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Company Update, 19 August 2013

Tune Ins (TIH MK) Buy (Maintained) Financial - Insurance Target Price: MYR2.40

Market Cap: USD482m Price: MYR2.10

Possible Travel Insurance Boost From Thailand?

Macro

3.00

Risks

2.00

Growth

3.00

Value

1.00

86

98

109

121

133

144

156

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1.3

1.5

1.7

1.9

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2.3

Tune Insurance Holdings (TIH MK)Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)

20

40

60

80

100

120

Feb

-13

Mar-

13

Ap

r-13

May-1

3

Jun-1

3

Jul-13

Vo

l m

Source: Bloomberg

Avg Turnover (MYR/USD) 1.83m/0.59m

Cons. Upside (%) 11.4

Upside (%) 14.3

52-wk Price low/high (MYR) 1.28 - 2.17

Free float (%) 28

Shareholders (%)

Tune Money SB 55.9

AirAsia 16.2

Capital Group 6.6

Shariah compliant

The Research Team 603 9207 7654 ext. 7620

research2@rhbgroup.com

Forecasts and Valuations Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Net premium revenue (MYRm) 165 211 217 225 268

Net income to ord equity (MYRm) 30 49 39 61 79

Net profit growth (%) 59.2 66.1 (20.4) 56.1 29.3

Recurrent net profit (MYRm) 30 49 47 61 79

Consensus EPS (MYR) 0.04 0.07 0.06 0.09 0.11

EPS (MYR) 0.04 0.07 0.06 0.08 0.11

DPS (MYR) 0.00 0.00 0.00 0.03 0.04

Dividend Yield (%) - - - 1.5 2.0

Return on average equity (%) - - - 17.8 20.4

Return on average assets (%) - - - 6.7 7.2

P/E (x) 53.3 32.1 33.3 25.8 20.0

P/B (x) - - 14.7 4.3 3.8

Source: Company data, RHB estimates

In our initiation report on TIH earlier, we highlighted that Thailand’s Health Ministry may introduce mandatory travel insurance for all tourists. If implemented, we see more opportunities vs risks for the company, with Thailand’s take-up rate and TIH’s FY14 EPS rising by 7-30% and 4-21% respectively. We raise our FV to MYR2.40 (from MYR2.15) as we peg a higher P/E of 22x FY14F EPS vs 20x previously.

Mode of payment undetermined. Thailand is still mulling the imposition

of mandatory travel insurance via: i) insurance charges on visa fees, ii) hotel tax, iii) additional fees on airfares (benefit TIH’s business outright), and/or iv) collecting medical fees at embassies or immigration checkpoints. The state agencies are expected to move to the next phase of discussions towards year-end.

Potential uptick in Thailand’s take-up rate. A simple simulation to

assess the potential market penetration upside vis-à-vis tourist arrivals is shown on Fig. 1. In our scenario analysis, we deem the potential market penetration similar to TIH’s current take-up rate of 26-32%. We have assumed TIH’s market penetration among tourists in Thailand at 26%. We gauge that the potential additional take-up, or tourist market that can be tapped by TIH, is 7-30% – assuming it is unable to capture the 39% of tourists that require visas, and the 28% with insurance from other providers/tour packages.

Potential FV between MYR2.23-2.60. Our simulation provides a 4-21%

FY14F EPS upside, assuming a 4% online claims ratio and 50% profit margin. Note that Thailand accounts for ~20% of TIH’s travel insurance policyholders. We retain our BUY call and raise our FV to MYR2.40 from MYR2.15, pegged to a higher 22x FY14F EPS (from 20x) on account of the potential re-rating on its EPS CAGR and underwriting margins of >20%, which are superior to the general insurance industry’s 13%.

Risks. We view the proposed mandatory travel insurance positively but

are nonetheless mindful of the potential risks, ie: i) TIH’s 3-4% online claims ratios could deteriorate if medical claims escalate and outweigh the take-up rate boost, ii) travel demand to Thailand may slow given the accompanying increase in travelling cost and the hassle in verifying insurance coverage, iii) competitors may instead emerge as beneficiaries at TIH’s expense, iv) the proposal could face huge execution risk (ie resistance and negative public feedback from travel forums and online Thai newspapers), and v) there are doubts as to the efficacy of enforcing mandatory travel insurance.

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 2

Figure 1: Scenario analysis

Formula

Current

Forecast

Best-

Case

Worst-

Case Comments

% of tourists require visa due to nationality (a) na 39.4 39.4 Based on 1HCY13 official figures by Thailand

% of tourists assumed to have insurance

via tour packages

(b) na 4.5 28.0 The proportion of tourists from China was 20.5% (based on 1HCY13 data).

We assumed all Chinese and Taiwan tourists traveled to Thailand via tour

packages. In 2007, ~57% of Chinese tourists were from group tours

TIH's current Thailand take-up rate (%) (c) 26.0 26.0 26.0 Based on the lower range of 26-32% blended take-up rate

Additional market share to TIH (%) (d) = 1-(a)-(b)-(c) na 30.1 6.6

TIH's overall take-up rate current + (d)*20% 29.0 35.1 30.4 Assuming Thailand contributed about 20% of total online policyholders

TIH FY14 gross online premiums (MYRm) 153.9 186.2 161.3

Net claims (MYRm) 78.3 80.0 78.6 Small increase if claims ratio for travel insurance maintained at 4%

Management expenses (MYRm) 53.6 54.9 54.9 We assume slight increase in management expenses

Net commission (MYRm) 44.2 49.3 45.3 AirAsia commission @ 30% of gross premium, absent regulated rate

Net profit (MYRm) 79.0 95.7 81.8 ~50% profit margin from online insurance business

EPS (sen) 10.5 12.7 10.9 Potential EPS increase (Best Case : 20.9%, Worst-case : 3.8%)

FV (MYR) 2.15 2.60 2.23 Assuming pegging to the same 20x P/E as per our previous FV

DPS (sen) @ 40% payout 4.2 5.1 4.4 Source: RHB estimates

Worst-case scenario assumptions. Although imposing mandatory travel insurance

on all foreign visitors seems like tremendous prospects at first glance, we believe the upside in TIH’s market share may be less significant than expected on a worst-case scenario basis:

o We assume the current take-up rate of TIH’s policyholders in Thailand is 26%. This is similar to TIH’s existing market penetration.

o If the proposal goes through, we believe the imposition of insurance charges on visa applications will most likely happen, given its relative convenience over the other suggested implementation methods. In such a scenario, we can assume that TIH’s Thai partner may not be able to capture this customer segment – mainly because of the possibility of unfair competition from other insurance providers that may already have established strong working relationships with visa application offices and immigration checkpoints. This can translate to an opportunity loss of 39% from tourists that are of nationalities not exempted from travel visas to Thailand (further details are in the next page of this report).

o We also assume TIH’s market share in travel insurance policies subscribed via tour packages as negligible. Essentially, we are referring to this segment of the market that is dominated by TIH’s competitors. Hence, the potential opportunity loss in market penetration for the company is estimated at 28%, ie the proportion of tourist arrivals in Thailand that came on tour packages in 2012 (further details are in the next page of this report).

o For the above assumptions, we presume no overlaps between tourists requiring visas and those that are insured via tour packages.

o As TIH’s online insurance is highly dependent on AirAsia, we can also assume that the proportion of AirAsia Thai’s passengers by nationality and tour package are consistent to the overall industry tourism data.

o If we disregard 39% tourists acquire insurance via visa applications, 28% of tourists acquire competitors’ travel insurance policies through tour packages, and 26% are from the existing customer base of TIH, the company can potentially capture a 7% market share.

o Please note that our scenarios do not take into account the proportion of tourists who already have insurance policies of their own, for which such data is not available. We are also unable to ascertain the proportion of tourists that may switch to other providers’ insurance policies, or opt for other modes of transport (ie land or water) as TIH’s exposure is mainly through air travel.

