Analysis Of Cost Controls And Performance Improvement Of Life Insurance Company

The insurance industry has experienced about 30% of annual growth in recent 20 years. Its profitability also gains improvement with the fast increase of premium, the upgraded importance of this industry and the improvement of its development environment. The development of this industry has accordingly attracted increased attention of the public, among which, cost control has become the key of company's profitability and performance improvement. However, with short operation history of life insurance companies in China and lack of cost control experience, how to enhance cost control and reduce or avoid waste of resources turns to be an urgent problem to be solved for this industry.The theme of this thesis is to study the effective methods of reducing cost of life insurance companies and innovate in performance improvement through financial management, aiming to prove that the core competition of life insurance companies is based on its effective cost control through the analysis of the inner correlation of cost control and performance so as to provide reference for business runners, investors and policy holders.The thesis selects 12 life insurance companies among others as samples and divides them into 5 categories including 3 old domestic ones,3 middle-aged domestic ones,2 new domestic ones,2 old foreign ones and 2 new foreign ones according to their different setup time, business scales and shareholders of the companies. On the basis of analysis of these companies, especially those within the same category, the companies are separated into those with high flexibility, middle flexibility and low flexibility in budget control according to different cost control models. The thesis also selects 10 indexes from solvency, profitability, operation and growth capability ones in performance assessment based on the methods used domestically and internationally and advises a comprehensive comment on 2008 performance of life insurance companies based on factor analysis of SPSS.The thesis reveals that (1) cost control flexibility has strong correlation with company performance in which low cost control flexibility will has adverse effect on company performance while high cost control flexibility will benefit the performance of life insurance companies; (2) SG&A percentage is not perfectly correlated to performance and SG&A per capita has weak correlation with performance. Accordingly, it's important for the improvement of company performance to control headcount and improve headcount efficiency; (3) the operation, organization structure, process and procedures, industry experience and learning ability of employees, core driving factors of company growth and corporate governance of companies will have positive effect on cost controls and accordingly can help life insurance companies achieve better performance.The thesis consists of 6 chapters. The first chapter of introduction maaninly covers the background, purpose, theme, contents and core study approach. The second chapter is about review of literature and theories, mainly introduces the cost control and performance assessment study results as well as overall budget theory and company growth theory. The third chapter is about case study of samples, analysis index and cost control models. It first introduces the selection of samples and data source, followed by the explanation of major performance indexes, quantity relationships and their definitions and ends with the analysis of major cost control models of life insurance companies. The fourth chapter is about the analysis of cost and performance relationship. It begins with the trim and consolidation of data followed by the respective analysis of operation, solvency, profitability and growth capability and then provides the comprehensive comments and analysis of performance of the life insurance companies based on factor analysis methods. This chapter ends with the correlation analysis of cost and performance of life insurance companies. The following chapter is about the perspective and strategic analysis of cost reduction of life insurance companies, mainly advising the thoughts in cost control and performance improvement of life insurance companies. The last chapter is conclusion and comments.