1 presentation operation and control of multinational insurance companies

1

Presentation

Operation and Control of

Multinational Insurance Companies

Question

Who said the following? The Chinese insurance industry:

• Has seen rapid expansion during the past 20 years.

• Will see continued high growth rates for the next several decades.

Center for Professional Education 专业教育中心 2

Answer

Yanli Zhou said the Chinese insurance industry:

• Has seen rapid expansion during the past 20 years.

• Will see continued high growth rates for the next several decades.


China Insurance Development

2002 2012 2016

Number of Insurers 5 134 ?

PICC Market Share 98% 36% ?

Premium Income $6B $220B __B

China's industries and the growing middle class drive growth.


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Presentation

U.S. Jobs

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Setting

It is a resort town in California.• It is tough times.• Everybody is in debt.• Everybody lives on credit.

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Hotel

The town has one hotel.• Rich business man stops on Tuesday.• Gives $500 to reserve a room for Friday and

Saturday.• Owner will refund if

the man cancels.

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Butcher

Hotel owner goes the butcher.• Gives him the money.• Thanks him for meat.

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Farmer

Butcher goes to a farmer.• Gives him the money.• Thanks him for a cow and pig.

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Farm Supplies

Hotel owner goes to a farm store.• Gives the owner the money.• Thanks him for

food for the cow

and pig and

gasoline for

his tractor.

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Doctor

Store owner goes the doctor.• Gives her the money.• Thanks her for

delivering his

daughter’s baby.

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Back to the Hotel

Doctor goes to the hotel.• Gives the owner the money.• Thanks him

catering her

son’s wedding.

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Business Man

Business man arrives at hotel on Friday.• Cancels his reservation.• Takes back his $500.

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Conclusion

This is a consumer-driven society.

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Presentation

China Jobs

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Setting

It is a busy time in a factory in China. Everybody has a job. All the workers are improving their lives and

the lives of their families.

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The Active Factory

The workers are making toys: Every day containers are filled with toys. The containers are shipped to

California. They will be sold at Christmas.

Emma Maersk

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Closing the Factory

One day the factory is closed. The U.S. recession caused Americans

to stop buying toys.

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The New Economy

The workers went home.

• They had no jobs.

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Conclusion

This is an export driven society.

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Presentation

Economics in U.S. and China

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U.S. Situation

The United States will become less of a consumer economy.

5% of population. 25% of world resources. Standard of living will decline

U.S. Family Net Worth Decline

The median net worth of U.S. families:

Year Net Worth•1992: $78,000•2007: $126,000•2010: $ 77,000•2015 $ 81,000 •39% decline in four years 2007-2010• 5% gain since 2010

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Details on U.S. Decline

U.S. Household Financial Data:

Median Values 2007 2010 2015

Annual Income $50,000 46,000 53,000

Value of House $95,000 55,000 59,000

Annual Pension $47,000 44,000 41,000

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U.S. Household Income (2015)

Top Percentile Household Income

1% $400,000

5% $200,000

10% $150,000

20% $100,000

33% $ 75,000

50% Median $ 53,000

Bottom Quarter $ 25,000

Bottom 10% $ 10,000

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U.S. Household Classes (2015)

Class Household Income

Stratosphere $10 million to $100 million

Upper class $2 million to $3 million

Upper middle class $200,000 to $2 million

Middle middle class $ 70,000 to $200,000

Lower middle class $ 50,000 to $ 70,000

Upper lower class $ 35,000 to $ 50,000

Lower lower class $ 20,000 to $ 30,000

Disenfranchised $ 0 to $ 20,00027

American Economic Classes

2005 2015•Upper Class 2% 2%•Upper Middle Class 8% 8%•Middle Middle Class 20% 15%•Lower Middle Class 40% 30%•Upper Lower Class 10% 25%•Lower Class 20% 20%

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U.S. Upper Class

• Individuals with great influence and wealth.• Entrepreneurs, CEOs, politicians, investment

bankers, lawyers, physicians, heirs to fortunes, venture capitalists, stockbrokers and celebrities.

• Considerable investment income.• 2% of Americans.

