TRUPANION, INC., 10-K filed on 2/12/2021
Annual Report
v3.20.4
Cover Page Document - USD ($)
12 Months Ended
Dec. 31, 2020
Feb. 04, 2021
Jun. 30, 2020
Cover Page [Abstract]      
Entity Central Index Key 0001371285    
Document Annual Report true    
Document Period End Date Dec. 31, 2020    
Document Transition Report false    
Entity Filer Category Large Accelerated Filer    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Title of 12(b) Security Common stock, $0.00001 par value per share    
City Area Code (855)    
Entity Address, Address Line One 6100 4th Avenue S, Suite 200    
Entity Incorporation, State or Country Code DE    
Entity File Number 001-36537    
Entity Registrant Name TRUPANION, INC.    
Entity Tax Identification Number 83-0480694    
Entity Address, City or Town Seattle,    
Entity Address, State or Province WA    
Entity Address, Postal Zip Code 98108    
Local Phone Number 727 - 9079    
Trading Symbol TRUP    
Security Exchange Name NASDAQ    
Entity Interactive Data Current Yes    
Entity Shell Company false    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Public Float     $ 1,416,026,489
Current Fiscal Year End Date --12-31    
Document Type 10-K    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Common Stock, Shares Outstanding   39,473,833  
ICFR Auditor Attestation Flag true    
v3.20.4
Consolidated Statement of Operations - USD ($)
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]      
Revenue $ 502,028,000 $ 383,936,000 $ 303,956,000
Veterinary invoice expense 351,124,000 270,947,000 214,539,000
Other Cost of Services Sold 69,003,000 48,065,000 38,051,000
Cost of Revenue 420,127,000 319,012,000 252,590,000
Technology and Development Expense 9,947,000 7,025,000 5,796,000
General and administrative 21,847,000 18,384,000 17,104,000
Sales and marketing 47,837,000 35,451,000 24,999,000
Depreciation, Depletion and Amortization 7,071,000 5,632,000 4,512,000
Total operating expenses 86,702,000 66,492,000 52,411,000
Income (Loss) from Equity Method Investments (126,000) (352,000) 0
Operating loss (4,927,000) (1,920,000) (1,045,000)
Interest expense 1,381,000 1,349,000 1,198,000
Other income, net (581,000) (1,629,000) (1,309,000)
Loss before income taxes (5,727,000) (1,640,000) (934,000)
Income tax expense (benefit) 113,000 169,000 (7,000)
Net loss $ (5,840,000) $ (1,809,000) $ (927,000)
Earnings Per Share, Basic and Diluted $ (0.16) $ (0.05) $ (0.03)
Weighted Average Number of Shares Outstanding, Basic and Diluted 35,858,869 34,645,345 31,961,192
v3.20.4
Consolidated Statement of Comprehensive Income Statement - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Net loss $ (5,840) $ (1,809) $ (927)
Foreign currency translation adjustments 2,496 359 (642)
Net unrealized gain (loss) on available-for-sale debt securities 325 644 (19)
Other comprehensive income (loss), net of taxes 2,821 1,003 (661)
Comprehensive loss $ (3,019) $ (806) $ (1,588)
v3.20.4
Consolidated Balance Sheet - USD ($)
$ in Thousands
Dec. 31, 2020
Dec. 31, 2019
Assets [Abstract]    
Cash and cash equivalents $ 139,878 $ 29,168
Short-term Investments 89,862 69,732
Accounts and other receivables 99,065 54,408
Prepaid expenses and other assets 8,222 5,513
Total current assets 337,027 158,821
Restricted Cash and Cash Equivalents 6,319 1,400
Investments in fixed maturities, at fair value 5,566 4,323
Property and equipment, net 72,602 70,372
Intangible assets, net 27,134 7,731
Other Assets, Noncurrent 16,557 14,553
Goodwill 33,045 0
Total assets 498,250 257,200
Liabilities and Equity [Abstract]    
Accounts payable 6,059 4,087
Accrued liabilities and other current liabilities 22,864 13,798
Reserve for veterinary invoices 28,929 21,194
Deferred Revenue, Current 92,547 52,546
Total current liabilities 150,399 91,625
Long-term debt 0 26,086
Deferred Tax and Other Liabilities, Noncurrent 4,705 1,118
Other liabilities 3,207 1,611
Total liabilities 158,311 120,440
Common stock: $0.00001 par value per share 0 0
Preferred Stock, Value, Outstanding 0 0
Additional Paid-in Capital 439,007 232,731
Accumulated other comprehensive loss 3,071 250
Accumulated deficit (91,360) (85,520)
Treasury stock, at cost (10,779) (10,701)
Total stockholders' deficit 339,939 136,760
Liabilities and Equity $ 498,250 $ 257,200
v3.20.4
Consolidated Balance Sheet Condensed Consolidated Balance Sheet Parentheticals - $ / shares
Dec. 31, 2020
Dec. 31, 2019
Common Stock, Shares Authorized 100,000,000  
Common Stock, Shares, Outstanding 39,450,807  
Preferred Stock, Shares Authorized 10,000,000  
Common Stock    
Common Stock, Par or Stated Value Per Share $ 0.00001 $ 0.00001
Common Stock, Shares Authorized 100,000,000 100,000,000
Common Stock, Shares, Issued 40,383,972 35,876,882
Common Stock, Shares, Outstanding 39,450,807 34,947,017
Preferred Stock [Member]    
Preferred Stock, Par or Stated Value Per Share $ 0.00001 $ 0.00001
Preferred Stock, Shares Authorized 10,000,000 10,000,000
Preferred Stock, Shares Issued 0 0
Preferred Stock, Shares Outstanding 0 0
Treasury Stock [Member]    
Treasury Stock, Shares 933,165 929,865
v3.20.4
Consolidated Statement of Stockholders' Equity Statement - USD ($)
Total
Common Stock
Additional Paid-in Capital
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss)
Treasury Stock [Member]
Treasury Stock, Common [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Common Stock, Shares, Outstanding   30,121,496          
Stock Issued During Period, Shares, Share-based Compensation, Net of Tax Withholdings   1,278,386          
Stock Issued During Period, Value, Share-based Compensation, Net of Tax Withholdings $ 1,806,000   $ 1,806,000        
Beginning Balance at Dec. 31, 2017 48,434,000 $ 0 134,511,000 $ (82,784,000) $ (92,000) $ (3,201,000)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Redemption of warrants   231,315          
Settlement of warrant liabilities 300,000   3,300,000       $ (3,000,000)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition 4,950,000   4,950,000        
