NAPHIA State of Industry Report Avalon

North American Pet Health
Insurance Industry
Industry Results for Years 2009 to 2013
Agenda
Section 1: Introduction and Methodology

Section 2: Gross Written Premium
Section 3: Number of Pets
Section 4: Average Premiums
Section 5: Future Outlook
Section 1
Introduction & Methodology
The North American Pet Health Insurance Market Survey was established 3 years ago, with
data going back to 2008
Todays presentation is a summary of the key findings of the 2014 North American Pet Health
Insurance Industry Report with industry results for years 2009 through 2013
Objectives of the Report:
Create a credible data-driven report that demonstrates to the marketplace and the pet
health community in North America that the pet health insurance industry is a solid,
growing insurance market
Monitor the industrys performance and growth in key areas
Highlight any emerging trends
The data was collected by means of a survey questionnaire/data call spreadsheet completed by
the NAPHIA members.
The data collected was thoroughly reviewed by Avalon. Reasonableness tests were conducted.
Follow-ups with participants were done as necessary. Quality Control processes were put in
place and aggregate results were compiled.
Section 1

Products monitored in the report
Accident Only
Foreign body ingestion, lacerations, motor vehicle accident,

ligament tears, poisoning, etc.
Accident & Illness

Accident benefits plus illnesses such as cancer, infections,
digestive problems, etc.
Insurance with Embedded Wellness

Comprehensive plans that may include vaccinations, early
screening diagnostics, consultations for proper nutrition,
dental care, etc.
Endorsements
Riders such as wellness or cancer endorsements.
Section 1
NAPHIA
Members
Section 2
Gross Written Premium
Section 2

In-Force GWP (2009-2013)
$487.4 M (*)
$425.2 M
14.6% increase from

2012 to 2013 (*)
$375.3 M
$339.3 M
$297.1 M
13.3% increase from

2011 to 2012
10.6% increase from
2010 to 2011
14.2% increase from
2009 to 2010
2009
2010
2011
2012
2013
The industry has experienced double-digit increases since 2009 (average annual growth rate of 13.2% *).
The North American market is estimated to be approximately $595 million.
(*) Results for 2013 include two new members (their data is not included in 2009-2012)
Section 2

In-Force GWP - Cats vs. Dogs (2009-2013)
$436.2 M (*)
Dogs
$380.1 M
14.8% increase from 2012 to 2013 (*)
$335.3 M
$302.6 M
13.4% increase from 2011 to 2012
$264.4 M

Cats
$32.8 M
$36.7 M
$40.0 M
$45.1 M
$51.2 M
(*)
13.5% increase from 2012 to 2013 (*)

2009
2010
2011
2012
2013
Dogs represented approximately 90% of In-Force Gross Written Premium in 2013, for a total of $436.2 million.
Section 2

In-Force GWP - Per Product (2013)
Accident & Illness;

$396.0 M
81.2%
Insurance with
Embedded
Wellness;
$14.5 M
3.0%
Endorsements;
$72.7 M
14.9%
Accident Only;
$4.2 M
0.9%
Accident & Illness represents the biggest share, with 81.2% of total gross written premium in 2013.
Note: Endorsements include Wellness and Cancer riders.
Section 2

In-Force GWP - Per Product (2009-2013)
2009
2010
2011
2012
2013 (*)
% change
2009-2013
Accident Only
$1.54 M
$2.50 M
$3.00 M
$3.65 M
$4.21 M
+173%
Accident & Illness
$193.0 M
$229.0 M
$266.0 M
$325.2 M
$396.0 M
+105%
Insurance with
Embedded Wellness
$33.8 M
$35.4 M
$34.6 M
$24.0 M
$14.5 M
-57%
Endorsements
$68.9 M
$72.4 M
$71.8 M
$72.3 M
$72.7 M
+5.5%
$297.1 M
$339.3 M
$375.3 M
$425.2 M
$487.4 M
+64%
TOTAL
10
Section 2

In-Force GWP - Per Product (2009-2013)
$396.0 M
$325.2 M
Accident Only
$266.0 M
$229.0 M
Insurance with
Embedded
Wellness
$193.0 M
Endorsements
$72.4 M
$71.8 M
$68.9 M
$35.4 M
$72.3 M
$34.6 M
$24.0 M
$33.8 M
$2.5 M
$1.5 M
2009
2010
$3.0 M
2011
$3.7 M
2012
$72.7 M
$14.5 M
Accident & Illness
$4.2 M
2013 (*)
11
Section 2

GWP - New Business Added (2009-2013)
$137.6 M (*)
$100.0 M
$110.4 M
$114.9 M
$117.0 M
17.6% increase from

2012 to 2013 (*)
1.8% increase from
2011 to 2012
4.1% increase from
2010 to 2011
10.4% increase from
2009 to 2010
2009
2010
2011
2012
2013
12
Section 2

GWP - New Business Added, Per Product (2009-2013)
2009
2010
2011
2012
2013 (*)
Accident Only
$0.69 M
$1.93 M
$2.03 M
$1.74 M
$2.11 M
Accident & Illness
$55.6 M
$67.1 M
$77.2 M
$90.7 M
$114.5 M
Insurance with Embedded

