Veterinary Pet Services Notes Increase in 2002 Net Income, Gross Premiums Produced

April 29, 2003

California-based Veterinary Pet Services, Inc. (VPSI), the parent company of Veterinary Pet Insurance (VPI) and its subsidiary, DVM Insurance Agency, announced net income for the year ending Dec. 31, 2002 of $2.3 million or $0.49 per diluted share, an increase of 123.4 percent compared to $1.0 million or $0.22 per diluted share for 2001. Gross premiums produced in 2002 grew to $64.2 million, an increase of 42.8 percent compared to 2001 gross premiums of $45.0 million.

VPSI’s 2002 annual revenues increased by 36.6 percent to $37.5 million, compared to $27.4 million in 2001. The increase in annual revenues was largely due to higher gross pet insurance premiums produced. The company wrote approximately 125,800 new pet insurance policies in 2002 compared to 88,100 new policies in 2001 – an increase of 42.8 percent.

The number of policies renewed also increased in 2002. Approximately 155,500 existing policies renewed in 2002 compared to 112,800 renewal policies sold in 2001, for an increase of 37.9 percent. The average policy renewal rate for 2002 was 77.4 percent.

The company’s combined ratio (loss ratio plus expense ratio) improved to 105.3 percent in 2002 compared to 109.8 percent in 2001, a decrease of 450 basis points. The combined ratio improvement is due to a 140 basis point improvement in its loss ratio (total of all claims and claim settlement costs incurred), from 64.0 percent in 2001 to 62.6 percent in 2002. The expense ratio (total of all net commissions and general and administrative expenses) improved by 310 basis points in 2002, from 45.8 percent in 2001 to 42.7 percent in 2002.

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