Press Release

Fitch Assigns IFS Rating To Labuan Reinsurance (L) Ltd

CONTACTS:

John Miles
Brisbane
+61 7 3222 8616
john.miles@fitchratings.com

Wan Siew Wai
Singapore
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Jeffrey Liew
Hong Kong
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Media Relations:
Shivani Sundralingam
Singapore,
+ 65 6796 7215

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

Fitch Ratings-Singapore/Singapore–18 December 2007: Fitch Ratings has today affirmed Labuan Reinsurance (L) Ltd’s (Labuan Re) ‘A-’ (A minus) Insurer Financial Strength (IFS) rating. The Outlook on the rating is Stable.

While Labuan Re is a relatively small global reinsurance company, it does have a reasonable level of geographic diversification and maintains a strong capital position - in addition to its paid-up capital, Labuan Re has a further USD50 million of committed, but as yet uncalled capital. Fitch considers this to be prudent as Labuan Re is exposed to countries prone to natural catastrophes such as earthquakes and hurricanes, but at the same time it appears to have adequate reinsurance protections in place.

Financial performance has been consistently sound, with the company gathering momentum, particularly via its participation in Lloyds. More broadly, Labuan Re has successfully diversified its business to reduce its reliance on Malaysia. In the past, Malaysia accounted for as much as 70% of Labuan Re’s premium income, but now this ratio is below 30%. Nonetheless, it is also worth noting that while Labuan’s network is widespread, its presence in each market is modest. Even in its home market of Malaysia, it only holds a 5.3% market share.

Performance in 2006 was influenced by a slight softening of premium rates in non-catastrophe affected markets like Malaysia, but more stable rates, terms and relatively benign claims were experienced in the catastrophe-affected markets of Lloyds and Thailand. Furthermore, the investment performance for the year was good, with yields exceeding 6.0%. Labuan Re’s immediate performance outlook is stable, although its profitability remains exposed to the impact of natural catastrophes. Despite this, it is well capitalised and has suitable reinsurance protections in place based on modest net retention limits.

Incorporated on 14 September 1992, Labuan Re is 20% owned by Malaysian Reinsurance Berhad, which is the national reinsurer established by the government. It appears that Labuan Re’s role is to concentrate on international opportunities, although it still maintains a modest presence in Malaysia. 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. Labuan is a federal territory of Malaysia and was launched as a financial centre in 1990. It is not a sovereign state and possess no separate legislature, but rather is directly administered by the government of Malaysia.