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Investment Thesis　　Why are we bullish on China Pacific Insurance Group (CPIG) now? β attribute of call　option during the economic recovery stage and α feature of liability recovery implied in life insurance industry. Since 2022, CPIG"s transformation effect begins to manifest: growth of new business value (NBV) for life insurance is expected to turn into positive for three consecutive quarters since 3Q22, and the core index of property insurance hit a record high in recent years. After the first wave of stock price rise driven by Covid control measures liberalization, the main logic turns from macro expectations to earnings realization, with investors’ focus switching from asset to liability. 2023 is a key year to test the effectiveness of transformation, and to observe the reshape of oligopoly industry structure into a divergent valuation.　　The first 18-month transformation phase of Changhang Action Programme is expected to finish by the end of June 2023. After the "shock therapy", CPIG"s core　business and financials in 2023 show positive signs. Its new orders and market value are likely to first reach the turning point thanks to 1) Steady increase in human capacity of individual insurance team; 2) Bottoming-out effect of the bancassurance channel; 3) New "product + service" system built around 3 core needs (health, wealth, and retirement). We believe that CPIG"s growth in 2023 may come from: 1) Rising ratio of core talents and income level; 2) NBV Margin reverting to its historical pivot (2023: 21%), driven by increases in installment payment plans and hybrid business; 3) Growing capacity and retention of new customers to enhance the growth. We expect NBV growth of listed insurance companies in 1Q23 to rank as: CPIG (+5%) >China Life (+2%) >PingAn (- 5%) >NCI (-6%). We estimate CPIG"s NBV growth rates to be 8.3%/9.7%/7.3% in 2023- 2025.　　Thanks to its Transformation Programme, CPIG"s ROE of the property insurance segment in 2022 may outperform its peers, achieving the best operating performance　in recent years. We believe that in 2023, the comprehensive cost ratio (COR) of auto insurance is likely to be under pressure, and the non-vehicle claim rate may be quite high due to frequent natural disasters in recent years, even though the Covid control measures have been relaxed. However, we believe CPIG"s ROE should remain at ~12% and improve its contribution to group"s profitability thanks to continuous improvement of quality and efficiency (e.g., auto insurance renewal, agricultural insurance development, non-vehicle development efficiency, per capita productivity, etc.). 　　Earnings Forecast & Rating: We expect CPIG"s net income to be Rmb30.6/34.9/38.3bn in 2023-2025 (original forecast of Rmb32.1/34bn for 2023/2024; newly-added forecast for 2025), with respective YoY growth rates of 28.7%/13.9%/9.7% and corresponding target price of Rmb39.72/share in 2023 with upside potential of 44%. We maintain the Buy rating. 　　Risks: 1) Unsustainable effectiveness of new management program; 2) Impact of chairman retirement on transformation effectiveness; 3) Pandemic resurgence.【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

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