TA Research is forecasting Tune Protect’s travel insurance segment to grow by 35% in 2023, following the reopening of borders in Malaysia and various countries, especially China and Asean.
PETALING JAYA: Tune Protect Group Bhd
’s travel insurance segment is set to get a boost in line with the reopening of borders and the expected global passenger traffic recovery.
The Malaysian Aviation Commission (Mavcom) anticipates air passenger traffic in 2023 to grow between 40% and 52% to 74.6 million and 80.8 million passengers.
Airlines are also expected to add more airline fleets in 2023, especially to popular destinations such as Taiwan, Japan, Australia and the Middle East.
For instance, Capital A (formerly AirAsia Group Bhd) operated 125 aircraft as of November 2022 and aims to reach full fleet utilisation of 211 aircraft by the second quarter of 2023 (2Q23).
The current major shareholders of Tune Protect is Tune Group Sdn Bhd (15.8%), AirAsia Digital (13.7%) and CIMB SI II Sdn Bhd (9.4%).
TA Research is forecasting Tune Protect’s travel insurance segment to grow by 35% in 2023, following the reopening of borders in Malaysia and various countries, especially China and Asean.
Overall, it said the recovery of Capital A would bode well for the insurer’s underwriting profit as the travel business typically provides a better-combined ratio of around 14 percentage points to non-Capital A travel premium.
For the first nine months of 2022, it gathers that Tune Protect’s gross written premium (GWP) for travel was at RM79.3mil (17.7% of the group total GWP). More importantly, it said Capital A travel premium contributed only 3.5% of Tune Protect GWP in the first nine months of 2022 (versus pre-Covid-19 pandemic level of 20% in financial year 2019 (FY19).
In terms of travel mix, Capital A contributed 20%, while non-Capital A accounted for 80% in the first nine months of 2022.
The research house expects Tune Protect’s loss after tax to strengthen over the coming two quarters and turnaround in 2Q23, as the high topline growth requires time to be realised as earned premiums.
In addition, it said the healthy earned premiums would be boosted by the recovery of the travel business and via higher contributions from partnership and agency channels.
“In all, we forecast Tune Protect to post a profit of RM12mil in FY23 compared with a loss after tax of RM39.4mil in FY22. The better performance is expected to be driven by a lower combined ratio of 97.1% (versus 109.2% in FY22).
The group has reported five consecutive quarterly losses (from 3Q21 to 3Q22) ranging from RM1.7mil to RM19.8mil.
Separately, Tune Protect would completely exit the large commercial business, such as high-hazard property fire businesses, due to the low retention rate of about 4% of the commercial business.
“We believe that the group will achieve its retention ratio target of above 70% by the first half of the year (versus 60% in the first nine months of 2022) in all lines of business (Health, Lifestyle and SME), which would help boost underwriting contributions as well,” it noted.
