UBS: Upgrades CHINA RE (01508) rating to "Buy" with expected 10% year-on-year increase in mid-term after-tax net profit.

UBS released a research report stating that the investment rating of CHINA RE (01508) has been upgraded from "neutral" to "buy", with a target price raised from HK$1.7 to HK$1.75. It is predicted that the company's net profit after tax in the first half of the year will increase by 10% to 6.9 billion RMB compared to the same period last year, mainly driven by the comprehensive growth of insurance services performance rather than investment income. UBS has raised the earnings per share forecasts for China Reinsurance for 2026 to 2028 by 8%, 13%, and 7% respectively, to 0.3, 0.34, and 0.35 RMB. UBS estimates that the premium of property and casualty reinsurance in the first half of the year will increase by 2% year-on-year, with domestic premiums growing by 3%, benefiting from the higher proportion of non-auto insurance business. The expected growth rate is expected to outperform the industry, while overseas premiums will remain roughly stable. The bank expects the comprehensive cost ratio of China Reinsurance to stabilize at around 96% year-on-year domestically, while the overseas comprehensive cost ratio is expected to improve by 4.5 percentage points to 82.5%, mainly due to the lowest level of natural disaster losses in the first half of the year since 2020. As for life reinsurance, it is expected that the insurance service performance will recover, benefiting from the reduction in savings-type business and the additional contract service margin release from the early termination of some contracts.