A Comparison of Efficiency of Life Insurance Companies in Mainland China and Taiwan Using Bootstrapped Truncated Regression Approach

Figures & data

Figure 1. The CCR model with translation of output.Source: created by authors.

Figure 2. The BCC model with translation of output.Source: created by authors.

Table 1. Number of observations during 2005 to 2011

Economy	2005	2006	2007	2008	2009	2010	2011
mainland China	40	41	46	49	54	57	57
Taiwan	29	29	29	30	28	30	30

Source: created by authors.

Table 2. Definitions of input and output variables

Variables	Definitions	Unit
Input Variables
Total asset (x1)	Total assets in the balance sheet, including insurance premium, property and other	Million USD in 2005
Employee (x2)	Total employees involved in the operation of Insurance company, including executive, administration staff, sales and other.	Person
Total Equity (x3)	Total equity in the balance sheet, including paid-in capital, retained earnings and other.	Million USD in 2005
Output Variables
Insurance revenues (${\mathrm{y}}_1$)	Incomes from the insurance premium	Million USD in 2005
Investment revenues (${\mathrm{y}}_2$)	Incomes from the financial operation	Million USD in 2005

Source: created by authors.

Table 3. Summary statistics of input and output variables

	Name	Mean	SD	Maximum	Minimum
	Output Variables
$y_1$	Insurance revenues	2725.63	8629.939	110,636.4	0.010983
$y_2$	Investment revenues	557.736	2036.325	22,534.92	−135.796
	Input Variables
$x_1$	Total asset	12,130.73	41,107.44	550,625.7	2.496918
$x_2$	Employee	18,849.09	68,330.46	818,241	9
$x_3$	Total Equity	1523.731	4956.75	67,700.98	0.758677

Source: created by authors.

Table 4. Correlation matrix for inputs and outputs, 2005–2011

	Input			Output
	Total asset	Employee	Total equity	Insurance revenues	Investment revenues
Total asset	1
Employee	0.798***	1
Total equity	0.656***	0.422***	1
Insurance revenues	0.946***	0.788***	0.607***	1
Investment revenues	0.915***	0.769***	0.661***	0.859***	1

Notes: ***, ** and * denote rejection of the zero null at the 1%, 5%, and 10% significance levels, respectively.

Source: created by authors.

Table 5. Definitions of environmental variables

Variables

Definitions

GDP growth rate (GDP) Inflation rate (IR) Financial leverage (FL) Savings rate (SV) Rediscount Rate (DR) Elderly population (EP) Insurance penetration rate (IPR) Business freedom (BF) Corruption Index (CI) Climate risk Index (CR)

GDP growth rates in Taiwan and mainland China.^1 Inflation rates in Taiwan and mainland China.^1 Total debt/ Shareholders Equity. National saving rate in Taiwan and mainland China.^2 Rediscount Rate announced by Central Bank in Taiwan and People’s Bank in mainland China.^1 Population of over 65 years in Taiwan and mainland China.^3 the ratio of the percentage of total insurance premiums (in US dollars) to gross domestic product.^1 The higher the level of regulation barriers, the lower a country’s score.^4 The higher the level of corruption, the lower the level of overall economic freedom and the lower a country’s score. ^4 The score of the impacts of weather-related loss events. The higher the level of risk, the lower a country’s score.^5

1. Swiss Re World Insurance Report from 2005–2011.

2. IMF.

3. The Ministry of Internal Affairs of Taiwan and National Bureau of Statistics of mainland China.

4. The Heritage Foundation.

5. Germanwatch Global Climate Risk Index Report from 2005 − 2011.

Source: created by authors.

Table 6. Bootstrapped truncated regression results

Variables	Lower bound			Mean		Upper bound
	0.5%	2.5%	5%			95%	97.5%	99.5%
Constant	–281.286	–259.307	–247.456	–178.658	***	–107.718	–89.536	–39.9106
GDP	–157.850	–131.274	–120.155	–62.561	*	–0.180	16.262	44.637
IR	–312.110	–281.750	–272.207	–204.563	***	–113.695	–93.784	–46.468
FL	–19.739	–10.042	–6.141	7.883		19.383	22.035	25.158
SV	–29.096	5.080	23.963	99.127	**	168.750	181.897	210.705
EP	0.651	1.030	1.220	1.902	***	2.440	2.534	2.700
IPR	–1.874	–1.645	–1.438	–0.495		0.453	0.630	1.029
BF	0.041	0.068	0.079	0.123	***	0.154	0.157	0.164
CI	–4.494	–4.051	–3.800	–2.561	**	–0.909	–0.413	1.054
CR	–0.9182	–0.874	–0.842	–0.635	***	–0.381	–0.278	–0.062
DR	–9.630	–6.856	–5.234	1.074		6.924	8.403	11.670
${\hat{\sigma }}_{\epsilon }$	9.733	11.096	11.647	14.820	***	17.130	17.463	18.283

1. ^{*, **}, and *** represent the 10%, 5%, and 1% levels of significance, respectively.

2. Mean (in column 5) is the average estimate obtained from MLE estimates and the bootstrap set with 2,000 replications.