A Study On The Operating Performance Of Financial-controlled Life Insurance Companies In Taiwan

After 60 years of development,the life insurance industry in Taiwan has gradually increased its insurance coverage rate from 15.8% in 1986(before opening)to 249% in 2018.The life insurance company's asset scale expanded from NTD 2.5 trillion in 1986 to 26.3 trillion in 2018,with an average compound growth rate of 15.6%.The life insurance industry in Taiwan was one of the fastest growing life insurance markets in the world.The marketing channel has changed from a single exclusive agent to a model which has the exclusive agent and bancassurance channel.The life insurance market is showing a booming scene.However,the market interest rates have fallen sharply with the Asian financial turmoil,and the issue of interest spreads on Taiwan life insurance companies has become increasingly prominent.How to deal with the decline in operating performance and even the pressure of losses caused by interest spreads has become an urgent issue for life insurance companies.In 2001,the “Taiwan Financial Holding Company Law” was promulgated,and some financial holding life insurance companies were born one after another.Implementing the “dual engine” strategy of banks and life insurance has become a business strategy choice for Taiwan life insurance companies.What are the operating performances of these financial holding life insurance companies? Does it truly achieve the “dual-engine” strategic goal and gain more profits than non-financial holding life insurance companies? These issues are the vital interests of the Taiwanese life insurance industry,especially those who want to establish financial holding life insurance companies through mergers and acquisitions or cross-industry.These are also the concerns of academic research institutes,and are with certain theoretical and practical guiding significance.Based on diversified business theory,marketing channel theory and business performance theory,this article explores these theoretical basis and practice such as financial holding company diversified operation,the cooperation with banks and life insurance companies and financial holding life insurance company implements “dual engine” strategy to improve business performance.This article starts from the development of Taiwan's life insurance industry and analyzes the challenges that the Taiwan life insurance industry faces in the global economic and financial environment and the changes in the local financial and insurance regulatory environment.It shows out the background of the introduction of Taiwan's financial holding life insurance companies.By comparing the development status of financial holding life insurance companies with non-financial holding life insurance companies,the factors affecting the operating performance of financial holding life insurance companies are analyzed.This article has studied the application examples of the implementation of the “bank + life insurance” dual-engine strategy by a Taiwan-based life insurance company.Through the abnormal exchanges between banks and life insurance subsidiaries under the financial holding company,it was found that the operation mode of adjusting the performance of banks and life insurance subsidiaries can be achieved through the bancassurance business.Through a comprehensive review of the relevant laws and regulations of financial holding companies and life insurance companies,it was found that financial holding companies were significantly less lenient in capital raising space than pure life insurance companies.These have formed the phenomenon that the life insurance subsidiary's transaction capital increase and capital utilization space under the financial holding framework are conducive to improving RBC and investment performance.Therefore,the implementation of the dual-engine strategy by financial holding frameword has inherent operational advantages.The author uses the panel data of 16 financial holding companies and 21 life insurance companies in Taiwan from 2011 to 2018 to establish a regression model.The author analyzed the performance of a financial holding company that solely owns a bank and a life insurance subsidiary(without a dual-engine framework),a financial holding company that has a bank and a life insurance subsidiary(with a dual-engine framework),and a non-financial holding life insurance company.Finally,this article puts forward related suggestions based on the analysis of empirical results.This article consists of seven chapters.The first chapter,introduction,expounds the background and significance of the thesis selection and outlines the framework and main content of the thesis according to the research ideas of the dissertation.It summarizes the innovation of the dissertation and comprehensively combs the relevant literature of the dissertation.The second chapter,related theoretical research,separately expounds the theory of diversified operation,marketing channel theory and business performance theory.These provide theoretical basis for the diversified operation of financial holding companies,the bancassurance business between banks and life insurance companies,and the implementation of the “dual engine strategy”.Based on a comprehensive analysis of Taiwan's life insurance industry and the comparison between the developments of financial/non-financial holding life insurance companies,this research raises the operational challenges faced by life insurance companies.It also provides background analysis for the introduction of financial holding life insurance companies.Chapter 3 is the development of Taiwan's life insurance industry and the introduction of financial holding life insurance companies.Based on a comprehensive analysis of Taiwan's life insurance industry and the comparison between the developments of financial/non-financial holding life insurance companies,this research raises the operational challenges faced by life insurance companies.It also provides background analysis for the introduction of financial holding life insurance companies.Chapter 4,the application of Taiwan's financial holding life insurance company's “dual-engine strategy” explains the content of Taiwan's financial holding dual-engine strategy,specifically explains how the bancassurance business affects the operating performance of financial holding bank and life insurance subsidiaries.In addition,the advantages of capital structure formation of financial holding life insurance companies are explained from the perspective of financial regulations to improve business performance.Chapter 5 is an empirical study on the operating performance of Taiwan's financial holding life insurance companies.In the empirical research,the author explains the research methods,research thinking,assumptions used in the panel data,how to select the samples and variables and how to construct an empirical model.Finally,the author uses the panel data of 16 financial holding companies and 21 life insurance companies in Taiwan from 2011 to 2018 to establish a regression model.The empirical results are found:(1)Financial holding company with simply bank and life insurance subsidiaries(without the bancassurance dual-engine framework)does not have significant better operating performance;(2)Financial holding company with a bank and a life insurance subsidiary(with a dual-engine structure of bank insurance)does have significantly improve the overall operating performance;(3)Financial holding life insurance companies with bancassurance dual-engine structure may not significantly better performance.Chapter 6,empirical results and analysis,includes narrative analysis,correlation analysis,multicollinearity detection and interpretation of the output results of the panel data regression model.Chapter 7,conclusions and recommendations,summarizes the findings of the empirical results of this study,and gives the forward suggestions to practitioners and follow-up researchers.There are two biggest features of this article.First,the author has accumulated more than 20 years of experience in life insurance practice in Taiwan,and has gone through the role of different companies and departments such as life insurance companies,bancassurance agency and bank wealth management.Author can not only look at the promotion and development of the bancassurance pipeline business from different perspectives,but also see from the actual work experience and observations the problems of business operation levels that are not seen by ordinary authors.This research can provide practical and operational methods for the strategy of Taiwan financial holdings or life insurance companies.Second,when discussing the operating performance of financial holding life insurance companies,the analysis is not just from the level of the life insurance company,but from the operating performance of the financial holding level.This research uses two levels of panel data from financial holding companies and life insurance companies to create regression models and verify them.By two different levels of empirical evidence,it is possible to more scientifically distinguish the operating performance differences between different financial control and life insurance companies,to more accurately explore the factors affecting the performance of financial holding companies and life insurance companies,and to make more targeted recommendations.At the same time,the consistency of empirical results at different levels can increase the credibility of the research.