Orient Securities has released its first coverage report on Sunshine Insurance Group (06963), assigning a "Buy" rating with a target price of HKD 5.35. The brokerage forecasts the company's net profit attributable to shareholders for 2026 to 2028 at RMB 6.43 billion, RMB 7.41 billion, and RMB 8.26 billion respectively, representing year-on-year growth of 1.9%, 15.3%, and 11.4%. It also projects embedded value to reach RMB 134.48 billion, RMB 152.13 billion, and RMB 173.43 billion over the same period, with year-on-year increases of 11.3%, 13.1%, and 14.0%.

Orient Securities believes that the company's bancassurance channel is driving strong growth in new business premiums and new business value (NBV) in its life insurance segment, while underwriting profitability in core property and casualty (P&C) insurance business is improving. The expansion of investment assets and increased equity allocation are enhancing earnings flexibility.

Bancassurance channel drives simultaneous growth in life insurance scale and value

In 2025, Sunshine Life Insurance achieved total premiums of RMB 102.61 billion, up 27.5% year-on-year, with NBV increasing 48.2% to RMB 7.64 billion and the NBV margin remaining stable at 16.9%. Within this, bancassurance channel new business premiums surged 69.0% to RMB 34.09 billion, while bancassurance NBV rose 64.6% to RMB 4.72 billion, accounting for 61.8% of Sunshine Life's total NBV and contributing the majority of NBV growth. The expansion of bancassurance new business, combined with stable value margins, is jointly driving the growth in life insurance scale and value.

Guarantee insurance disrupts overall P&C underwriting results, while core insurance lines maintain stable profitability

In 2025, Sunshine P&C Insurance's combined ratio increased by 2.4 percentage points year-on-year to 102.1%, primarily due to strengthened provisions for financing guarantee insurance. Excluding guarantee insurance, the combined ratio decreased by 1.0 percentage point to 98.9%, and underwriting profit rose from RMB 0.07 billion to RMB 0.49 billion. The combined ratios for auto insurance and accident & short-term health insurance were 98.2% and 95.6% respectively, generating underwriting profits of RMB 0.48 billion and RMB 0.29 billion, continuing to be the main sources of underwriting profit for the company.

Investment asset expansion and increased equity allocation enhance earnings flexibility, while group embedded value continues to accumulate

In 2025, the company's investment assets grew 16.7% year-on-year to RMB 640.20 billion, with the proportion of stock investments increasing by 1.4 percentage points to 13.7%. Approximately 70% of stock assets are allocated to FVOCI accounts. Dividend income from high-dividend assets and floating gains from FVOCI accounts are helping to alleviate the pressure from declining bond yields. The total investment yield for 2025 increased by 0.5 percentage points year-on-year to 4.8%, while the comprehensive investment yield remained stable at 6.1%. The group's embedded value grew 4.3% year-on-year to RMB 120.78 billion.

Risk factors

The risks include a faster-than-expected decline in long-term interest rates, significant volatility in the equity market, underperformance in life insurance reform, product structure transformation falling short of expectations, an unexpected rise in the P&C combined ratio, weaker-than-expected household income, changes in regulatory policies, and adjustments to actuarial assumptions.