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Well the image below was the highlight yesterday for Tune Protect and the ‘big tie up’ seems to have propelled the stock upwards by almost 10%. However, after the market closes, the earnings report was out and it really disappoints and market opens today with a big fall.

What are Our Thoughts?

Indeed, no doubt downright bad earnings but we couldn’t be happier. Why?

We think that the rally from the ‘big tie up’ announcement had gone overboard. Announcing a tie up between Tune Protect and Air Asia couldn’t or shouldn’t create such a surprise since both typically have the same boss/shareholder and one’s goal isn’t going to leave the other entity dead. So, it is to no surprise that a tie up like this is bound to happen in the end.

Air Asia had been carrying Tune Protect behind its back for a while. Again to no surprise that this trend continues and a 10% sharp rise doesn’t justify this collaboration. You can argue that the tie up creates synergy and increases the likelihood to create higher revenue growth for Tune Protect but like what we said earlier, this is bound to happen. As an investor, we have known or should have knew about this the first time we put money in to this company.

The stock price drop today creates the opportunity for us to collect more which in our view the long-term goal for Tune Protect is still intact. We have collected some after ex-dividend and today’s drop at around 7% seems fine to continue adding. Business is still an infant and with the right investment into marketing and brand awareness it is set to grow.

What’s Coming?

As what we said in our previous review (click for link), this is still a very small insurer but the prospects that it brings are just tremendous. Although travel insurance still plays a huge role in squeezing profits for the company, we urge investors especially the new ones looking to put money into this company to take a longer-term view. Something like a 3 – 5 years horizon perhaps!

Think out of the box rather than just Air Asia piggy backing the whole company. Think in the modern digital terms of business where people just love everything that is just a tap or a click away. Convenience leads the way in today’s world as people are somewhat lazy.

With such a small premium that customers pay, people tend give in less thought when buying it. Recently, issues with delayed baggage on flights are getting a little severe and RM26.25 is what it takes to give me a peace of mind. Already paying RM8,000 trip to Japan, adding RM26.25 isn’t going to quite eat up my total budget which just feels awesome!

It is small fees like these that keep the buy rate high and the claim rates low. Actuarist on the backend had done their math and risk had been calculated accordingly. Historically, the claims rate had been around 5% and it is likely to stay at such levels even when business grows two or three folds.

A plus factor that we saw was the reinsurance license for takaful or known as retakaful that was approved not long ago. Reinsurance business is important for an insurance company, we should see a new stream of income from retakaful in the future. There aren’t many retakaful players in the world and this should turn out to be more promising when income doesn’t only come from everyday customers like you and me.

Talking about the world, Malaysia is only one country with 30 million people living in it. The population in the whole of South East Asia exceeds 600 million and that has huge potential to be tapped on. That is why being the front runner has its advantage and digital insurance can cater to almost anyone who are connected to the net.

What We Think Tune Protect Can Do?

A positive factor that we saw was the growing number of Tune Protect branches. Over the last couple months, we kept seeing more and more ‘Tune Protect Pejabat Wakil Insurans’ coming up and that’s a good thing.

Having that many offices creates awareness to the public on the existence of the company. Furthermore, the idea of having a physical offices remove the question of ‘where should I go when I need to claim?’ even though everything had gone digital including claims. But this was the first thing we asked ourselves before buying. Having a physical office nearby ensures that customers remove the invisible barrier and commit to buy the insurance online. It is some of those things that we human beings are hard wired to!

Adding this with the right marketing rather than just sitting as a byproduct on the online ticketing site for Air Asia, this could make the public aware that it isn’t protecting your only when your fly. There are other insurance plans offered as well by Tune Protect.

We’ve downloaded the App and shockingly it doesn’t seem that stable until we gave up even before the payment page came out. We went back to the site on a PC instead as we do not like to pay on mobile browser or on some clonky application.

The mobile application purchases should be emphasized if the company plans on going fully digital. There aren’t that many people equipped with PCs these days but smartphone penetration had achieved something like 90%. A faster way to purchase the insurance offered could be the key in attracting returning customers.

A quick tap sitting on the airport waiting lounge makes all the difference. With more simplified payment system in place, this process could be shortened further.

We always keep our sights on the prize at the end and we think that digital platforms could ruin conventional insurance underwriting. That is why we are invested in this company determined as a new economy stock in our portfolio.

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