Other comprehensive income (loss), net of taxes (661,000)       (661,000)    
Net loss (927,000)     (927,000)      
Ending Balance at Dec. 31, 2018 129,173,000 $ 0 219,838,000 (83,711,000) (753,000) (6,201,000)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Common Stock, Shares, Outstanding   34,025,136          
Stock Issued During Period, Shares, New Issues   2,090,909          
Proceeds from issuance of common stock, follow-on public offering 65,638,000   65,638,000        
Payments to Acquire Buildings, Shares   303,030          
Payment to Acquire Corporate Building, Fair Value of Shares 9,633,000   9,633,000        
Stock Issued During Period, Shares, Share-based Compensation, Net of Tax Withholdings   615,761          
Stock Issued During Period, Value, Share-based Compensation, Net of Tax Withholdings 1,043,000   1,043,000        
Redemption of warrants   306,120          
Settlement of warrant liabilities 300,000   4,800,000       (4,500,000)
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition 7,050,000   7,050,000        
Other comprehensive income (loss), net of taxes 1,003,000       1,003,000    
Net loss (1,809,000)     (1,809,000)      
Ending Balance at Dec. 31, 2019 $ 136,760,000 $ 0 232,731,000 (85,520,000) 250,000 (10,701,000)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Common Stock, Shares, Outstanding   34,947,017          
Stock Issued During Period, Shares, New Issues 3,636,364 3,636,364          
Stock Issued During Period, Shares, Share-based Compensation, Net of Tax Withholdings   870,726          
Stock Issued During Period, Value, Share-based Compensation, Net of Tax Withholdings $ 4,864,000   4,864,000        
Treasury Stock, Shares, Acquired (3,300)            
Stock Issued During Period, Value, New Issues $ 192,265,000   192,265,000        
Adjustments to Additional Paid in Capital, Share-based Compensation, Requisite Service Period Recognition 9,147,000   9,147,000        
Treasury Stock, Value, Acquired, Cost Method (78,000)           $ (78,000)
Other comprehensive income (loss), net of taxes 2,821,000       2,821,000    
Net loss (5,840,000)            
Ending Balance at Dec. 31, 2020 $ 339,939,000 $ 0 $ 439,007,000 $ (91,360,000) $ 3,071,000 $ (10,779,000)  
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Common Stock, Shares, Outstanding 39,450,807 39,450,807          
v3.20.4
Consolidated Statement of Cash Flows
12 Months Ended
Dec. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Net Cash Provided by (Used in) Operating Activities [Abstract]      
Net loss $ (5,840,000) $ (1,809,000) $ (927,000)
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities [Abstract]      
Depreciation, Depletion and Amortization 7,071,000 5,632,000 4,512,000
Stock-based compensation expense 8,912,000 6,846,000 4,775,000
Other Operating Income (Expense), Net 153,000 105,000 (240,000)
Increase (Decrease) in Operating Assets [Abstract]      
Accounts and other receivables (43,272,000) (22,772,000) (11,248,000)
Prepaid expenses and other assets (2,839,000) (432,000) (2,628,000)
Accounts payable, accrued liabilities, and other liabilities 9,951,000 4,110,000 4,531,000
Reserve for veterinary invoices 7,662,000 5,059,000 3,440,000
Deferred revenue 39,746,000 19,418,000 10,465,000
Net cash provided by operating activities 21,544,000 16,157,000 12,680,000
Net Cash Provided by (Used in) Investing Activities [Abstract]      
Purchases of investment securities (65,286,000) (65,506,000) (52,862,000)
Maturities of investment securities 44,066,000 49,762,000 35,413,000
Payments to Acquire Businesses, Net of Cash Acquired (48,133,000)    
Purchases of Other Investments 0 4,000,000 3,000,000
Payments to Acquire Intangible Assets 0 0 (2,959,000)
Purchases of property and equipment (7,451,000) (5,373,000) (56,936,000)
Payments for (Proceeds from) Other Investing Activities 57,000 (2,891,000) (1,107,000)
Net cash used in investing activities (76,747,000) (28,008,000) (81,451,000)
Net Cash Provided by (Used in) Financing Activities [Abstract]      
Proceeds from Issuance of Common Stock 192,265,000 0 65,671,000
Proceeds from exercise of stock options 6,013,000 2,982,000 3,601,000
Payments Related to Tax Withholding for Share-based Compensation (1,115,000) (1,667,000) (1,839,000)
Proceeds from Debt Financing 6,213,000 13,167,000 13,431,000
Repayments of Long-term Debt (32,450,000) 0 (10,000,000)
Proceeds from (Payments for) Other Financing Activities (78,000) (438,000) 365,000
Net cash provided by financing activities 170,848,000 14,044,000 71,229,000
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash, net (16,000) 423,000 (812,000)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect 115,629,000 2,616,000 1,646,000
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents 146,197,000 30,568,000 27,952,000
Supplemental Cash Flow Information [Abstract]      
Income taxes paid (refund) (31,000) (158,000) (216,000)
Interest Paid, Excluding Capitalized Interest, Operating Activities 1,363,000 1,188,000 1,019,000
Redemption of Warrants Non-Cash; Common Stock 0 4,500,000 3,000,000
Acquisition of Corporate Real Estate Non-Cash, Common Stock 0 0 9,640,000
Purchases of property and equipment included in accounts payable and accrued liabilities 861,000 $ 485,000 $ 106,000
Business Combination, Contingent Consideration, Liability $ 162,000    
v3.20.4
Condensed Consolidated Balance Sheet Parentheticals - $ / shares
Dec. 31, 2020
Dec. 31, 2019
Common Stock, Shares Authorized 100,000,000  
Common Stock, Shares, Outstanding 39,450,807  
Preferred Stock, Shares Authorized 10,000,000  
Common Stock    
Common Stock, Par or Stated Value Per Share $ 0.00001 $ 0.00001
Common Stock, Shares Authorized 100,000,000 100,000,000
Common Stock, Shares, Issued 40,383,972 35,876,882
Common Stock, Shares, Outstanding 39,450,807 34,947,017
Preferred Stock [Member]    
Preferred Stock, Par or Stated Value Per Share $ 0.00001 $ 0.00001
