Regarding the reasons for the decline in solvency adequacy ratio, BYD Insurance pointed out in the report that as the scale of auto insurance business increased, the risk exposures related to premium risk, reserve risk, and catastrophe risk also significantly increased, leading to a substantial rise in the minimum capital required for insurance risks. Additionally, the newly allocated stock funds and portfolio insurance asset management products increased the minimum capital required for market risk. After considering the quantitative risk diversification effect, the overall minimum capital increased significantly compared to the end of the previous quarter, resulting in a decrease in the comprehensive solvency adequacy ratio.

Industry insiders analyzed that BYD Insurance’s losses in 2024 were influenced by both industry-wide factors and challenges specific to its own development. The repair costs and parts replacement costs for new energy vehicles are significantly higher than those for traditional fuel vehicles, leading to a combined cost ratio that is approximately 10% higher. Furthermore, as batteries age, the risks and claim costs associated with new energy vehicles increase significantly, further exacerbating the loss situation. Meanwhile, to expand market share, BYD Insurance adopted a strategy of lowering average premiums per vehicle, but the contradiction between low premiums and high claims gradually emerged, affecting profitability.