Claims Reserve (Notes)

12 Months Ended

Dec. 31, 2019

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

Supplementary Insurance Information, for Insurance Companies 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 reserve is made for each of the Company's segments, subscription and other business, and are 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	2019		2018		2017
Reserve at beginning of year	$	13,875	$	11,059	$	8,538
Veterinary invoice expense during the period related to:
Current year	231,831		190,642		155,623
Prior years	585		409		(69		)
Total veterinary invoice expense	232,416		191,051		155,554
Amounts paid during the period related to:
Current year	217,538		177,418		144,802
Prior years	12,494		10,130		7,777
Total paid	230,032		187,548		152,579
Non-cash expenses	718		687		454
Reserve at end of period	$	15,541	$	13,875	$	11,059

The Company's reserve for the subscription business segment increased $1.6 million from $13.9 million at December 31, 2018 to $15.5 million at December 31, 2019. This change was comprised of $232.4 million in expense recorded during the period less $230.0 million in payments of veterinary invoices. This $232.4 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. The Company's adjustments to prior year reserves were an increase of $0.4 million and a reduction of $0.1 million as a result of analysis of payment trends in the years ended December 31, 2018 and 2017, respectively.

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

	Year Ended December 31,
Other Business	2019			2018			2017
Reserve at beginning of year	$	2,187		$	1,697		$	983
Veterinary invoice expense during the period related to:
Current year	38,881			23,784			14,739
Prior years	(350		)	(296		)	(171		)
Total veterinary invoice expense	38,531			23,488			14,568
Amounts paid during the period related to:
Current year	33,254			21,615			13,053
Prior years	1,811			1,383			801
Total paid	35,065			22,998			13,854
Non-cash expenses	—			—			—
Reserve at end of period	$	5,653		$	2,187		$	1,697

The Company’s reserve for the other business segment increased $3.5 million from $2.2 million at December 31, 2018 to $5.7 million at December 31, 2019. This change was comprised of $38.5 million in expense recorded during the period less $35.1 million in payments of veterinary invoices. This $38.5 million in veterinary invoice expense incurred included a reduction of $0.4 million to the reserves relating to prior years, which was the result of ongoing analysis of recent payment trends. The Company's adjustments to decrease prior year reserves were $0.3 million and $0.2 million as a result of analysis of payment trends in each of the years ended December 31, 2018 and 2017, respectively.

Veterinary invoice expenses

In the following tables, the cumulative number of veterinary invoices represents the total number received as of December 31, 2019, 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 2016 through 2018 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, 2019.

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	2016		2017		2018		2019		2019		2019
Year of Occurrence	(unaudited)		(unaudited)		(unaudited)
2016	$	124,169	$	123,954	$	124,035	$	124,040	$	137	600,143
2017			$	155,398	$	155,678	$	155,681	$	464	725,796
2018					$	190,316	$	190,804	$	1,365	870,806
2019							$	232,552	$	13,575	965,768
							$	703,077	$	15,541

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	2016		2017		2018		2019		2019		2019
Year of Occurrence	(unaudited)		(unaudited)		(unaudited)
2016	$	9,027	$	8,843	$	8,855	$	8,862	$	1	59,665
2017			$	14,738	$	14,420	$	14,471	$	5	105,891
2018					$	23,782	$	23,371	$	20	173,778
2019							$	38,883	$	5,627	262,083
							$	85,587	$	5,653

Cumulative paid veterinary invoice expense

In the following tables, amounts are by 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, 2019. Information for years 2016 through 2018 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	2016		2017		2018		2019
Year of Occurrence	(unaudited)		(unaudited)		(unaudited)
2016	$	115,965	$	123,422	$	123,764	$	123,902
2017			$	145,087	$	154,679	$	155,217
2018					$	177,714	$	189,439
2019							$	218,977
							$	687,535
Total amounts unpaid and recorded as a liability							$	15,541

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	2016		2017		2018		2019
Year of Occurrence	(unaudited)		(unaudited)		(unaudited)
2016	$	8,048	$	8,832	$	8,852	$	8,861
2017			$	13,053	$	14,408	$	14,466
2018					$	21,613	$	23,351
2019							$	33,256
							$	79,934
Total amounts unpaid and recorded as a liability							$	5,653

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense [Table Text Block]

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

	Year Ended December 31,
Subscription	2019		2018		2017
Reserve at beginning of year	$	13,875	$	11,059	$	8,538
Veterinary invoice expense during the period related to:
Current year	231,831		190,642		155,623
Prior years	585		409		(69		)
Total veterinary invoice expense	232,416		191,051		155,554
Amounts paid during the period related to:
Current year	217,538		177,418		144,802
Prior years	12,494		10,130		7,777
Total paid	230,032		187,548		152,579
Non-cash expenses	718		687		454
Reserve at end of period	$	15,541	$	13,875	$	11,059

The Company's reserve for the subscription business segment increased $1.6 million from $13.9 million at December 31, 2018 to $15.5 million at December 31, 2019. This change was comprised of $232.4 million in expense recorded during the period less $230.0 million in payments of veterinary invoices. This $232.4 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. The Company's adjustments to prior year reserves were an increase of $0.4 million and a reduction of $0.1 million as a result of analysis of payment trends in the years ended December 31, 2018 and 2017, respectively.

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

	Year Ended December 31,
Other Business	2019			2018			2017
Reserve at beginning of year	$	2,187		$	1,697		$	983
Veterinary invoice expense during the period related to:
Current year	38,881			23,784			14,739
Prior years	(350		)	(296		)	(171		)
Total veterinary invoice expense	38,531			23,488			14,568
Amounts paid during the period related to:
Current year	33,254			21,615			13,053
Prior years	1,811			1,383			801
Total paid	35,065			22,998			13,854
Non-cash expenses	—			—			—
Reserve at end of period	$	5,653		$	2,187		$	1,697

The Company’s reserve for the other business segment increased $3.5 million from $2.2 million at December 31, 2018 to $5.7 million at December 31, 2019. This change was comprised of $38.5 million in expense recorded during the period less $35.1 million in payments of veterinary invoices. This $38.5 million in veterinary invoice expense incurred included a reduction of $0.4 million to the reserves relating to prior years, which was the result of ongoing analysis of recent payment trends. The Company's adjustments to decrease prior year reserves were $0.3 million and $0.2 million as a result of analysis of payment trends in each of the years ended December 31, 2018 and 2017, respectively.