Although premature to ascertain how Thailand will implement its proposed mandatory travel insurance, we formulate two scenarios (see Fig. 1) to determine the likely upside in TIH’s take-up rate

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 3

Upside to FV. We believe the take-up rate for Thailand could potentially be boosted

by 7-30%, ranging from the worst-case to best-case scenario. Assuming Thailand contributed about 20% of TIH’s total online insurance policyholders’ base, a 7-30% take-up rate increase could translate to a FY14F EPS upside of between 3.8-20.9% while our FV could be upgraded to MYR2.23-2.60.

Figure 2: Proportion of tourist-related medical cases in Thailand

40%

20%

8%

32%

Expats

Medical Tourist -Specific Treatment

Medical Tourist -General Treatment

Emergency Cases

Source: RHB estimates

Why the need to impose mandatory travel insurance? This proposal serves to

address the increasing burden on Thailand’s local medical centres, as unpaid bills are putting a huge strain on the country’s public hospitals. This cost amounted to THB200m annually on average. The situation may become more acute, as Thailand projects tourist numbers to reach 30m by 2015 (from 22.4m in 2012). Furthermore, it is estimated that 2.5m foreign visitors make hospital visits in Thailand each year and that hospitals in Phuket – Thailand’s top travel destination – had to shoulder about THB5m a year in medical costs for foreigners without insurance. Most foreign patients sought treatment for motorcycle-related accidents.

Which other countries require mandatory travel insurance? It is mandatory in the

Schengen Area countries like Austria, Greece, Portugal, Spain, France, Germany, Belgium, Luxemburg, and the Netherlands. However, the efficiency of its implementation is unknown. Qatar recently announced a phased implementation of mandatory health insurance for foreigners. However, details on how visitors will be able to access insurance cover and fee slabs remain unknown at this juncture. What is known, however, is that the initial phase will be applied to expatriates there, while the insurance scheme for visitors is expected to be mandatory by CY15-CY16.

~22-39% of tourists to Thailand required travel visas. Based on Figures 2 and 3

below, approximately 33% of tourists that arrived at the Suvarnabhumi International Airport (SIA) in Thailand in CY12 required a travel visa. By comparison, since 2006, this figure stood at 22-39%. The affected tourists were mainly residents of China, Taiwan and India, with the former dominating market share at around 21% as at 1HCY13. Likewise, we noted that this proportion had increased over the years (1HCY13: 21%; CY12: 14%; CY11: 11%) on the back of China’s rapidly growing economic wealth.

~28% of tourists to Thailand may have already have insurance coverage incorporated into their tour packages. Based on the Tourism Ministry's data, up to

6.19m tourists, or about 28% of the total 22.3m visitors that travelled by all modes of transport last year, came as part of a tour package. We are unable to ascertain the proportion of tourists who had insurance or were made to purchase travel insurance as part of their holiday packages. Nevertheless, we assume a worst-case scenario that TIH is unable to capture any of the 28% market share of tourists purchasing tour packages from their travel agencies, once travel insurance becomes mandatory. In Malaysia, tour packages offered by members of The Malaysian Association of Tour and Travel Agents (MATTA) have imposed mandatory conditions for travel insurance for their customers since March 2012.

As reported in the Bangkok Post, ~40% of

medical visits in 2012 compared expats living in the kingdom, ~20% are medical tourists in town for specific procedures, ~8% are attending for general medical care while ~32% are believed to be emergency cases

Most foreign patients sought treatment for motorcycle-related accidents. Those insured were able to receive emergency treatment at private institutions, while those who do not had to be referred to public hospitals.

We are unable to identify a successful example of a country that has efficiently carried out mandatory travel insurance policies

Based on their nationalities, ~39% of the 8.6m tourists travelling to SIA in 1HCY13 were not exempted from travel visas

~28% of tourists travelling to Thailand (by all modes of transportation) in CY12 purchased tour packages and may have had insurance coverage

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 4

Figure 3: Tourists at SIA by nationality (blue denotes nationalities not exempted from visas)

Pax *2006 *2007 2007 2008 2009 2010 2011 2012 1H2012 1H2013

East Asia 5,715,567 5,525,455 4,792,955 4,447,703 3,946,770 4,237,310 5,401,256 6,754,814 3,162,178 4,636,306

ASEAN 1,637,342 1,573,134 1,285,514 1,351,898 1,285,943 1,294,716 1,616,152 1,964,254 963,222 1,257,707

Brunei 8,814 8,324 8,095 7,919 7,008 5,844 6,138 8,756 4,063 6,174

Cambodia 31,708 31,717 31,443 28,754 25,640 25,758 34,567 51,277 24,722 32,059

Indonesia 142,572 155,174 143,044 149,908 141,076 148,054 224,016 258,399 132,837 211,489

Laos 13,125 14,667 13,647 14,334 16,542 17,656 19,127 30,302 13,313 18,399

Malaysia 495,145 490,529 363,283 371,986 336,209 354,223 415,581 434,250 220,866 290,327

Myanmar 61,534 71,166 68,948 69,204 77,436 83,511 104,294 117,054 59,474 81,299

Philippines 135,312 159,470 151,472 158,349 155,416 155,362 177,110 206,423 105,253 118,225

Singapore 617,364 538,737 404,379 396,908 378,655 361,591 401,398 551,425 250,156 309,296

Vietnam 131,768 103,350 101,203 154,536 147,961 142,717 233,921 306,368 152,538 190,439

China 929,269 877,902 781,126 717,004 660,907 864,977 1,289,651 1,931,169 891,992 1,767,143

Hong Kong 372,424 364,449 313,606 297,426 274,298 258,477 334,788 386,259 168,972 238,707

Japan 1,273,647 1,237,318 1,179,217 1,083,555 930,330 907,569 1,038,685 1,272,756 578,706 685,814

Korea 1,006,756 1,022,303 841,621 623,516 434,153 552,501 686,103 802,627 373,076 428,050

Taiwan 469,792 423,119 365,293 346,515 336,874 335,788 403,446 355,893 167,624 231,501

Others 26,337 27,230 26,578 27,789 24,265 23,282 32,431 41,856 18,586 27,384

Europe 3,244,818 3,667,257 3,072,113 3,128,694 3,188,069 3,400,547 3,806,415 4,035,474 2,017,744 2,232,643

