China Life Insurance Company On Budget Management Issues Studied

一,The Research Topic and the Significance of the TopicThe gap of managerial level between Chinese insurance companies and foreign insurance companies is wide, in which budgeting management is the most serious one. With the development of modern managerial science, the budget theory is changing too: linking budget explicitly to strategy; using activity-based budgeting to guide areas for cost reduction; tailoring the budget cycle to the purpose of budgeting; balance financial aspects with both non-financial (such as quality and time) aspects; signaling to all employees the need for continuous improvement of performance within the budget period. But in China, especially in insurance section, the budgeting management is only on traditional stage, so systematic studies on it are badly needed. This dissertation will systematically discuss the budgeting management of Chinese life insurance companies.二,Innovation of this Dissertation1．Innovation and practicability in topic selection. Beyond the limit of the insurance, the author chooses the subject of budget management that stands as a cross-discipline science that includes Insurance, Finance, Accounting and Management Science.2．Contribution in analytical tool. The Balanced Scorecard, Break-Even Analysis and Operating Leverage are used to analyze budgeting management of Chinese life insurance companies.3．Construct a theoretical framework of budgeting management of Chinese life insurance companies.三,Structure of this DissertationThe dissertation consists of five sections. Section One: Brief introduction of budget's knowledge points, suchas the definition, type, components, use and limitation (including "moral risk" and "dysfunctions") of budget. And the author emphasizes on new development of modern budget theory in comparison with traditional budget, which plays a fundamental role so as to discuss the following sections.Section Two: Budget features of life insurance companies.This section is divided into two subsections. The first subsection briefly explains three budget features of insurance companies: all-round sides; attaching importance to risk planning; paying attention to the analysis and forecast of insurance demand. We will talk about risk planning for new insurance products in Section Four. The second subsection gives a minute description of the budget features of life insurance companies. According to the comparative singularity of life insurance accounting, it has its own features besides the three features of total insurance companies, which can be embodied from two factors: one is the financial budget, the other is cost budget. Section Three: Comprehensive budget of Chinese life insurance companies. This section is divided into three subsections. The first subsection gives an overall analysis on the comprehensive budget system: the first step is sell forecast; then revenue budget, compensation &payment budget, fee& commission budget, operating expense budget, reinsurance budget, investment budget, and capital budget; at last pro forma financial statement: pro forma income statement, pro forma balance sheet and cash flows statement. Secondly, the author gives a detailed dimension of the comprehensive budget system. In the last subsection, life insurance budget tools are discussed, especially the activity-based budget and KAIZEN budget.Section Four: Risk planning of life insurance company-operating new insurance products as an example, which involves three calculatedrisks:Size of the Market. Are there a sufficient number of potential customers for the new business? One way to approach this question involves break-even analysis.Stability of Income. Will a small decline in the estimated sales level have a major impact on the projected profits from a new line of business? This may be addressed in terms of operating leverage.Adequacy of Surplus. Under conservative accounting rules for insurance companies, most new products will reduce a company's surplus in their early months or years. T...