People's Insurance Company of China: Solid premium growth in July, positive mid-year results; actively grasp share price pullback opportunities

From a single-month perspective, the company achieved premium revenue of ￥31.2B in July, +10.4% YoY, the growth rate continuing to pick up since March. The company's auto insurance business achieved premiums of ￥21.4B in July, +8.4% YoY, maintaining a high growth rate; the non-vehicle insurance business achieved premiums of ￥9.8B in July, +15.2% YoY, a higher growth rate compared to previous five months. The company's overall premium growth rate returned to double-digit growth in July, thanks to the continuation of the solid growth trend in auto insurance premiums. China Merchants Securities believes that the company's annual premiums are expected to grow by about 10%, as auto insurance premiums will grow rapidly and the market share of new energy auto insurance will increase.

Starting in March 2022, the sudden outbreak of the epidemic led to a decline in auto insurance premiums from March to May, mainly due to the large impact on auto industry production and sales. The company's car insurance premiums recovered to 8.8% growth in June as a result of a 24%YoY increase in auto sales and continued to grow steadily in July, mainly due to the continued effect of the national policy to stimulate auto consumption, such as the halving of purchase tax on fuel vehicles and the new energy vehicles in the countryside.

In the second half of the year, as the auto industry chain continues to recover and the penetration rate of new energy vehicles continues to rise, there will be subsequent improvements in auto sales, which will in turn drive rapid growth in auto insurance premiums and a continued increase in market share. PICC is expected to achieve better-than-industry growth of 8%-10% due to its scale advantage.

Non-vehicle insurance premiums increased by 15.2% YoY in July and are expected to continue to grow in the context of sustained economic recovery. The company has obvious business advantages, and its non-vehicle insurance business is expected to maintain a growth rate of over 12% for the whole year. From the perspective of the non-vehicle business structure, the company continues to reduce the scale of high-loss insurance to promote structure optimization this year. Meanwhile, the company has built a risk reduction management platform and launched an independent underwriter system to strengthen risk control, thus improving the profitability of the non-vehicle business. China Merchants Securities expects that the overall COR of the non-vehicle insurance business will improve more than expected in 2022, and the COR of the non-vehicle business is expected to narrow down to less than 100% for the year, turning loss into profit.