AM Best has assigned a Financial Strength Rating of B (Fair) and a Long-Term Issuer Credit Rating of “bb+” (Fair) to Veterinary Professionals Insurance Society Incorporated (VPIS) (New Zealand). The outlook assigned 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 underpinned by its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which is at the strongest level. As a result of 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 base of NZD 3.3 million and limited financial flexibility, which increases the sensitivity of its capital adequacy to stress scenarios. Whilst VPIS’ reinsurance program protects the company against large single losses and aggregate exposure, the company is viewed to have high reliance on reinsurance.
AM Best views VPIS’ operating performance 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 sound underwriting performance, although the combined ratio exhibited elevated volatility over this period. VPIS’ expense ratio is heightened when compared with the industry average as a result of its size and investment in technology in recent years. Investment income remains a key driver of the company’s operating performance, with a five-year average net investment yield (including gains/losses) of 5.1% (fiscal years 2017-2021).
VPIS is a not-for-profit organization that provides predominantly professional indemnity insurance to veterinarians in New Zealand. The company’s business profile assessment of limited reflects its small-scale operations, niche product focus and high geographic concentration. However, VPIS has a dominant market position in its targeted segment, supported by its highly specialized knowledge and experience in New Zealand’s veterinary industry.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not subsequently amended to that communication.
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Senior Financial Analyst
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Manager, Public Relations
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Michael Dunckley, CFA
+65 6303 5020
+1 908 439 2200, ext. 5204
Source: AM Best