A.M. Best Removes Ratings of Labuan Reinsurance (L) Ltd. From Under Review

HONG KONG--(BUSINESS WIRE)-- A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Labuan Reinsurance (L) Ltd(Labuan Re) (Malaysia). The outlook assigned to both ratings is stable.

The rating actions recognize the restoration of Labuan Re’s capital position with its capital rising through the issuance of subordinated bonds. In A.M. Best’s opinion, the capital raised (which amounts to USD 55 million) is sufficient to offset the losses from the Thailand flooding and from Labuan Re’s indirect participation in the run-off of Lloyd’s Syndicate 1965.

Labuan Re has reported a historical net loss for fiscal year 2011, which has eroded the financial strength of the company. This result is attributable to losses from natural catastrophes that occurred in 2011 and from Labuan Re’s participation in the run-off of Syndicate 1965 through its investment in ACAL Holdings Pte Ltd.

In order to restore the risk-adjusted capitalization of Labuan Re, management has taken corrective actions since December 2011. These actions include the issuance of subordinated bonds, further tightening the underwriting guidelines for its overseas business and a quota share agreement to further relieve the pressure of the premium risk on the company’s capitalization. While the outlook is stable, negative rating actions could occur if there is a significant deterioration in the risk-adjusted capitalization of Labuan Re.

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: “Understanding Universal BCAR”; “Catastrophe Analysis in A.M. Best Ratings”; “Rating Members of Insurance Groups”; “Evaluating Country Risk”; “Risk Management and the Rating Process for Insurance Companies”; “Equity Credit for Hybrid Securities”; and “Insurance Holding Company and Debt Ratings.” 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.

Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Arina Tek,+852-2827-3424
Senior Financial Analyst
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or
Jeff Yeung,+852-2827-3413
Senior Financial Analyst
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or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations
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or
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Co.