AM Best Revises Issuer Credit Rating Outlook to Negative of Veterinary Professional Insurance Society Incorporated

SINGAPORE--(BUSINESS WIRE)--AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B (Fair) and the Long-Term ICR of “bb+” (Fair) of Veterinary Professional Insurance Society Incorporated (VPIS) (New Zealand). The outlook of the FSR is stable.

The Credit Ratings (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.

The revision of the Long-Term ICR outlook to negative from stable reflects the deterioration in VPIS’ recent operating performance, which places pressure on the organisation’s balance sheet strength fundamentals, including a weakened regulatory solvency position. Although the regulatory capital remains above the regulatory minimum, there is increased sensitivity to lower than expected earnings retention and other shock events given VPIS’ limited financial flexibility and reliance on earnings retention to support its capital position.

VPIS’ balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the strongest level at year-end 2025, as measured by Best’s Capital Adequacy Ratio (BCAR). Notwithstanding, the organisation’s regulatory solvency position weakened significantly in recent periods. VPIS’ small absolute capital base (NZD 3.7 million as of fiscal year-end 2025) increases the sensitivity of its capital adequacy to stress scenarios. Whilst VPIS’ reinsurance programme protects the organisation against large single losses and aggregate exposure, AM Best views the organisation as having a high reliance on reinsurance.

AM Best assesses VPIS’ operating performance as adequate, albeit exhibiting a declining trend in recent years. In fiscal year 2025, VPIS recorded a combined ratio (net/net, IFRS 17) of 114.4% and a return-on-equity (ROE) ratio of -1.1%. The underwriting losses were predominantly driven by elevated expenses, arising from technology-related expenditures. Prospectively, AM Best expects VPIS’ near-term operating performance to remain under pressure. Investment income remains a key contributor to VPIS’s overall earnings, with a reported net investment yield (including gains/losses) of 6.0% in fiscal year 2025.

VPIS is a not-for-profit organisation that provides predominantly professional indemnity insurance to veterinarians in New Zealand. The business profile assessment of limited reflects VPIS’ small-scale operations, niche product focus and high geographic concentration. Nonetheless, 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 amended subsequent to that communication.

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AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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