• We maintain our HOLD call on Tune Protect Group (TPG) with an unchanged fair value of RM0.69/share based on an FY19 ROE of 10.2% leading to a P/BV of 0.9x. Our earnings estimates are unchanged.

• Management held an analyst meeting to reiterate on their key business strategies moving forward and to provide updates on the group.

• AirAsia (AA) still accounts for a large portion at 83% of the group’s GWP for travel insurance while the non-AirAsia (NAA) segment accounts for 17%. Out of the total travel insurance through AA’s flights, circa 94% has been sold digitally with offline channels contributed the remaining 6.0%.

• Management sees opportunities for growth in travel premiums from the NAA segment. On international markets for travel insurance business, the group is focused on Indonesia, Indochina and the Middle East. In Indonesia, the group has partnered PT Asuransi Buana Independent (ABI), a local underwriter in Indonesia. ABI will first underwrite the travel insurance in Indonesia before ceding 70% of the risk/premiums to Tune Protect as reinsurer. The two will cooperate on travel insurance to target sales from the members of the Association of the Indonesian Tours and Travel Agencies (East Java). We understand that the association has more than 700 travel agents. The immediate market for this collaboration will be Surabaya before moving onto Jakarta and Bali. In the first year, the alliance targets to achieve US$350,000 of travel insurance premiums. Meanwhile, its partnership with a Vietnamese insurer for travel insurance will be commencing operations soon.

• Dynamic pricing 2.0 for travel insurance has gone live in 5 markets, Indonesia, Singapore, Thailand, Malaysia and China. As the implementation of this initiative is still in the early stage, its topline contribution is still opaque for now. The group expects it to be 4% accretive to its revenue in the first year after implementation.

• The group expects higher sales for travel insurance from its offline channels, mainly through tie ups with travel agents. While there is room for growth in offline sales, online channels will still dominate in terms of the sales of travel insurance. This will be in line with the group’s aspirations to be the leading digital insurer.

• On the general insurance business, the group will be focusing on growing the nonmotor and retail insurance such as fire, PA and foreign workers’ insurance. As at the end of FY18, motor contributed 41% while non-motor premiums constituted 49% of the group’s total GWP. For FY19 and FY20, the group plans to scale down the mix of motor premiums further to 30% and 20% respectively with non-motor premiums making up 70% and 80% of its GWP.

Source: AmInvest Research - 18 Apr 2019