Claims Reserve (Notes)

3 Months Ended

Mar. 31, 2022

Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid [Abstract]

SEC Schedule, 12-16, Insurance Companies, Supplementary Insurance Information, Disclosure [Text Block]

Reserve for Veterinary Invoices

The reserve for veterinary invoices is an estimate of the future amount the Company will pay for veterinary invoices that are dated as of, or prior to, its balance sheet date. The reserve also includes the Company's estimate of related internal processing costs. The reserve estimate involves actuarial projections, and is based on management's assessment of facts and circumstances currently known, and assumptions about anticipated patterns. The Company uses generally accepted actuarial methodologies, such as paid loss development methods, in estimating the amount of the reserve for veterinary invoices. The reserve is made for each of the Company's segments, subscription and other business, and is continually refined as the Company receives and pays veterinary invoices. Changes in management's assumptions and estimates may have a relatively large impact to the reserve and associated expense.

Reserve for veterinary invoices

Summarized below are the changes in the total liability for the Company's subscription business segment (in thousands):

	Three Months Ended March 31,
Subscription	2022		2021
Reserve at beginning of year	$	22,407	$	19,925
Veterinary invoices during the period related to:
Current year	101,078		84,216
Prior years	(488)		(490)
Total veterinary invoice expense	100,590		83,726
Amounts paid during the period related to:
Current year	85,993		68,214
Prior years	13,922		12,468
Total paid	99,915		80,682
Non-cash expenses	1,234		2,369
Reserve at end of period	$	21,848	$	20,600

The Company's reserve for the subscription business segment decreased $0.6 million from $22.4 million at December 31, 2021 to $21.8 million at March 31, 2022. This change was comprised of $100.6 million in expense recorded during the period less $99.9 million in payments of veterinary invoices. The $100.6 million in veterinary invoice expense incurred included a reduction of $0.5 million to the reserves relating to prior years, which was the result of ongoing analysis of recent payment trends. For the three months ended March 31, 2021, the Company's adjustment to prior year reserves was a reduction of $0.5 million as a result of analysis of payment trends.

Summarized below are the changes in total liability for the Company's other business segment (in thousands):

	Three Months Ended March 31,
Other Business	2022		2021
Reserve at beginning of year	$	17,264	$	9,004
Veterinary invoices during the period related to:
Current year	43,735		26,414
Prior years	601		(270)
Total veterinary invoice expense	44,336		26,144
Amounts paid during the period related to:
Current year	29,426		18,031
Prior years	15,498		7,582
Total paid	44,924		25,613
Non-cash expenses	—		—
Reserve at end of period	$	16,676	$	9,535

The Company’s reserve for the other business segment decreased $0.6 million from $17.3 million at December 31, 2021 to $16.7 million at March 31, 2022. This change was comprised of $44.3 million in expense recorded during the period less $44.9 million in payments of veterinary invoices. The $44.3 million in veterinary invoice expense incurred included an increase of $0.6 million to the reserves relating to prior years, which was the result of ongoing analysis of recent payment trends. For the three months ended March 31, 2021, the Company's adjustment to decrease prior year reserves was $0.3 million as a result of analysis of payment trends.

Reserve for veterinary invoices, by year of occurrence

In the following tables, the reserve for veterinary invoices for each segment is presented as the amount (in thousands) by the year to which the veterinary invoice relates, referred to as the year of occurrence.

Subscription	As of March 31, 2022
Year of Occurrence
2020 and prior	$	1,584
2021	6,413
2022	13,851
	$	21,848

Other Business	As of March 31, 2022
Year of Occurrence
2020 and prior	$	11
2021	2,357
2022	14,308
	$	16,676