Trupanion doubles down on quest to make pet insurance more palatable

When pet insurer Trupanion ($TRUP) announced its fourth-quarter and full-year 2014 earnings Thursday night, the top-line numbers screamed tremendous growth: Sales jumped 38% year over year to $116 million in 2014, as the company increased the number of pets enrolled by 29% to 218,684. The company spent much of the year signing veterinary practices up for Trupanion Express--its service that allows vets to get reimbursed directly, rather than making pet owners pay out-of-pocket and submit claims for repayment later.

The rollout of Trupanion Express has come at a cost, however: During a conference call with analysts after the earnings release, CEO Darryl Rawlings said Trupanion's gross profit margin minus stock-compensation expenses came in 1% short of its target for the year, at 17.4%. The company's net loss widened from $8.2 million in 2013 to $21.2 million last year.

Still, Trupanion has no intentions of scaling back its sales efforts. Only a tiny percentage of pet owners carry health insurance, leaving a wide-open market for Trupanion and competitors such as VPI, Petplan USA and Healthy Paws. But most companies still operate on the traditional pay-now-get-paid-back-later model--a system that can saddle pet owners with enormous (albeit short-term) expenses.

In 2013, Trupanion sought to flip that model with Express, a software interface that allows vets to submit claims directly to the company and get paid in less than 5 minutes. The system is designed to "reduce our claims handling expense and delight our members with a significantly better experience," Rawlings said. "With Trupanion Express we will be removing a major point of friction that has been permeating the traditional reimbursement pet insurance category."

To further develop the technology, Rawlings said during the call that Trupanion will likely incur costs of up to $5 million this year, but he also believes the effort will pay off: He told analysts to expect the company to double deployments of Trupanion Express this year and to pull in total revenues of $145 million to $150 million for 2015.

Investors seem to be taking a wait-and-see stance. In morning trading, Trupanion's stock bumped up nearly 3% to $7.41, but shares are still well down from their July 2014 IPO price of $10.

- here's the earnings release
- access a transcript of the earnings call here

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