Review

• Tune Protect Group Berhad's 1H23 net profit of RM11.5mn exceeded our expectations at 78.0%. The variance was primarily due to higher-than-expected net earned premiums.

• QoQ, 2Q23 PBT improved from RM9.2mn to RM13.0mn, driven by improved insurance service results and share of profits of an associate. Gross written premiums grew by 21.8%, while net claims reduced by 27.4%.

• YoY, 2Q23 growth was mainly due to the higher contribution from Air Asia Travel (+48% YoY) and the motor segment (+42% YoY). We gather that 2Q23 travel premiums exceeded pre-Covid levels (2Q19) by 2%. Meanwhile, the combined ratio increased by 9.9 pts to 102.8% on the back of better claims experience, mainly from the motor segment.

Impact

• We raised our FY23/24/25 earnings by 42.0/16.7/23.5% after lowering the average claim ratio by 5.8 pts and raising the retention ratio by 3.2 pts.

Outlook

• Moving into 2H23, we expect Tune Protect to continue benefitting from the recovery of travel activities. In addition, we expect Vietjet (gone live on 5th July 2023) to be Tune Protect’s second-largest travel insurance revenue contributor after Air Asia. Assuming a take-up rate of 6% for Vietjet, we estimate an additional RM15.2mn to Tune Protect GWP in FY23.

• Meanwhile, the group has re-priced its motor premiums, which will contribute positively to Tune Protect overall premium growth.

• Management is confident that the group’s investment strategies that emphasise gaining stable returns will continue to deliver favourable returns in 2H23 as the bond market has rallied.

Valuation

• Following the earnings revision, we raise our TP to RM0.51/share (previously RM0.50) based on an unchanged 0.7x CY24 PB. Maintain Buy.

Source: TA Research - 25 Aug 2023