A Case Study Of HD Life Insurance Company Equity Valuation Based On Improved Market Approach

In recent years,the equity transactions of Chinese life insurance companies have become increasingly frequent,and there has been a surge in insurance equity transactions.In the process of equity mergers and acquisitions of life insurance companies,the equity valuation of life insurance companies plays a vital role,directly determining the success of equity transactions and the transaction price of equity transactions.In the practice of equity valuation of life insurance companies,the market approach is the most commonly used method,but because there are few listed life insurance companies in China,it is unreasonable for most unlisted life insurance companies to apply the embedded value method which is applicable to listed life insurance companies,so the market approach is a common method to evaluate the equity value of unlisted life insurance companies in practice.This paper studies the application of the market approach in the valuation of life insurance equity with specific evaluation case studies and improves the traditional market approach.It demonstrates the practical operation process of life insurance company's application of improved market approach for equity valuation,making the application of the market approach more scientific and objective.The three major difficulties in the application of the market approach are: First,the selection of comparable indicators is incomplete.Life insurance companies are different from general enterprises.The high debt operating characteristics of the company determine that the risk management capabilities of life insurance companies must be paid attention to during the assessment.Therefore,in this paper,indicators such as the surrender rate and asset-liability ratio that can show the comprehensive risk management capabilities of life insurance companies are added to the comparable indicator system,and the growth rate is adjusted to a compound growth rate to show its development ability,which enrich the comparable indicator system,and make the process more comprehensive.Second,determining the weight of comparable indicators and comparable cases is subjective.At present,the method of determining weights in practice mostly uses mean or expert experience.Because each indicator has different degrees of impact on the evaluation results,this article introduces the entropy weight method and gray relational analysis to determine the weight of comparable indicators and comparable cases,making the evaluation resultsmore accurate;Third,the selection of comparable cases is arbitrary.The standard used by general evaluators to select comparable cases is relatively simple,without quantitative analysis.This article applies the comparable indicator system established in the grey relational analysis method and introduces the weight of the comparable indicators determined by the entropy weight method to determine the weight of comparable cases.Thus,more objective and accurate selection of cases that are comparable to the case being evaluated.By improving the above three points,this article finally obtains a logical and practical significance of equity value results.This paper illustrates the feasibility of applying the improved market approach to evaluate the equity value of life insurance companies in the evaluation practice,laying a foundation for the widespread application of the life insurance evaluation market approach in the near future,and has certain practical significance.