Wellness
$12.7 M
$11.1 M
$9.7 M
$5.9 M
$3.2 M
Endorsements
$31.1 M
$30.2 M
$26.0 M
$18.7 M
$17.8 M
$100.0 M
$110.4 M
$114.9 M
$117.0 M
$137.6 M
Total
13
Section 2

GWP - Ratio of New Business Added to In-Force GWP (2009-2013)
2009
2010
2011
2012
2013 (*)
New Business Added
$100.0 M
$110.4 M
$114.9 M
$117.0 M
$137.6 M
$297.1 M
$339.3 M
$375.3 M
$425.2 M
$487.4 M
33.7%
32.5%
30.6%
27.5%
28.2%
Ratio (%)
14
Section 2

Net Premium Growth (2009-2013)
2009
2010
2011
2012
2013 (*)
In-Force Premium Volume

(BOY)
$261.5 M
$297.1 M
$339.3 M
$375.4 M
$425.2 M
(Dec. 31, 2008)
(Dec. 31, 2009)
(Dec. 31, 2010)
(Dec. 31, 2011)
(Dec. 31, 2012)
New Business Added
$100.0 M
$110.4 M
$114.9 M
$117.0 M
$137.6 M
In-Force Premium Volume

(EOY)
$297.1 M
$339.3 M
$375.4 M
$425.2 M
$487.4 M
(Dec. 31, 2009)
(Dec. 31, 2010)
(Dec. 31, 2011)
(Dec. 31, 2012)
(Dec. 31, 2013)
Net Premium Loss (1)
$64.4 M
$68.2 M
$78.8 M
$67.2 M
$75.4 M
17.8%
16.7%
17.3%
13.6%
13.4%
Net Premium Loss (%)

(Net Premium Loss / (In-Force
Volume BOY + New Business
Added))
(1) Net Premium Loss represents the difference between the End Of Year (EOY) result and Beginning Of Year
(BOY) plus New Business Added.
15
Section 3
Number of Pets
Section 3
Number of Pets
Total Insured Pets (2009-2013)
1,033,983 (*)
904,694
14.3% increase from

2012 to 2013 (*)
844,239
796,713
731,404
7.2% increase from

2011 to 2012
6.0% increase from
2010 to 2011
8.9% increase from
2009 to 2010
2009
2010
2011
2012
2013
17
Section 3
Number of Pets
Breakdown: Total Insured Cats vs. Dogs (2009-2013)
876,441 (*)
768,262
716,557
675,288
Dogs
618,755
Cats
112,649
2009
121,425
2010
127,682
2011
136,432
2012
157,542
(*)
2013
18
Section 3
Number of Pets
Results from 2013-14 National Pet Owners Survey (APPA):
The APPA National Pet Owners Survey found that pet ownership in the U.S. is at a
record. The survey indicated that pet ownership among all US households is 68%,
representing 82.5 million pet-owning households in 2012 (an all-time high).
Dog ownership rose to 56.7 million households, and cat ownership grew to 45.3
million.
These gains in dog- and cat-owning households indicate that the total number of
these pets also rose in the U.S. to a total of 179 million:
83.3 million dogs
95.6 million cats
19
Section 3
Number of Pets
Total Insured Pets - Per Product (2013)
Accident & Illness;

988,338
95.6%
Insurance with
Embedded
Wellness;
13,918
1.3%
Accident Only;
31,727
3.1%
The average age of Insured Pets in 2013 was 4.57 years (was 4.04 in 2012)
The average age of New Pets Added in 2013 was 2.73 years (was 2.79 in 2012)
20
Section 3
Number of Pets
Insured Pets Per Product (2009-2013)
2009
2010
2011
2012
2013 (*)
% change
2009-2013
Accident Only
12,557
19,678
23,697
27,290
31,727
+153%
Accident & Illness
664,768
726,935
771,973
850,672
988,338
+48.7%
Insurance with
Embedded Wellness
54,079
50,100
48,569
26,732
13,918
-74.3%
731,404
796,713
844,239
904,694
1,033,983
+41.4%
TOTAL
21
Section 3
Number of Pets
New Insured Pets Added Each Year (2009-2013)
321,373 (*)
24.7% increase from
2012 to 2013 (*)
257,721
251,791
255,728
253,003
1.9% increase from

2011 to 2012
1.1% decrease from
2010 to 2011
1.6% increase from
2009 to 2010
2009
2010
2011
2012
2013
22
Section 3
Number of Pets
Breakdown by Pet : New Pets Added (2009-2013)
265,590 (*)
214,332
210,164
214,626
211,406
Dogs
Cats
41,627
2009
41,396
2010
41,597
2011
43,095
2012
55,783
(*)
2013
23
Section 3
Number of Pets
Net Growth - Number of Insured Pets (2009-2013)
2009
Total Insured Pets (BOY)

