Press Release


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



Public Relations
Jim Peavy
Assistant Vice President, Public Relations
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Christopher Sharkey
Manager, Public Relations
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Chi-Yeung Lok
Senior Financial Analyst
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Moungmo Lee
General Manager, Analytics
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A.M. Best Affirms Ratings of Labuan Reinsurance (L) Ltd

Singapore, November 7, 2014 - A.M. Best has affirmed the financial 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 affirmations acknowledge Labuan Re’s adequate risk-adjusted capitalization, which remains supported by a USD 55 million subordinated debt issue. Underwriting leverage is expected to continue to decline as management anticipates lower business volumes. As the company continues remediation of its underwriting portfolio, claims ratios have continued to trend downward in the first half of 2014.

Offsetting rating factors include pressure on the company’s expense ratio as its net premium base is budgeted to decline. The company’s combined ratio is expected to remain high and overall profitability will rely significantly on investment results. Labuan Re’s growth in its profitable domestic market appears to have slowed down and become more reliant on a smaller number of cedants, partly due to market consolidation caused by mergers and acquisitions. The company’s participation in Lloyd’s involves a contingent call on Labuan Re’s capital. While this is in line with market practice, the potential size of this contingent capital call is large relative to Labuan Re’s capital size.

Upward rating movements are unlikely. Downward pressure on the ratings could occur from sustained negative earnings due to lower than expected investment results and a large call on Labuan’s capital as a result of its Lloyd’s commitments.

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

Key insurance criteria reports utilized:

  • Catastrophe Analysis in A.M. Best Ratings
  • Evaluating Country Risk
  • Equity Credit for Hybrid Securities
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding Universal BCAR

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which 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







Primary Analyst:
Wan Siew Wai

Senior Director
+65 6796 7217

Secondary Analyst:
Jeffrey Liew
Senior Director
Hong Kong
+852 2263 9939

Committee Chairperson:
Chris Waterman
Managing Director
+44 20 3530 1168

Media Relations:
Leslie Tan
+65 67 96 7234




Fitch Ratings-Singapore/Hong Kong-21 November 2013: Fitch Ratings has affirmed Malaysia-based Labuan Reinsurance (L) Ltd's (Labuan Re) Insurer Financial Strength (IFS) rating at 'A-'. The Outlook is Stable. The agency has simultaneously withdrawn the rating.

Fitch has withdrawn the ratings as Labuan Re has chosen to stop participating in the rating process. Fitch has determined that Labuan Re's public disclosures are not sufficient to allow Fitch to maintain
the ratings. Accordingly, Fitch will no longer provide ratings or analytical coverage for Labuan Re.


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 in July 2012 issued a private placement of 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 to 28% at end-2012 from 0% at end-2011, although this is still acceptable for its current rating.

The Stable Outlook reflects Fitch's view that the company is expected to continue adopting a prudent underwriting approach with emphasis on bottom-line profitability as opposed to mere top-line growth.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.