SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Labuan Reinsurance (L) Ltd (Labuan Re) (Malaysia). The outlook of these Credit Ratings (ratings) is stable.
The rating affirmations reflect Labuan Re’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company maintains low event retention and a USD 55 million subordinated bond issue.
The company’s underwriting leverage has trended downward in recent years, as Labuan Re remediated its underwriting portfolio. The effects of this remediation have been reflected in the company’s operating performance, and underwriting results have improved as well. Most of the remediation has been completed, and the company will seek profitable growth opportunities going forward.
Labuan Re also benefits from having an underwriting portfolio that is geographically diversified. Through its participation in several Lloyd’s syndicates, Labuan Re has been able to gain exposure to risks outside of Asia, reducing its underwriting concentration.
An offsetting rating factor is an expense ratio drag, as the company operates on a small scale. Increased competition in some of the Lloyd’s syndicates that Labuan Re participates in also could reduce profitability in this important segment of the company. Additionally, there is some uncertainty regarding the subordinated bond, as its July 2017 call date is nearing.
Positive rating actions are unlikely. Negative rating actions could occur from a material decline in risk-adjusted capitalization or deterioration in Labuan Re’s operating performance.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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