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U.S. Upper Middle and Middle Middle

• White collar professionals.• Skills craftspeople.• Business owners• Salaried or self employed.• Comfortable standard of living.• Constantly threatened by taxes and inflation.• 23% of Americans

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U.S. Lower Middle and Upper Lower

• Many households with two workers.• Semi-professionals and office workers.• Uncomfortable standard of living.• Constantly threatened by cash shortages.• 55% of Americans.

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U.S. Lower Class

• The Working Poor. Low-paid service and production workers.

• Underclass. Not in the labor force. Depend on the government for food and shelter.

• Uneducated.• Limited legal and political rights.• 20% of Americans.

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U.S. Perks

Class Vacations New Cars

Stratosphere (.0005%) Yes Yes

Upper class (2%) Yes Yes

Upper middle (8%) Yes Yes

Middle middle (15%) Yes Maybe

Lower middle (30%) Yes No

Upper lower (25%) Yes No

Lower lower (10%) No No

Disenfranchised (10%) No No

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U.S. Finances

Class Assets Debt

Stratosphere (.0005%) Lots None

Upper class (2%) Lots None

Upper middle (8%) Lots Some

Middle middle (15%) Some Lots

Lower middle (30%) Some Lots

Upper lower (25%) None Lots

Lower lower (10%) None None

Disenfranchised (10%) None None

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U.S. Health Care

Class Medical Dental




Middle middle (15%) Yes Some

Lower middle (30%) Some Some

Upper lower (25%) Some None



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U.S. Savings

Class Emergency Retirement




Middle middle (15%) Some Some

Lower middle (30%) Little Some

Upper lower (25%) Little Little



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China Middle Class

• 2001: 50 million people

• 2011: 250 million people.

• 2015: 300 million people?

• Concentrated in cities.

• Purchase cars, computers, smart phones,

• appliances and TVs.

• $17,000 (¥100,000) median income.

• 30% savings.

China Consumption Controversy

Financial Times Data:

•China consumption data is underreported.

•Growth rates of Chinese consumption are underestimated.

•Is this true?


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China Situation

China:

•Is economically free.

•Is intensively competitive.

•Is developing a consumer society.

•Will become more of a consumption economy.

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China Situation

China:

•Is economically free.

•Is intensively competitive.

•Is developing a consumer society.

•Will become more of a consumption economy.

•Will need new forms of insurance.

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Presentation

China Facts 2015

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Question

How much total growth was experienced by the United States and China in the past 10 years?

U.S China

47% 47%

85% 85%

160%160%

340%340%

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Answer

How much total growth was experienced by the United States and China in the past 10 years?

U.S China

47% 47%

85% 85%

160%160%

340%340%

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Question

Out of 180 countries, where do the United States and China rank on gross domestic product per capita?

U.S China

10 10

45 45

67 67

88 88

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Answer

Out of 180 countries, where do the United States and China rank on gross domestic product per capita?

U.S China

10 10

45 45

67 67

88 88

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Question

What percent of toys sold in the United States are made in China?

50% 65% 80% 95%

47

Answer

What percent of toys sold in the United States are made in China?

50% 65% 80% 95%

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Question

A typical U.S. apartment is 1,200 square feet in size. How many years would a Beijing resident have to work without spending any earnings to afford to buy such an apartment?

17 years 27 years 34 years 47 years

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Answer

A typical U.S. apartment is 1,200 square feet in size. How many years would a Beijing resident have to work without spending any earnings to afford to buy such an apartment?

$10,000 Annual income $340,000 cost of

apartment 34 years

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Question

The world has a pig population of one billion. Estimate the number of pigs in the United States and China:

United States China

65 million 65 million




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Answer

The world has a pig population of one billion. Estimate the number of pigs in the United States and China:

United States China





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Question

Estimate the maximum speed of the fastest train in the United States.

90 MPH 145 KPH

120 MPH 190 KPH

150 MPH 260 KPH

220 MPH 350 KPH

53

Answer

Estimate the maximum speed of the fastest train in the United States.

90 MPH 145 KPH

120 MPH 190 KPH

150 MPH 260 KPH

220 MPH 350 KPH

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Question

Estimate the maximum speed of the fastest train in the China.

90 MPH 145 KPH

120 MPH 190 KPH

150 MPH 260 KPH

220 MPH 350 KPH

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Answer

Estimate the maximum speed of the fastest train in the China.

