Core Viewpoint - Strengthening asset-liability matching management has become a consensus in the industry, with many life insurance companies adjusting their development concepts on both the liability and asset sides to achieve this goal [1][2]. Group 1: Asset-Liability Management Challenges - The complexity of life insurance business necessitates a sophisticated understanding of asset-liability management, which poses new challenges for corporate management and organizational structure [1][2]. - There is a prevalent misunderstanding of "asset-liability matching management," with some substituting "duration gap" for "asset-liability matching," leading to significant deviations from the core principles of asset-liability management [1][2][8]. Group 2: Independent Account Management - Asset-liability management should focus on each independent account within life insurance companies rather than the overall company, as these accounts have distinct asset ownership, liability responsibilities, and risk allocations [3][4]. - The establishment of independent accounts is a significant operational decision that requires clear management logic and a rigorous decision-making process [5]. Group 3: Core Concepts of Asset-Liability Management - The core demands of asset-liability management include matching, interaction, and dynamic management, which should not be rigidly interpreted as an absolute equality between assets and liabilities [6][7]. - The management of asset-liability interactions remains disconnected, despite some recognition of the need for two-way interaction management [6][8]. Group 4: Data System Improvement - The complexity of life insurance business leads to a diverse array of economic principles and management perspectives, necessitating an improvement in the data system for asset-liability management [8][9]. - The concept of "duration gap" is often misused as a substitute for "asset-liability matching," which can lead to secondary risks if treated as a static management goal [8][10]. Group 5: Duration Calculation Issues - The current calculation of liability duration is relatively straightforward, while the calculation of asset duration is overly rigid and disconnected from reality [10][11]. - The existing rules for calculating asset duration primarily focus on fixed-income assets, neglecting the impact of equity and other asset classes, which can distort the overall asset-liability management [10][12]. Group 6: Recommendations for Improvement - It is recommended to realistically assess the extendability of historical data in the current liability cash flow model and incorporate future economic changes into the evaluation of life insurance contract liabilities [13][14]. - A comprehensive asset duration calculation model that aligns with investment management practices should be developed to reflect the unique long-cycle nature of life insurance [14].

Group 1 - The article discusses common arbitrage combinations such as TS*2-TF, TS*4-T, TF*2-T, and T*3-TL, which often deviate from the corresponding cash bond yield spread trends due to not achieving duration neutrality, thus failing to immunize against interest rate risk [2][7][20] - It highlights the importance of considering interest rate fluctuations when tracking yield spreads with these arbitrage combinations, suggesting that an ideal approach is to gain potential returns from both yield spreads and unilateral volatility [2][19] - The current duration gaps for various combinations indicate that if interest rates are expected to decline, attention should be paid to opportunities in the 7Y-5Y yield spread narrowing or the 5Y-2Y and 30Y-7Y yield spreads widening [2][20][21] Group 2 - The article emphasizes that the net basis can significantly impact the short-term performance of arbitrage combinations, advising that when constructing these combinations, the overall net basis level should be considered [2][15][17] - It notes that the historical performance of net basis fluctuations has been limited to a range of ±1 yuan, with recent trends showing a convergence to around ±0.5 yuan, indicating a reduced impact on combination value [15][17] - The report suggests that when engaging in curve shape arbitrage, it is crucial to consider both the current yield spread position and the duration gap, as well as the expected direction of future interest rate movements [19][20][26]

Investment Rating - The report maintains an "Overweight" rating for the insurance industry [2] Core Insights - The average duration gap in the insurance industry is approximately -7 years, with a trend of widening expected post-2024, particularly in the life insurance sector [5][21] - Large insurance companies generally maintain a duration gap around -5 years, while small to medium-sized insurers exhibit a widening gap, indicating a disparity in asset-liability management [5][21] - The report emphasizes the importance of managing duration gaps to mitigate interest rate risks and reinvestment risks, especially in a low-interest-rate environment [5][21] Summary by Sections 1. Introduction: Duration Gap in Insurance Asset-Liability Matching - Duration gap refers to the difference between asset duration and liability duration, categorized into various types [9] - The report highlights the increasing duration gap due to the issuance of long-term savings products by life insurers [9][10] 2. Calculation of Duration Gap and Industry Data Statistics - The average duration gap for life insurance companies from 2020 to 2022 was -6.67 years, -6.57 years, and -6.28 years, respectively [21] - The report identifies a trend where over 65% of companies have seen their duration gaps widen, with many experiencing an increase of over 2 years [23][26] 3. Significance and Measures for Duration Gap Management - Effective duration gap management is crucial for balancing asset-liability management in insurance companies [5] - Suggested measures to narrow the duration gap include increasing allocations to long-term bonds, developing long-term equity investments, and adjusting product structures to enhance liability duration [5][21] 4. Investment Recommendations - The report suggests focusing on companies like New China Life, Ping An, AIA, China Life, China Pacific, and PICC, which are well-positioned to benefit from the dual dividend attributes of insurance stocks [5][21]