UBS Upgrades China Reinsurance to 'Buy', Raises Price Target to HK$1.75
UBS has upgraded its investment rating for China Reinsurance (China Re) from 'Neutral' to 'Buy', while also increasing the price target from HK$1.70 to HK$1.75. The financial institution anticipates that China Re's net profit after tax for the first half of the year will grow by 10% year-on-year, reaching 6.9 billion RMB. This projected growth is primarily attributed to a comprehensive increase in insurance service performance, rather than investment income. UBS has revised its earnings per share (EPS) forecasts for China Re for the years 2026 to 2028 upwards by 8%, 13%, and 7% respectively, setting them at 0.30 RMB, 0.34 RMB, and 0.35 RMB.
UBS estimates that property and casualty reinsurance premiums will see a 2% year-on-year increase in the first half of the year. Domestic premiums are expected to grow by 3%, benefiting from a higher proportion of non-auto insurance business, which is predicted to outperform the industry. Overseas premiums are projected to remain relatively stable.
This report from UBS indicates a positive outlook for China Reinsurance, driven by anticipated improvements in its core insurance operations rather than investment gains. The upgrade in rating and price target suggests confidence in the company's ability to grow its insurance service performance, particularly in domestic markets where non-auto insurance is a key growth driver. The upward revision of future EPS forecasts signals a belief in sustained profitability. Investors may consider how China Re's strategic focus on insurance services, and its performance in both domestic and international markets, aligns with broader trends in the global reinsurance industry, including evolving risk landscapes and the impact of technological advancements on underwriting and claims processing over the next decade.
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