1H21 result: NPAT in-line; underwriting profit moderated in 2Q

NPAT +25% YoY to Rmb16 bn in 1H, in line with CSe, implying a slowdown to 11% YoY growth in 2Q (vs 1Q: 41%), mainly due to 43% decline in U/W profit in 2Q. Net loss reserve ratio +3.3 pp HoH to 37.4%. Into 2H, investment outlook is unclear on soft A-share.

Premium +2.6% YoY in 1H, implying 1.5% YoY decrease in 2Q, as key lines decelerated in 2Q: A&H/agriculture/auto: +10/+10/-8.8% YoY (vs +25/+25/-6.7% in 1Q). Credit continued to shrink in 2Q, but at a slower pace. Looking ahead, auto pressure likely to continue in 3Q, but base would get easier from 4Q.

1H CoR improved 0.1 pp YoY to 97.2%, slightly lagging CSe, mainly led by 49 pp decrease in credit CoR. Auto CoR deteriorated by 1.9 pp to 96.7% in 1H, implying 98.7% in 2Q (94.6% in 1Q). Auto CoR pressure should continue in 2H; non-auto supported by improving credit, but weighed by natural disasters and supply chain disruption.

Core/comprehensive solvency ratios strong at 269/309%. We revise FY21/22E EPS by -3%/+3% after factoring in: (1) 1H21 results, (2) falling equity prices in 2H, and (3) better growth of policy-oriented lines. PICC P&C trades at 5.0x P/E and 0.6x P/B (12M fwd).