Valuation Study Of Commercial Health Insurance Companies

Since1982, along with the recovery of China’s insurance business, commercial health insurance business has also experienced a rapid development, especially after2005, four companies specializing in the health insurance business were established, such as PICC Health, Peace health, Kunlun health, Harmony health, marking China’s health insurance market began to embark on the road of professional management. As of2011, there are a total of95insurance companies operating health insurance, including28foreign life insurance companies,33Chinese-funded life insurance companies,30Insurance companies and4professional insurance companies. The premium income of Commercial health insurance increased fromY36.5billion in1999toY69.172billion in2012. China’s commercial health insurance business has made a great achievement.In order to obtain a better development in the future, health insurance companies must do its own management, it is necessary to accurately assess the value of companies, valuation is not just draw a number, first, it can be an indicator for performance evaluating; Secondly, companies can know a lot of intermediate information from the valuation process in order to take measures to enhance their own value; third, China’s health insurance market is in a vigorous developing stage, regulators purpose is to safeguard the interests of consumers and to ensure the continued effective operation of the insurance market, so the control and supervision of the value of the health insurance companies is necessary; Finally, the traditional valuation method may be not suitable for the health insurance company in China, the own valuation method for China’s health insurance companies is more in line with investors and ideals related requirements. For the above reasons, an accurate assessment of the value of health insurance companies is essential because the rapid and healthy development of China’s health insurance industry. Currently, few people devoted to studying the valuation of the health insurance companies in China. First, this paper introduces the concept of enterprise value and purposes of value assessment, combing with the characteristics of the health insurance and health insurance companies in China’s market environment, divided the value of health insurance companies into two parts, the intrinsic value and the implied goodwill, then summarizes three valuations that foreign health insurance company used, such as the market approach, the present value method and the embedded value method, then analyze conditions and advantages and disadvantages of these valuation method, at the same time, gives a new method of the free cash flow model, drawing a conclusion that the intrinsic value method is most suitable for China’s national conditions. I use the three methods which suit for the valuation of PICC Health Insurance company, the ultimate goal of valuation is to accomplish the maximize the value of the company. Therefore, I try to give some advances in order to enhance the value of health insurance company in the end of the article. The content and structure of this paper is organized as follows:The first chapter mainly illustrates the background, the significance of research, the purpose of the study, the content and methods of literature review and the main contribution of this paper, then makes a summarize about the relevant literature to the reach on health insurance companies valuation. According to the general characters and the individual characters of the health and life insurance and non-life insurance, the paper analyzes the development of the theory about the valuation from the general to the specific research ideas, and the key of the reach on health insurance companies valuation is the characteristics of the health insurance business, such as, industry development, special assumptions and long-term business value assessment.The second chapter study come to the conclusion that the profit and profitability is very important for the valuation of health insurance companies value. Starting from the health insurance products and their features, and the current development of the health insurance industry in China, I got the conclusion that the valuation of health insurance in China is facing these problems:the profit is difficultly to be expected, products form is complex, actuarial assumptions are too subjective and prospects of the development of the industry is uncertainties, and so on.With the research of foreign health insurance company valuation, the second chapter summarize the popular evaluation methods of the health insurance companies:investment banking approach, free cash flow for the firm and embedded value. On this basis, I focus on analyzing their applicability in our country. I found these three methods in will encounter a variety of difficulties in our country, these difficulties will affect the accuracy of the assessment in the valuation of the health insurance companies. Such as:the lack of an open and active market and lack of comparable companies, the market approach is not suitable as the method of valuation of the health insurance companies in China; and the forecast of losses and the insurance company net profit is very difficulty, and will underestimate the value of long-term business, it needed to adjust the free cash flow method; theoretically, the intrinsic value is more suitable for assessment of the value of health insurance companies, but due to the complex calculation and the regional differences development of China’s health insurance and other reasons, the intrinsic value method is extremely complex in the practice. Finally, I believe that the intrinsic value method is the most suitable valuation method for China’s health insurance company, the source of health insurance companies can be recognized, so as to take measures to increase the company’s value,In the fourth chapter, because the data collection of health insurance companies is very difficult, and actuarial reports are considered as trade secrets, I can only use the data of PICC Health Insurance Company, which is the largest professional health insurance companies in China, according to the annual report of2010and2011, using three methods to calculate the company’s value. The results show that the results made by its own cash flow model is negative, because the company is in an initial stage in the industry, the profit is very unstable, it is difficult to assess the future profitability. Then draw the conclusion that intrinsic value method is suitable for the assessment of the value of the health insurance companies in China at this stage, and the other two methods can be used as supplementary.In the fifth chapter, the purpose of this research is to find a method suitable for the assessment of the value of health insurance in China, and divided the impact factors of health insurance companies into five main sections, the company’s strategy and the vision、financial capacity、the ability of risk management risk、human resources, and control health care costs, and suggestions for our health insurance companies from these five areas to realize the value-added.The title of this article is more innovative, and will certainly help the development of our health insurance company, along with the development of market economy, the valuation of health insurance company becoming more and more inportant, but the discussion about valuation of the domestic health insurance companies is rarely. Therefore, this article is relatively new and certainly practical significance. In addition, this paper has focused on the comparison, summary and the using of the reference. In the paper, the author compares the method of the evaluation between the general companies and the health insurance business, comparing both the advantages and the disadvantages. Then on the basic of summarizing and using the references of the foreign health insurance companies, according the condition of our country, the author attempts to put forward the ideas some useful references of our country’s evaluation on the health insurance companies. However, due to the limited time and less of the health insurance company valuation practice, there are also some defects. I hope I can try to improve this article in the future.