A.M. Best Affirms Ratings of Labuan Reinsurance (L) Ltd
HONG KONG, December 12, 2013—A.M. Best Asia-Pacific Limited has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Labuan Reinsurance (L) Ltd (Labuan Re) (Malaysia). The outlook for both ratings is stable.
The rating affirmations reflect Labuan Re’s adequate risk-adjusted capitalization, continuing improved operating performance and prudent underwriting strategy.
Labuan Re’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is supportive of its current ratings as a result of the company’s positive earnings, capital raising through the issuance of subordinated bonds (USD 55 million) in July 2012, and prudent dividend policy.
Labuan Re’s operating results turned around in 2012; the company reported a net profit after tax of USD 1.7 million from a net loss after tax of USD 58.9 million in 2011, which was driven by the company’s favorable investment income and underwriting strategy to focus on risk selection while avoiding aggressive premium growth.
The company has been reviewing and updating its loss development from the Thailand flooding since November 2011; the total gross loss estimate is approximately USD 58 million.
Offsetting these positive rating factors include the intense competition in the Asian reinsurance market and the pressure on Labuan Re’s profitability from the cost of servicing the subordinated debt.
Labuan Re is well positioned at its current rating level. Negative rating actions could occur if the company’s operating performance materially deviates from its projections, or its risk-adjusted capitalization declines to a level below A.M. Best’s expectations.
The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.