Bottom line: We expect a positive share price reaction to PICC Group and PICC P&C 1H26 results. Net profit was 24%/10% ahead of GSe for PICC Group/PICC P&C, reflecting both better-than-expected underwriting and strong investment results, with the combined ratio improving to 94% in 1H26. Interim DPS increased by 47%/42% yoy, well ahead of both GSe and the Visible Alpha consensus. This reaffirms our view that 1) there is room for further improvements in auto insurance underwriting results, driven by rising NEV mix and reduction in claims frequency; and 2) PICC P&C can sustain its superior ROA relative to peers, given its leading market share and underwriting capabilities.

Having said that, we note that 1) net investment yield declined 30bps for both companies, similar to its peers; and 2) non-auto lines, which showed larger-than-expected improvements in COR, tend to show larger impacts from natural catastrophes. As a result, we expect investors to focus on 1) impact of recent natural catastrophes (e.g. typhoons and floods) on 2H26 underwriting results and FY26 targets; 2) potential for further non-auto line COR improvements in 2027 under tightened expense regulation; and 3) outlook on net investment results.

The companies will jointly host a results conference call on Aug 31, 2026. In addition to the above, we would focus on management comments on 1) FY26 dividend, and 2) auto insurance claims trend, for both claims frequency and claims severity.