Tune Protect Group Bhd’s travel insurance category is predicted to grow in tandem with the reopening of borders and the expected rebound in global passenger traffic.
The Malaysian Aviation Commission (Mavcom) predicts that air passenger traffic would increase by 40% to 52% in 2023, reaching 74.6 million to 80.8 million people.
Airline fleets are also predicted to grow in 2023, particularly to popular locations such as Taiwan, Japan, Australia, and the Middle East.
For example, Capital A (previously AirAsia Group Bhd) operated 125 aircraft as of November 2022 and expects to have 211 aircraft in service by the second quarter of 2023. (2Q23).
Tune Protect’s current significant owners are Tune Group Sdn Bhd (15.8%), AirAsia Digital (13.7%), and CIMB SI II Sdn Bhd (9.4%).
According to TA Research, Tune Protect’s travel insurance category would rise by 35% in 2023 as a result of the reopening of borders in Malaysia and other countries, particularly China and Asean.
Overall, it stated that the insurer’s underwriting profit will benefit from the recovery of Capital A because the travel business normally gives a better-combined ratio of roughly 14 percentage points to non-Capital A travel premium.
For the first nine months of 2022, it gathers that Tune Protect’s gross written premium (GWP) for travel was at RM79.3mil (17.7% of the group total GWP). More importantly, it said Capital A travel premium contributed only 3.5% of Tune Protect GWP in the first nine months of 2022 (versus pre-Covid-19 pandemic level of 20% in financial year 2019 (FY19).
In terms of travel mix, Capital A contributed 20%, while non-Capital A accounted for 80% in the first nine months of 2022.
The research house expects Tune Protect’s loss after tax to strengthen over the coming two quarters and turnaround in 2Q23, as the high topline growth requires time to be realised as earned premiums.
In addition, it said the healthy earned premiums would be boosted by the recovery of the travel business and via higher contributions from partnership and agency channels.
“In all, we forecast Tune Protect to post a profit of RM12mil in FY23 compared with a loss after tax of RM39.4mil in FY22. The better performance is expected to be driven by a lower combined ratio of 97.1% (versus 109.2% in FY22).
The group has reported five consecutive quarterly losses (from 3Q21 to 3Q22) ranging from RM1.7mil to RM19.8mil.
Separately, Tune Protect would completely exit the large commercial business, such as high-hazard property fire businesses, due to the low retention rate of about 4% of the commercial business.
“We believe that the group will achieve its retention ratio target of above 70% by the first half of the year (versus 60% in the first nine months of 2022) in all lines of business (Health, Lifestyle and SME), which would help boost underwriting contributions as well,” it noted.
