Insurance -PICC (2328.HK):"PICC Announced October Premium Income under growth, higher, income, Insurance

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Events:
PICC announced October premium income under PRC GAAP.
Our Comments:
•           PICC’s October premium income totaled Rmb6.496bn under PRC GAAP, up 10.2% YoY, slightly higher than the growth of 8.4% in September. Its January~ October premium income rose 16.6% YoY to Rmb88.39bn, lower than 17.2% growth over January~September (Chart 1).
•           With an extremely high proportion of motor insurance business, PICC’s premium income shows a strong correlation with auto sales (Chart 2), and growth in P&C insurance premium income has slowed since 2008 as the main driver of this, compulsory motor insurance, has moderated as new car sales have weakened. This tendency is more obvious in PICC’s YTD premium income growth rate, which has been declining continually since July.
•           Although the YoY growth rate of PICC’s October premium income rebounded a little, with the slight increase in auto sales, the trend of slowing premium growth is obvious and hard to stop.
•           2008 is a very tough year for PICC, in view of deteriorating investment returns and surging combined ratio caused by the intensified price war and frequent natural disasters. Slowing premium growth strengthens our worries about PICC’s underwriting performance. And we maintain our forecast that PICC may suffer net losses on a full-year basis in 2008.
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