SINGAPORE–(BUSINESS WIRE)–AM Best has removed from under review with negative implications and downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to �bbb from bbb+ and affirmed the Financial Strength Rating of B++ (Good) of Tune Protect Re Ltd. (TPR) (Malaysia). The outlook assigned to these Credit Ratings (ratings) is negative.
The ratings reflect TPRs balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The downgrade of the Long-Term ICR follows a deterioration in AM Bests view of TPRs operating performance assessment. Despite TPR having historically reported favourable operating performance metrics, its premium volume and net profit have declined significantly in the first half of 2020 as a result of the COVID-19 pandemic, which has driven a severe reduction in demand for TPRs primary product line of travel insurance. While the company has promptly lowered its marketing expenditure and other management costs, AM Best expects TPRs operating results to depict elevated volatility and fall short of historical levels over the medium term. Nonetheless, the companys claim experience has not been impacted notably by the COVID-19 pandemic to date, and investment income has remained stable.
AM Best assesses TPRs balance sheet strength as strong. The companys risk-adjusted capitalisation, as measured by Bests Capital Adequacy Ratio (BCAR), remained at the strongest level at year-end 2019, underpinned by its low underwriting leverage. However, an offsetting balance sheet factor is the modest size of the companys absolute capital base, which increases the sensitivity of capital adequacy to shock events, changes in operating performance or material movements in key balance sheet items.
AM Best assesses TPRs business profile as limited. As a single-product focused reinsurer, TPRs business model is linked closely to, and heavily reliant on, travel insurance products that are distributed principally through the AirAsia group, an airline operator headquartered in Malaysia. In 2019, business sourced through this distribution channel accounted for approximately 80% of TPRs revenues. During the recent period of disruption to airline travel, TPR has sought to place increased emphasis on its non-travel products and other business initiatives; however, these are currently small contributors to its overall premium base.
The negative outlooks reflect AM Bests expectation of an increasingly challenging operating environment for TPR over the near to intermediate term, caused by the prevailing COVID-19 pandemic. AM Best expects this environment to drive heightened volatility and pressure on the companys operating performance metrics. In addition, the companys business profile remains sensitive to any unexpected changes in key distribution partners, as well as longer-term demand for air travel and associated insurance products.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on AM Bests website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
Contacts
Tran Nhat Trung
Financial Analyst
+65 6303 5019
trung.tran@ambest.com
Myles Gould
Director, Analytics
+65 6303 5020
myles.gould@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com
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