Preferred Stock, Shares Authorized 10,000,000 10,000,000
Preferred Stock, Shares Issued 0 0
Preferred Stock, Shares Outstanding 0 0
Treasury Stock [Member]    
Treasury Stock, Shares 933,165 929,865
Parent Company | Common Stock    
Common Stock, Par or Stated Value Per Share $ 0.00001 $ 0.00001
Common Stock, Shares Authorized 100,000,000 100,000,000
Common Stock, Shares, Issued 35,876,882 35,876,882
Common Stock, Shares, Outstanding 34,947,017 34,947,017
Parent Company | Preferred Stock [Member]    
Preferred Stock, Par or Stated Value Per Share $ 0.00001 $ 0.00001
Preferred Stock, Shares Authorized 10,000,000 10,000,000
Preferred Stock, Shares Issued 0 0
Preferred Stock, Shares Outstanding 0 0
Parent Company | Treasury Stock [Member]    
Treasury Stock, Shares 929,865 929,865
v3.20.4
Schedule 1-Parent Only Disclosures [Schedule] Condensed Statement of Comprehensive Loss (Details) - USD ($)
12 Months Ended
Dec. 31, 2020
Dec. 31, 2019
Dec. 31, 2018
Condensed Financial Statements, Captions [Line Items]      
Technology and Development Expense $ 9,947,000 $ 7,025,000 $ 5,796,000
General and administrative 21,847,000 18,384,000 17,104,000
Sales and marketing 47,837,000 35,451,000 24,999,000
Income (Loss) from Equity Method Investments (126,000) (352,000) 0
Operating loss (4,927,000) (1,920,000) (1,045,000)
Interest expense 1,381,000 1,349,000 1,198,000
Other income, net (581,000) (1,629,000) (1,309,000)
Income Tax (Benefit) Expense, Attributable to Parent 8,460,000 5,423,000 4,042,000
Comprehensive loss (3,019,000) (806,000) (1,588,000)
Parent Company      
Condensed Financial Statements, Captions [Line Items]      
Veterinary invoice expense 1,118,000 697,000 571,000
Other costs of revenue 468,000 353,000 357,000
Technology and Development Expense 1,087,000 904,000 208,000
General and administrative 7,055,000 5,944,000 4,738,000
Sales and marketing 2,799,000 2,137,000 1,355,000
Cost, Depreciation and Amortization 328,000 211,000 445,000
Total expenses 12,855,000 10,246,000 7,674,000
Income (Loss) from Equity Method Investments (108,000) (205,000) 0
Operating loss (12,963,000) (10,451,000) (7,674,000)
Interest expense 1,361,000 1,327,000 1,184,000
Other income, net 4,845,000 4,156,000 2,557,000
Loss before equity in undistributed earnings of subsidiaries (9,479,000) (7,622,000) (6,301,000)
Equity (Loss) in Undistributed Earnings of Subsidiaries (4,821,000) 390,000 1,332,000
Net loss (5,840,000) (1,809,000) (927,000)
Other comprehensive income (loss) of subsidiaries 2,821,000 1,003,000 (661,000)
Comprehensive loss $ (3,019,000) $ (806,000) $ (1,588,000)
v3.20.4
Net Loss per Share
12 Months Ended
Dec. 31, 2020
Earnings Per Share [Abstract]  
Earnings Per Share [Text Block] Net Loss per Share
Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated using the weighted-average number of shares of common stock plus, when dilutive, potential common shares outstanding using the treasury-stock method. Potential common shares outstanding include stock options, unvested restricted stock awards and restricted stock units, and warrants.
The following potentially dilutive equity securities were not included in the diluted earnings per common share calculation because they would have had an antidilutive effect:
 As of December 31,
 202020192018
Stock options1,459,290 2,097,978 2,621,503 
Restricted stock awards and restricted stock units782,755 581,943 451,160 
Warrants— — 480,000 
v3.20.4
Business Combinations
12 Months Ended
Dec. 31, 2020
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block] Business Combination
On October 30, 2020, the Company completed an acquisition of 100% of the equity of Aquarium Software Limited (Aquarium), a U.K.-based insurance software provider, for approximately $48.3 million in net cash. The acquired technology from Aquarium focuses on the pet space and, along with the acquired personnel, is intended to enable the Company to improve its back-end software to help facilitate growth opportunities. The Company incurred $0.5 million of acquisition related costs that were included in general and administrative expenses during the year ended December 31, 2020.
The acquisition is recorded using the purchase method of accounting in accordance with ASC 805, Business Combinations, which requires that the assets acquired and liabilities assumed to be recorded at their respective fair values at the acquisition date. The excess of the purchase price over the estimated fair values of the net tangible and intangible assets acquired is recorded as goodwill. The application of the purchase method of accounting resulted in the recognition of intangible assets, the estimated fair values of which involved a discounted cash flow model and certain assumptions and estimates, including but not limited to, revenue growth rates and margins, attrition rates, and discount rates. These estimates are inherently uncertain and unanticipated events and circumstances may occur which could affect the accuracy or validity of estimates used in purchase accounting. The purchase price allocation recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
December 31,
2020
Current assets, net of cash acquired$1,469 
Property and equipment171 
Amortizable intangible assets19,512 
Goodwill31,352 
Other long-term assets1,421 
Current liabilities(1,269)
Deferred tax liability and other liabilities(4,361)
Total Consideration Transferred, net of cash acquired$48,295 
Acquired intangible assets included trade name, developed technologies, and customer relationships. These definite-lived intangible assets had weighted-average estimated useful lives of approximately 5.3 years. The goodwill recognized is attributable primarily to going concern value such as assembled workforce, future technology development, future customers, and expected synergies from incorporating the operations into Trupanion’s portfolio. None of the goodwill associated with this acquisition is expected to be deductible for income tax purposes.
