Press Release

 
 

A.M. Best Affirms Ratings of Labuan Reinsurance (L) Ltd.

 

CONTACTS:


Public Relations
Jim Peavy
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com

Rachelle Morrow
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com

Analyst(s)
Billy Kwan
+852-2827-3405
billy.kwan@ambest.com

Moungmo Lee
+852-2827-3402
moungmo.lee@ambest.com

 

 
 

A.M. Best Affirms Ratings of Labuan Reinsurance (L) Ltd.

FOR IMMEDIATE RELEASE

OLDWICK, NEW JERSEY, U.S.A., Jan. 26, 2010
A.M. Best Co. has affirmed thefinancial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Labuan Reinsurance (L) Ltd. (Labuan Re) (Malaysia). The outlook for both ratings is stable.

The ratings reflect Labuan Re’s stable loss ratio, lower management expense ratio and well balanced portfolio with diversified geographic risk.

Although Labuan Re was hit by several catastrophe claims, the company reported a loss ratio of 64.7% in 2008. Prior to 2008, Labuan Re maintained a stable loss ratio in the range of 61.1% - 65.1% over the past five years, demonstrating its ability to generate profitable underwriting business as well as highlighting the improvement in its underwriting techniques.
Labuan Re slightly increased its management expense to USD 13.5 million in 2008 from USD 13.0 million in 2007. As the net premium written also had increased, the management expense ratio (management expense/net premium written) decreased by 1 percentage point to 7.0% in 2008.

Labuan Re had a sound spread of business composition, with 22% of gross premiums written generated from Malaysia, 43% from Lloyd’s and 35% from other overseas markets in the Middle East and Asia. The participation in Lloyd’s increased the international diversification of the company’s underwriting portfolio. The European and North American risk exposure in theLloyd’s portfolio offers instant diversification to Labuan Re’s primarily Asian risk exposure.

Offsetting factors include higher underwriting risk and intense competition in the Asian reinsurance market

A.M. Best believes that Labuan Re’s current risk-adjusted capitalization is adequate to support its ratings. However, due to increases in premiums written and further participation in new Lloyd’s syndicates, the risk-adjusted capitalization, as demonstrated by Best’s Capital Adequacy Ratio (BCAR), has shown a downward trend over the past three years. A.M. Best believes that there will be pressure on Labuan Re’s ratings if the risk-adjusted capitalization further deteriorates. Labuan Re’s net premiums written increased by 20.9% in 2007 and 18.3% in 2008, respectively, and its exposure to the Lloyd’s market increased to USD 69.9 million as at year-end 2008 from USD 39 million at year-end 2006.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

   

 

 
 

Fitch Affirms IFS Rating To Labuan Reinsurance (L) Ltd

 

CONTACTS:


Wan Siew Wai
Singapore
+65 6796 7217
Siewwai.wan@fitchratings.com

Jeffrey Liew
Hong Kong
+852 2263 9939

jeffrey.liew@fitchratings.com

Media Relations:
Shivani Sundralingam
Singapore,
+ 65 6796 7215
shivani.sundralingam@fitchratings.com

 

 
 

Fitch Affirms Labuan Re’s ‘A-’ IFS Rating

Fitch Ratings-Singapore/Singapore–08 June 2009:Fitch Ratings has today affirmed the 'A-' Insurer Financial Strength (IFS) rating of Labuan Reinsurance (L) Ltd (Labuan Re). The Outlook on the rating
remains Stable.

The rating incorporates the company's good business geographic diversification, prudent management, maintenance of a healthy capital position, and generally liquid investment mix. On the other hand, the company faces the challenges of managing the high catastrophe exposure of its business portfolio, as well as improving its operating performance amidst tough market conditions.

Fitch views that the company has achieved good business geographical diversification. It underwrites business from a wide variety of markets spread across Asia, US and Europe. Malaysia is the largest market, constituting about 22.5% of total business premiums. Other than writing business directly from its overseas clients, growth in its overseas business is also achieved via its participation in Lloyd's, and through its Bahrain Branch, which brings access to the Middle East markets.

Labuan Re maintains a good level of capital buffer commensurate with its business profile. Its regulatory solvency margin ratio was 439% as at end December 2008. The company has a further USD50m of committed, but uncalled, capital to be contributed by its existing shareholders in proportion of their respective shareholdings in times of need. Capital quality is sound, comprising entirely of equity capital and retained earnings, with no debt issuance.

Against the backdrop of a challenging business environment with poor investment sentiments, Labuan Re incurred an unaudited operating loss of USD5.0m for FY2008, compared to a net income of USD22.5m for FY2007. The drop in profitability has largely resulted from a significant write-off of investment losses stemming mainly from its equity investments.

Labuan Re has since stepped up its risk management measures on various fronts with the aim to achieve a turnaround in its performance. In particular, it plans to revise its investment strategy with a strong emphasis on capital preservation and reduced volatility in investment performance. The company plans to further trim its equity investments to 5% from the current 8% of total investments.

While the company continues to operate in a challenging operating environment, Fitch does not expect significant deterioration in its business profile, performance and capitalisation in view of its prudent management, healthy capitalisation and de-risking of the company's balance sheet.

Established in September 1992, Labuan Re is licensed under the Offshore Insurance Act, 1990 and incorporated in the International Offshore Financial Centre of Labuan, which is an island off the coast
of Sabah in East Malaysia. The company writes predominantly general reinsurance business. Labuan is a federal territory of Malaysia and was launched as a financial centre in 1990.


Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, http://www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.