Austria 72,067 77,583 66,601 70,051 74,391 76,898 76,524 80,018 41,812 43,521

Belgium 62,268 66,163 56,098 61,242 61,110 61,268 66,609 73,585 33,512 36,665

Denmark 121,570 135,436 104,570 106,495 105,960 111,122 117,567 115,972 62,933 62,918

Finland 106,318 138,563 85,125 86,102 86,699 79,368 74,834 76,230 41,465 42,086

France 281,404 336,024 311,278 332,300 346,729 366,583 413,074 446,575 228,837 239,585

Germany 484,422 511,782 445,577 457,084 482,449 500,811 508,101 534,791 271,701 282,412

Ireland na 67,454 62,573 61,163 53,675 45,893 46,610 45,882 21,793 21,658

Italy 140,334 161,561 140,999 134,222 143,063 135,693 153,546 160,461 72,864 70,656

Netherlands 163,664 175,797 162,897 163,041 174,929 164,821 166,228 167,712 71,791 78,097

Norway 100,916 103,535 81,746 85,497 86,203 101,336 108,352 116,659 63,146 61,343

Russia 184,358 271,727 225,616 266,638 272,982 467,971 705,679 783,286 389,511 549,020

Spain 66,263 78,980 76,206 73,945 65,280 57,992 83,417 96,707 34,311 34,428

Sweden 288,691 360,511 218,478 209,109 197,360 205,073 205,594 210,409 114,666 104,239

Switzerland 131,695 136,849 110,251 110,411 116,920 122,919 133,032 148,069 71,433 74,736

United Kingdom 779,331 798,154 702,638 682,984 682,493 639,855 661,485 669,666 336,389 344,659

East Europe 104,905 141,276 124,299 138,516 157,394 184,007 205,121 233,277 119,863 133,211

Others 156,612 105,862 97,161 89,894 80,432 78,937 80,642 76,175 41,717 53,409

The Americas 842,659 849,629 778,565 761,610 706,622 675,879 753,809 835,205 434,247 465,686

Argentina 4,038 6,051 5,536 5,802 5,937 7,652 9,437 12,854 8,351 9,852

Brazil 11,221 14,462 12,903 14,389 14,602 16,046 18,926 23,250 11,811 13,594

Canada 162,524 164,964 147,655 145,119 133,375 127,896 147,156 162,209 86,653 91,483

USA 637,058 632,862 583,083 565,899 527,334 498,664 548,868 602,208 308,000 330,439

Others 27,818 31,290 29,388 30,401 25,374 25,621 29,422 34,684 19,432 20,318

South Asia 607,357 680,622 663,889 665,146 775,631 913,887 1,067,560 1,181,570 597,666 627,112

Bangladesh 39,904 44,441 44,091 45,922 51,412 64,411 62,508 69,843 32,618 36,166

India 438,523 509,309 494,259 495,855 570,573 693,191 837,119 919,108 473,444 493,970

Nepal 20,806 19,278 19,018 19,966 24,864 23,705 22,077 24,981 12,133 11,833

Pakistan 45,157 45,704 45,058 46,990 60,512 61,110 69,366 67,468 33,376 35,674

Sri Lanka 45,974 43,848 43,496 37,805 46,046 48,346 51,738 71,604 31,999 33,758

Others 16,993 18,042 17,967 18,608 22,224 23,124 24,752 28,566 14,096 15,711

Oceania 596,954 715,976 550,376 563,446 499,931 475,023 552,658 652,375 312,310 315,938

Australia 503,168 617,046 463,346 482,925 431,032 407,601 483,072 570,425 274,910 275,864

New Zealand 90,918 97,236 85,421 78,736 67,137 65,693 67,761 79,719 36,352 38,923

Others 2,868 1,694 1,609 1,785 1,763 1,729 1,825 2,231 1,048 1,151

Middle East 384,131 426,958 415,303 444,909 468,065 548,983 566,941 561,271 280,994 267,482

Egypt 11,712 12,797 12,000 13,024 14,775 15,304 15,010 17,126 8,464 9,862

Israel 116,466 123,118 120,551 101,165 105,066 109,495 118,301 121,208 53,147 56,376

Kuwait 33,388 31,413 29,647 30,184 42,495 39,167 51,963 59,237 30,786 29,444

Saudi Arabia 20,254 22,125 19,818 14,858 9,811 7,683 11,370 15,225 7,769 9,318

U.A.E. 69,255 74,708 73,528 93,940 82,759 103,789 107,409 108,994 52,324 51,234

Others 133,056 162,797 159,759 191,738 213,159 273,545 262,888 239,481 128,504 111,248

Africa 103,611 109,595 97,285 97,180 87,390 100,417 109,582 122,378 59,474 59,921

S.Africa 45,064 50,472 39,294 35,799 27,588 37,821 48,453 54,984 25,990 25,213

Others 58,547 59,123 57,991 61,381 59,801 62,596 61,129 67,394 33,484 34,708

Grand Total 11,495,097 11,975,492 10,370,486 10,108,688 9,672,478 10,352,046 12,258,221 14,143,087 6,864,613 8,605,088

- of which requires visa 2,560,357 2,589,316 2,355,878 2,280,570 2,322,555 2,864,883 3,790,758 4,604,291 2,219,526 3,391,526

* The following data consists of total tourists who traveled by air to and fro all airports in Thailand

# Nationalities of the blue highlights may be required to apply for Visa on Arrival at major entry points whether travel by air or by land. The cost is THB1000, and

allows traveller to stay for 15 days.

* The following data consists of total tourists who travelled by air to and from all airports in Thailand

# Nationalities in the blue highlighted areas may be required to apply for a visa on arrival at major entry points. The cost is THB1,000, and allows travellers to stay for 15 days

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 5

Source: Tourism Authority Of Thailand, Thailand’s Immigration Bureau, Police Department.

Figure 4: Tourist market share at SIA by nationality (blue denotes nationalities not exempted from visas)

Market Share (%) *2006 *2007 2007 2008 2009 2010 2011 2012 1H2012 1H2013

East Asia 50% 46% 46% 44% 41% 41% 44% 48% 46% 54%

ASEAN 14% 13% 12% 13% 13% 13% 13% 14% 14% 15%

Brunei 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Cambodia 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Indonesia 1% 1% 1% 1% 1% 1% 2% 2% 2% 2%

Laos 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Malaysia 4% 4% 4% 4% 3% 3% 3% 3% 3% 3%

Myanmar 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Philippines 1% 1% 1% 2% 2% 2% 1% 1% 2% 1%

Singapore 5% 4% 4% 4% 4% 3% 3% 4% 4% 4%

Vietnam 1% 1% 1% 2% 2% 1% 2% 2% 2% 2%

China 8% 7% 8% 7% 7% 8% 11% 14% 13% 21%

Hong Kong 3% 3% 3% 3% 3% 2% 3% 3% 2% 3%

Japan 11% 10% 11% 11% 10% 9% 8% 9% 8% 8%

Korea 9% 9% 8% 6% 4% 5% 6% 6% 5% 5%

Taiwan 4% 4% 4% 3% 3% 3% 3% 3% 2% 3%

Others 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Europe 28% 31% 30% 31% 33% 33% 31% 29% 29% 26%

