During CPIC’s 2020 Investor Day event on 24 Sep, the Company presented transformation achievements of CPIC P/C and outlook on its P&C business development following the comprehensive auto insurance reform.
- Achievements in numbers. Over the past few years, CPIC P/C has made steady progress in business growth and quality. Premium growth was above industry average, up 12.9%/12.3% in 2019/1H20. Underwriting margin also improved along with business expansion. Combined ratio has been falling since 2015 to 98.3% in 2019 and 1H20. Meanwhile, premium structure has become more balanced as a result of the Company’s efforts to develop non-auto business lines. In 2019, non-auto contributed to 29.9% of P&C premium income. Across non-auto business lines, agricultural, guarantee and liability insurance all achieved quality growth in the past few years.
- Technology uplifted underwriting quality. Wide application of technology has strengthened CPIC P/C’s capability in risk management, underwriting approval, claim settlement and other business procedures. Around 40-70% of the decline in claim ratio was attributable to technology assistance.
- Outlook on auto insurance after the comprehensive reform. Auto insurance premium growth and underwriting profitability may face some pressures, since auto insurance is a primary contributor to both premium and profit. However, the Company may be able to offset auto’s slowdown with strong and quality growth of non-auto business lines. It will also explore opportunities to sell non-auto products to its auto insurance clients. Since the reform placed high requirements on insurers’ capabilities, CPIC P/C may also enjoy competitive edge over peers in expense control, claim management and services.
- Maintain BUY. The investor day event exposed us to past success as well as future blueprints of CPIC P/C. We think CPIC P/C will continue to strengthen its footing in P&C insurance market despite challenging market environment posed by the auto insurance reform. CPIC P/C’s government business exposure will also contribute to the Group’s health ecosystem establishment and service platform development. We maintain BUY with TP at HK$33.22.
