Research On The Valuation Of Life Insurance Industry Based On Residual Income Model

The COVID-19 outbreak at the beginning of 2020 has an impact on the operation of life insurance companies,people's risk awareness has been further enhanced.The development prospect of life insurance industry is still broad,so it is of great significance to study the valuation of life insurance companies.Under this background,this paper tries to find a valuation model suitable for life insurance companies.First of all,based on the theoretical analysis of the current situation and the limitations of the traditional valuation methods and the limitations of embedded value in the life insurance industry,this paper finds that the residual income model has its applicability.As a result,this paper introduce the model combining with the three basic assumptions,come to the conclusion that the reform of the life insurance company accounting system and information disclosure is gradually meet the basic assumptions,and the residual income model is to cater to the life insurance company's business characteristics;Then,combined with A life insurance company in case study,this paper first introduces the reasons of choosing A life insurance company from the perspective of value creation influence factors,using the residual income model to evaluate the value of A company on June 30,2020,the valuation result has compared with embedded value method and market value respectively.Only from the point of valuation results,residual income model and the method of embedded value as well as applicability,and market value have a certain underestimate,and through sensitivity analysis,the rising cost of equity capital will cause more significantly reduce the value of the company,therefore,in order to improve the value of life insurance companies,can first consider appropriate to reduce the equity capital cost.Finally,based on the research results of this paper,conclusions are drawn and some suggestions are put forward from the perspectives of investors,professionals,intermediaries and regulatory authorities.From the perspective of valuation results and valuation process,the residual income model is widely used and is conducive to investors to evaluate the rationality of valuation based on financial data,helping investors to draw valuable conclusions even when data is limited.Compared with traditional valuation model and embedded value method,it is more operable and understandable.