This article first appeared in The Edge Malaysia Weekly on March 6, 2023 - March 12, 2023

GENERAL insurer Tune Protect Group Bhd is on track to return to profit this year, as its turnaround plan has been bearing fruit, says group CEO Rohit Chandrasekharan Nambiar. This is barring global economic headwinds.

In the financial year ended Dec 31, 2021 (FY2021), higher-than-expected Covid-19 claims from the group’s 49%-owned Thai associate, Tune Protect Thailand, arising from group personal accident (PA) account exposure, sent Tune Protect into the red for the first time since its listing in 2013. The loss was also attributable to fair value loss on its investment in equities and bonds in 2021.

Net loss for FY2021 amounted to RM14.99 million, compared to a net profit of RM18.39 million in FY2020.

Its results for FY2022 continued to be affected by higher Covid-19 claims and fair value loss on investments, resulting in a wider net loss of RM34.39 million. However, it managed to turn a profit in the fourth quarter of 2022, following four consecutive quarters of losses. The group posted a net profit of RM558,000 for 4QFY2022, as its investment portfolio rebounded in the quarter and ended the year at break-even while Tune Protect Thailand’s Covid-19 claims stabilised.

Rohit, who joined Tune Protect in October 2020, says the group is encouraged by the recovery of international travel in view of the reopening of borders and anticipation of pent-up demand for travel insurance.

Tune Protect benefited from a strong uptake of policies with Covid-19 coverage required by countries for inbound travellers during the pandemic.

“Covid-19 travel insurance was a big success for us. Our business in the Middle East doubled. Our business in Thailand grew significantly. When the Langkawi sandbox was introduced (in November 2021), we were the first to introduce a travel protection plan to meet the mandatory coverage for foreign travellers into Langkawi. Many people who flew into Malaysia initially bought our Covid-19 travel insurance and the products were profitable as well,” Rohit, 42, tells The Edge in an interview.

Success in the segment was not enough, however, to offset the share of losses from Tune Protect Thailand.

While not back at pre-Covid-19 levels yet, revenue generation should gradually recover this year as business momentum across its three pillars — lifestyle, health and SME (small and medium enterprise) — picks up. About 70% of Tune Protect’s revenue comes from its lifestyle insurance business, which includes motor, travel, PA and e-wallets, whereas SME and health businesses account for 30% of its sales.

“Motor insurance contributes about 35% of the business, while travel insurance takes up 25%,” says Rohit.

“We expect the travel segment to have a very good year [this year]. We have a travel technology platform where 2,400 travel agents in the Middle East can plug into our technology to sell travel insurance. We launched this in Malaysia in December 2022 and Thailand in February. We will be launching this in other Asean countries this year as well.” Tune Protect has diverted its reliance on AirAsia and AirAsia X operations for business, and now also has partnerships with four other carriers, namely Bamboo Airways, Salam Air, Air Arabia and Fly Arna, an Armenian low-cost airline.

Rohit says the pandemic has raised the awareness of travellers regarding the importance of purchasing travel insurance to mitigate potential financial losses. “The number of air passengers who buy travel insurance has [risen] one or two percentage points from about 10% before the pandemic. But it differs from airline to airline. Some airlines like Air Arabia are higher because they bundle travel insurance with other coverage. In many countries like Malaysia, it is not allowed by law to make insurance compulsory.”

In January 2021, Tune Protect unveiled a three-year (2021 to 2023) strategic transformation plan comprising eight commitments that it endeavours to meet. “We have always said the turnaround story is about looking at the longer-term ambitions of the company. [The year] 2023 is when I said I would deliver, and that is my focus. The eight goals that we have committed — we see no reason not to deliver them,” Rohit says.

This is underpinned by the fact that the exceptionally high Covid-19 claims suffered by Tune Protect Thailand is now a thing of the past, given that the group PA account expired in FY2021 and was not renewed.

Rohit says the group is also expecting volatility of its investment return to lessen considerably in the coming quarters, after significantly reducing its exposure to equities and upping its exposure to bonds and fixed income securities from November 2022.

“I am cautiously optimistic about 2023. I am very optimistic about us delivering on what we have committed [under the three-year strategic plan]. I am very optimistic about the market. I am very optimistic about travel coming back. I am also very optimistic about our technology capability.

“Obviously, the caution is that we are subject to unknown factors. Do I know what will happen in Ukraine and Russia, or in China and Taiwan? I am not a political expert. It doesn’t take much for the market to react,” he observes.

Also, while a recovery in China’s economy this year looks certain, the nature and speed of that recovery remain in doubt. “How fast is China’s revival? It influences a lot of our performance. We are expecting it to come back by the second half of the year. Having said that, the Chinese market represents not more than 5% of our travel insurance — even before Covid-19. It does not have a material effect on our business, but we expect to get more.

“From where I am sitting, I see the bond market to be quite stable this year, which is why we have made a conscious decision to cut our exposure in the equity market and move most of our holdings to bonds and fixed income securities. But who is to say that the bond market may not go back to bear-market territory like last year? It hasn’t been the case for the last few months but that is the unknown.

“There is also a lack of clarity around global geopolitical issues, which could affect the equity and bond markets. The [investment] committee meets every three months, but the management reviews the company’s investments every month. The golden rule is you can never time the market,” says Rohit.

Rohit notes that the group has seen results and traction in some of its eight deliverables under its strategic plan, including recording its highest top line of RM529.51 million and highest net written premium (NWP) in FY2022 since its listing in 2013. NWP rose 72.5% to RM347 million from RM201.1 million in FY2021.

He says; “We now work with 65 digital partners comprising e-commerce, health and technology players as well as hospitals, from five 2½ years ago.

“We have also been able to drive a lot of interesting innovations, which are industry firsts. For example, we have launched bite-sized health insurance products in Malaysia and Thailand, where customers can buy a policy that covers two or three critical illnesses or as many as they want, depending on their income. Our products are built with the philosophy of a budget airline. We are unbundling insurance and making it simpler for consumers.”

The Malaysian market accounts for about 60% of Tune Protect’s revenue, with the rest coming from the Middle East, Thailand and Vietnam.

Rohit says: “In the longer term, this composition will change. We expect the other markets to also start contributing to revenue. This year, our focus is to strengthen our foothold in Vietnam. In FY2022, Vietnam’s total gross written premium (GWP) contribution to the group was RM20.8 million, up from close to RM1 million before that.

“We are also interested in expanding to Indonesia. Currently, we are selling travel insurance in Indonesia through our partners — [likewise] in Cambodia and Laos. We don’t necessarily always need to be in a country. We can have a partnership [with local business partners], where they will front it, but we will teach them how to do it.”

Citing 2020 data from the Life Insurance Association of Malaysia, Rohit says only 54% of Malaysians have any form of insurance coverage. “The penetration rate as at 2020 was 56.1% (insurance and takaful). After deducting policyholders with more than two policies, the rate fell to 41%. Thus, there is still a high growth potential in the country.”

He also believes digital insurance will become more popular, especially for run-of-the-mill insurance products such as motor and travel. “I don’t think any insurer can run away from going digital; you have no choice. That’s not to say that traditional channels such as agents won’t be relevant. You still need advice for more complex insurance products.”

Capital A Bhd’s 100%-owned subsidiary AirAsia Digital Sdn Bhd held a 13.65% stake in Tune Protect at end-March 2022, while Tune Group Sdn Bhd held 15.77% and CIMB SI II Sdn Bhd, 9.4%. Tune Group is equally owned by Capital A co-founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun.

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