Industrial: SUNSHINE INS(06963) NBV year-on-year high growth, increased allocation of TPL assets may significantly improve performance flexibility.

Industrial released a research report stating that against the backdrop of the strong expansion of the bank-insurance channel, SUNSHINE INS (06963) is expected to seize the opportunity of the rapid development of bank-insurance with its advantages such as a large number of cooperation points in the bank-insurance sector, differentiated services, and high per capita productivity, supporting overall value growth. Property insurance actively clears high-risk businesses, and the underwriting profitability of core businesses continues to improve. In terms of investment strategy, while maintaining an unchanged conservative style, it is recommended to appropriately increase the proportion of TPL assets, expecting a significant improvement in short-term investment performance in the "slow bull" market. The current PEV is only 0.27, at the historical 23rd percentile, indicating high cost-effectiveness. Industrial's main viewpoints are as follows: Overview: Overall meeting expectations 1) Mother net profit is expected to increase by +15.7% to 6.31 billion yuan in 2025, mainly due to the impact of taxes, in line with expectations. 2) NBV increased by +48.2% year-on-year driven by new single premium growth, in line with expectations. NBVM increased by +0.1 percentage points to 16.9% year-on-year, slightly improved. 3) Group EV increased by +4.3% compared to the beginning of the year, with growth slowing down due to negative contributions from investment returns and the high base effect in the same period. 4) COR increased by +2.4 percentage points to 102.1% year-on-year, excluding guaranteed insurance COR was 98.9%. 5) DPS is 0.19 yuan, flat year-on-year, in line with expectations. Life insurance bank-insurance contributions continue to increase, and the quality of agents continues to improve 1) Bank-insurance and individual NBV increased by +64.6% and +18.5% year-on-year, with the contribution of bank-insurance NBV increasing by +6.1 percentage points to 61.8% year-on-year, becoming the main driver of value growth. 2) New single premiums increased by +47.3% year-on-year, with bank-insurance new single premiums increasing by +69.0% year-on-year, driving overall new single growth. 3) The quality of the agent team has improved, with the average per capita productivity of traditional teams at 22,000 yuan and elite teams at more than twice that of traditional teams, deepening the "integrated two-wing" strategy. 4) Business quality steadily improves, with policy continuation rates at 97.1% and 95.5% year-on-year for 13 and 25 months. Property insurance actively adjusts business structure, improving underwriting profitability of core businesses 1) Property insurance original premium income increased by +0.1% year-on-year, with non-auto insurance contributions continuously increasing, accounting for +1.9 percentage points to 46.1% year-on-year. 2) COR increased by +2.4 percentage points to 102.1% year-on-year, mainly due to the company's decision to stop adding new financing insurance business and provision for reserves on a prudent basis, leading to a +30.0 percentage point increase in guaranteed insurance COR to 129.0% year-on-year. Excluding guaranteed insurance COR, it decreased by -1.0 percentage points to 98.9% year-on-year, achieving an underwriting profit of 490 million yuan. 3) Auto insurance COR decreased by -0.9 percentage points to 98.2% year-on-year, mainly due to improvements in expense ratios. Increase allocation of TPL assets, investment performs well in a buoyant equity market 1) Total investment assets increased by +16.7% from the beginning of the year to the end of 2025. 2) The proportion of equity assets increased by +1.4 percentage points to 21.4% year-on-year, with stocks and equity-based funds accounting for +1.6 percentage points to 14.9% year-on-year. 3) Optimize investment strategy, with OCI stocks accounting for 68.1% of total stocks by the end of 2025, mainly due to the company's recent moderate realization of early investments and significant returns on OCI stocks, marginally increasing allocation of TPL assets to increase investment returns. 4) Estimated annual OCI equity tool price increase of approximately +14.1%. Risks: significant decreases in long-term interest rates, substantial downturn in equity markets, and significant underperformance in new sales.