The results of Aquarium’s operations have been included in the consolidated financial statements since the acquisition date, but were immaterial to the Company's consolidated financial statements.
v3.20.4
Property Plant and Equipment (Notes)
12 Months Ended
Dec. 31, 2020
Property, Plant and Equipment [Abstract]  
Property and Equipment, Net Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
 December 31,
 20202019
Land and improvements$15,854 $15,854 
Building and improvements46,682 47,558 
Software27,707 22,976 
Office equipment and other4,146 3,384 
Construction in progress2,855 247 
Property and equipment, at cost97,244 90,019 
Less: Accumulated depreciation(24,642)(19,647)
Property and equipment, net$72,602 $70,372 
Depreciation expense related to property and equipment was $5.2 million, $4.7 million and $4.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Acquisition of Real Estate
In August 2018, the Company purchased a real property that houses the company headquarters located at 6100 Fourth Avenue South, Seattle, Washington. The real estate acquisition was determined to be an asset acquisition, with the purchase price allocated based on relative fair value of the assets acquired. Additionally, acquisition-related expenses were capitalized as part of the purchase price. The purchase price was $65.2 million, consisting of $55.0 million in cash, 303,030 shares of common stock with an estimated fair value of $9.6 million, and transaction costs totaling $0.6 million.
v3.20.4
Intangible Assets (Notes)
12 Months Ended
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets Disclosure [Text Block] Intangible Assets
Goodwill arises from business acquisitions in which the purchase price exceeds the fair value of tangible and intangible assets acquired less assumed liabilities. As discussed in Note 3—Business Combination, the Company recognized $31.4 million in goodwill on October 30, 2020. The carrying amount of goodwill as of December 31, 2020 was $33.0 million, due to a foreign exchange translation fluctuation of $1.6 million between the acquisition date and December 31, 2020.
The following table presents the detail of intangible assets other than goodwill for the periods presented (in thousands):
Gross Carrying ValueAccumulated AmortizationNet Carrying Value
December 31, 2020:
Licenses$4,773 $— $4,773 
Leases2,959 (2,213)746 
Trade name1,387 (23)1,364 
Developed technologies11,512 (352)11,160 
Customer relationships7,667 (256)7,411 
Patents, trademarks, and other2,037 (357)1,680 
Total Intangibles$30,335 $(3,201)$27,134 
December 31, 2019:
Licenses$4,773 $— $4,773 
Leases2,959 (1,084)1,875 
Patents, trademarks, and other1,287 (204)1,083 
Total Intangibles$9,019 $(1,288)$7,731 
The Company acquired an insurance company in 2007, which originally included licenses in 23 states. These licenses were valued at $4.8 million. The Company is currently licensed in all 50 states, the District of Columbia and Puerto Rico. Most licenses are renewed annually upon payment of various fees assessed by the issuing state. Renewal costs are expensed as incurred. This is considered an indefinite-lived intangible asset given the planned renewal of the certificates of authority and applicable licenses for the foreseeable future.
The lease-related intangible assets relate to in-place lease agreements associated with the building acquisition in August 2018 and have a remaining weighted-average useful life of 2.4 years. Intangible assets acquired from the Aquarium acquisition included trade name, developed technologies, and customer relationships. These definite-lived intangible assets have a remaining weighted-average useful life of 5.1 years. Patents, trademarks, and other intangible assets have a remaining weighted-average useful life of 6.3 years.
Amortization expense associated with intangible assets was $1.9 million, $0.9 million, and $0.2 million for the years ended December 31, 2020, 2019, and 2018, respectively.
As of December 31, 2020, expected amortization expense relating to purchased intangible assets for each of the next five years and thereafter is as follows (in thousands):
Year ending December 31:
2021$4,725 
20224,692 
20234,359 
20243,982 
20253,288 
Thereafter905 
Total$21,951 
v3.20.4
Investment Securities (Notes)
12 Months Ended
Dec. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
The amortized cost, gross unrealized holding gains and losses, and fair value of long-term and short-term investments by major security type and class of security were as follows as of December 31, 2020 and 2019 (in thousands):
Amortized
Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Fair
Value
As of December 31, 2020
Long-term investments:
Foreign deposits$4,564 $— $— $4,564 
Municipal bond1,000 — 1,002 
$5,564 $$— $5,566 
Short-term investments:
              U.S. Treasury securities$6,494 $— $(2)$6,492 
              Certificates of deposit1,696 — — 1,696 
              U.S. government funds81,672 — — 81,672 
$89,862 $— $(2)$89,860 
 Amortized
Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Fair
Value
As of December 31, 2019
Long-term investments:
Foreign deposits$3,323 $— $— $3,323 
Municipal bond1,000 — — 1,000 
$4,323 $— $— $4,323 
Short-term investments:
U.S. Treasury securities$6,156 $— $(1)$6,155 
Certificates of deposit440 — — 440 
U.S. government funds63,136 — — 63,136 
$69,732 $— $(1)$69,731 
Maturities of debt securities classified as available-for-sale were as follows (in thousands):
 December 31, 2020
 Amortized
Cost
Fair
Value
Available-for-sale:
Due after one year through five years$5,564 $5,566 
$5,564 $5,566 
v3.20.4
Other Investments (Notes)
12 Months Ended
Dec. 31, 2020
Other Investments [Abstract]  
Investments and Other Noncurrent Assets [Text Block] Other Investments
Investment in Variable Interest Entity
The Company has invested $7.0 million in preferred stock of a privately held corporation with a complementary business line. The Company does not have power over the activities that most significantly impact the economic performance of the variable interest entity and is, therefore, not the primary beneficiary. The Company has the option to purchase all of the outstanding common shares issued by the variable interest entity in 2023 at an amount approximating its expected fair value. The preferred stock investment in the variable interest entity is accounted for as an available-for-sale debt security, and measured at fair value at each balance sheet date.
