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How return to normal will impact pet ownership

Pet insurance has seen another year of double-digit growth. Trupanion Co-President Margi Tooth joins Yahoo Finance Live to discuss.

Video Transcript

- Welcome back. There's been no shortage of sectors that have seen a big boost in the pandemic. We've already talked about food delivery companies, e-commerce, even working out from home. But what about pets as more and more Americans adopted pets or went out to acquire a new dog or cat at home. It's been a big boost for pet insurance company Trupanion as that stock is more than doubled in the last year.

And for more on that, I want to bring on the co-president of Trupanion here with us today. Margi Tooth joins us right now. And Margi, when we look at it, it's interesting because more pets obviously seems like it'd be a big boost for more pets to be insured out there. So where are you seeing the biggest growth since the pandemic?

MARGI TOOTH: We're seeing it across the board actually. And thank you for having me today. When we look at the overall penetration rate of insurance in North America is significantly under the penetration rate in more highly developed countries. So if you think about the UK or Western Europe where the penetration rate's about 25%, we saw it too.

So there's a lot of opportunity for us. And if we look across the country, across North America for where we've had that high pandemic pressure point, it's honestly been across the place. California is high, Canada is very strong, but across no one has fully penetrated at this point.

- What's your expectation on how much of that momentum you can maintain? This is a question we ask often here on the show about these trends that were set during the pandemic. And as people return back to work, things moving away from that trend, there's a lot of concern about a lot of pets that were adopted during the pandemic. Maybe some families saying, we can't keep them if we're not home all the time. What does the outlook look like for you in your business?

MARGI TOOTH: Yeah, great question. So we obviously had a really strong pandemic year. We've always talked about insurance being a recession pre-product. And I think it's really proven it's also pandemic proof. And what we've seen as the world starts to return to something of a normality, a new normal is that growth has continued.

So our main performance was still up 40% in terms of our gross new [INAUDIBLE], so the number of people enrolling their pets. And our net pet growth is ahead to 37% year over year. So what that means is that pets being added and the pets still cancelling still we're seeing a much lower cancel rate. So people are holding on to their coverage, and they're focusing on what they can control and being able to take care of their pet.

As we think about people coming back to the working environment, there's a lot of hybrid structures. One great opportunity that we see in front of us as Trupanion is the partnership with Aflac and how more of the worksite benefits, employee benefits, partnerships are coming together to create an environment where you can either bring your pet to work or have a worksite plan where you can make sure you've got that peace of mind that if you are going back to work, if your pet's suffering from separation anxiety, all of the things that we know will be very different for a pet in the post-pandemic world will be taken care of.

So at Trupanion, we allow pets in the office. And that's something-- I have my dog here today, is something that we live and breathe by what we do. And seeing more of an influx of pets in the workspace is highly likely rather than people worrying about them at home. But it's going to be very much a hybrid world.

- Yeah, it looked like last quarter, the one that you guys reported dipped into unprofitable territory. The year before that, it was a profitable quarter. How much of that just stems from additional costs you're trying to grow the business versus the actual costs of underwriting some of these pets? What's the change there?

MARGI TOOTH: The change really is when we see the opportunity in a 2% penetration rate, there's a lot of space for us to continue to grow. So the way that our business model is structured, as long as adjusted operating income is there, we will invest that in the business to grow it as effectively as we can.

So it's not getting more expensive to compete in the market as it's more opportunities for specifically what you're planning to be doing outside of the call, that centricity that we have working through the vent channel. There's a lot of opportunity to raise awareness, to educate both in Canada and the US. So I think as we look at more education and people understanding what the benefit of insuring their pet is, we have a lot of space.

- Or maybe just giving time to new owners out there to figure out all the ins and outs of it too. But the co-president of Trupanion Margi Tooth, appreciate you coming on here to join us today.