Where to Begin
On July 29, Byd's insurance unit disclosed its financial report for the second quarter of 2026.
Looking solely at the basic metrics, both its asset base and solvency levels remained robust.
By the end of the second quarter, the company's total assets reached 708,000.33 million yuan, with a comprehensive solvency ratio of 549.50%.
Premium volume also maintained an upward trajectory, with signed premiums totaling 801.9 million yuan in the second quarter. Among this, auto insurance premiums accounted for 655 million yuan. The average premium per vehicle edged up slightly from 3,512.89 yuan in the first quarter to 3,547.77 yuan in the second quarter, indicating a modest increase in underwriting pricing while overall stability was maintained.
However, alongside this expansion in scale, the company's profitability data showed volatility.
In the first quarter, Byd's insurance arm posted a net profit of 92.4685 million yuan, with a return on equity of 2.74%.
By the second quarter, single-quarter net profit fell to 27.2328 million yuan, marking a significant sequential decline. This weakening profitability directly impacted asset returns.
Why the Profit Shrinkage
The core reason for the profit contraction lies in the underwriting business, which swung from profit to loss.
In the first quarter, the company's combined ratio stood at 97.90%, still within a profitable range.
However, the cumulative combined ratio for the first half of the year rose to 101.23%. This indicates that in its core insurance operations, the company is now facing a situation where for every 100 yuan in premiums earned, it incurs a 1.23 yuan underwriting loss.
As an insurance company directly operated by an automaker, the cost advantage of its channel is confirmed in the financial report: In the first half of the year, Byd's insurance unit maintained a 0.00% ratio for fees and commissions, with a comprehensive expense ratio of just 4.26%. Compared to the generally high comprehensive expense ratios in the traditional property insurance industry, this figure demonstrates significant cost-control effectiveness from its fully direct sales channel.
Nevertheless, the low channel costs were not enough to fully offset the pressure from claims. The main factor driving the combined ratio above 100% was the loss ratio metric. In the first half, the comprehensive loss ratio reached 96.97%, up from 93.55% in the first quarter.
Just 10 ASX 200 Stocks? No, Focus on Claims Challenges
Common industry issues for new energy vehicles—such as high costs from damaged underbody batteries and expensive repairs for integrated die-cast parts—remain the primary drivers of elevated claims expenses. These problems have not disappeared simply because the insurer is owned by the automaker.
Against the backdrop of underwriting losses, the company's ability to maintain positive net profit in the second quarter was largely due to strength in its investment segment.
In the first half of the year, the company's cumulative comprehensive investment return rate reached 4.25%, a significant improvement from 0.22% in the first quarter. The recovery in capital markets generated fair value gains or realized floating profits, effectively bridging the gap from the underwriting losses and preventing the overall income statement from falling into the red.
From a capital and liquidity perspective, the company holds 4 billion yuan in registered capital as a safety buffer, providing ample capital cushion. However, cash flow indicators have tightened. In the second quarter, the company's single-quarter net cash flow was -293.8885 million yuan, a further outflow compared to -33.6941 million yuan in the first quarter.
Additionally, the ratio of cash and liquidity management tools to total assets fell from 7.32% at the end of the first quarter to 2.30% at the end of the second quarter.
This suggests that in the second quarter, the company may have shifted some cash and short-term liquidity instruments into medium- to long-term investment assets in an effort to achieve higher investment returns.
Overall, Byd's insurance unit's second-quarter financial performance reflects the real environment of the current new energy vehicle insurance market.
Leveraging its parent company's ecosystem, it holds a significant advantage in customer acquisition and premium scale. The direct sales model has also effectively reduced front-end costs. However, at the most critical stage—claims—the high cost of repairs remains a major hurdle to overcome.
Relying solely on zero-commission channels or investment-driven profitability is unlikely to support long-term underwriting sustainability. How the company can substantially lower its loss ratio through the accumulation of real-time data from connected vehicles, iterative actuarial pricing, and deeper integration with its parent company's after-sales repair supply chain will be the core focus for market observers going forward.
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