, China
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Sunshine Life retains adequate capital buffer: Moody’s

The insurer was able to show an ROC of 4.7% in FY23.

Moody’s Ratings reckons that China-based Sunshine Life will maintain its stable market position and profitability, as well as an adequate capital buffer and stable financial leverage.

The insurer was also perceived to have an adequate capital buffer, moderate market presence in China, and stable profitability. 

These strengths are somewhat offset by its significant reliance on the bancassurance channel and traditional products for premium income, as well as its relatively high exposure to equity investments.

Sunshine Life's core and comprehensive solvency ratios have improved to 135% and 204%, respectively, as of March, up from 127% and 178% in September 2023. 

This increase was driven by a $690m (RMB5b) capital injection in Q1 2024 and the issuance of $970m (RMB7b) capital supplementary bonds in Q423. 

Moody's expects the insurer to maintain an adequate solvency ratio through internal capital generation.

The insurer's profitability remains stable, with a return on capital (ROC) of 4.7% for FY2023, despite lower investment income and the adoption of IFRS 17. 

The value of the new business (VONB) margin, whilst lower than some peers, grew by 19% year-on-year in 2023, driven by increased sales of long-term regular-premium traditional products.

However, Sunshine Life continues to heavily rely on the bancassurance channel, which accounted for over 75% of its first-year premium income in FY23. 

The insurer's exposure to traditional products also increased to 65% of total premium income in 2023, up from 53% in 2022, posing higher interest rate risk amidst declining rates in China.

The insurer's investments in equity financial assets are relatively high, focused on stocks with high dividend yields. This strategy is partially mitigated by an increase in long-dated fixed-income holdings over the years.

($1.00 = RMB7.25)

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