Tune Protect should see a boost in diversification: AM Best

TPR’s operating performance was ‘satisfactory’, AM Best said.

Tune Protect Re’s (TPR) outlook turns positive on the back of a robust balance sheet strength, assessed by AM Best. This is coupled with its satisfactory operating performance, limited business profile, and appropriate enterprise risk management.

Over the medium term, the company is projected to enhance its business profile by diversifying into new lines of business, such as lifestyle and supplemental healthcare products, and forging new partnerships.

The updated Long-Term ICR outlook shifted from stable to positive, signifies AM Best's anticipation of improved operating performance metrics for TPR in the medium term. 

This improvement is expected to be predominantly driven by the resurgence of the travel industry post-COVID-19.

TPR's strong balance sheet strength evaluation is supported by its risk-adjusted capitalization, projected to remain at the strongest level over the medium term, as measured by Best’s Capital Adequacy Ratio (BCAR). 

AM Best characterises the company as having a conservative risk investment strategy, with investment assets primarily held in unit trust funds, predominantly comprising fixed-income securities with good credit quality. 

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Offsetting factors on the balance sheet include the company’s relatively modest absolute capital base compared to peer reinsurers ($31m at year-end 2022), which increases capital adequacy volatility under stressed scenarios. 

AM Best’s assessment of balance sheet strength also factors in the neutral impact of the holding company following an evaluation of TPR’s parent group, Tune Protect Group Berhad (TPG).

AM Best deems TPR’s operating performance as satisfactory, with a five-year average return-on-equity ratio of 16.4% (2018-2022). The company experienced adverse impacts on revenue and operating earnings over the past three years due to the COVID-19 pandemic and unrealised fair value investment losses from interest rate movements. 

However, the expected recovery of air travel post-COVID-19 is anticipated to lead to an improved trend in TPR’s technical performance, benefiting from economies of scale.

Assessing TPR’s business profile as limited, AM Best acknowledges its role as a niche reinsurer with a specific focus on travel-related insurance products. 

TPR utilises TPG’s in-house technology platform to facilitate policy support and distribution in collaboration with corporate partners, including airlines and travel agencies.