In an interesting development in the pet insurance world, Pethealth, a Canadian pet insurance company, bought Pet Protect, a British insurer from Domestic & General Insurance in the UK for 3.5 mil British pounds (7.133 mil Canadian dollars/$6.98 mil US) in cash.
Some interesting points to note from the press release:
The purchase price represents 27% of 2007 gross written premiums placed by Pet Protect.
Prior deals involving pet insurance companies have been in the 1-2 times gross written premium so this is a bargain indeed; however, it also implies that the earnings of the book of business isn't the best, which means there's work to be done by the new owners.The purchase price being paid for the company represents approximately Pounds Sterling 64.50 (C$129) per paid policy in force.
Not bad. Pethealth gets policies that make money for them (hopefully) and infrastructure to sell more policies that make money for them. As a reference, according to Pethealth's prior earnings discussions, their acquisition costs per policy in North America is in the range of $50-60 (although this does not include any non-insurance costs that are incurred to generate those policies).Pet Protect currently places insurance for over 54,300 dogs and cats, representing approximately 3% of the U.K. market.
54,300 dogs and cats insured resulting in 3% of the market implies that the total market in the UK is 1.8 million pets insured.According to the latest Defaqto report (2006) on pet insurance in the UK, the total number of cats and dogs in the UK is around 16.4 million with 3.8 million insured (23%). When I was at the International Pet Insurance Conference in 2006, UK insurers uniformly said that about 20% of cats and dogs are insured insured (3.3 million cats and dogs insured). So that would make Pet Protect's share in the 1.4 - 1.7% range rather than 3%. Probably some rounding and different assumptions making up the difference (numbers - who needs them!)
So overall, kudos to Mark Warren and the gang over at Pethealth. It will be interesting to see what they do in the UK. They've certainly done very well in the US.
