Research On Financial Leverage Effect Of AB Life Insurance Company

Enterprises need to carry out financing activities in order to operate.As one of the important financing methods,debt financing can not only bring a lot of funds to enterprises by rational use of the financial leverage formed by it,but also bring high profits to enterprises by utilizing the leverage effect.However,there are positive and negative effects of financial leverage.If used properly,financial leverage benefits can be obtained,while improper use will cause financial risks.In order to pursue rapid development and high profits,many enterprises blindly expand the scale of debt financing,which leads to the high level of financial leverage of enterprises,which is particularly common in the financial field.In February 2018,AB Insurance co.Ltd.was taken over by the China Insurance Regulatory Commission due to its excessive leverage ratio and its operation difficulties.Leverage mystery to explore business insurance,after the author studies have found that it set up at the same time,the group has life insurance and business insurance and financial statements relative to other business,enterprise more believable,so this article chooses business insurance group's business life insurance,study the influence of the financial leverage effect to the enterprise,and find a way to lead them life should be how to get rid of the predicament.Based on the existing research results of financial leverage effect,this paper takes AB Life Insurance,a Chinese insurance company,as the research object,and makes the following in-depth analysis of the case.First,the financial leverage coefficient is measured according to the financial leverage theory,and the financial leverage ratio of enterprises in different periods is judged.Second,in combination with the specific situation of AB Life,it is analyzed that in the early stage of small leverage period,financial leverage has exerted the effect of interest saving and tax saving and high income,but the extent of the effect has certain limitations;In the later period of high leverage,due to the serious decline in the company's net profit and the doubling of the company's losses due to leverage effect,the company's free cash flow is seriously insufficient,leading to the company's financial risks.Thirdly,combined with the above,the total effect of the financial leverage of AB Life Insurance was evaluated,and the financial risk of the enterprise was evaluated by using the F-score model,which proved that the high financial leverage of the enterprise did bring hugefinancial risk.Fourthly,in view of the current situation of AB Life Insurance,countermeasures and Suggestions are proposed from three perspectives,including rational use of financial leverage,improvement of financial risk control and adjustment of enterprise development strategy mode.Finally,the research finds that for insurance companies,the financial leverage ratio should not be too high,and dynamic changes should be carried out in combination with the development of the company,and the leverage ratio can be appropriately increased when the development of the company and the industry environment are better.Instead,it should be reduced.Through the case study of AB Life Insurance,it is hoped to provide a supplement to the study of financial leverage effect,and provide some Suggestions on the use of financial leverage of insurance enterprises.For enterprises operating with high leverage,this paper will give a warning role and provide some help for the development of China's insurance market.