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 rating affirmations acknowledge Labuan Re’s risk-adjusted capitalization and low event retention. Exposure to the Lloyd’s market via Labuan Re’s subsidiary, Labuan Re Underwriting Ltd, has provided Labuan Re with a steady source of profitable business and helped the company to maintain profitability while remediating its self-underwritten portfolio after the 2011-2012 catastrophe years. Led by improving claims ratios, underwriting profitability has started emerging in 2015, which provides the company with a better balance of earnings.
Offsetting rating factors include a drag on the company’s expense ratio as profitable growth remains challenging for market participants. Furthermore, increased market competition for participation in Lloyd’s business could reduce profitability in this important business segment of the company.
Upward rating movements are unlikely. Negative rating pressure could result from deterioration in the good and balanced operating result trend that has recently emerged, as well as a reduction in risk-adjusted capitalization.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
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Chi Yeung Lok
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