Additionally, the Company has extended a $2.5 million revolving line of credit to the variable interest entity to fund its inventory purchases. The Company's investment and amounts loaned under the line of credit are recorded in other long-term assets on its consolidated balance sheet. The outstanding loan balance under the line of credit was $2.5 million as of December 31, 2020 and 2019. The Company has also entered into a series of agreements to provide ancillary services to the variable interest entity at cost. The Company provided $1.2 million and $1.4 million of these services for the years ended December 31, 2020 and 2019, respectively, which were recorded against its operating expenses.
Investment in Joint Venture
In September 2018, the Company acquired a non-controlling equity interest in a joint venture in Australia, whereby it has committed to licensing certain intellectual property and contributing up to $2.2 million AUD upon the achievement of specific operational milestones over a period of at least four years from the agreement execution date. As of December 31, 2020, the Company has contributed $0.5 million AUD. This equity investment is accounted for using the equity method and is classified in other long-term assets on the Company's consolidated balance sheet. The Company's share of income and losses from this equity method investment is included in gain (loss) from investment in joint venture on its consolidated statement of operations. Also included in this line item are income and expenses associated with administrative services provided to the joint venture.
v3.20.4
Fair Value
12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block] Fair Value
Investments
The following table summarizes, by major security type, the Company's assets that are measured at fair value on a recurring basis, and placement within the fair value hierarchy (in thousands):
 As of December 31, 2020
 Fair ValueLevel 1Level 2Level 3
Assets
Restricted cash$6,319 $6,319 $— $— 
Money market funds99,054 99,054 — — 
Fixed maturities:
Foreign deposits4,564 4,564 — — 
Municipal bond1,002 — 1,002 — 
Investment in variable interest entity7,949 — — 7,949 
Total$118,888 $109,937 $1,002 $7,949 
 As of December 31, 2019
 Fair ValueLevel 1Level 2Level 3
Assets
Restricted cash$1,400 $1,400 $— $— 
Money market funds1,050 1,050 — — 
Fixed maturities:
Foreign deposits3,323 3,323 — — 
Municipal bond1,000 — 1,000 — 
Investment in variable interest entity7,625 — — 7,625 
Total$14,398 $5,773 $1,000 $7,625 
The Company measures the fair value of restricted cash, money market funds, and foreign deposits based on quoted prices in active markets for identical assets. The fair value of the municipal bond is based on either recent trades in inactive markets or quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. Short-term investments are carried at amortized cost and the fair value and changes in unrealized gains (losses) are disclosed in Note 6, Investments. The fair value of these investments is determined in the same manner as for available-for-sale securities and is considered a Level 1 measurement.
The preferred stock investment in the variable interest entity (see Note 7) is accounted for as an available-for-sale debt security, and measured at fair value at each balance sheet date. The estimated fair value of the preferred stock investment is a Level 3 measurement, and is based on certain unobservable inputs such as the value of the underlying enterprise, volatility, time to liquidity, and market interest rates. An increase or decrease in any of these unobservable inputs would result in a change in the fair value measurement. Estimated fair value was $7.9 million and $7.6 million as of December 31, 2020 and December 31, 2019, respectively, recorded in other long-term assets on the Company's consolidated balance sheet. Unrealized gains of $0.3 million and $0.6 million were recorded in other comprehensive income in the year ended December 31, 2020, and 2019, respectively.
Fair Value Disclosures
The Company's other long-term assets balance included notes receivable of $6.1 million as of December 31, 2020 and 2019, recorded at their estimated collectible amount. The Company estimates that the carrying value of the notes receivable approximates the fair value. The estimated fair value represents a Level 3 measurement within the fair value hierarchy, and is based on market interest rates and the assessed creditworthiness of the third party. There was no significant activity in Level 3 of the hierarchy during the year ended December 31, 2020.
The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers between levels for the year ended December 31, 2020 and 2019.
v3.20.4
Commitment and Contingencies
12 Months Ended
Dec. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure [Text Block] Commitments and Contingencies
The following summarizes the Company's contractual commitments as of December 31, 2020 (in thousands):
Year Ending December 31,
20212022202320242025ThereafterTotal
Lease obligations$176 $146 $136 $136 $136 $477 $1,207 
Outstanding purchase commitments5,592 1,692 422 168 330 2,128 10,332 
Total$5,768 $1,838 $558 $304 $466 $2,605 $11,539 
Legal Proceedings
Certain state insurance regulators in the United States have contacted the Company regarding whether employees who had helped prospective members enroll by telephone in prior years were required to have an insurance license to conduct such telephone conversations. To date, the Company has resolved each of these matters in non-material amounts and believes it is compliant with the applicable regulations. The Company is currently engaged with a limited number of state insurance regulators to resolve this same legacy issue and believes it has adequately reserved for these matters.
In addition, from time to time the Company is or may become subject to various legal proceedings arising in the ordinary course of business, including proceedings against members, other entities or regulatory bodies. Estimated liabilities are recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. At this time, the Company does not believe any such matters to be material individually or in the aggregate. These views are subject to change following the outcome of future events or the results of future developments.
v3.20.4
Claims Reserve (Notes)
12 Months Ended
Dec. 31, 2020
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,
Subscription202020192018
Reserve at beginning of year$15,541 $13,875 $11,059 
Veterinary invoice expense during the period related to:
Current year278,776 231,831 190,642 
Prior years229 585 409 
Total veterinary invoice expense279,005 232,416 191,051 
Amounts paid during the period related to:
Current year259,971 217,538 177,418 
Prior years13,387 12,494 10,130 
Total paid273,358 230,032 187,548 
Non-cash expenses1,263 718 687 
Reserve at end of period$19,925 $15,541 $13,875 
The Company's reserve for the subscription business segment increased $4.4 million from $15.5 million at December 31, 2019 to $19.9 million at December 31, 2020. This change was comprised of $279.0 million in expense recorded during the period less $273.4 million in payments of veterinary invoices. This $279.0 million in veterinary invoice expense incurred included an increase of $0.2 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 $0.6 million and $0.4 million as a result of analysis of payment trends in the years ended December 31, 2019 and 2018, respectively.
