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Trupanion Pet Insurance Proposes $75 Million IPO

Veterinarians are Trupanion’s largest referral source but appear reluctant to push pet health insurance.

Veterinarians are instrumental in converting clients into pet health insurance customers, according to Trupanion.

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Trupanion, which commands about 10 percent of the U.S. pet health insurance market, is planning a $75 million initial public offering (IPO) to help pay down a mountain of debt.

The Seattle company revealed in documents filed Monday with the U.S. Securities and Exchange Commission that while annual revenue and the number of insured pets continues to rise, profits have been elusive. Losses the past three years totaled $3.9 million, $6.4 million and $8.2 million.

The number of IPO shares and the anticipated price are to be determined.

Trupanion reported that some of the proceeds would be used to reduce the company’s $29.9 million debt. The balance sheet includes $12 million outstanding on a loan that carries an 11 percent interest rate.

“The principal purposes of this offering are to increase our financial flexibility, create a public market for our stock, obtain additional capital and increase our visibility in the marketplace,” one document explained.

The company got its start in Canada in 2000 under founder and CEO Darryl Rawlings. Trupanion enrolled its first U.S. pet in 2008, and today it insures more than 181,000 dogs and cats in the United States, Canada and Puerto Rico.

Trupanion’s coverage — 90 percent of most veterinary costs and no payout limit — is considered generous in the ultracompetitive insurance industry.

“Our data-driven, vertically integrated approach enables us to provide pet owners with what we believe is the highest value medical plan for their pets, priced specifically for each pet’s unique characteristics,” Trupanion stated in a prospectus summary.

A company spokeswoman declined to comment because of the quiet period imposed after the IPO announcement.

The SEC documents offered a peek into Trupanion’s business operations.

The company relies on 62 so-called Territory Partners to promote Trupanion insurance to veterinarians in the hope that practitioners will recommend the coverage to clients. Veterinarians are not compensated for referrals, but the Territory Partners, who act as independent contractors, were paid a total of $3.5 million in 2013.

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Veterinarians are the company’s “largest referral source,” according to Trupanion, but as a group they appear reluctant to push pet health insurance.

“We believe that many veterinarians have negative perceptions of traditional pet insurance providers, which likely stems from problems their clients have experienced with traditional providers,” the SEC filing noted.

While admitting that its debt and business losses are deep, Trupanion pointed to striking numbers in other areas as signs of why investors may want to purchase stock:

• The number of enrolled pets grew from 31,207 at the start of 2010 to 181,634 on March 31, 2014.

• Annual revenue rose from $18 million in 2010 to $84 million in 2013.

• The average monthly retention rate — a measure of customer loyalty — was more than 98 percent the past three years.

Trupanion competes against several heavyweights in a U.S. market predicted to grow to more than $1 billion in sales by 2020. The largest and oldest is Veterinary Pet Insurance Co. (VPI) of Brea, Calif., which enrolls more than 500,000 U.S. pets.

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