of 67.7%, which was the main source of underwriting profits for the company. Despite the increase in the proportion of new energy vehicles and the rise in the standard of personal injury compensation leading to an increase in the loss ratio by 1.9 percentage points year-on-year, the company achieved a significant decrease in the expense ratio by 4.1 percentage points through strict cost control, ensuring the enhancement of business profitability. The overall COR for non-motor insurance was 95.7%, a slight decrease of 0.1 percentage points year-on-year; profitability of non-motor insurance showed differentiation, with commercial property insurance performing the most outstandingly, as a result of a decrease in the impact of major disasters in the first half of the year year-on-year, the COR significantly decreased by 9.5 percentage points to 90.1%, agricultural insurance maintained its stability, with a year-on-year decrease in COR of 0.6 percentage points to 88.4%, while health insurance and liability insurance saw an increase in the loss ratio 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 total investment income of 17.26 billion yuan, an increase of 26.6% year-on-year; the total investment income rate (unannualized) was 2.6%, an increase of 0.2 percentage points year-on-year. The growth in investment income was mainly due to the company effectively capturing the structural market trends in the A-share market, increasing equity investment income through flexible day trading operations, and enhancing bond spread income through active management. The company was more proactive in asset allocation, with the balance of equity investments reaching 186.05 billion yuan by the end of the reporting period, accounting for 26.1% of total investment assets, an increase of 1.0 percentage point compared to the beginning of the year; of which stock allocation amount was 65.32 billion yuan, an increase of 1.9 percentage points compared to the beginning of the year to 9.2%.