Austria 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Belgium 1% 1% 1% 1% 1% 1% 1% 1% 0% 0%

Denmark 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Finland 1% 1% 1% 1% 1% 1% 1% 1% 1% 0%

France 2% 3% 3% 3% 4% 4% 3% 3% 3% 3%

Germany 4% 4% 4% 5% 5% 5% 4% 4% 4% 3%

Ireland na 1% 1% 1% 1% 0% 0% 0% 0% 0%

Italy 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Netherlands 1% 1% 2% 2% 2% 2% 1% 1% 1% 1%

Norway 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Russia 2% 2% 2% 3% 3% 5% 6% 6% 6% 6%

Spain 1% 1% 1% 1% 1% 1% 1% 1% 0% 0%

Sweden 3% 3% 2% 2% 2% 2% 2% 1% 2% 1%

Switzerland 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

United Kingdom 7% 7% 7% 7% 7% 6% 5% 5% 5% 4%

East Europe 1% 1% 1% 1% 2% 2% 2% 2% 2% 2%

Others 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

The Americas 7% 7% 8% 8% 7% 7% 6% 6% 6% 5%

Argentina 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Brazil 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Canada 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

USA 6% 5% 6% 6% 5% 5% 4% 4% 4% 4%

Others 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

South Asia 5% 6% 6% 7% 8% 9% 9% 8% 9% 7%

Bangladesh 0% 0% 0% 0% 1% 1% 1% 0% 0% 0%

India 4% 4% 5% 5% 6% 7% 7% 6% 7% 6%

Nepal 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Pakistan 0% 0% 0% 0% 1% 1% 1% 0% 0% 0%

Sri Lanka 0% 0% 0% 0% 0% 0% 0% 1% 0% 0%

Others 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Oceania 5% 6% 5% 6% 5% 5% 5% 5% 5% 4%

Australia 4% 5% 4% 5% 4% 4% 4% 4% 4% 3%

New Zealand 1% 1% 1% 1% 1% 1% 1% 1% 1% 0%

Others 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Middle East 3% 4% 4% 4% 5% 5% 5% 4% 4% 3%

Egypt 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Israel 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Kuwait 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Saudi Arabia 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

U.A.E. 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

Others 1% 1% 2% 2% 2% 3% 2% 2% 2% 1%

Africa 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

S.Africa 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Others 1% 0% 1% 1% 1% 1% 0% 0% 0% 0%

Grand Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

- of which requires visa 22% 22% 23% 23% 24% 28% 31% 33% 32% 39%

* The following data consists of total tourists who traveled by air to and fro all airports in Thailand

# Nationalities of the blue highlights may be required to apply for Visa on Arrival at major entry points whether travel by air or by land. The cost is THB1000, and

allows traveller to stay for 15 days.

* The following data consists of total tourists who travelled by air to and from all airports in Thailand

# Nationalities in the blue highlighted areas may be required to apply for a visa on arrival at major entry points. The cost is THB1,000, and allows travellers to stay for 15 days

Source: Tourism Authority Of Thailand, Thailand’s Immigration Bureau, Police Department.

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 6

Figure 5: Monthly foreign tourists arrivals in Thailand (‘000) – all modes of transport

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N 2

010

MA

Y 2

010

SE

P 2

010

JA

N 2

011

MA

Y 2

011

SE

P 2

011

JA

N 2

012

MA

Y 2

012

SE

P 2

012

JA

N 2

013

MA

Y 2

013

Source: Bank Of Thailand

Other measures to promote safe tourism. As part of a five-pronged strategy

(named DISCO), the Thai Government has stepped up safety measures for tourists, especially during festive seasons:

o According to the Royal Thai Police, safety zones have been designated in 56 provinces, to be patrolled by personnel from all 353 police stations across Thailand. Measures have been set up to protect tourists against assault, robbery and other criminal acts, as well as other services to facilitate tourists’ entry into the country.

o More closed-circuit television cameras will be installed at various tourist destinations and more volunteers will be recruited to help in ensuring the safety of tourists.

o The Office of Immigration has assigned additional officers to international and regional airports to reduce the waiting time at Thailand’s immigration checkpoints for foreign tourists. The Office has also streamlined immigration formalities by shortening the time required to obtain a visa upon arrival and providing one-stop services at such checkpoints.

o In preparation for welcoming visitors during the Chinese New Year celebrations, the Bureau of Prevention and Assistance In Tourist Fraud – an Agency under the Ministry Of Tourism And Sports – has doubled the number of Chinese-speaking officers on duty at international and regional airports throughout Thailand.

o The Tourism And Sports and Justice Ministries have discussed the idea of a tourism court to specially handle tourist-related cases, eg instances where tourists have received unfair treatment from their tour agencies.

o Free Wifi routers have been installed at major tourist spots nationwide to offer high-speed internet service for tourists.

Overall, these measures should indirectly bode well for TIH, as they can help keep its claims ratio low and sustain its underwriting margins for the online travel insurance business in the longer run. Nonetheless, we will constantly monitor the company’s claims ratios, but we are not overly concerned about them. TIH tracks its travel insurance claims experience on a frequent basis and it is able to respond quickly to changes in claims ratio by adjusting the benefits and loading factor.

The Tourism Authority of Thailand is stepping up measures to promote tourism via a five-pronged strategy named DISCO:

D: digital marketing

I: image building

S: sustainability

C: crystallisation and crisis communication

O: organisation management

SARS

Tsunami

Global recession, local riots

H1N1 flu

Riots, political instability

Major flood

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 7

Appendix

Figure 6: Based on 2007 data, most tourists to Thailand were between 25-44 years old

