The Empirical Research On Evaluation Model Of Insurance Company's Financial Performance In China

China's insurance industry has made remarkable achievements since the restoration of insurance industry in the early 1980s and the number of insurance companies becomes more and more since then. There are 110 insurance companies in China at the end of 2007. In these companies, the state-owned shareholders and other prime shareholders, included regulators have more information about the financial statue of the insurance company. In the meantime, small and medium shareholders and policyholders are in a weak position , they can only make a limited appraisement based on the information got from the public statements on the financial performance of the insurance companies because of asymmetric information.Therefore, this article intends to set up a set of insurance company rating system for both small and medium-sized investors and policyholders relying on limited information report on China's insurance companies to conduct comprehensive evaluation of financial performance. With the help of the system, the small and medium-sized investor and policyholders can find out an insurance company with a better financial performance and help themselves to make rational decisions.In this paper, factor analysis and factor approach are been used to set up the evaluation model. With empirical analysis of financial performance of China's insurance companies, the ranking of life insurance companies and non-life insurance company's financial performance are carried out. We can find out the strengths and weaknesses between domestic companies and foreign companies and work out a way to improve it. At the end of this paper, appraisements are made to illustrate the applicability and limitation of the model.