New Pets Added during year
2010
2011
2012
2013 (*)
677,585
731,404
796,713
844,239
904,694
(Dec. 31, 2008)
(Dec. 31, 2009)
(Dec. 31, 2010)
(Dec. 31, 2011)
(Dec. 31, 2012)
251,791
255,728
253,003
257,721
321,373
731,404
796,713
844,239
904,694
1,033,383
(Dec. 31, 2009)
(Dec. 31, 2010)
(Dec. 31, 2011)
(Dec. 31, 2012)
(Dec. 31, 2013)
Net Cancellations
197,972
190,419
205,477
197,266
192,684
Attrition
(% of Total Insured Pets BOY plus
New Pets Added)
21.3%
19.3%
19.6%
17.9%
15.7%
Total Insured Pets (EOY)
Attrition Rate: There are various methods of calculating the attrition rate and each company may have their
own calculation method. For the purposes of this study, the attrition rate is calculated as Net Cancellations /
(Total Insured Pets BOY + New Pets Added).
The industry achieved an average monthly attrition rate of approximately 1.3% in 2013 , which also means the
industry achieved 98.7% monthly retention.
24
Section 4
Average Premiums
Section 4
Average Premiums
Average Premiums - Per Insured Pet (straight average)
$1,110.50
$1,018.47
$799.14
$820.67
Accident Only
$706.64
$316.66
$138.03
2009
$343.54
$137.29
2010
$369.06
$143.58
2011
$407.37
$407.37
$161.92
$150.53
2012
Accident & Illness

Insurance with
Embedded Wellness
2013
26
Section 5
Future Outlook
Section 5
Future Outlook
The Survey questions were designed to gather your opinions on industry issues
shared by your peers (based on all respondents)
All respondents agree or strongly agree with the statement The

current economic climate is good for pet insurance
9 respondents agree or strongly agree with the statement We will see

greater competition for Pet insurance within the next 12 months
9 respondents agree or strongly agree with the statement As

competition intensifies, Pet insurance products/services will help
differentiate among competing providers
All respondents agree or strongly agree that Consumers compare

Pet insurance options based on benefits/services
8 respondents agree or strongly agree that Consumers compare Pet

insurance options based on price
Section 5
Future Outlook
Drivers most likely to affect premium / business growth in the next year:
Ranked 1st by:
Growth in New Pets Insured
5 companies
Increase in Premium Rates
2 companies
New Products
2 companies
Use of Additional Distribution

Channels
1 company
29
Section 5
Future Outlook
Main concerns in the industry for the next year:
Ranked 1st by:

Sales / Growth
6 companies
Consumer Satisfaction
2 companies
Regulation
1 company
Pricing
1 company
30
Recap
The participating NAPHIA members combined for a total premium volume of

approximately $487.4 million in 2013.
From 2009 to 2013, the average annual growth rate in GWP was approximately 13.2%
(including the 2 new participants in 2013)
Based on available public reports and information, the North American market was
estimated at approximately $595 million in 2013.
A total of just over 1 Million Pets insured at year-end 2013

Average annual growth rate of 9% from 2009 to 2013 (including the new
participants in 2013)
Approximately 85% of insured pets are dogs
Approx. 320,000 new pets added in 2013 (including the new participants in 2013);
double-digit increase in 2013 over 2012 for same sample (up from less than 2% year
over year from 2009)
Accident & Illness is the top selling plan in North America with $397.6 million GWP in
2013, representing 81.3% of the total premium volume in 2013.
31

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North American Pet Health

Section 1: Introduction and Methodology

Introduction & Methodology

Objectives of the Report:

Introduction & Methodology

Foreign body ingestion, lacerations, motor vehicle accident,

Accident & Illness

Insurance with Embedded Wellness

Introduction & Methodology

Gross Written Premium

Gross Written Premium

14.6% increase from

13.3% increase from

Gross Written Premium

14.8% increase from 2012 to 2013 (*)

13.4% increase from 2011 to 2012

10.8% increase from 2010 to 2011

13.5% increase from 2012 to 2013 (*)

11.8% increase from 2009 to 2010

Gross Written Premium

Accident & Illness;

Gross Written Premium

Accident & Illness

Gross Written Premium

Accident & Illness

Gross Written Premium

17.6% increase from

Gross Written Premium

Accident & Illness

Insurance with Embedded

Gross Written Premium

New Business Added

Gross Written Premium

Gross Written Premium

In-Force Premium Volume

(Dec. 31, 2008)

(Dec. 31, 2009)

(Dec. 31, 2010)

(Dec. 31, 2011)

(Dec. 31, 2012)

New Business Added

In-Force Premium Volume

(Dec. 31, 2009)

(Dec. 31, 2010)

(Dec. 31, 2011)

(Dec. 31, 2012)

(Dec. 31, 2013)

Net Premium Loss (1)

Net Premium Loss (%)

14.3% increase from

7.2% increase from

Results from 2013-14 National Pet Owners Survey (APPA):

Accident & Illness;

Accident & Illness

1.9% increase from

Total Insured Pets (BOY)

(Dec. 31, 2008)

(Dec. 31, 2009)

(Dec. 31, 2010)

(Dec. 31, 2011)

(Dec. 31, 2012)

(Dec. 31, 2009)

(Dec. 31, 2010)