Country Average

of Residence <15 15-24 25-34 35-44 45-54 55-64 >65 Age

East Asia 4.4% 10.1% 27.1% 24.5% 19.3% 10.8% 3.7% 39.19

ASEAN 5.2% 11.1% 28.2% 23.7% 19.0% 9.4% 3.4% 38.30

Brunei 6.7% 9.2% 23.8% 26.1% 20.5% 10.5% 3.2% 39.06

Cambodia 5.3% 15.5% 29.3% 27.2% 13.6% 5.7% 3.5% 36.02

Indonesia 4.6% 9.2% 25.9% 26.3% 19.7% 10.6% 3.9% 39.49

Laos 6.1% 16.5% 38.8% 14.3% 17.8% 5.3% 1.2% 34.42

Malaysia 6.1% 9.0% 24.4% 23.7% 20.6% 11.3% 4.9% 39.77

Myanmar 3.8% 10.9% 24.8% 27.5% 20.0% 9.9% 3.0% 39.11

Philippines 3.0% 11.0% 30.7% 28.1% 16.7% 8.4% 2.2% 37.88

Singapore 4.7% 8.9% 26.4% 27.8% 19.7% 9.5% 3.0% 39.01

Vietnam 1.8% 19.3% 37.1% 21.2% 12.2% 7.6% 0.8% 34.92

China 2.8% 9.2% 30.2% 29.1% 17.7% 8.1% 2.9% 38.55

Hong Kong 6.2% 9.5% 25.5% 29.7% 19.0% 7.5% 2.6% 38.05

Japan 1.7% 8.9% 20.2% 23.7% 21.2% 18.6% 5.7% 43.01

Korea 5.5% 9.1% 29.3% 21.8% 19.8% 10.9% 3.6% 38.93

Taiwan 5.0% 9.6% 26.1% 24.9% 19.9% 10.6% 3.9% 39.31

Others 7.7% 12.4% 23.8% 26.9% 18.4% 7.6% 3.3% 37.38

Europe 3.4% 11.3% 26.3% 22.7% 18.8% 12.7% 4.7% 39.85

Austria 2.3% 9.8% 26.7% 23.2% 20.3% 12.9% 4.9% 40.64

Belgium 2.8% 8.3% 22.4% 24.6% 21.8% 15.0% 5.1% 41.83

Denmark 7.1% 11.9% 19.6% 20.9% 18.7% 15.4% 6.5% 40.48

Finland 6.4% 11.1% 24.1% 21.7% 19.7% 13.2% 3.9% 39.35

France 3.3% 10.8% 26.4% 21.4% 19.7% 14.0% 4.4% 40.23

Germany 1.8% 7.4% 23.9% 25.9% 21.6% 13.1% 6.4% 42.03

Italy 2.7% 6.9% 29.3% 28.1% 17.5% 11.6% 4.0% 40.08

Netherlands 2.6% 10.6% 23.1% 21.4% 21.0% 15.8% 5.5% 41.53

Norway 5.4% 11.2% 18.3% 21.4% 20.6% 17.1% 6.0% 41.55

Russia 4.3% 13.1% 33.3% 26.6% 16.9% 4.7% 1.1% 35.87

Spain 1.4% 5.6% 43.8% 22.0% 16.8% 8.2% 2.1% 37.99

Sweden 7.9% 15.0% 19.1% 19.7% 18.2% 14.4% 5.7% 39.23

Switzerland 2.7% 7.9% 22.7% 24.0% 21.3% 15.3% 6.1% 42.18

United Kingdom 1.8% 14.5% 27.6% 20.3% 17.2% 13.5% 5.2% 39.60

East Europe 3.3% 10.3% 34.4% 25.1% 17.0% 8.0% 1.9% 37.45

Others 2.0% 13.5% 35.1% 22.4% 15.2% 8.8% 3.0% 37.34

The Americas 2.4% 11.4% 22.7% 19.3% 19.8% 16.7% 7.6% 42.06

Argentina 0.9% 9.7% 34.0% 22.9% 13.8% 11.1% 7.6% 39.94

Brazil 1.9% 17.7% 24.5% 21.4% 17.2% 9.3% 8.0% 39.10

Canada 2.0% 15.5% 27.1% 17.4% 17.8% 14.7% 5.6% 39.80

USA 2.6% 10.2% 21.1% 19.7% 20.6% 17.6% 8.2% 42.84

Others 2.3% 14.0% 33.7% 19.0% 13.2% 11.9% 5.9% 38.43

South Asia 4.7% 9.8% 29.6% 28.8% 18.2% 7.1% 2.0% 37.63

Bangladesh 6.4% 8.2% 21.2% 31.1% 22.2% 8.8% 2.1% 39.12

India 4.7% 10.3% 31.1% 27.6% 17.2% 7.1% 2.0% 37.28

Nepal 3.1% 8.0% 26.8% 29.4% 22.7% 7.7% 2.4% 39.37

Pakistan 4.3% 7.6% 29.3% 32.8% 18.7% 6.2% 1.1% 37.84

Sri Lanka 4.3% 9.6% 22.0% 32.1% 22.7% 7.4% 1.9% 39.03

Others 4.3% 8.0% 30.3% 34.3% 16.9% 3.9% 2.4% 37.38

Oceania 4.7% 14.7% 23.9% 18.9% 19.6% 13.4% 4.8% 39.32

Australia 4.8% 15.1% 23.9% 18.8% 19.6% 13.3% 4.6% 39.16

New Zealand 3.6% 12.8% 24.5% 19.0% 20.0% 14.2% 5.9% 40.41

Others 7.1% 3.3% 20.1% 35.6% 18.4% 9.2% 6.3% 40.82

Middle East 5.6% 12.1% 28.3% 25.2% 17.6% 8.5% 2.7% 37.49

Egypt 3.4% 10.0% 36.2% 24.2% 16.4% 7.7% 2.1% 37.21

Israel 3.5% 17.1% 26.3% 17.7% 18.1% 13.0% 4.3% 38.59

Kuwait 6.1% 14.8% 25.2% 27.9% 18.0% 5.9% 2.1% 36.52

Saudi Arabia 8.3% 9.6% 26.5% 26.1% 20.6% 6.6% 2.4% 37.33

U.A.E. 8.8% 11.6% 29.4% 26.9% 15.0% 6.4% 1.9% 35.81

Others 4.9% 8.5% 29.6% 29.2% 18.4% 7.2% 2.1% 37.94

Africa 3.5% 10.8% 26.1% 28.2% 20.3% 8.9% 2.1% 38.68

South Africa 2.8% 13.6% 24.2% 25.6% 21.0% 9.9% 2.8% 38.94

Others 4.1% 8.6% 27.5% 30.3% 19.8% 8.1% 1.5% 38.48

Grand Total 4.1% 10.8% 26.6% 23.7% 19.1% 11.5% 4.1% 39.40

<------------------------------------------------------------------- Age ------------------------------------------------------------------>

Source: Tourism Authority Of Thailand, Thailand’s Immigration Bureau, Police Department.

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 8

Figure 7: ~34% of tourists to Thailand travelled in group tour packages in 2007 (China: 57%)

Country of Residence Group Tour (m) Share (%) Non-Group Tour (m) Share (%)

