Veterinary Pet Services Notes Increase in Q2 2003 Revenue

Brea, Calif.-based Veterinary Pet Services Inc., the parent company of Veterinary Pet Insurance Company and its subsidiary, DVM Insurance Agency, announced a 26 percent increase in revenue for the quarter ended June 30, 2003. Revenue grew to $11.2 million compared to $8.9 million for the same period in 2002.

The company reported a net loss of $209,000 in the second quarter of 2003 compared to net income of $437,000 for the same period in 2002. Income for the six months ending June 30, 2003 was $402,000 compared to $873,000 for the first six months of 2002. The decrease in net income, as well as the loss produced in the current quarter, is strictly a result of higher general and administrative costs. The key factors contributing to the higher costs include additional expenditures relating to enhanced marketing and advertising campaigns; higher depreciation and increased consulting costs associated with the implementation of the company’s software system conversion; and increased expenditures pertaining to the fulfillment processes. The advertising and marketing programs will continue to enhance future business growth and increase revenue. Investments into the fulfillment processes and software development are expected to increase the company’s operating efficiencies to support future revenue growth.

The company wrote approximately 14.6 percent more pet insurance policies in the second quarter of 2003 than in the comparable period of 2002. Gross premiums produced in the second quarter of 2003 increased 29.4 percent to $20.7 million compared to gross premiums produced of $16 million for the same period in 2002.

Gross premiums produced include sales of pet insurance policies in California by VPI and sales of pet insurance outside of California through DVM that are underwritten by National Casualty Company prior to the application of the quota share reinsurance agreement VPI has with Scottsdale Insurance Company, an affiliate of National Casualty.

Total gross revenue, which comprises gross premiums produced, service fees and investment income, for the second quarter of 2003 was $22.2 million compared to $16.9 million in the second quarter of 2002, a 31.4 percent increase.