Shenzhen BYD Property Insurance Co., Ltd. (BYD Insurance) incurred a loss of 169 million yuan in 2924 (RMB, same below), with both its comprehensive payout ratio and comprehensive cost ratio in 2024 exceeding 200%, much higher than the industry average.
According to a report by the Beijing Business Daily on February 5, BYD Insurance recently disclosed its latest solvency report for the fourth quarter of 2024, showing that it achieved insurance business revenue of 1.351 billion yuan in 2024, but the company’s net profit remained in a deficit. The loss in the fourth quarter of 2024 amounted to 81 million yuan, resulting in a total annual loss of 169 million yuan for BYD Insurance in 2024.
Furthermore, BYD Insurance’s solvency adequacy ratio has rapidly decreased. According to the solvency report, at the end of the fourth quarter of 2024, the comprehensive solvency adequacy ratio was 1173.83%, a 605.00 percentage point decrease compared to the end of the previous quarter. Meanwhile, the net profit for the fourth quarter of 2024 decreased by 81 million yuan, with other comprehensive income increasing by 19 million yuan, leading to a total actual capital decrease of 62 million yuan, a 1.90% decline. Overall, the company’s comprehensive solvency adequacy ratio decreased from 1778.83% at the end of the third quarter to 1173.83% at the end of the fourth quarter of 2024.
Regarding the losses of BYD Insurance, Zhao Ming, a professor at the Capital University of Economics and Business, analyzed that the company’s losses in 2024 were mainly due to various factors such as high claims costs, rising initial investments and operational costs, increased market risks and capital allocation, low-price competition strategies, and industry-wide challenges working together.
Zhao Ming further stated that the maintenance costs and component replacement costs for new energy vehicles are significantly higher than traditional fuel vehicles, resulting in a comprehensive cost ratio approximately 10% higher. In addition, as the batteries age, the risks and claims costs for new energy vehicles significantly increase, further exacerbating the loss situation. With business expansion, the initial investments of BYD Insurance continue to rise, operational costs and marketing expenses are on the rise, putting pressure on the company’s net profit. Moreover, to expand its market share, BYD Insurance adopted a strategy of reducing the average premium per vehicle, but the contradiction between low premiums and high claims payout gradually emerged, affecting profitability.
In specific terms, in 2024, BYD Insurance’s comprehensive cost ratio and comprehensive payout ratio both exceeded 200%. The comprehensive cost ratio was 308.81%, and the comprehensive payout ratio was 233.92%, which is relatively rare in the industry. For most property insurance companies, the two indicators are typically around 100% and 70%, respectively.
Zhao Ming believes that high payout ratios and comprehensive cost ratios can lead to a deterioration of an insurance company’s financial situation, potentially facing fund shortages and impacting its solvency and sustainable operational capabilities.
Not only BYD Insurance, but overall in 2024, the Chinese insurance industry covered 31.05 million new energy vehicles and incurred losses of 5.7 billion yuan, showing a continued state of deficits.
A netizen named “醉裡花落” commented, “Even BYD’s own insurance is in deficit. With frequent accidents, overall pressure, and battery pack issues… without fundamentally reducing accident rates and maintenance costs, anyone would suffer losses.”
Public information shows that BYD Insurance is a wholly-owned subsidiary of BYD Auto Industry Co., Ltd. The company commenced operations on February 16, 2016, with a registered capital of 4 billion yuan, registered in Shenzhen City.