AM Best assigns credit ratings to Veterinary Professionals Insurance Society Incorporated

SINGAPORE–(BUSINESS WIRE)–AM Best has assigned a financial strength rating of B (fair) and a long-term credit rating of “bb+” (fair) to Veterinary Professionals Insurance Society Incorporated (VPIS) (New Zealand). The outlook attributed to these Credit Ratings (ratings) is stable.

The ratings reflect VPIS’ balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

VPIS’ balance sheet strength assessment is supported by its risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR), which is at the highest level. Due to a significant increase in VPIS’ regulatory solvency requirement in the near term, its regulatory solvency position is expected to weaken but remain above the regulatory minimum. In addition, the company has a small absolute capital of NZD 3.3 million and limited financial flexibility, which increases the sensitivity of its capital adequacy to stress scenarios. While VPIS’ reinsurance program protects the business against large individual losses and global exposure, the business is considered to be heavily dependent on reinsurance.

AM Best considers the operating performance of VPIS to be adequate, with a five-year average return on equity ratio of 6.5% (fiscal years 2017-2021). This is supported by the company’s strong underwriting performance, although the combined ratio has shown high volatility during this period. VPIS’ expense ratio is above the industry average due to its size and investment in technology over the past few years. Investment income remains a key driver of the company’s operating performance, with a five-year average net return (including gains/losses) of 5.1% (fiscal years 2017-2021).

VPIS is a not-for-profit organization that primarily provides professional liability insurance to veterinarians in New Zealand. The assessment of the company’s business profile, which is limited, reflects its small-scale operations, its focus on niche products and its strong geographical concentration. However, VPIS holds a dominant market position in its target segment, backed by its highly specialized knowledge and experience of the New Zealand veterinary industry.

Ratings are communicated to rated entities before publication. Unless otherwise indicated, the ratings have not been changed as a result of this communication.

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