PICC’s 4Q’23 earnings to rebound: UOBKayHian

Improvements in underwriting and reduced natural catastrophe losses contribute to the outlook.

PICC (People's Insurance Company of China) is poised for a positive turn in earnings during the fourth quarter of 2023, supported by enhanced underwriting profit and investment income, according to a research note by UOBKayHian.

Despite a modest 1.7% year-on-year (YoY) growth in premiums, improvements in underwriting and reduced natural catastrophe losses contribute to this positive outlook.

Premium growth was 0.8% YoY on 23 December, with a 6.4% YoY decline in the non-auto segment, reflecting PICC's proactive restructuring. 

Auto premium growth slowed to 3.8% in December, primarily due to a slowdown in passenger vehicle retail sales growth to 8.5% YoY.

CoR targets of 97%/<100% for auto/non-auto are deemed achievable in 2023. Auto CoR is expected to remain stable in 4Q23 due to stricter expense control, offsetting the rising claim ratio following a recovery in travel demand.

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Non-auto is anticipated to achieve an underwriting profit in 4Q23, driven by reduced losses from natural disasters.

Improvement in investment yield is expected despite a gloomy stock market, supported by better bond market performance in 4Q23 and stable dividend income from stock investments.

A new dividend policy is under discussion, considering investor concerns about a potential decline in 2023 net profit impacting upcoming dividend payouts. 

Discussions with the Ministry of Finance aim to make adjustments to the dividend policy, with a possible temporary increase in the payout ratio to maintain the current dividend per share (DPS) level.