• We maintain our BUY call on Tune Protect Group (TPG) with a lower FV of RM1.65/share (previously RM1.80/share) based on an unchanged 2.0X FY18 P/BV. This is after revising our FY17/18/19 net profit estimates lower by 19.1%/19.5%/22.4%, factoring in lower premium from travel insurance and a higher estimate for combined ratio. Our forward P/BV of 2.0x is in line with the average M&A P/BV of general insurance companies and a circa 1 standard deviation below the stock's 3 years' P/BV of 2.5x.

• Recall that the take-up rate for travel insurance has declined due to MAVCOM's opt-in ruling for inbound and outbound flights to and from Malaysia. The take-up rate for global travel insurance has since fallen to 11.9% in 1QFY17 from 13.0% in 4QFY16 and 15.0% in 3QFY16.

• To address the decline, the group will be implementing several initiatives in stages. It has already tied-up with AirAsia to bundle its travel insurance with the latter's fair packages under Value Pack, Premium Flex and Premium Flatbed in 2QFY17. On 1 June 2017, the group launched the bundling of its travel insurance with AirAsia's Premium Flex and Premium Flatbed packages. It plans to bundle its air travel insurance with AirAsia's Value Pack by the end of June 2017. Presently, the product bundling is only available for Malaysia and Thailand, the first and 2nd largest market respectively for travel insurance. By July and August 2017, this will be extended to all markets.

• The group will extend its dynamic pricing to more markets by 3QFY17. This will be increased from the present 5 markets comprising Malaysia, Singapore, Thailand, Indonesia and Vietnam. As for now, the dynamic pricing involved lowering the premium for some routes with the objective of increasing the volume of travel insurance purchase. Moving ahead, it will take into account more variables based on customers' profile.

Source: AmInvest Research - 22 Jun 2017