Rule change drags down Tune Protect 1Q net profit

TheEdge Tue, May 23, 2017 08:56am - 6 years View Original


PETALING JAYA: Tune Protect Group Bhd saw its net profit drop 47.2% to RM11.94 million or 1.59 sen a share in the first quarter ended March 31, 2017 (1QFY17) from RM22.63 million or 3.01 sen a share a year ago, on lower net earned premiums from its digital global travel business due to a change in the online travel booking regulation late last year.

There was also a decline in gross earned premiums of the Philippines, Australia and China markets in general reinsurance business, as well as lower investment income.

Quarterly revenue was up by a marginal 0.4% to RM130.08 million in 1QFY17 from RM129.54 million in 1QFY16.

“We’ve had some setbacks this quarter (1QFY17) that has taken a hit on our net profit. We had higher motor claims resulting from inflationary costs. Additionally, we made higher investments in human capital and technology, as well as for marketing and promotion to support our digital initiatives,” its group chief executive officer Razman Hafidz Abu Zarim said in a statement yesterday.

Its digital global travel business was impacted towards the end of last year by the Malaysian Aviation Commission’s (Mavcom) new requirement for airlines to provide an “opt-in” facility for travellers wishing to purchase ancillary products and services, including travel insurance.

To address the decline in its digital global travel business, Razman said the group has launched a new collaboration with AirAsia to leverage the airline’s technology to digitalise insurance.

Earlier after Tune Protect’s annual general meeting yesterday, Razman said the group expects to maintain single-digit growth in gross written premiums (GWP) for the financial year ending Dec 31, 2017 (FY17). Tune Protect recorded a growth of 5.7% in GWP to RM501 million in FY16.

“I believe we will have some short-term pains [going forward]. But with this collaboration with AirAsia, we are going to get the initiatives which we had planned last year to address this situation fully on-board this year,” he said.

The many initiatives to be launched under this umbrella include a one-click payment option with BIG Pay and fast track claims process, introduction of bundled insurance, Annual pass, Family plan and Migrant plan; which are designed to increase demand for travel insurance, and introduction of flexible and dynamic premiums based on travellers’ data and market demands.

“Leveraging on these initiatives, we expect the decline in premiums in 1QFY17 to be recovered by the second-half of the year.

“We’re still hopeful for a satisfactory financial performance this year. We probably won’t post double-digit growth, but FY18 onwards, we hope to get back to where we were,” Razman added. In FY16, Tune Protect issued 7.1 million travel insurance policies.

On the group’s planned acquisition in Indonesia, Razman said it is still actively pursuing opportunities there, noting that the country is a tough market to penetrate seeing two failed attempts at acquiring an Indonesian insurer previously due to regulatory issues.

“We are making sure we will tie up with the right partner and are not just looking at just insurance entities but any entity that can bring win-win outcomes.

“We have been talking to several parties and hope to share more updates later this year,” Razman said.

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