Study About Improvement Of Du Pont Analysis System Based On The Performance Evaluation Of Life Insurance Companies

It is very important to gain the accurate performance evaluation for life insurance companies. It can help the stakeholders decide the strategy that they require. It is also the basis of decision- making adjustment for sustainable development of companies. Various performance evaluation methods apply for companies, and DuPont Analysis System is used in various industries because of its high systematicness, clear hierarchy and better maneuverability, as well as more universal applicability.DuPont Analysis System is widely used due to its own advantages, however, according to the operating particularity in life insurance companies, DuPont Analysis System cannot be directly applied in performance evaluation of life insurance companies, for it cannot satisfy the demands for the performance evaluation of life insurance companies. Therefore, it is meaningful to adjust financial ratios by standing on the point of performance evaluation of life insurance companies, and then establish a comprehensive financial analysis which can evaluate the performance of life insurance companies accurately and objectively.This article analyzes the operating particularity of life insurance companies, and then discusses the practical application status quo of their performance evaluation, as well as the companies’ overall performance contents. Based on the above, the article puts forward the necessity and importance of DuPont Analysis System applied in the performance evaluation of life insurance companies. Next, the article analyzes the limitations in the traditional DuPont System that would be used in performance evaluation of life insurance companies, which specifically include: The devoting extent of different profit sources; providing the financial index which meet the requirement of ―five management ability‖ for company; ignoring the influences of division of cost, financial information analysis of cash flow, stockholders’ equity and the sustainable development of company, etc.Based on the above, this article focuses on improving the DuPont System by following ways: based on Smith’s DuPont System, regarding sustainable developing growth rate as the core index; combine the limitations of traditional DuPont System and cash flow statement, cost behavior analysis to resolve the core index, finally makes it could evaluate the companies’ debt paying ability, operating ability, profitability, internal financing ability and developing ability.The article separately eva luates C hina Life Insurance Company Limited ’s performance from the year of 2007 to 2013 by using the traditional DuPont analysis and the ―improved‖ analytical method at last. After that, the variance analysis will show the conclusion which the improved DuPont System is more suitable for life insurance companies. Next, the article will compare the financial data between C hina Life Insurance Company Limited and industry average to support the conclusion.In short, this article makes comprehensive improvement and perfection of DuPont Analysis System based on performance evaluation of life insurance companies, the aim is to enhance the practicability of DuPont Analysis System.