Post on 21-Jan-2016
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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.
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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.
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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
Stratosphere (.0005%) Yes Yes
Upper class (2%) Yes Yes
Upper middle (8%) Yes Yes
Middle middle (15%) Yes Some
Lower middle (30%) Some Some
Upper lower (25%) Some None
Lower lower (10%) None None
Disenfranchised (10%) None None
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U.S. Savings
Class Emergency Retirement
Stratosphere (.0005%) Yes Yes
Upper class (2%) Yes Yes
Upper middle (8%) Yes Yes
Middle middle (15%) Some Some
Lower middle (30%) Little Some
Upper lower (25%) Little Little
Lower lower (10%) None None
Disenfranchised (10%) None None
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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%
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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
200 million 200 million
450 million 450 million
600 million 600 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
65 million 65 million
200 million 200 million
450 million 450 million
600 million 600 million
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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
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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?
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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.
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Answer
In 2015:
Automobiles in Beijing. 5.6 million
Average speed of vehicle 15KMH
Speed of marathon runner 18KMH
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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?
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Answer
Are they looking for weak signals that will affect commercial insurance markets in the future?
Are they looking for speciality insurer opportunities?
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Presentation
Push to Add Drama
Somewhere in a town in Belgium,
On a square where nothing really happens,
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We placed a button.
An arrow pointed to the button:
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We waited for someone to push it.
Now we will watch the video.
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