Summarized below are the changes in total liability for the Company's other business segment (in thousands):
 Year Ended December 31,
Other Business202020192018
Reserve at beginning of year$5,653 $2,187 $1,697 
Veterinary invoice expense during the period related to:
Current year72,286 38,881 23,784 
Prior years(167)(350)(296)
Total veterinary invoice expense72,119 38,531 23,488 
Amounts paid during the period related to:
Current year63,359 33,254 21,615 
Prior years5,409 1,811 1,383 
Total paid68,768 35,065 22,998 
Non-cash expenses— — — 
Reserve at end of period$9,004 $5,653 $2,187 

The Company’s reserve for the other business segment increased $3.4 million from $5.7 million at December 31, 2019 to $9.0 million at December 31, 2020. This change was comprised of $72.1 million in expense recorded during the period less $68.8 million in payments of veterinary invoices. This $72.1 million in veterinary invoice expense incurred included a reduction of $0.2 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 $0.4 million and $0.3 million as a result of analysis of payment trends in each of the years ended December 31, 2019 and 2018, respectively.
Veterinary invoice expenses

In the following tables, the cumulative number of veterinary invoices represents the total number received as of December 31, 2020, 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 2017 through 2019 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, 2020.
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 expensesReserveCumulative number of veterinary invoices
As of December 31,As of December 31,
Subscription201720182019202020202020
Year of Occurrence(unaudited)(unaudited)(unaudited)
2017$156,139 $156,414 $156,416 $156,172 $— 730,136 
2018$191,194 $191,679 $191,775 $702 881,595 
2019$233,609 $233,986 $1,681 1,042,392 
2020$281,248 $17,542 1,086,816 
$863,181 $19,925 

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 expensesReserveCumulative number of veterinary invoices
As of December 31,As of December 31,
Other Business201720182019202020202020
Year of Occurrence(unaudited)(unaudited)(unaudited)
2017$14,740 $14,422 $14,473 $14,482 $— 106,124 
2018$23,786 $23,375 $23,469 $45 174,778 
2019$38,885 $38,610 $32 281,215 
2020$72,297 $8,927 497,165 
$148,858 $9,004 

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, 2020. Information for years 2017 through 2019 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,
Subscription2017201820192020
Year of Occurrence(unaudited)(unaudited)(unaudited)
2017$145,793 $155,412 $155,951 $156,172 
2018$178,554 $190,311 $191,073 
2019$219,993 $232,305 
2020$263,706 
$843,256 
Total amounts unpaid and recorded as a liability$19,925 
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 Business2017201820192020
Year of Occurrence(unaudited)(unaudited)(unaudited)
2017$13,054 $14,410 $14,468 $14,482 
2018$21,617 $23,355 $23,424 
2019$33,258 $38,578 
2020$63,370 
$139,854 
Total amounts unpaid and recorded as a liability$9,004 
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,
Subscription202020192018
Reserve at beginning of year$15,541 $13,875 $11,059 
Veterinary invoice expense during the period related to:
Current year278,776 231,831 190,642 
Prior years229 585 409 
Total veterinary invoice expense279,005 232,416 191,051 
Amounts paid during the period related to:
Current year259,971 217,538 177,418 
Prior years13,387 12,494 10,130 
Total paid273,358 230,032 187,548 
Non-cash expenses1,263 718 687 
Reserve at end of period$19,925 $15,541 $13,875 
The Company's reserve for the subscription business segment increased $4.4 million from $15.5 million at December 31, 2019 to $19.9 million at December 31, 2020. This change was comprised of $279.0 million in expense recorded during the period less $273.4 million in payments of veterinary invoices. This $279.0 million in veterinary invoice expense incurred included an increase of $0.2 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 $0.6 million and $0.4 million as a result of analysis of payment trends in the years ended December 31, 2019 and 2018, respectively.
Summarized below are the changes in total liability for the Company's other business segment (in thousands):
 Year Ended December 31,
Other Business202020192018
Reserve at beginning of year$5,653 $2,187 $1,697 
Veterinary invoice expense during the period related to:
Current year72,286 38,881 23,784 
Prior years(167)(350)(296)
Total veterinary invoice expense72,119 38,531 23,488 
Amounts paid during the period related to:
Current year63,359 33,254 21,615 
Prior years5,409 1,811 1,383 
Total paid68,768 35,065 22,998 
Non-cash expenses— — — 
Reserve at end of period$9,004 $5,653 $2,187 

The Company’s reserve for the other business segment increased $3.4 million from $5.7 million at December 31, 2019 to $9.0 million at December 31, 2020. This change was comprised of $72.1 million in expense recorded during the period less $68.8 million in payments of veterinary invoices. This $72.1 million in veterinary invoice expense incurred included a reduction of $0.2 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 $0.4 million and $0.3 million as a result of analysis of payment trends in each of the years ended December 31, 2019 and 2018, respectively.
v3.20.4
Debt
12 Months Ended
Dec. 31, 2020
Debt Disclosure [Abstract]  
Debt Disclosure [Text Block] DebtThe Company had a revolving line of credit of up to $50.0 million with a maturity date in June 2022. The debt balance, net of unamortized financing fees, was $26.1 million as of December 31, 2019. In December 2020, the Company elected to terminate the line of credit and repaid all of the outstanding obligations.
v3.20.4
Stock-based Compensation
12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-based Compensation Stock-Based Compensation
Stock-based compensation expense includes stock options, restricted stock awards, and restricted stock units granted to employees and non-employees and has been reported in the Company’s consolidated statements of operations depending on the function performed by the employee or non-employee. Stock-based compensation expense recognized in each category of the consolidated statement of operations for the years ended December 31, 2020, 2019 and 2018 was as follows (in thousands):
 Year Ended December 31,
 202020192018
Veterinary invoice expense$1,118 $697 $571 
Other cost of revenue468 353 356 
Technology and development758 364 209 
General and administrative3,795 3,312 2,304 
Sales and marketing2,773 2,120 1,335 
Total expensed stock-based compensation8,912 6,846 4,775 
Capitalized stock-based compensation235 204 175 
Total stock-based compensation$9,147 $7,050 $4,950 
As of December 31, 2020, the Company had 41,521 unvested stock options and 782,755 unvested restricted stock awards and restricted stock units. Total stock-based compensation expense of $0.3 million related to unvested stock options and $24.5 million related to unvested restricted stock awards and restricted stock units is expected to be recognized over a weighted-average period of approximately 0.4 years and 2.8 years, respectively.
