Operating Environment

On the environment, the Asia-Pacific region continued to experience natural catastrophe activity, driven primarily by earthquakes (Myanmar & Thailand), tropical cyclones like Super Typhoon Ragasa (Philippines) and widespread flood events affecting Malaysia, Thailand, Vietnam, Indonesia and the Philippines toward the latter part of the year. Insured losses across the region varied significantly by market in 2025, reflecting differences in exposure growth, mitigation measures and insurance penetration. Notwithstanding the natural catastrophe activity across the region, the Group’s disciplined underwriting and effective risk management framework ensured the impact on Labuan Re was limited.

On economics, the global economic conditions in the past year were influenced by ongoing geopolitical uncertainties and shifts in trade policies, particularly in the United States, which contributed to volatility in the global economy and financial markets. Economic growth trends indicated moderation in major economies, including the United States, alongside signs of slower expansion in China.

In Malaysia, the economy remained resilient in 2025 with real GDP expanding by 5.2%, supported by sustained domestic demand, investment activity and continued growth in the services and manufacturing sectors, reflecting continued underlying stability.

Group Performance

Labuan Re reported a net profit of USD34.9 million, higher than the USD19.0 million registered in 2024.

Underwriting

The Group’s Insurance Revenue remained broadly stable at USD183.8 million in 2025, compared with USD180.7 million in the previous year. While revenue
recognition reflects the coverage provided during the reporting period, the underlying reinsurance portfolio continued to record positive growth.

Coupled with a more favorable claims experience, this contributed to a significant improvement in the Group’s Insurance Service Result (ISR) to USD22.9 million, compared with USD9.9 million in 2024.

For our participation at Lloyd’s, the Group’s total participation remained at four syndicates in 2025. We remain selective and disciplined in our approach to participating in Lloyd’s syndicates, ensuring that any expansion contributes to territorial and class diversification within our overall portfolio.

Investment

The Investment Return for our Non-Lloyd’s portfolio was USD36.7 million (2024: USD23.2 million) where the strong performance was supported by higher returns across a diversified asset portfolio, particularly in fixed income and equities.

Capital

Our capital position continues to be strongly supported by earnings and disciplined risk taking. Labuan Re’s capital position continued to remain strong at 268.7% with the Insurance Capital Adequacy Framework (ICAF) ratio being comfortably above the Internal Target Capital Level of 180% as of December 31st, 2025.

The Board remains committed to delivering long term returns to our shareholders whilst recognizing the importance of balancing shareholder rewards with the Group’s future capital needs. We note of Labuan Re’s thorough, consistent and prudent approach to reserving and the confidence that
Management has in the Group’s reserves which is at the 75th percentile.

Environmental, Social & Governance (ESG) and Sustainability

Labuan Re remains committed to ESG initiatives and sustainable practices. In 2025, we have identified our Scope 1 and 2 emissions under the GHG Protocol and commenced its disclosure in our sustainability report. I’m pleased to note that this marks another step forward to align with sustainable practices in line with our commitment to be net zero carbon by 2050.

Outlook for 2025

In its January 2026 report, AM Best had revised the global reinsurance outlook to stable (from positive) as property reinsurance pricing softened considerably, persistent social inflation, frequency and severity of weather-related events continued to be elevated and macroeconomic uncertainties caused by inflationary pressures, shifting of monetary policies and potential financial market volatility.

Recent disruption to the Strait of Hormuz has underscored the global economy’s continued reliance on Middle Eastern energy supplies, with nearly one-fifth of global oil flows transiting this critical route. These disruptions have intensified volatility in energy markets, contributing to higher commodity prices, supply chain disruptions, and renewed inflationary pressures.

For the reinsurance sector, this environment presents both challenges and opportunities. Heightened volatility and inflationary pressures may contribute to increased claims severity and reserve uncertainty, particularly across property, energy, marine, and trade-related exposures. At the same time, ongoing geopolitics and supply chain disruption are expected to sustain demand for risk transfer solutions.

In response, the Group will continue to exercise disciplined underwriting, emphasizing risk-adjusted returns, portfolio diversification, and prudent capital management to maintain resilience and support sustainable long-term growth.

Material Event Subsequent to FYE 2025

Amidst this landscape, the Group marked a significant strategic milestone in May 2026 when MNRB Holdings Berhad (“MNRB”) entered into a conditional share purchase agreement to acquire the remaining 80% stake in Labuan Re. Upon completion, Labuan Re will become a wholly owned subsidiary enabling closer alignment within a more integrated financial services group. The combination is expected to promote collaboration across reinsurance and retakaful and support the shared growth objectives across the MNRB Group.

Acknowledgement and Appreciation

I take this opportunity to thank our staff for their diligence and hard work, and for the commendable performance achieved this year despite the tough operating environment. Together, we are building a better Labuan Re which will strive to deliver value for its clients and shareholders.

I would also like to express my sincere appreciation to all the shareholders, ceding companies, broking partners and the Office of the Director-General of Labuan FSA for their continuous support to Labuan Re.

To Encik Shahrul Azuan Mohamed and Encik Ahmad Shahril Mohamed Nazar, my heartfelt appreciation to both for their untiring service as a Board member of Labuan Re.

I would like to extend a warm welcome to Encik Fukhairudin Mohd Yusof from Etiqa General Insurance Berhad.

Finally, I wish to record my appreciation to all my fellow Directors for their relentless assistance, support and guidance during the year.

Thank you.

George Oommen