A leading domestic private insurance group

Sunshine Insurance was founded in Beijing in 2004. It has been deeply involved in the insurance industry for nearly 20 years. The company strives to provide families with a diversified service system covering the entire life cycle through vertical and horizontal plans and partnership actions, and provide a package of risk solutions for corporate customers. After years of development, it was officially listed on the Hong Kong Stock Exchange in December 2022.

Currently, the company is undergoing comprehensive reforms, and overall efficiency is constantly improving.

In terms of personal insurance, the company continuously optimizes the business structure and transforms to value; in terms of manpower, through differentiated management and hierarchical team management, Sunshine Insurance continuously optimizes the quality of agents and increases production capacity; in terms of production insurance, the company takes the initiative to adjust the non-car insurance business to reduce the scale of guarantee insurance, and also increases the proportion of accident insurance and short-term health insurance by participating in the construction of a medical insurance system; in terms of technology, the company implements comprehensive digital transformation to maintain a stable investment ratio in scientific research every year, strengthen the company's technological capabilities and optimize the application of business processes and data and models.

Life insurance is two-wheel drive, and the business is developing steadily.

(1) In terms of personal insurance: The Group's revenue and profits mainly come from the personal insurance business. In the first half of 2023, the personal insurance business contributed nearly 70% of premium income and more than 80% of net profit. The agent team continued to optimize, and the business quality continued to improve. In addition, new life insurance policies continue to improve, the prepayment ratio continues to rise, and the business is gradually transforming into value.

(2) In terms of financial insurance: The car insurance business is the main driver of financial insurance's performance. The car insurance business gradually escaped the impact of the comprehensive reform, and the premium growth rate changed from negative to positive, accounting for nearly 60% of the company's financial insurance premium income. The non-car insurance business was restructured, the scale of the credit guarantee insurance business continued to shrink, and the share of accident insurance and short-term health insurance gradually expanded. In 2022, the overall comprehensive cost ratio fell 100% for the first time, making underwriting profitable.

We expect that by deepening personal insurance reform, the company will improve the quality of personal insurance services, thereby creating higher business value. At the same time, by promoting financial insurance reform, the comprehensive cost rate of financial insurance will be reduced, and overall profitability will be enhanced. Furthermore, we believe that with the recovery of the capital market, the return on the investment side of Sunshine Insurance is expected to increase, so we have given Sunshine Insurance a target market value of 59.4 billion yuan, corresponding to the target price of HK$5.16 per share. There is still room for 32.3% growth compared to the current closing price of 3.9 yuan on October 30, 2023. First coverage, giving a “buy” rating.

Risk warning: changes in industry policies; increased market fluctuations; corporate reforms falling short of expectations