AM Best assigns credit ratings to Veterinary Professionals Insurance Society Incorporated

SINGAPORE-(BUSINESS WIRE)–AM Best has assigned a financial strength rating of B (satisfactory) and a long-term issuer credit rating of ‘bb+’ (satisfactory) to Veterinary Professionals Insurance Society Incorporated (VPIS) (New Zealand). The outlook given to these credit ratings (ratings) is stable.

The ratings reflect VPIS’s balance sheet strength, which AM Best rates as adequate, as well as its adequate operating results, limited business profile and appropriate corporate risk management.

The assessment of VPIS’s balance sheet strength is based on its risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR), which is at its strongest. As a result of a significant increase in the regulatory solvency requirement of VPIS, its regulatory solvency is expected to weaken in the near future, but remain above the regulatory minimum. In addition, the company has a small absolute capital base of NZ$3.3 million and limited financial flexibility, which increases the sensitivity of its capital adequacy to stress scenarios. Although the VPIS reinsurance program protects the company against large single losses and aggregate exposure, the company is considered to be heavily reliant on reinsurance.

AM Best believes that VPIS’s operating performance is adequate, with an average five-year return on equity ratio of 6.5% (fiscal years 2017-2021). This is supported by the company’s solid underwriting performance, although the combined ratio shows increased volatility during this period. VPIS’s expense ratio is elevated compared to the industry average as a result of its size and technology investments in recent years. Investment income remains a key driver of the company’s operating results, with an average five-year net return on investments (including gains/losses) of 5.1% (fiscal years 2017-2021).

VPIS is a not-for-profit organization that primarily provides professional indemnity insurance to veterinarians in New Zealand. The company’s business profile rating of limited reflects its small-scale operations, focus on a niche product, and high geographic concentration. However, VPIS has a dominant market position in its target segment, supported by its highly specialized knowledge and experience in the New Zealand veterinary industry.

Ratings are communicated to rated entities prior to publication. Unless otherwise noted, ratings have not changed since this announcement.

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