Pethealth in the red despite revenue growth

Despite almost doubling its revenue in the second quarter ending June 30, 2003, Oakville-based pet insurer Pethealth Inc. (TSX: PTZ) reported a net loss for the period of $743,093, or $0.01 per share. While this represents an improvement over the loss of $1.52 million, or $0.01 per share, reported for the same period in 2002, the company admits the difference is largely the result of changed accounting practices relative to advertising costs.
The company notes that to break even, it must reduce per-policy acquisition costs in the U.S. to US$70. For the second quarter, that cost was US$98, a drop from the cost of US$136 reported in second-quarter 2002. In Canada, per-policy acquisition costs actually rose, to $141 for the quarter versus $127 a year earlier, as a result of a new program launched in second-quarter 2003 and expansion into Quebec.
The company also suffered with the strengthening of the Canadian dollar relative to the U.S., with most of its growth coming in the southern market, in U.S. dollars, but most of its costs being paid here, in Canadian dollars. Revenue growth was stemmed by 13% as a result of the currency exchange.
The company notes that its new accounting policy, in which policy acquisition advertising costs are now amortized over three-years rather than being reported as incurred, reduced net marketing expense by about $685,000 during the quarter and accounted for the 51% decrease in net loss year-on-year.
On a bright note, the company did report record revenue of $1.65 million for the quarter, doubling its revenue of $823,379 in the second-quarter last year. In the first half of this year, revenue was $3.1 million, versus $1.43 million a year earlier. Gross written premiums were up 98% for the quarter, to $4.15 million from $2.09 million a year earlier.
Policies in force at the end of the first half of this year were also more than double the same point last year, up to 85,964 from 39,668. New policy sales in the most recent quarter totaled 54,598, up from 19,998 in second-quarter 2002.
“We are very pleased to report record results this quarter,” says Pethealth president and CEO Mark Warren. “New policy sales growth remains very robust and the significant increase in our revenue numbers comes despite the fact the Canadian dollar has appreciated by over 12% for the year to date.”