JIA Fan School of Finance Renmin University of China

1. 2011 China International Conference On Insurance And Risk Management Analysis of State-owned holding Insurance Companies’ Risk Management on the Basis of Equity Structure JIA Fan School of Finance Renmin University of China July 26th,2011

2. Contents Introduction 1 2 Equity Structure vs. Risk management Problems 3 Summary & Conclusion 4

3. Introduction • Why we choose this topic？ China Life PICC Insurance Market CPIC PING AN

4. Introduction Researches about this topic are as follows: Financial risk ERM & Corporate Governance Others 2003 2007 2008 • Wang Wen, Shi Min(2007) • Fang Yongbin(2007) • Zhang Jian(2008) • Jiang Shengzhong, Bo Pangtuo(2008) • Zhang Wei(2008) • Suo Lingyan(2008) • Zhang Jun(2003)

5. The form of equity structure decides the risk level of insurance company’s corporate governance. Diversification trend of equity structure brings new challenges to insurance company’s risk management. Equity Structure vs. Risk Management There is an important logic line between Equity Structure and Risk Management: Risk Management Equity Structure Corporate Governance Rational arrangement of the equity structure guarantees the effective implementation of the risk management for insurance company.

6. Equity Structure vs. Risk Management Features of equity structure for state-owned holding insurance company : Examples Features Highly concentrated • China life:68.37% • PICC:69.0% State-owned equity is highly concentrated. Trend of strengthen controlling by holding company. Relatively diversified • CPIC:71.94% >10%(3),5%~10%(1),<5%(6) • PING AN:43.26% >10%(0),5%~10%(3),<5%(7) No absolutely controlling shareholder. Company’s equity is relatively shared by several shareholders.

7. State-owned equity 69% 68.37% 39.06% 8.65% China life CPIC PICC PINGAN

8. Problems State-owned equity highly concentrated No actual controller Benefit of the insured can not be guaranteed Insider control is inevitable Risk Manage-ment

9. Problems State-owned equity highly concentrated. No actual controller ※Property of state-owned assets are not clearly defined. ※SASAC can not afford these state-owned holding insurance companies liabilities. Insider controller is inevitable. ※Equity highly concentrated. ※Equity relatively diversified. Benefit of the insured can not be guaranteed. ※Insured is the creditor and stakeholder of the insurance company. ※Profit maximization and insured’s benefit guaranteed.

10. Stick to optimization of equity structure ■Realize the decentralization of equity ■Decrease the state-owned equity ■Institutional investors Strengthen corporate governance construction Summary & Conclusion

11. Summary & Conclusion • Improved external supervision system arrangement ■Laws and regulations should relax the limit of investors ■Increasing the percentage of non state-owned equity ■Equity structure diversified further ■Information disclosure ■Pay-off monitoring mechanism

12. Thank you for your time! JIA Fan School of Finance Renmin University of China TEL:15201151927 Email:jiaf1006-momo@ruc.edu.cn