Stock Options
The grant date fair value of stock option awards are estimated on the date of grant using the Black-Scholes option-pricing model. The Company did not grant any stock options during the years ended December 31, 2020, 2019, and 2018.
The following table presents information regarding stock options granted, exercised and forfeited for the periods presented:
Number
of
Options
Weighted Average
Exercise
Price per Share
Aggregate
Intrinsic
Value
(in thousands)
Outstanding as of January 1, 20184,006,399 $7.16 $88,578 
Granted— — — 
Exercised(1,292,037)2.82 36,625 
Forfeited(92,859)15.36 — 
Outstanding as of December 31, 20182,621,503 9.01 43,136 
Granted— — — 
Exercised(510,268)5.28 13,151 
Forfeited(13,257)18.23 — 
Outstanding as of December 31, 20192,097,978 9.86 57,907 
Granted— — — 
Exercised(626,554)9.54 35,696 
Forfeited(12,134)17.41 — 
Outstanding as of December 31, 20201,459,290 9.93 160,200 
Exercisable at December 31, 20201,417,769 $9.69 $155,984 
As of December 31, 2020, stock options outstanding and stock options exercisable had a weighted average remaining contractual life of 4.1 years and 4.0 years, respectively.

The fair value of options vested were as follows for the years ended December 31, 2020, 2019, and 2018. The Company didn't grant any stock options in these three years.
Weighted Average Grant Date Fair Value per ShareFair Value of Options Vested
(in thousands)
Year:
2018$— $2,665 
2019$— $1,591 
2020$— $1,105 
Restricted Stock Awards and Restricted Stock Units
The below table summarizes the Company’s restricted stock award and restricted stock unit activity for the years ended December 31, 2020, 2019 and 2018:
Number of 
Shares
Weighted Average
Grant Date Fair Value per
Share
Unvested shares as of January 1, 2018256,842 $4.77 
Granted375,313 28.10 
Vested(149,213)9.74 
Forfeited(31,782)28.57 
Unvested shares as of December 31, 2018451,160 22.16 
Granted459,523 30.03 
Vested(276,184)18.20 
Forfeited(52,556)29.85 
Unvested shares as of December 31, 2019581,943 29.56 
Granted535,184 37.60 
Vested(266,640)29.77 
Forfeited(67,732)31.51 
Unvested shares as of December 31, 2020782,755 $34.81 
v3.20.4
Leases (Notes)
12 Months Ended
Dec. 31, 2020
Leases [Abstract]  
Leases of Lessor Disclosure [Text Block] Leases
The Company leases certain office space and equipment from third parties and recognizes lease expense on a straight-line basis over the lease term. For operating leases with an initial term of over 12 months, the Company recorded $0.9 million and $0.1 million right-of-use assets and lease liabilities on its consolidated balance sheets as of December 31, 2020 and 2019, respectively. Leases with an initial term of 12 months or less are not recorded on its consolidated balance sheets. Rental expense for operating leases was $0.2 million, $0.4 million and $1.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The Company also leases a portion of its home office building to third parties and records related rental income within general and administrative expense in the consolidated statements of operations. These leases have remaining lease terms of up to 6 years, some of which give tenants options to terminate the leases early, with termination fees required. The Company recorded rental income of $1.9 million and $2.2 million for the years ended December 31, 2020 and December 31, 2019, respectively.
The following table summarizes the Company's future rental payments to be received from non-cancellable leases in place as of December 31, 2020 (in thousands):
Year ending December 31:
2021$1,303 
20221,345 
2023882 
2024384 
2025319 
Thereafter100 
Total rental payments$4,333 
v3.20.4
Stockholder's Equity (Notes)
12 Months Ended
Dec. 31, 2020
Equity [Abstract]  
Stockholders' Equity Note Disclosure [Text Block] Stockholders Equity
Common Stock and Preferred Stock
As of December 31, 2020, the Company had 100,000,000 shares of common stock authorized and 39,450,807 shares of common stock outstanding. Holders of common stock are entitled to one vote on each matter properly submitted to the stockholders of the Company except those related to matters concerning possible outstanding preferred stock. At December 31, 2020, the Company had 10,000,000 shares of undesignated shares of preferred stock authorized for future issuance and did not have any outstanding shares of preferred stock. The holders of common stock are also entitled to receive dividends as and when declared by the board of directors of the Company, whenever funds are legally available. These rights are subordinate to the dividend rights of holders of any senior classes of stock outstanding at the time. The Company does not intend to declare or pay any cash dividends in the foreseeable future.
Issuance of Common Stock in a Private Placement
The Company issued 3,636,364 shares of common stock through a private placement in the fourth quarter of 2020 for net proceeds of $192.3 million. The newly issued shares are subject to a minimum holding period of three years.
Share Repurchase Program
In November 2019, the Company's board of directors approved a share repurchase program, pursuant to which the Company may repurchase up to $15.0 million of its outstanding shares over the twelve-month period following the approval. The Company repurchased 3,300 shares during year ended December 31, 2020. The share repurchase program expired in November 2020.
v3.20.4
Segments
12 Months Ended
Dec. 31, 2020
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block] Segments
The Company has two reporting segments: subscription business and other business. The subscription business segment currently includes revenue from subscription fees related to our “Trupanion” branded products, while the other business segment is comprised of revenue from other product offerings that generally have a business-to-business relationship and different margin profiles than our subscription segment, including revenue from writing policies on behalf of third parties and revenue from other products and software solutions.