East Asia 3,280,375 41.1% 4,700,830 58.9%

ASEAN 1,034,761 27.6% 2,720,793 72.4%

Brunei 2,669 21.5% 9,761 78.5%

Cambodia 30,991 28.5% 77,785 71.5%

Indonesia 80,476 34.4% 153,443 65.6%

Laos 145,025 27.8% 376,037 72.2%

Malaysia 497,463 32.1% 1,054,496 67.9%

Myanmar 18,799 25.0% 56,384 75.0%

Philippines 60,690 30.5% 138,183 69.5%

Singapore 117,574 14.7% 681,526 85.3%

Vietnam 81,074 31.9% 173,178 68.1%

China 570,057 56.8% 433,084 43.2%

Hong Kong 166,500 37.2% 281,557 62.8%

Japan 498,160 39.9% 750,540 60.1%

Korea 776,691 72.2% 298,825 27.8%

Taiwan 224,789 52.6% 202,244 47.4%

Others 9,417 40.6% 13,787 59.4%

Europe 931,744 25.3% 2,758,026 74.7%

Austria 14,791 19.9% 59,359 80.1%

Belgium 15,690 22.7% 53,352 77.3%

Denmark 28,720 21.3% 106,286 78.7%

Finland 67,138 48.5% 71,194 51.5%

France 75,387 21.4% 276,264 78.6%

Germany 106,330 19.8% 430,870 80.2%

Italy 42,261 26.6% 116,662 73.4%

Netherlands 48,311 26.3% 135,036 73.7%

Norway 24,407 22.2% 85,669 77.8%

Russia 143,122 51.2% 136,649 48.8%

Spain 30,785 36.3% 53,929 63.7%

Sweden 83,636 22.3% 290,684 77.7%

Switzerland 22,809 15.0% 129,213 85.0%

United Kingdom 128,531 17.2% 617,891 82.8%

East Europe 51,397 39.1% 79,941 60.9%

Others 48,429 29.6% 115,027 70.4%

The Americas 156,769 19.2% 660,795 80.8%

Argentina 1,295 23.1% 4,316 76.9%

Brazil 3,112 28.2% 7,914 71.8%

Canada 27,795 18.6% 121,968 81.4%

USA 116,112 18.6% 507,526 81.4%

Others 8,455 30.7% 19,071 69.3%

South Asia 254,947 37.2% 430,627 62.8%

Bangladesh 11,962 24.9% 36,037 75.1%

India 203,384 40.2% 302,853 59.8%

Nepal 5,080 24.7% 15,458 75.3%

Pakistan 14,414 30.2% 33,347 69.8%

Sri Lanka 16,040 36.3% 28,199 63.7%

Others 4,067 21.6% 14,733 78.4%

Oceania 99,434 13.6% 631,849 86.4%

Australia 83,277 13.1% 554,849 86.9%

New Zealand 15,744 17.5% 74,184 82.5%

Others 413 12.8% 2,816 87.2%

Middle East 133,049 29.3% 320,842 70.7%

Egypt 3,171 25.8% 9,097 74.2%

Israel 35,025 28.5% 87,987 71.5%

Kuwait 7,143 20.4% 27,940 79.6%

Saudi Arabia 4,173 17.2% 20,073 82.8%

U.A.E. 25,885 26.4% 72,237 73.6%

Others 57,652 35.8% 103,508 64.2%

Africa 28,645 27.3% 76,296 72.7%

South Africa 11,434 24.7% 34,835 75.3%

Others 17,211 29.3% 41,461 70.7%

Grand Total 4,884,963 33.8% 9,579,265 66.2% Source: Tourism Authority Of Thailand, Thailand’s Immigration Bureau, Police Department.

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 9

Figure 8: In 2007, ~60% of tourists to Thailand were returning visitors

Country of Residence First- Visit (m) Share (%) Revisit (m) Share (%)

East Asia 2,877,638 36.1% 5,103,567 63.9%

ASEAN 682,415 18.2% 3,073,139 81.8%

Brunei 3,304 26.6% 9,126 73.4%

Cambodia 21,597 19.9% 87,179 80.1%

Indonesia 72,073 30.8% 161,846 69.2%

Laos 67,346 12.9% 453,716 87.1%

Malaysia 215,262 13.9% 1,336,697 86.1%

Myanmar 24,651 32.8% 50,532 67.2%

Philippines 80,310 40.4% 118,563 59.6%

Singapore 99,662 12.5% 699,438 87.5%

Vietnam 98,210 38.6% 156,042 61.4%

China 600,695 59.9% 402,446 40.1%

Hong Kong 132,845 29.6% 315,212 70.4%

Japan 447,742 35.9% 800,958 64.1%

Korea 789,781 73.4% 285,735 26.6%

Taiwan 215,287 50.4% 211,746 49.6%

Others 8,873 38.2% 14,331 61.8%

Europe 1,592,725 43.2% 2,097,045 56.8%

Austria 31,080 41.9% 43,070 58.1%

Belgium 27,154 39.3% 41,888 60.7%

Denmark 45,925 34.0% 89,081 66.0%

Finland 64,798 46.8% 73,534 53.2%

France 139,248 39.6% 212,403 60.4%

Germany 203,748 37.9% 333,452 62.1%

Italy 70,008 44.1% 88,915 55.9%

Netherlands 86,045 46.9% 97,302 53.1%

Norway 40,969 37.2% 69,107 62.8%

Russia 178,535 63.8% 101,236 36.2%

Spain 51,641 61.0% 33,073 39.0%

Sweden 144,416 38.6% 229,904 61.4%

Switzerland 45,217 29.7% 106,805 70.3%

United Kingdom 303,129 40.6% 443,293 59.4%

East Europe 77,214 58.8% 54,124 41.2%

Others 83,598 51.1% 79,858 48.9%

The Americas 321,750 39.4% 495,814 60.6%

Argentina 3,404 60.7% 2,207 39.3%

Brazil 6,151 55.8% 4,875 44.2%

Canada 64,631 43.2% 85,132 56.8%

USA 230,452 37.0% 393,186 63.0%

Others 17,112 62.2% 10,414 37.8%

South Asia 307,884 44.9% 377,690 55.1%

Bangladesh 13,045 27.2% 34,954 72.8%

India 250,688 49.5% 255,549 50.5%

Nepal 5,992 29.2% 14,546 70.8%

Pakistan 18,144 38.0% 29,617 62.0%

Sri Lanka 16,338 36.9% 27,901 63.1%

Others 3,677 19.6% 15,123 80.4%

Oceania 278,096 38.0% 453,187 62.0%

Australia 240,311 37.7% 397,815 62.3%

New Zealand 36,782 40.9% 53,146 59.1%

Others 1,003 31.1% 2,226 68.9%

Middle East 213,243 47.0% 240,648 53.0%

Egypt 7,397 60.3% 4,871 39.7%

Israel 62,804 51.1% 60,208 48.9%

Kuwait 12,355 35.2% 22,728 64.8%

Saudi Arabia 12,678 52.3% 11,568 47.7%

U.A.E. 40,491 41.3% 57,631 58.7%

Others 77,518 48.1% 83,642 51.9%

Africa 49,503 47.2% 55,438 52.8%

South Africa 23,872 51.6% 22,397 48.4%

Others 25,631 43.7% 33,041 56.3%

Grand Total 5,640,839 39.0% 8,823,389 61.0% Source: Tourism Authority Of Thailand, Thailand’s Immigration Bureau, Police Department.

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 10

Figure 9: In 2007, ˃80% of visitors to Thailand came for holidays vs other purposes

Country of Residence Holiday (m) Share (%) Business (m) Share (%) Conventional (m) Share (%) Official (m) Share (%) Others (m) Share (%)

