This report is read as follows:

The company's net profit and ROE index increased significantly in 2019, and the proportion of short-term protection business in life reinsurance business increased to 30.8%. The reinsurance business structure continued to be optimized, and the profitability and market share of direct insurance business increased.

Summary:

Maintain the target price of HK $1.86 per share and maintain the overweight rating: the company's net profit in 2019 was 6.049 billion yuan, up 62.19% from 4.9% in 2018 to 7.32% in 2018. The overall performance exceeded expectations. Maintain the company's 2020-2022 homing net profit forecast of 7.141 billion yuan, 8.366 billion yuan and 9.831 billion yuan, maintain the target price of HK $1.86 per share, maintain the "overweight" rating.

The property repayment rate is affected by African classical swine fever, and the short-term guaranteed business develops rapidly: in 2019, the comprehensive cost rate of the company's property re-business is 101.76%, an increase of 2.38% over the same period last year, mainly due to the epidemic of African classical swine fever. If the impact of African classical swine fever is excluded, the comprehensive cost rate is 99.32%, the same as in 2018. Benefiting from the overall transformation of the insurance industry, the proportion of domestic protection reinsurance business in the company's personal rebusiness has increased significantly, with the proportion of premium income rising to 30.8% in 2019, up 7.1% over the same period in 2018, and the COR is 97.478% after the short-term insurance business has been subdivided, with stronger underwriting capacity and continuous optimization of the overall business structure.

Dadi property insurance underwriting turned losses into profits, and the market share of direct insurance business increased: in 2019, the total premium income of Dadi property insurance reached 48.73 billion yuan, accounting for 33.2% of the group's total premium income. Driven by the decline in the expense rate, the comprehensive cost rate dropped to 99.89% in 2019, achieving a profit on the underwriting end. In 2019, the market share of direct insurance in property insurance reached 3.7%, an increase of 0.1% over the same period in 2018. The quality and market share of direct insurance business have both improved.

Catalyst: further increase the proportion of short-term guarantee business and improve the underwriting profitability of reinsurance business

Risk hint: COVID-19 epidemic has a greater-than-expected impact on the direct insurance business, reducing reinsurance income; the stock market has fallen sharply, affecting the return of the investment side