The chief operating decision maker reviews revenue and operating income (loss) to evaluate segment performance. Revenue, veterinary invoice expense, other cost of revenue, and sales and marketing expenses are generally directly attributed to each segment. Other operating expenses, such as technology and development expense, general and administrative expense, and depreciation and amortization are allocated proportionately based on revenue in each segment. Interest and other expenses and income taxes are not allocated to the segments, nor included in the measure of segment profit or loss. The Company does not analyze discrete segment balance sheet information related to long-term assets.
Operating income (loss) of the Company’s segments were as follows (in thousands):
Year Ended December 31,
202020192018
Subscription business:
Revenue$387,732 $321,163 $263,738 
Veterinary invoice expense279,005 232,415 191,051 
Other cost of revenue35,870 29,724 24,941 
Technology and development7,673 5,879 5,031 
General and administrative16,866 15,397 14,853 
Sales and marketing47,017 35,037 24,623 
Depreciation and amortization5,451 4,725 3,911 
Subscription business operating income (loss)(4,150)(2,014)(672)
Other business:
Revenue114,296 62,773 40,218 
Veterinary invoice expense72,119 38,532 23,488 
Other cost of revenue33,133 18,341 13,110 
Technology and development2,274 1,146 765 
General and administrative4,981 2,987 2,251 
Sales and marketing820 414 376 
Depreciation and amortization1,620 907 601 
Other business operating income (loss)(651)446 (373)
Gain (loss) from investment in joint venture(126)(352)— 
Total operating income (loss)$(4,927)$(1,920)$(1,045)

The following table presents the Company’s revenue by geographic region of the member (in thousands):
 Year Ended December 31,
 202020192018
United States$419,162 $316,138 $246,280 
Canada and Other82,866 67,798 57,676 
Total revenue$502,028 $383,936 $303,956 
Substantially all of the Company’s long-lived assets were located in the United States as of December 31, 2020 and 2019.
v3.20.4
Dividend Restrictions Statutory Surplus (Notes)
12 Months Ended
Dec. 31, 2020
Insurance [Abstract]  
Dividend Restrictions And Statutory Suprlus [Text Block] Dividend Restrictions and Statutory Surplus
The Company’s business operations are conducted through subsidiaries, one of which is an insurance company domiciled in New York, American Pet Insurance Company, and one of which is a segregated cell business, Wyndham Segregated Account AX, located in Bermuda. In addition to general state law restrictions on payments of dividends and other distributions to stockholders applicable to all corporations, insurance companies are subject to further regulations that, among other things, may require such companies to maintain certain levels of equity and restrict the amount of dividends and other distributions that may be paid to their parent corporations.
New York law restricts the ability of the Company's insurance subsidiary in New York to pay dividends to its holding company parent. These restrictions are based in part on the prior year’s statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval, and dividends in larger amounts, or extraordinary dividends, are subject to approval by the New York State Department of Financial Services, the subsidiary's primary regulator. An extraordinary dividend or distribution is defined as a dividend or distribution that, in the aggregate in any 12-month period, exceeds the lesser of (i) 10% of surplus as of the preceding December 31 or (ii) the insurer’s adjusted net investment income for such 12-month period, not including realized capital gains. Under regulatory requirements at December 31, 2020, the amount of dividends that may be paid by the Company’s insurance subsidiary in New York to the Company without prior approval by regulatory authorities was $0.5 million. This insurance subsidiary did not pay dividends to the Company during the years ended December 31, 2020, 2019, and 2018.
The Company's insurance subsidiary in Bermuda is regulated by the Bermuda Monetary Authority. Under the Bermuda Companies Act of 1981, as amended, a Bermuda company may not declare or pay a dividend or make a distribution out of contributed surplus if there are reasonable grounds for believing that: (a) the company is, or would be after the payment, unable to pay its liabilities as they become due; or (b) the realizable value of the company’s assets would thereby be less than its liabilities. The Segregated Accounts Company Act of 2000 further requires that dividends out of a segregated account can only be paid to the extent that the cell remains solvent. The value of its assets must remain greater than the aggregate of its liabilities, issued share capital, and share premium accounts. Per our contractual agreements with Wyndham Insurance Company (SAC) Limited, the allowable dividend is equivalent to the positive undistributed profit attributable to the shares. This insurance subsidiary paid the Company a dividend of $4.7 million, $3.9 million, and $2.2 million during the years ended December 31, 2020, 2019 and 2018, respectfully.
The statutory net income for 2020, 2019 and 2018 and statutory capital and surplus at December 31, 2020, 2019 and 2018, for the Company’s insurance subsidiary in New York were as follows (in thousands):
 As of December 31,
 202020192018
Statutory net income$17,547 $16,311 $11,021 
Statutory capital and surplus$93,171 $73,810 $56,244 
As of December 31, 2020, the Company’s insurance subsidiary in New York maintained $93.2 million of statutory capital and surplus which was above the required amount of $79.1 million of statutory capital and surplus to avoid additional regulatory oversight.
As of December 31, 2020, the Company had $6.7 million on deposit with various states in which it writes policies.
v3.20.4
Income Taxes (Notes)
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before income taxes was as follows for the years ended December 31, 2020, 2019 and 2018 (in thousands):
 Year Ended December 31,
 202020192018
United States$(5,408)$(1,783)$(1,054)
Foreign(319)143 120 
$(5,727)$(1,640)$(934)
The components of income tax expense (benefit) were as follows (in thousands):
 Year Ended December 31,
 202020192018
Current:
U.S. federal & state$198 $12 $(10)
Foreign45 52 37 
243 64 27 
Deferred:
U.S. federal & state(9)116 (32)
Foreign(121)(11)(2)
(130)105 (34)
Income tax expense (benefit)$113 $169