East Asia 6,592,894 82.6% 697,373 8.7% 323,196 4.0% 20,388 0.3% 347,354 4.4%

ASEAN 3,007,335 80.1% 303,229 8.1% 195,306 5.2% 12,197 0.3% 237,487 6.3%

Brunei 9,540 76.7% 929 7.5% 696 5.6% 0 0.0% 1,265 10.2%

Cambodia 69,887 64.2% 7,459 6.9% 13,746 12.6% 135 0.1% 17,549 16.1%

Indonesia 185,964 79.5% 18,274 7.8% 15,769 6.7% 708 0.3% 13,204 5.6%

Laos 368,794 70.8% 13,423 2.6% 41,769 8.0% 615 0.1% 96,461 18.5%

Malaysia 1,376,071 88.7% 87,262 5.6% 49,742 3.2% 3,241 0.2% 35,643 2.3%

Myanmar 43,383 57.7% 11,948 15.9% 5,273 7.0% 656 0.9% 13,923 18.5%

Philippines 140,214 70.5% 21,250 10.7% 13,783 6.9% 2,899 1.5% 20,727 10.4%

Singapore 620,816 77.7% 119,739 15.0% 34,606 4.3% 2,821 0.4% 21,118 2.6%

Vietnam 192,666 75.8% 22,945 9.0% 19,922 7.8% 1,122 0.4% 17,597 6.9%

China 854,566 85.2% 77,062 7.7% 34,719 3.5% 2,600 0.3% 34,194 3.4%

Hong Kong 395,681 88.3% 37,634 8.4% 10,610 2.4% 512 0.1% 3,620 0.8%

Japan 990,552 79.3% 176,690 14.1% 44,724 3.6% 2,222 0.2% 34,512 2.8%

Korea 970,213 90.2% 54,388 5.1% 21,836 2.0% 1,836 0.2% 27,243 2.5%

Taiwan 354,485 83.0% 46,821 11.0% 15,451 3.6% 962 0.2% 9,314 2.2%

Others 20,062 86.5% 1,549 6.7% 550 2.4% 59 0.3% 984 4.2%

Europe 3,246,015 88.0% 270,023 7.3% 73,525 2.0% 6,527 0.2% 93,680 2.5%

Austria 64,829 87.4% 5,266 7.1% 1,896 2.6% 143 0.2% 2,016 2.7%

Belgium 59,202 85.7% 6,219 9.0% 1,461 2.1% 112 0.2% 2,048 3.0%

Denmark 118,072 87.5% 11,419 8.5% 2,382 1.8% 124 0.1% 3,009 2.2%

Finland 126,928 91.8% 7,765 5.6% 1,714 1.2% 61 0.0% 1,864 1.3%

France 294,391 83.7% 35,688 10.1% 9,229 2.6% 814 0.2% 11,529 3.3%

Germany 471,720 87.8% 40,795 7.6% 12,294 2.3% 761 0.1% 11,630 2.2%

Italy 133,016 83.7% 15,689 9.9% 4,086 2.6% 475 0.3% 5,657 3.6%

Netherlands 159,449 87.0% 15,045 8.2% 3,701 2.0% 183 0.1% 4,969 2.7%

Norway 98,636 89.6% 6,885 6.3% 2,035 1.8% 236 0.2% 2,284 2.1%

Russia 258,943 92.6% 10,977 3.9% 3,264 1.2% 286 0.1% 6,301 2.3%

Spain 73,207 86.4% 6,722 7.9% 1,990 2.3% 93 0.1% 2,702 3.2%

Sweden 340,917 91.1% 22,803 6.1% 4,926 1.3% 508 0.1% 5,166 1.4%

Switzerland 130,001 85.5% 14,987 9.9% 3,424 2.3% 321 0.2% 3,289 2.2%

United Kingdom 659,096 88.3% 50,240 6.7% 14,099 1.9% 1,797 0.2% 21,190 2.8%

East Europe 114,720 87.3% 7,413 5.6% 3,124 2.4% 317 0.2% 5,764 4.4%

Others 142,888 87.4% 12,110 7.4% 3,900 2.4% 296 0.2% 4,262 2.6%

The Americas 621,234 76.0% 93,838 11.5% 32,471 4.0% 3,704 0.5% 66,317 8.1%

Argentina 4,322 77.0% 414 7.4% 524 9.3% 11 0.2% 340 6.1%

Brazil 8,990 81.5% 1,138 10.3% 394 3.6% 0 0.0% 504 4.6%

Canada 123,728 82.6% 12,978 8.7% 4,504 3.0% 309 0.2% 8,244 5.5%

USA 461,551 74.0% 77,366 12.4% 25,972 4.2% 3,384 0.5% 55,365 8.9%

Others 22,643 82.3% 1,942 7.1% 1,077 3.9% 0 0.0% 1,864 6.8%

South Asia 495,182 72.2% 89,870 13.1% 46,356 6.8% 2,910 0.4% 51,256 7.5%

Bangladesh 33,725 70.3% 5,797 12.1% 2,596 5.4% 171 0.4% 5,710 11.9%

India 377,339 74.5% 64,609 12.8% 32,891 6.5% 2,078 0.4% 29,320 5.8%

Nepal 10,849 52.8% 3,095 15.1% 2,018 9.8% 107 0.5% 4,469 21.8%

Pakistan 32,374 67.8% 6,907 14.5% 4,200 8.8% 142 0.3% 4,138 8.7%

Sri Lanka 32,018 72.4% 5,785 13.1% 2,709 6.1% 228 0.5% 3,499 7.9%

Others 8,877 47.2% 3,677 19.6% 1,942 10.3% 184 1.0% 4,120 21.9%

Oceania 601,456 82.2% 65,031 8.9% 20,537 2.8% 1,820 0.2% 42,439 5.8%

Australia 527,391 82.6% 57,078 8.9% 17,398 2.7% 1,638 0.3% 34,621 5.4%

New Zealand 71,853 79.9% 7,601 8.5% 2,811 3.1% 169 0.2% 7,494 8.3%

Others 2,212 68.5% 352 10.9% 328 10.2% 13 0.4% 324 10.0%

Middle East 379,800 83.7% 36,815 8.1% 11,794 2.6% 568 0.1% 24,914 5.5%

Egypt 9,337 76.1% 1,374 11.2% 925 7.5% 0 0.0% 632 5.2%

Israel 106,935 86.9% 7,573 6.2% 2,266 1.8% 68 0.1% 6,170 5.0%

Kuwait 30,171 86.0% 2,163 6.2% 973 2.8% 17 0.0% 1,759 5.0%

Saudi Arabia 20,112 82.9% 2,412 9.9% 670 2.8% 32 0.1% 1,020 4.2%

U.A.E. 82,440 84.0% 8,179 8.3% 1,987 2.0% 177 0.2% 5,339 5.4%

Others 130,805 81.2% 15,114 9.4% 4,973 3.1% 274 0.2% 9,994 6.2%

Africa 79,652 75.9% 16,155 15.4% 3,813 3.6% 309 0.3% 5,012 4.8%

South Africa 38,420 83.0% 4,674 10.1% 1,452 3.1% 158 0.3% 1,565 3.4%

Others 41,232 70.3% 11,481 19.6% 2,361 4.0% 151 0.3% 3,447 5.9%

Grand Total 12,016,233 83.1% 1,269,105 8.8% 511,692 3.5% 36,226 0.3% 630,972 4.4% Source: Tourism Authority Of Thailand, Thailand’s Immigration Bureau, Police Department.

