TIH’s  1HFY13  core  profit  was  in  line  with  FY13  forecasts  (51.6%  ours; 47.7%  consensus).  Its  bottomline  was  hampered  by  higher  combined ratio (claims and expenses) arising from the Malaysian Motor Insurance Pool (MMIP), mitigated by tax relief. We retain our forecasts, pending its analysts’ briefing,  but  expect  2H  to  be  stronger.  Maintain  BUY  with  FV pegged to 22.0x FY14F EPS, given its superior underwriting margins.

- In line. TIH achieved a total core net profit of MYR31.5m, if we exclude MYR2.7m  in  finance  costs  and  listing  expenses,  and  MYR2.4m  from MMIP  provisioning,  which  was  offset  by  MYR2.7m  in  MMIP  tax  relief. Including these items, reported 1H13 profits were within our forecast, but below consensus estimates.

- Online  premiums  at  45%  of  our  full  year  expectations.  As  expected from  our  Earnings  Preview  dated  13  Aug,  TIH  recorded  1H13  online premiums  of  MYR45.2m  (1H12:  MYR32.8m),  while  its  MYR23.4m  profit before tax (PBT) (1H12: MYR16.9m) translated to a 51.7% profit margin (1H12: 51.5%). Meanwhile, 2Q13 online premiums increased ~3% q-o-q to MYR23.0m (1Q13: MYR22.2m), due mainly to a 24% yearly growth in online policies and a ~4% q-o-q growth in passenger numbers carried by the AirAsia Group from 1QCY13. This was offset, however, by a surge in expenses  ratios  due  to  personnel  and  IT  costs.  Despite  1H  premiums comprising  of  only  45%  of  our  FY13  forecast,  we  deem  it  to  be  in  line. This  is  because  contributions  from  overseas  markets,  ie  Myanmar, Vietnam, Philippines and India, are expected kick in towards 2HCY13.

- Tune Insurance Malaysia (TIMB) hit by MMIP. The group’s non-online general  insurance  business,  operated  by  TIMB,  saw  an  increase  of MYR8.3m in 1H PBT, due to a better mix of underwriting results from its non-motor  class  of  business  in  1Q13.  However,  overall  PBT  margins from  this  segment  declined  to  6.1%  in  2Q13  (1Q13:  13.2%;  1Q12: 18.0%)  due  to  higher  net  claims.  Excluding  MMIP  losses, PBT  margins would  be  in  line,  as  1H13  combined  ratios  of  80.4%  (at  group  level) would have been 74.8%.

- Maintain  forecast  pending  the  company  briefing. We  may  decide  to retain the MMIP losses as part of the company’s  core  profit,  but  may tweak  our  tax  rates  lower,  given  that  our  assumptions  were  overly conservative.  We  retain  our  forecasts  for  now  as  we  await  further guidance on the company’s expenses ratios  at  its  briefing  later  this week.

Source: RHB