Sunshine Life Insurance Corporation Limited — Moody’s affirms Sunshine Life’s Baa1 IFSR and Baa2 senior debt rating; outlook stable – Yahoo Finance
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Rating Action:
Moody’s affirms Sunshine Life’s Baa1 IFSR and Baa2
senior debt rating; outlook stable
1 March 2022
Hong Kong, March 1, 2022 – Moody’s Investors Service has affirmed Sunshine Life Insurance
Corporation Limited’s Baa1 insurance financial strength rating (IFSR) and Baa2 senior unsecured
debt rating.
The outlook on Sunshine Life remains stable.
RATINGS RATIONALE
The affirmation of Sunshine Life’s Baa1 IFSR reflects the insurer’s moderate market presence,
stable profitability and adequate capital buffer.
These strengths, however, are partially offset by the insurer’s high reliance on its bancassurance
channel and its significant exposure to high-risk assets relative to its shareholders’ equity.
Sunshine Life’s market share has increased to 1.74% in 2020 from 1.62% in 2019 and the insurer
grew its premium by 9.3% in H1 2021, compared with a 1.1% decline of the industry. The stronger
sales performance was driven by higher sales on traditional life products through its bancassurance
channel, amid the challenges of declining headcounts and productivity in the agency channel.
We expect the insurer’s profitability to remain stable. Its five-year return-on-capital (ROC) was 6.5%
in 2020, supported by stable investment returns and solid premium growth in the past few years.
Sunshine Life’s financial leverage and earnings coverage also improved with the redemption of
$700 million of senior unsecured bonds in April 2021. Moody’s expects the insurer will continue to
replenish its capital through debt issuance and maintain its adjusted financial leverage at around
30%.
Sunshine Life will still rely on its bancassurance channel, which accounted for around 81% of its first-
year premium in the first half of 2021, compared with 79% in 1H20. Moody’s expects this channel
would offer lower new business margins and pricing power to the insurer compared with its agency
channel.
The company’s high-risk assets, which comprise mainly equity investments, remained high at 253%
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of its shareholders’ equity in 2020. It has several large equity holdings, with its largest single equity
investment accounted for around 33% of shareholders’ equity at the end of 2020, which poses
material concentration and liquidity risk.
Moody’s expects the insurer to retain adequate capital buffer above the regulatory minimum
requirements. Sunshine Life’s core and comprehensive solvency ratios declined to 176% and 190%
respectively as of end-December 2021 from 188% and 206% as of end-December 2020 because of
higher capital consumption to support business growth. Sunshine Life’s significant equity investment
will also lead to more stringent capital requirements under the China Risk-Oriented Solvency System
(C-ROSS) Phase II regime, which will be implemented on 1 April 2022. The negative pressure on its
solvency ratios will be partly mitigated by the insurer’s potential debt issuance and efforts to narrow
the duration gap over the past few years.
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The stable outlook reflects Moody’s expectation that the insurer will maintain its stable market
position and profitability track record, as well as an adequate capital buffer and stable financial
leverage.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody’s could upgrade the rating if (1) the company successfully increases the proportion of
premiums from its agency channel and sells a greater proportion of high-margin products; (2) it
achieves a sustained improvement in profitability, with its return on capital remaining above 8%,
along with more diversified and balanced sources of earnings; (3) its high-risk asset remains
consistently below 150% of its shareholders’ equity; and (4) its capitalization substantially improves
due to a reduction of underlying risks or an increase in available capital.
Moody’s could downgrade the rating if (1) the company’s high-risk asset rises consistently above
300% of its shareholders’ equity; (2) its capitalization deteriorates materially, driven by a material
increase in risk exposure from investments and underwriting; (3) its profitability shows significant
volatility or its earnings decline significantly, with the return on capital remaining consistently below
2%; and (4) its standalone financial leverage remains consistently above 45%.
The principal methodology used in these ratings was Life Insurers Methodology published in
September 2021 and available at
https://www.moodys.com/researchdocumentcontentpage.aspx?
docid=PBC_1254133
. Alternatively, please see the Rating Methodologies page on
www.moodys.com for a copy of this methodology.
Headquartered in Beijing, Sunshine Life Insurance Corporation Limited specializes in providing
comprehensive life policies, such as life insurance, health insurance and accident insurance. As of
31 December 2020, its assets totaled RMB337.3 billion and its shareholders’ equity RMB35.6 billion,
on a consolidated basis.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see
the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure
form. Moody’s Rating Symbols and Definitions can be found at:
https://www.moodys.com/
researchdocumentcontentpage.aspx?docid=PBC_79004
.
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Frank Yuen, CFA
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Financial Institutions Group
Moody’s Investors Service Hong Kong Ltd.
24/F One Pacific Place
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Hong Kong
China (Hong Kong S.A.R.)
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Chen Huang
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Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody’s Investors Service Hong Kong Ltd.
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