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 11

Figure 10: Duration of stay among tourists to Thailand

Tourists by Year

International

(m)

Average

Length of Stay

(Days)

Domestic

(m)

Average

Length of Stay

(Days)

1998 7.76 8.40 51.68 2.37

1999 8.58 7.96 53.62 2.43

2000 9.51 7.77 54.74 2.48

2001 10.06 7.93 58.62 2.51

2002 10.80 7.98 61.82 2.55

2003 10.00 8.19 69.36 2.61

2004 11.65 8.13 74.80 2.60

2005 11.52 8.20 79.53 2.73

2006 13.82 8.62 81.49 2.65

2007 14.46 9.19 83.23 2.63 Source: Tourism Authority Of Thailand

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 12

Financial Exhibits

Profit & Loss (MYRm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Premium income from insurance policies 288 301 322 357 400

Reinsurance ceded (122) (90) (105) (132) (132)

Net premium revenue 165 211 217 225 268

Total insurance premium revenue 165 211 217 225 268

Gain on securities and other fin assets 16 24 26 30 34

Net investment income 16 24 26 30 34

Total operating income 182 235 244 255 301

Claims, maturities & surrenders (94) (110) (100) (78) (78)

Agents' comissions (23) (30) (31) (34) (44)

Management fees (23) (24) (41) (45) (54)

Other operating costs 0 (2) (4) (2) (2)

Cash operating costs (139) (166) (175) (159) (178)

Total costs (139) (166) (175) (159) (178)

Operating profit 42 69 68 95 123

Other exceptional items 0 0 (10) 0 0

Non recurring items 0 0 (10) 0 0

Pre-tax profit 42 69 58 95 123

Taxation (6) (9) (10) (19) (25)

Minority interests (7) (11) (9) (15) (20)

Profit after tax & minorities 30 49 39 61 79

Net income to ord equity 30 49 39 61 79

Recurring net profit 30 49 47 61 79 Source: Company data, RHB estimates

Key Ratios Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Reinsurance ratio (%) 42.5 30.0 32.5 37.0 33.0

Retention ratio (%) 57.5 70.0 67.5 63.0 67.0

Claims ratio (%) 56.6 52.1 45.9 34.7 29.2

Commission ratio (%) 13.6 14.1 14.2 15.3 16.5

Expense ratio (%) 14.0 12.4 20.5 20.9 20.7

Combined ratio (%) 84.3 78.6 80.6 70.8 66.5

Underwriting margin (%) 15.7 21.4 19.4 29.2 33.5

Investment yield (%) 0.0 0.0 5.5 0.1 0.1

Liquidity ratio (%) 0.0 0.0 9.8 0.8 0.7

Return on average equity (%) 0.0 0.0 0.0 17.8 20.4

Return on average assets (%) 0.0 0.0 0.0 6.7 7.2

EPS growth (%) 59.2 66.1 (20.4) 56.1 29.3

Bv per share growth (%) 0.0 0.0 0.0 237.8 13.0

Operating profit growth (%) 64.1 63.7 (1.0) 39.4 29.3 Source: Company data, RHB estimates

We believe TIH's topline growth will continue to be driven by the strong latent potential of online premiums. We believe that its TIMB subsidiary's revenue growth is not likely to pick up yet, as Management is more focused on boosting its bottomline

We expect TIH’s claims ratio to be better than the industry’s, as we project an increase in the proportion of low-claims online travel insurance premiums vs total premiums. Historically, its online claims ratio stands at 3.6%

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 13

Financial Exhibits Balance Sheet (MYRm) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Cash at bank - - 23 93 102

Total current assets - - 23 93 102

Total investments - - 477 529 592

Tangible fixed assets - - 10 10 10

Intangible assets - - 30 30 30

Premiums receivable - - 76 84 94

Debtors & prepayments - - 37 94 139

Other assets - - 160 178 199

Total other assets - - 273 356 432

Total assets - - 813 1,019 1,166

Total current liabilities - - 231 117 139

Technical provisions - - 440 488 546

Long term insurance liabilities - - 440 488 546

Total non-current liabilities - - 2 2 3

Total liabilities - - 673 608 688

Share premium account - - 0 199 199

Revaluation reserve - - (0) 5 5

Other reserves - - (28) (14) (14)

Total reserves - - 47 266 266

Shareholders' equity - - 108 364 411

Minority interests - - 32 47 67

Total equity - - 140 411 478 Source: Company data, RHB estimates

Key Ratios (MYR) Dec-10 Dec-11 Dec-12 Dec-13F Dec-14F

Operating profit growth (%) 64.1 63.7 (1.0) 39.4 29.3

Net profit growth (%) 59.2 66.1 (20.4) 56.1 29.3

EPS growth (%) 59.2 66.1 (3.6) 28.8 29.3

Bv per share growth (%) 0.0 0.0 0.0 237.8 13.0

Return on average assets (%) - - - 6.7 7.2

Return on average equity (%) - - - 17.8 20.4

DPS 0.00 0.00 0.00 0.03 0.04 Source: Company data, RHB estimates

TIH's repayment of MYR133m in borrowings (for the business expansion via TIMB) is expected to result in zero D/E

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 14

SWOT Analysis

Growing its highly profitable online insurance business segment

Embarking on key strategies to improve the efficiency and underwriting profitability of TIMB

Improving TIMB’s capital adequacy ratio

Competition will intensify in tandem with liberalisation and detariffication

Regulatory changes could affect agency and other operating costs

Natural calamities and severe pandemics, eg SARS, could affect air travel and its take-up rate

Opportunities to expand into new markets via M&As and through AirAsia's expansion

Opportunities to improve take-up rates

Expansion into other distribution channels

Small market share within the total GI market and agency force

Highly dependent on the quality of service, both its own and that of AirAsia

Claims expenses could be volatile

-30%

-18%

-6%

7%

19%

31%

43%

56%

68%

80%

0

10

20

30

40

50

60

70

80

90

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

P/E (x) vs EPS growth

P/E (x) (lhs) EPS growth (rhs)

0

20

40

60

80

100

120

140

160

180

200

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

P/BV (x) vs ROAE

P/B (x) (lhs) Return on average equity (rhs)

Source: Company data, RHB estimates Source: Company data, RHB estimates

Company Profile Tune Insurance Holdings (TIH), an investment holding company, is engaged in the provision of various general and life insurance products in the Asia-Pacific region. The company offers a range of online products, including travel, lifestyle protection, and guest personal accident insurance.

Re-rating catalysts:

Higher than expected take-up rate in the online business

Better than expected improvement in general insurance (GI) claims ratio

Higher than expected growth in GI premiums, with controlled levels of expenses and claims

Potential acquisition opportunities

New customer segment

TIMB posting better than expected profitability

Higher dividend payouts

Tune Ins (TIH MK) 19 August 2013

See important disclosures at the end of this report 15

Recommendation Chart

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Feb-13 Apr-13 Jun-13 Aug-13

Price Close

NR

1.7

5

1.7

5

2.0

5

2.0

5

2.1

5

2.1

5

2.1

5 Recommendations & Target Price

Buy Neutral Sell Trading Buy Take Prof it Not Rated

Source: RHB estimates, Bloomberg

Date Recommendation Target Price Price

2013-08-13 Buy 2.15 2.04

2013-07-03 Buy 2.15 1.81

2013-05-27 Neutral 2.15 2.05

2013-05-22 Neutral 2.05 2.08

2013-05-08 Buy 2.05 1.73

2013-05-02 Buy 1.75 1.48

2013-04-02 Buy 1.75 1.45

Source: RHB estimates, Bloomberg

16

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17

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