KUALA LUMPUR: Tune Protect Group Bhd is expected to recover from a slump with the return of flights translating favourably into earnings, said Kenanga Research.
A pick-up was expected as the demand for flights reverts, albeit likely below pre-Covid-19 as reservations could still exist amid the rising cost of flying, the firm added.
This is seen from Tune Protect's financial year 2019 (FY19) 9.7 million policies issued via local and regional affiliates against only 4.2 million policies in FY22.
"That said, Tune Protect has built a solid partnership portfolio to offer greater exposure in the Middle East.
"We gather that FY19 sold 632,000 policies and surged to 3.1 million policies in FY22," it said in a report.
Kenanga Research said Tune Protect's exit from an inefficient commercial segment could smoothen ratios while claim rates could come off relative to the rise in new policies underwritten.
It also said the improving sentiment in the aviation space would also uplift investor appetite.
"Alongside the normalisation of claims and lower combined ratios, we opine the group could report net profits of RM11.2 million/RM20.5 million in FY23/FY24.
"This is still below its pre-Covid-19 earnings of RM45 million−RM50 million which we believe may require longer-term effort to bring combined ratios to circa 90 per cent."
Kenanga Research tagged an "Add" rating on Tune Protect with a fair value of 55 sen.