90 MPH 145 KPH

120 MPH 190 KPH

150 MPH 260 KPH

220 MPH 350 KPH

260 MPH 415 KPH

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Question

What was the total percent change in Hong Kong housing prices from 2003 to 2015?-25%0%+120%+250%

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Answer

What was the total percent change in Hong Kong housing prices from 2003 to 2015?-25%0%+120%+250%

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Question

China is consuming 40% of the world’s output of which of the following resources?Cement.Iron ore.Coal.Two of the above.Three of the above.

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Answer

China is consuming 40% of the world’s output of which of the following resources?Cement.Iron ore.Coal.Two of the above.Three of the above.

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Question

China has a population of 1.3 billion people. How many of them have spending money of less than $3 a day?100 million.300 million.500 million.700 million.

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Answer

China has a population of 1.3 billion people. How many of them live on less than $3 a day?100 million.300 million.500 million.700 million.

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Question

How many of the ten largest stocks on the Shanghai Stock Exchange are owned by the government of China?3579

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Answer

How many?

PetroChina

Industrial and Commercial Bank of China

Agricultural Bank of China

Bank of China

China Life

China Petroleum & Chemical

Ping An Insurance

China Merchants Bank

China Shenhua Energy

Citic Securities

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Presentation

Hundred Dollar Bills

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U.S. Paper Currency

In circulation, totaled $1400 billion in 2015.

Bill Dollar Value Percent

$20 $ 210 billion 15%

$100 $ 1050 billion 75%

Total $1400 billion 100%

Question

What percent of $100 bills are outside the United States?

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Answer

Outside the United States.

• $680 billion

• 2/3rd of all

• $100 bills.

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Currency

$100

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Currency

$10,000

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Currency

One million dollars.

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Currency

0ne hundred million dollars.

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Currency

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Presentation

Weak Signals

What is a “weak signal?”

It is an early warning of change.Starts at low volume.Grows over time.Can have large risk impact.

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Question

Is the insurance industry around the world tuned in to search for weak signals?


Question

How much does this car cost in China?

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Answer

$6,000 plus 30% taxes.

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Weak Signal from China

China Brilliance.

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Car Purchases

2008 2010 2012 2015

Worldwide 53M 58M 60M 72M

United States 13M 10M 10M 13M

China 7M 14M 15M 16M

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Car Production (2015)

• China 20M 27.8%

• Japan 8M 11.1%

• Germany 6M 8.3%

• U.S.A. 4M 5.6%

• South Korea 4M 5.6%

• India 3M 4.2%

• Others 31M 37.5%

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Chinese Joint Ventures

Toyota Nissan Honda Suzuki Mazda Daihatsu Mitsubishi FIAT Isuzu General Motors Ford PSA Peugeot-

Citroën VW

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Question

What is this?

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Beijing-Tibet Highway

September 2010: Speed one KM a day in 10 KM line of vehicles.

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Answer

Normal traffic in Beijing.

84

Answer

In 2015:

Automobiles in Beijing. 5.6 million

Average speed of vehicle 15KMH

Speed of marathon runner 18KMH

85

86

Answer

Weak signal is oil (barrels per day). 2010 Consumption: 87 million. 2006 Refining: 84-86 million. 2011 Refining: 84-86 million. 2015 Refining 95 million 2015 Global Demand: 93 million

New Refineries

Renovated refineries around the world New refineries in China and the Middle

East.

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Big Picture

Crude Oil (Millions of Barrels per Day)

2010 2014

U.S. Consumption 19M 19M

Chinese Consumption 9M 11M

Indian Consumption 3M 4M

Refining Capacity 86M 96M

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Small Picture

Proposed Solutions Natural gas. Coal. Railroads. Waterways. Public transportation.

Question

What does the oil picture mean for commercial insurance companies?


Answer

Are they looking for weak signals that will affect commercial insurance markets in the future?

Are they looking for speciality insurer opportunities?


92

Presentation

Push to Add Drama

Somewhere in a town in Belgium,

On a square where nothing really happens,


We placed a button.

An arrow pointed to the button:


We waited for someone to push it.

Now we will watch the video.


1 presentation operation and control of multinational insurance companies

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