9M收入同比下降，但超出我们/市场预期

>> Employed by a non-US affiliate of MLPF&S and is not registered/qualified as a research analyst under the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Merrill Lynch entities that take responsibility for this report in particular jurisdictions. BofA Merrill Lynch does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 11 to 13. Analyst Certification on page 8. Price Objective Basis/Risk on page 8. 11680128 China Pacific Insurance Group 9M earnings declined YoY but ahead of our/consensus estimates PO: 37.07 HKD | Price: 28.00 HKD Equity | 29 October 2016 9M earnings: 86% of our/consensus full-year estimates 3Q net profit of RMB2.7bn was down 28% YoY, and 9M net profit of RMB8.8bn was down 4% YoY. We attribute the 3Q earnings drop to more reserve catch-up in response to the decline in the 750-day China Government Bond (CGB) yield. We estimate the extra reserve amount at nearly RMB2-2.7bn in 3Q. It seems the reserve catch-up amount is in line with the 750-day CGB yield decline, and CPIC YTD has not increased or adjusted liquidity premium to smooth the amount of reserve catch-up and earnings. Also, CPIC maintained a relatively stable investment performance, with not much change in investment income in 3Q YoY (investment return around 5%, according to our calculation). We continue to like the company’s fundamental outlook and undemanding valuation. We maintain our Buy rating on CPIC-H share. Improvement in premium mix CPIC continued to focus on agency and long-term regular-pay polices. Agency momentum remained strong, with agency first-year new premiums (FYP) up by 44.6% YoY in 9M16 (+3.8% YoY in 3Q). Overall, regular-pay FYP grew by 40% YoY, accounting for 80% of total FYP in 9M16 vs. 80% in 1H16 and 78% in 9M15. There was no disclosure regarding the value of new business (VNB) growth in the quarterly report. But, given the strong agency premium growth, we remain comfortable with our VNB growth forecast of 40%. Improving surrender rate; solvency margin remains high Surrender rate improved to 0.5% in 3Q16 from 0.7% in 3Q15. Net worth slightly recovered by 3% from 2Q to RMB131bn, with an increase in mark-to-market (MTM) unrealized gain under available for sale. Life’s core solvency margin holds up well at 249%, same as 2Q. P&C: profitable in underwriting P&C premiums grew by 1.1% in 9M, still below the industry average of about 7-8%. Our channel checks suggest that the combined ratio of its P&C business continued to improve and witnessed growth in underwriting profit. But, overall, P&C’s earnings contribution remains relatively small, and it will take time to resume growth momentum. Estimates(Dec) (CNY) 2014A 2015A 2016E 2017E 2018E Reported Net profit (mn) 11,049 17,728 10,320 9,948 9,985 Net profit growth 19.31% 60.45% -41.79% -3.60% 0.37% EPS (HKD) 1.53 2.34 1.30 1.29 1.29 Book value per share (HKD) 16.27 17.57 17.37 18.52 19.15 DPS (HKD) 0.63 1.19 0.66 0.66 0.66 Valuation (Dec) 2014A 2015A 2016E 2017E 2018E Price to book value 1.89 1.66 1.60 1.55 1.50 PER 18.37 11.99 21.49 22.29 22.21 Dividend yield 2.23% 4.26% 2.38% 2.29% 2.30% P/EV 1.18 1.03 0.92 0.78 0.68 Implied new business multiplier 3.53 0.58 -1.19 -2.99 -4.22 Katherine Hu >> Research Analyst Merrill Lynch (Hong Kong) +852 3508 2568 katherine.hu@baml.com Gigi Chen >> Research Analyst Merrill Lynch (Hong Kong) +852 3508 7152 gigi.chen@baml.com Stock Data Rating (H Share) BUY Rating (A Share) NEUTRAL Price (H Shr / A Shr) 28.00 HKD / 29.38 CNY Price Objective 37.07 HKD / 29.47 CNY Date Established 12-Sep-2016 / 12-Sep-2016 Investment Opinion C-1-7 / C-2-7 52-Week Range 23.70 HKD- 34.25 HKD 52-Week Range 22.00 CNY- 30.70 CNY Mkt Val / Shares Out (mn) 35,350 USD / 9,062.0 Market Value (mn) 274,126 HKD Average Daily Value (mn) 26.27 USD Free Float 70.0% BofAML Ticker / Exchange CHPXF / HKG BofAML Ticker / Exchange XCJNF//SHH Bloomberg / Reuters 2601 HK / 2601.HK Bloomberg / Reuters 601601 CH / 601601.SS ROE (2016E) 7.6% Net Dbt to Eqty (Dec-2015A) NA Timestamp: 28 October 2016 02:52PM EDTUnauthorized redistribution of this report is prohibited. This report is intended for ivandu@fuhhwa.com.hk 2 China Pacific Insurance Group | 29 October 2016 iQprofile SM China Pacific Insurance Group Company Sector Insurance - Multi-line Company Description CPIC is the third largest life insurer and non-life insurer in China. The company is a quasi-government owned company, where major shareholders are state owned enterprise & companies related to Shanghai government. CPIC is known for its strength in P&C business and its strong capital position.