Predicted Top-Performing Animal Insurance Shares in 2024
Encountering the distressing situation of needing expensive veterinary surgery for your cherished pet that you can't afford is not an uncommon predicament, especially in the increasing trend of pet ownership.
Luckily, there's a solution. Pet insurance works in a similar manner to your personal medical insurance. You pay regular premiums with typically required deductibles, and the pet insurance covers the majority of veterinary medical costs for your beloved pet.
Pet insurance firms are filling a significant need and opening the door for investment opportunities. Here are the top three pet insurance stocks you should consider before investing in this sector:
Three top pet insurance stocks
Top pet insurance stocks in 2024
Although several independent pet insurance companies exist, some publicly traded companies offer pet insurance either as a part or whole of their business. Three leading pet insurance stocks are:
- Lemonade (LMND -8.88%)
- Synchrony Financial (SYF -5.36%)
- Trupanion (TRUP -7.4%)
1. Lemonade
Known mainly for providing renter and homeowner insurance, Lemonade also offers auto, life, and pet insurance.
The company introduced pet insurance in 2020, leveraging artificial intelligence (AI) and behavioral economics research to simplify the insurance buying and claim processing process online. Lemonade's successful home and renter insurance business provide ample opportunities to promote its pet insurance services. The company's pet insurance division has already surpassed initial expectations.
Lemonade's rapid growth is fueled by attracting new customers. Despite its expanding expenses related to customer acquisition, the company remains unprofitable.
2. Synchrony Financial
Synchrony Financial is a major player in consumer financial services, offering credit cards and online banking. In 2019, it acquired Pets Best, a pioneer in pet health insurance.
While Synchrony Financial does not provide extensive details about its pet insurance unit, by the third quarter of 2024, Pets Best had more than 670,000 insured pets, a significant increase from its 2019 acquisition.
Synchrony Financial launched a new payment platform for pet owners in October 2024. Consumers using CareCredit cards and Pets Best pet insurance can have their insurance claims directly paid to their health and wellness credit cards.
3. Trupanion
As opposed to Lemonade and Synchrony, Trupanion specializes entirely in the pet insurance market. It has been in operation for over two decades, and its cat and dog medical insurance sales history dates back that far.
Trupanion covered over 1.68 million pets by the end of the third quarter of 2024, thanks to its strong relationships with U.S. and Canadian veterinarians. It also became the first pet insurer offering direct payments to veterinarians at checkout, giving it a formidable competitive advantage.
Revenue growth is the company's strength. Trupanion has also achieved profitability in the third quarter of 2024, after posting losses since mid-2020.
Choosing the best
Selecting the best pet insurance stocks
To evaluate pet insurance companies, consider these key aspects, similar to evaluating any health insurance company:
- Revenue mix: Identify the extent to which a company derives its revenue from pet insurance compared to other sources.
- Financial strength: Pet insurers should have enough funds to cover all legitimate claims filed by pet owners. They need strong financial resources, such as cash, cash equivalents, and short-term liquid investments.
- Free cash flow: The cash left over after a company covers operating expenses and capital expenditures (physical assets such as property and equipment) is its free cash flow (FCF). A pet insurer with unstable or insufficient FCF may need to tap its cash reserves, which could pose problems if the FCF shortfall persists.
Potential risks
Risks of investing in pet insurance stocks
Investing in pet insurance stocks carries risks. These are particularly relevant for pet insurance stocks:
- Shrinking pet ownership: While pet ownership in the U.S. is currently increasing, this trend could change. Any significant economic downturn could make pet ownership too expensive, hurting pet insurance stocks.
- Intensified competition: As pet insurance becomes increasingly popular, competition may escalate. This could negatively impact pet insurers' profits due to increased marketing costs and potential pricing pressure.
- Unexpected medical costs: Pet insurers rely on cost projections within typical historical medical cost levels. However, an unforeseen increase in medical costs for pets could negatively influence pet insurer profitability. An outbreak of a new pet disease, for example, could trigger a spike in pet insurance claims.
Capitalize on the shifting finance sector and put your money into its top-notch stocks. Let me disclose the scene.**## Potential for Long-term Triumph?
Pet insurance shares might be long-term triumphs
Despite the threats, there are valid grounds for believing that pet insurance shares will flourish for investors in the long run. Pet ownership in the U.S. and numerous other nations is on an upward trend. With more individuals working from home, possessing pets has become more mainstream.
Pet insurance sectors remain largely untapped, especially in the U.S. and Canada. Only approximately 4% of pets in these regions are insured at the moment. Conversely, in the U.K., roughly one in four pets is insured. The geographic disparity highlights the colossal market potential that pet insurers -- and investors in pet insurance shares -- could tap into.
Synchrony Financial serves as an advertising partner for Our Website Money. Keith Speights lacks a stake in any of the mentioned stocks. Our Website, however, holds positions in and recommends Lemonade and Trupanion. Our Website is bound by a disclosure policy.
In light of the increasing trend of pet ownership and the untapped potential of the pet insurance market, investing in pet insurance stocks could be a wise long-term financial strategy. Companies like Lemonade, Synchrony Financial, and Trupanion, which offer pet insurance, have shown significant growth and promise, making them potential candidates for investment. When considering investment opportunities in the pet insurance sector, it's crucial to examine elements such as a company's revenue mix, financial strength, and free cash flow.
