Claims Reserve (Notes)

12 Months Ended

Dec. 31, 2023

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

The reserve for veterinary invoices is an estimate of the future amount the Company will pay for veterinary invoices that haven't been processed or received but 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):


	Year Ended December 31,
Subscription	2023		2022		2021
Reserve at beginning of year	$	21,543	$	22,407	$	19,925
Veterinary invoices during the period related to:
Current year	540,396		439,679		357,859
Prior years	2,800		(2,799)		(1,411)
Total veterinary invoice expense	543,196		436,880		356,448
Amounts paid during the period related to:
Current year	506,294		414,778		333,182
Prior years	23,001		18,739		16,109
Total paid	529,295		433,517		349,291
Non-cash expenses	3,896		4,227		4,675
Reserve at end of period	$	31,548	$	21,543	$	22,407

The Company had unfavorable development on veterinary invoice reserves for the subscription business segment of $2.8 million for the year ended December 31, 2023, favorable development on veterinary invoice reserves of $2.8 million for the year ended December 31, 2022, and favorable development on veterinary invoice reserves of $1.4 million for the year ended December 31, 2021, all of which were the result of ongoing analysis of recent payment trends.

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


	Year Ended December 31,
Other Business	2023		2022		2021
Reserve at beginning of year	$	22,191	$	17,264	$	9,004
Veterinary invoices during the period related to:
Current year	287,361		211,729		129,826
Prior years	498		1,128		(212)
Total veterinary invoice expense	287,859		212,857		129,614
Amounts paid during the period related to:
Current year	256,616		190,031		112,574
Prior years	21,744		17,899		8,780
Total paid	278,360		207,930		121,354
Non-cash expenses	—		—		—
Reserve at end of period	$	31,690	$	22,191	$	17,264

The Company had unfavorable development on veterinary invoice reserves for the other business segment of $0.5 million for the year ended December 31, 2023, unfavorable development on veterinary invoice reserves of $1.1 million for the year ended December 31, 2022, and favorable development on veterinary invoice reserves of $0.2 million for the year ended December 31, 2021, all of which were the result of ongoing analysis of recent payment trends.

Reserve for veterinary invoices, by year of occurrence

In the following tables, the cumulative number of veterinary invoices represents the total number received as of December 31, 2023, by year the veterinary invoice relates to, referred to as the year of occurrence. If a pet is injured or becomes ill, multiple trips to the veterinarian may result in several invoices. Each of these veterinary invoices is included in the cumulative number, regardless of whether the veterinary invoice was paid. Information for years 2020 through 2022 is provided as required supplementary information. Amounts in these tables are presented on a constant currency basis to remove the impact of changes in the foreign currency exchange rate on development. The cumulative expenses as of the end of each year are revalued using the currency exchange rate as of December 31, 2023.

The following table summarizes the development of veterinary invoice expense, on a constant currency basis, for the Company's subscription business segment by year of occurrence (in thousands, except for cumulative number of veterinary invoices data):


	Cumulative veterinary invoice expenses								Reserve		Cumulative number of veterinary invoices

	As of December 31,								As of December 31,
Subscription	2020		2021		2022		2023		2023		2023
Year of Occurrence	(unaudited)		(unaudited)		(unaudited)
2020	$	279,236	$	278,325	$	277,839	$	278,342	$	—	1,205,693
2021			$	354,083	$	351,797	$	352,320	$	—	1,482,674
2022					$	438,148	$	439,448	$	1,342	1,775,110
2023							$	542,362	$	30,206	1,981,465
							$	1,612,472	$	31,548

The following table summarizes the development of veterinary invoice expense, on a constant currency basis, for the Company's other business segment by year of occurrence (in thousands, except for cumulative number of veterinary invoices data):


	Cumulative veterinary invoice expenses								Reserve		Cumulative number of veterinary invoices

	As of December 31,								As of December 31,
Other Business	2020		2021		2022		2023		2023		2023
Year of Occurrence	(unaudited)		(unaudited)		(unaudited)
2020	$	72,289	$	72,026	$	72,255	$	72,352	$	—	536,416
2021			$	129,814	$	130,650	$	130,577	$	—	906,658
2022					$	211,724	$	212,163	$	945	1,289,524
2023							$	287,365	$	30,745	1,414,664
							$	702,457	$	31,690

Cumulative paid veterinary invoice expense

In the following tables, amounts are by the year the veterinary invoice relates to, referred to as the year of occurrence. Amounts in these tables are presented on a constant currency basis to remove the impact of changes in the foreign currency exchange rate. The cumulative amounts paid as of the end of each year are revalued using the currency exchange rate as of December 31, 2023. Information for years 2020 through 2022 is provided as required supplementary information.

The following table summarizes the amounts paid for veterinary invoices, inclusive of related internal processing costs and reported on a constant currency basis, for the subscription segment (in thousands):


	Year Ended December 31,
Subscription	2020		2021		2022		2023
Year of Occurrence	(unaudited)		(unaudited)		(unaudited)
2020	$	261,780	$	276,589	$	277,839	$	278,342
2021			$	334,187	$	350,925	$	352,320
2022					$	417,419	$	438,106
2023							$	512,156
							$	1,580,924
Total amounts unpaid and recorded as a liability							$	31,548

The following table summarizes the amounts paid for veterinary invoices, inclusive of related internal processing costs and reported on a constant currency basis, for the other business segment (in thousands):


	Year Ended December 31,
Other Business	2020		2021		2022		2023
Year of Occurrence	(unaudited)		(unaudited)		(unaudited)
2020	$	63,362	$	72,013	$	72,255	$	72,352
2021			$	112,562	$	130,157	$	130,577
2022					$	190,026	$	211,218
2023							$	256,620
							$	670,767
Total amounts unpaid and recorded as a liability							$	31,690