Labuan Reinsurance

Press Release


	A.M. Best Affirms Ratings of Labuan Reinsurance (L) Ltd.
	CONTACTS:	Public Relations Jim Peavy Assistant Vice President, Public Relations +(1) 908 439 2200, ext. 5644 james.peavy@ambest.com Rachelle Morrow Senior Manager, Public Relations +(1) 908 439 2200, ext. 5378 rachelle.morrow@ambest.com Analyst(s) Moungmo Lee General Manager +852-2827-3402 moungmo.lee@ambest.com Jeff Yeung Senior Financial Analyst +852-2827-3413 jeff.yeung@ambest.com




	A.M. Best Affirms Ratings of Labuan Reinsurance (L) Ltd HONG KONG, December 12, 2012—A.M. Best Co. 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 ratings reflect Labuan Re’s adequate capitalization and its revised underwriting strategy to improve management of its underwriting risk. In July 2012, Labuan Re issued subordinated bonds, which amounted to USD 55 million, in order to offset the losses from natural catastrophes that occurred in 2011 and from its participation in the run-off of syndicate 1965 through its investment in ACAL Holdings Pte Ltd. In addition to the capital-raising exercise, Labuan Re has revised its underwriting strategies including reduction of its high risk overseas business in catastrophe-exposed markets or business with multi-territorial exposures, and tightened underwriting of highly unbalanced or unprofitable business. In A.M. Best’s opinion, Labuan Re’s risk-adjusted capitalization has been restored to an adequate level, which is supportive of its current ratings. Offsetting these positive rating factors are the competitive reinsurance market in the region and the drag on Labuan Re’s profitability from the cost of servicing the subordinated debt. Upward rating actions are unlikely in the near future. Conversely, negative rating actions could occur if Labuan Re’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 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. Key criteria utilized include: “Catastrophe Analysis in A.M. Best Ratings”; “Equity Credit for Hybrid Securities”; “Evaluating Country Risk”; “Insurance Holding Company and Debt Ratings”; “Risk Management and the Rating Process for Insurance Companies”; and “Understanding Universal BCAR.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.


	Fitch Revises Malaysia’s Labuan Reinsurance’s Outlook To Stable
	CONTACTS:	Primary Analyst: Wan Siew Wai Senior Director Singapore +65 6796 7217 Siewwai.wan@fitchratings.com Secondary Analyst: Jeffrey Liew Senior Director Hong Kong +852 2263 9939 jeffrey.liew@fitchratings.com Committee Chairperson: Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Leslie Tan Singapore, +65 67 96 7234 leslie.tan@fitchratings.com




	FITCH REVISES MALAYSIA'S LABUAN REINSURANCE’S OUTLOOK TO STABLE Fitch Ratings-Singapore-17 December 2012: Fitch Ratings has revised the Malaysia-based Labuan Reinsurance (L) Ltd's (Labuan Re) Outlook to Stable from Negative. At the same time, its Insurer Financial Strength (IFS) Rating has been affirmed at 'A-'. The revision in Outlook reflects the turnaround in Labuan Re's operating performance for the first nine months of this year, following weakened financial performance and capitalisation in 2011 as a result of several catastrophes in Asia. Based on unaudited figures for 9M12, Labuan Re's combined ratio (aggregation of the loss ratio and expense ratio) is estimated to have improved to about 100.5% (FY11: 125%), following various risk management initiatives to improve the quality of its portfolio. The rating reflects Labuan Re's diverse geographical spread with limited business concentration risks, highly liquid investment mix and manageable financial leverage. However, the company faces challenges to manage the high catastrophe exposure of its business portfolio and to increase its market presence amid keen competition. Labuan Re has always sought to maintain a robust capital buffer to support business growth and absorb shocks. Its regulatory solvency ratio fell to 232% at end-2011 from 396% in end-2010, but remains above the regulatory minimum of 100%. Labuan Re in July 2012 issued USD55m callable cumulative subordinated bonds with a tenor of up to 50 years to boost capital resources. Consequently, financial leverage, measured as debt to total capital, rose 27% at end-September 2012 from 0% at end-2011, albeit still acceptable for its current rating. Key rating triggers for an upgrade include a sustained improvement in its underwriting performance, with the combined ratio falling consistently below 95%, as well as boosting capital to commensurate with business growth. Conversely, key rating triggers for a downgrade include a significant deterioration in operating performance, with the combined ratio consistently above 105%, or a weakening of capitalisation relative to its business profile, with the financial leverage ratio increasing above 35% for an extended period. 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.