This was finally resolved after I filed a Bug Report. I had defined a category on UILabel where I was overriding (CGSize)intrinsicContentSize. So problem disappeared after removing the category. And nothing else broke - makes me wonder why I had put in that category :)
Apple answer:
This is happening because you have a category on UILabel and are overriding:
-(CGSize)intrinsicContentSize {
CGSize s = [super intrinsicContentSize];
s = CGSizeMake(s.width, s.height + 4);
return s;
}