Industrial Securities Co.,Ltd. has released a research report stating that SUNSHINE INS (06963) is well-positioned to capitalize on the rapid growth of the bancassurance channel, leveraging its extensive network of cooperative bank outlets, differentiated services, and higher per capita productivity to support overall value growth. The property and casualty insurance segment is actively exiting high-risk business, with the core business's underwriting profitability continuing to improve. Regarding investment strategy, while maintaining a prudent style, the company has appropriately increased its allocation to Texas Pacific Land (TPL) assets, which is expected to significantly enhance short-term investment performance elasticity in a 'slow bull' market. The current P/EV of only 0.27 is at the 23rd historical percentile, indicating a relatively high allocation value. The main points from Industrial Securities are as follows:

Overview: Broadly in Line with Expectations

1) Net profit attributable to shareholders for 2025 increased by 15.7% year-on-year to RMB 6.31 billion, primarily due to income tax effects and in line with expectations.

2) New Business Value (NBV) grew by 48.2% year-on-year, driven by new premium growth, meeting expectations. The NBV margin increased by 0.1 percentage points year-on-year to 16.9%, showing slight improvement.

3) The Group's Embedded Value (EV) increased by 4.3% from the beginning of the year, with growth slowing due to negative contributions from investment return variances and a high base in the same period last year.

4) The Combined Operating Ratio (COR) rose by 2.4 percentage points year-on-year to 102.1%. Excluding guarantee insurance, the COR was 98.9%.

5) The Dividend Per Share (DPS) was RMB 0.19, flat year-on-year and in line with expectations.

Life Insurance: Bancassurance Contribution Rising, Agent Quality Improving

1) NBV from bancassurance and individual agency channels increased by 64.6% and 18.5% year-on-year, respectively. The contribution share of bancassurance NBV rose by 6.1 percentage points year-on-year to 61.8%, becoming the main driver of value growth.

2) New premiums grew by 47.3% year-on-year, with bancassurance new premiums surging 69.0% year-on-year, driving the overall new premium growth.

3) The quality of the agent force is improving. The per capita productivity of the traditional active agent force was RMB 22,000, while the elite force's per capita productivity is more than double that of the traditional force, indicating continuous deepening of the "One Body, Two Wings" strategy.

4) Business quality is steadily improving, with the 13-month and 25-month policy persistency rates increasing by 0.2 and 3.7 percentage points year-on-year to 97.1% and 95.5%, respectively.

P&C Insurance: Proactive Business Restructuring, Core Business Underwriting Profit Improves

1) Original premium income for P&C insurance grew by 0.1% year-on-year. The contribution from non-auto insurance continues to rise, with its share increasing by 1.9 percentage points year-on-year to 46.1%.

2) The COR increased by 2.4 percentage points year-on-year to 102.1%, mainly due to the company's decision to cease new financing guarantee insurance business and prudently set aside provisions, leading the guarantee insurance COR to rise by 30.0 percentage points year-on-year to 129.0%. Excluding guarantee insurance, the COR decreased by 1.0 percentage point year-on-year to 98.9%, achieving an underwriting profit of RMB 490 million.

3) The auto insurance COR decreased by 0.9 percentage points year-on-year to 98.2%, which is expected to be primarily due to improvements in the expense ratio.

Increased Allocation to TPL Assets, Investment Performs Well Amid Strong Equity Market

1) The total investment asset scale at the end of 2025 increased by 16.7% from the beginning of the year.

2) The proportion of equity assets increased by 1.4 percentage points year-on-year to 21.4%, with the share of stocks and equity funds rising by 1.6 percentage points year-on-year to 14.9%.

3) The investment strategy has been marginally optimized. At the end of 2025, OCI (Other Comprehensive Income) stocks accounted for 68.1% of total stocks, primarily as the company has moderately realized gains from early-stage, significantly appreciated OCI stock allocations in recent years, while marginally increasing allocation to TPL assets to enhance investment return elasticity.

4) The estimated full-year price increase for OCI equity instrument investments was approximately +14.1%.

Risk Factors

Key risks include a significant decline in long-term interest rates, a substantial pullback in the equity market, and new policy sales falling significantly short of expectations.