The ratings reflect TPR’s favorable business profile and strong operating performance. As a subsidiary of Tune Protect Group Berhad (TPG) and an affiliate of AirAsia Berhad and its associates (AirAsia Group), TPR has exclusive access to a profitable travel insurance portfolio derived primarily from the AirAsia Group via its partnership with cedents and distribution partners. This competitive advantage has allowed TPR to achieve strong and stable combined ratios of below 50% between 2012 and 2015, while growing revenue and profits.

Offsetting rating factors include low earnings retention and credit risk concentration. While the trend in the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), has improved since 2014, earnings retention has been low and fluctuating, resulting in significant volatility in the company’s BCAR. TPR remains exposed to the credit profile of its major business counterparty, namely the AirAsia Group, with insurance receivables ultimately due from this group remaining large relative to TPR’s total assets.

Positive rating actions could result from establishing a stable and strong BCAR trend that is supported by an effective capital management policy and a reduction in its credit risk concentration to AirAsia Group.

Negative rating pressure could arise from a lower-than-expected BCAR, as well as any deterioration to AirAsia Group’s business profile and financial strength.

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 rating(s) that have been published on A.M. Best’s 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 A.M. Best’s Recent Rating Activity web page.

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