PICC P&C management gives clear 2026 operating guidance, with non-auto growth and combined ratio improvement as the key focus

Overview

This report is a summary of the key points from the FY25 NDR of PICC P&C Company Ltd (2328.HK), focusing on management's comments on 2026 underwriting profitability, auto and non-auto growth, agriculture insurance volatility, expense ratio improvement, new-energy vehicle insurance, dividend policy, and valuation methodology. Overall, the tone is constructive, with the core message being that management provided clear combined-ratio guardrails while continuing to emphasize non-auto growth potential and stable shareholder returns.

Core views

Management expects the 2026 auto insurance combined ratio to be no worse than 2025's 95.3%, and the non-auto combined ratio to be below 100%; even against the low 1Q25 base of 94.5%, 1Q26 is still expected to maintain a healthy CoR. Individual non-auto insurance is the largest potential segment, with premiums already at about RMB 50 billion, a five-year CAGR of about 15%, and the possibility of sustaining that pace over the next five years to reach about RMB 100 billion in 2030. Auto premium growth has recently turned positive, and management expects positive growth to continue in 2026, while full enforcement of expense rules and an improved vehicle mix should further support auto CoR improvement.

Analysis framework

The report takes the form of NDR notes, centered on management guidance and business-line breakdowns, and combines Morgan Stanley's ModelWare framework, a three-stage dividend discount model, and risk scenarios to assess operating quality and valuation support. The focus is not on short-term trading catalysts, but on underwriting discipline, non-auto growth, lower expense ratios, natural disaster risk, and dividend sustainability.

Methodology notes

• Valuation methodThree-stage dividend discount model

  Dividend discount valuation

  The base case uses a three-stage DDM with a cost of capital of 11%; payout ratios are assumed at 40%, 64%, and 80% for 2025-2027, 2028-2033, and after 2033, respectively, corresponding to dividend growth rates of 14%, 20%, and 1%, and implying a 2026E P/B of 1.3x.

• Research frameworkMorgan Stanley ModelWare

  Model-based research framework

  Unless otherwise stated, the metrics in the report are based on the Morgan Stanley ModelWare framework, with some data derived from consensus estimates or Morgan Stanley research assumptions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• PICC P&C Company Ltd（2328.HK）

  The subject company of the report, a Hong Kong-listed P&C name

  Strengths

  Management gave clear 2026 CoR guidance; individual non-auto insurance has strong growth potential; auto premium growth has turned positive; the dividend policy is stable.

  Weaknesses

  Agriculture insurance CoR is affected by catastrophe losses linked to continued rainfall during the autumn grain harvest period and impairment related to local fiscal diversion; natural disasters and competition may pressure underwriting profit.

  Comparison

  The report does not provide a quantitative valuation comparison with peers, but Morgan Stanley's rating framework emphasizes risk-adjusted total return relative to the industry coverage universe.

  Risks

  CoR falling short of guidance, more frequent or more severe natural disasters, and intensifying market competition.

• Individual non-auto insurance business

  Core growth business line

  Strengths

  Premiums have grown at about 15% CAGR over the past five years, are currently about RMB 50 billion, and management expects the momentum to continue over the next five years toward about RMB 100 billion by 2030; CoR is around 92%.

  Weaknesses

  Sustained growth depends on demand, pricing, and expense discipline; if competition intensifies, profitability quality may be affected.

  Comparison

  Management believes it has the greatest potential among the non-auto subsegments.

  Risks

  Growth below expectations, weaker underwriting discipline, and changes in policy or expense conditions.

• Auto insurance business

  Main underwriting business line

  Strengths

  Premium growth has recently turned positive, and management expects positive growth to continue in 2026; full enforcement of expense rules and an improved vehicle mix should still leave room for further CoR improvement.

  Weaknesses

  Industry competition and claims costs may limit margin improvement.

  Comparison

  In new-energy vehicle insurance, 2025 CoR was below 100% and continued to trend down; management believes autonomous driving will not be disruptive to the industry because the related risks will continue to exist.

  Risks

  Rising competition, higher loss ratios, and CoR missing guidance.

Key data

• 2025 auto CoR95.3%Management's 2026 auto insurance CoR guidance is no worse than this level.
• 1Q25 CoR low base94.5%Management still expects 1Q26 CoR to be very healthy.
• Individual non-auto insurance premium scaleabout RMB 50 billionManagement believes this business has the greatest growth potential.
• Target scale for individual non-auto insurancearound RMB 100 billion by 2030This corresponds to maintaining a 15% CAGR for roughly the next 5 years.
• Individual non-auto CoR92%Management said this business CoR remains healthy.
• Non-auto expense ratio improvementdown about 2 percentage pointsApplied non-auto lines have been affected by deregulation, and CoR may continue to benefit over the next 2-3 years.
• Dividend policyP&C 40%, group 30%Management said the payout policy remains unchanged and DPS growth will be maintained over the long term.
• Implied 2026E P/B1.3xDerived from the base-case three-stage DDM valuation.
• Latest historical target price20.7Chart text shows the target price was 20.7 on 2026-02-26, but no current share price or expected upside was provided.

Impact & implications

If management guidance is delivered, the investment case for PICC P&C will be supported by stable underwriting profitability, high-quality non-auto expansion, and dividend growth. In the near term, the main focus is whether 1Q26 CoR remains healthy; over the medium term, investors should watch whether the non-auto expense ratio continues to decline, whether the improvement in auto vehicle mix is realized, and whether agriculture insurance is less affected by natural disasters and local fiscal factors.

Risks

• CoR failing to meet management guidance.
• Higher frequency or severity of natural disasters, especially affecting agriculture insurance.
• Intensifying market competition, weighing on underwriting profit and expense ratio improvement.
• Local fiscal diversion or collection timing leading to volatility in agriculture insurance impairments.
• Non-auto growth or expense ratio improvement falling short of expectations.

What to watch

• Whether 1Q26 CoR remains healthy after the low 1Q25 base of 94.5%.
• Whether 2026 auto CoR stays no worse than 95.3% and non-auto CoR stays below 100%.
• Whether individual non-auto premiums continue to grow at about 15% CAGR and advance toward the RMB 100 billion target.
• Whether the expense ratio decline from non-auto deregulation continues to show through over the next 2-3 years.
• Whether positive auto premium growth and vehicle mix improvement continue.
• Whether DPS growth and the 40% P&C payout ratio are maintained.