<Result first take>: CPIC (2601 HK, BUY): 1Q22 net profit declined 36%, expectations missed
What’s new:
- CPIC (2601 HK, BUY) announced 1Q22 result which posted net profit attributable to shareholders of Rmb5.4bn, declined 36% y-o-y, representing 19% of ours FY22F earnings estimate.
Our views:
- The earnings miss was primarily due to the significant decline in investment income, which posted a 33% decline in 1Q22.
- Gross written premium (GWP) increased 7% to Rmb150bn, CPIC Life GWP increased 4% y-o-y with bancassurance channel premiums grew 893% y-o-y in 1Q22. First-year premium per agent per month has seen rise by 20% y-o-y, indicating the improving productivity.
- CPIC P&C business GWP grew 14% y-o-y in 1Q22 with combined ratio improved 0.2ppts to 99.1%, contributed by the 2ppts improvement of expense ratio
- Investment assets increased 3% y-o-y to Rmb1,867bn in 1Q22, with investment income decreased 33% y-o-y to Rmb18bn. Total investment yield/net investment yield slightly down 0.9%/0.2% to 3.7%/3.7%. The company announced increase in long-term fixed income assets allocation to extend asset duration, which we believe will narrow the duration gap and better match liability duration.
- By implementing C-ROSS II Phase 2, core solvency ratio has seen substantial decrease to 113% and the company provided core solvency guidance for the next season to be 107%. Overall, solvency performance remains healthy given the results are substantial higher than regulatory threshold.
- Overall, we maintain BUY on CPIC with TP of HK$30.0.