TUNE Ins Holdings Bhd, having completed its due diligence exercise, does not foresee any regulatory hurdles from derailing its plans to start operations in Indonesia by the first half of the year.
An insurance product manager and underwriter across the Asia-Pacific, Tune Ins has online and general insurance businesses.
It also provides online travel protection products for AirAsia Bhd and has partnerships with Cebu Pacific and Air Arabia.
The company has footprints in 36 countries across four continents, including 20 countries in the Middle East-North Africa and European Union regions. As of Feb 27, 2015, AirAsia owned 13.65% of Tune Ins, while Tune Group Sdn Bhd, controlled by Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, had a 17.08% stake.
Tune Ins new chief executive officer, Junior Cho (pic), tells StarBizWeek that the company is on track to begin operations in Indonesia despite the recent move by its authorities to raise capital requirements for insurers operating there in a bid to drive consolidation in the insurance sector.
“We do not foresee any regulatory hurdles and have been engaged with the country’s regulators. Tune Ins is currently in discussions with the relevant authorities as well as a few insurers in Indonesia with a view to acquire a strategic stake in one of them.
“The due diligence exercise has been completed and we have just finished our analysis on some of these companies to facilitate our acquisition and expansion plans in that country. Once we succeed in setting up operations in Indonesia via a joint venture, Tune Ins hopes to see its profits from overseas rising close to 9% of the group’s total profit this year from the current 5%,’’ Cho says.
According to Cho, Indonesia, which is currently the largest Asean economy, is the next market that is most attractive to the company after its acquisition in Thailand last year.
In Thailand, Tune Ins operates via its 49% associate company, Tune Insurance Public Co Ltd (formerly Osotspa Insurance Public Co Ltd). Having a foothold in Indonesia, according to him, fits in well with the group’s strategy to be a leading digital insurer in Asean, adding that Indonesia has a low insurance penetration rate, rising income and strong growth prospects.
The company had previously planned to buy a 70% stake in Indonesian general insurer PT Batavia Mitratama Insurance worth about RM26.13mil. It, however, aborted the deal last year due to the time being taken, as well as the fact that there was no substantial progress in obtaining the necessary local regulatory approval.
Cho, who has been helming the company since last November, adds that Tune Ins will vie for a majority stake in the company it acquires, or at least have management control in the proposed joint venture (JV) when the deal materialises.
In Indonesia, the maximum limit for foreign ownership of local insurance companies is currently capped at 80%. On the choice of the JV candidate, he says besides having a clean balance sheet, Tune Ins is eyeing a small to medium-sized insurer which can facilitate in the growth and expansion of its general insurance business. “We are not pursuing the Top 10 or 20 insurers there, but as long as we can find ‘gems in the raft’ and grow our business with the right partner, it should be good enough,” he notes.
He says the three-pronged strategy of the company is to build its existing business, boost its travel business via its collaboration with sister company AirAsia, and drive its new business. The last strategy is where the company will work closely with its partners when it ventures overseas to beef up its operations via various channels, just like in Thailand and Indonesia soon.
In terms of collaborations, Cho says on the travel side, the company hopes to tie up with two to three companies this year, which could be either airlines- or travel-related companies.
On the digital side, in view of its aspiration to be a leading digital insurer, the company will explore opportunities to form partnerships with e-commerce players, he says.
He adds that the company will soon launch an improved digital platform for direct to consumer engagement through enhanced web and mobile solutions, and also form partnerships with e-commerce players.
It will look to build upon its online travel insurance experience to simplify the purchase process of its insurance products and enhance customer experience through its own portals and via collaboration with its partners’ web/mobile sites.
The Asean market, adds Cho, will still be the focus of the company in view of its low insurance penetration rate and good economic prospects.
On the company’s performance this year, vis-a-vis its stellar performance in the fourth quarter of last year, he s is optimistic of garnering a good set of results due the improvement in the travel industry despite headwinds like lower commodity prices, the weaker ringgit and recent regional airline disasters.
For this year, the key priorities for the company will include initiatives to secure a higher take-up rate for its travel insurance, global marketing, expanding its travel partnerships and channel digitalisation.
Tune Ins registered a record fourth quarter result, posting the highest profit after tax of RM24.1mil for the quarter and RM76.1mil for the full year ended Dec 31, 2014. The global travel business posted a healthy quarterly and yearly profit growth of 7.6% and 9.3%, respectively, over the same period last year, despite many industry challenges during the middle of the year.
In addition, the company also achieved the highest operating revenue since its initial public offering, where its operating revenue at RM118.5mil was a 12% increase over the same quarter last year. For the full year, meanwhile, it achieved an operating revenue of RM443.5mil, a 14.3% increase from the year before.
The stellar performance was mainly contributed by a strong gross earned premium (GEP) growth from the fire, travel and marine classes of the business. GEP achievement was RM113mil for the quarter and RM423.5mil for the year, which translates to a 14.1% and 15.2% growth, respectively, against the preceding quarter and year.
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