Asia Pacific Equity Research 12 November 2025 China Healthcare/Health Insurance Key takeaways from expert session: New opportunities in China's health insurance ecosystem We hosted an expert call on 10 Nov focusing on emerging opportunities in China Health Insurance ecosystems. Recent government directives – including updates to the Innovative Drugs Catalogue, ongoing DRG/DIP payment reforms, and the long-term fiscal pressure on the basic medical scheme from an ageing population – are driving new demand whi ...

Sunshine Insurance Group - H Conference Call Summary Company Overview - **Company**: Sunshine Insurance Group - **Period**: 1H25 - **Net Profit**: Rmb3.4B, exceeding JPMe estimate of Rmb3.0B - **New Business Value (NBV)**: Rmb4.0B, up 47% year-on-year (oya) on a like-for-like basis [1][3] Key Positives - **Contractual Service Margin (CSM)**: - CSM balance reached Rmb56B as of June 2025, growing at 10.3% half-on-half (H/H) [2] - Indicates high visibility of steady underwriting profit primarily from CSM release [2] - **Earnings Performance**: - P&C's 1H25 underwriting combined ratio improved by 0.3 percentage points oya to 98.8% [2] - Overall net profit of Rmb3.4B represents a 7.8% increase oya, beating estimates [2] - **Solvency Ratios**: - Core solvency ratios for Sunshine Group, Sunshine Life, and Sunshine P&C are 171% (+13%p H/H), 155% (+18%p H/H), and 177% (+12%p H/H) respectively, well above the minimum requirement of 50% [2] Key Negatives/Concerns - **New Life Sales Volume**: - New life sales volume was Rmb19B, down 3% oya, with agency channel sales down 11% and bancassurance channel sales down 5% [3] - Indicates low new business quality, raising concerns about sustainability of in-force book growth [3] - **Market Reaction**: - Despite strong earnings, a negative stock reaction is anticipated due to concerns over the quality of new life sales [5][7] Likely Changes to Consensus - 1H25 net profit accounts for 59% of FY25E consensus earnings, suggesting potential marginal upward revisions to full-year consensus [4] Investment Thesis - **Market Position**: Sunshine Insurance Group has a composite license but has seen sluggish market share gains over the past decade [10] - **Growth Outlook**: Attractive CSM growth outlook indicates steady insurance profit potential, but the company requires more time to scale up its business size [10] - **Risks**: - Higher earnings volatility risk due to equity market movements - Capital adequacy concerns amidst falling bond yields - Imbalanced distribution channels for risk diversification [10] Valuation - **Price Target**: HK$2.10, implying a 5x FY25E P/E at the consolidation level [11] - **Valuation Methodology**: - Life Operations valued at 4x FY25E P/E - Non-life Operations valued at 3x FY25E P/E - Other business assigned 0.3x P/BV [11] Risks to Rating and Price Target - Upside risks include: - Mitigation of earnings sensitivity against equity market movements - Faster-than-expected recovery in front-book growth and new life sales - More balanced earnings contribution from the non-life segment [12]

Asia Pacific Equity Research 01 July 2025 China SMid Insurance Key investor feedback post the initiation; ZhongAn remains top investor focus See page 4 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as onl ...