Press

Press Releases 2003

Pethealth Inc. announces growth of 100% in Revenue and a 117% increase in paid policies in force for the second quarter ended June 30, 2003.

OAKVILLE, ON, August 13, 2003. Pethealth Inc. ("Pethealth" or "the Company") (TSX Venture Exchange Tier 1: PTZ) today announced record financial results for the quarter ended June 30, 2003.

Highlights

Pethealth, the parent Company of PetCare Insurance Brokers Ltd., PetCare Insurance Agency, Ltd., Pethealth Services Inc. and Pethealth Services (USA) Inc., achieved record revenue for the eighteenth consecutive quarter of $1,647,178 as compared to $823,379 for the same period in 2002, representing a 100% increase. Gross premiums written in Q2 2003 were $4,148,466, up 98% from the same period in 2002. The Company's operating loss for Q2, 2003 was $743,093, a 51% reduction from the $1,517,556 loss reported in Q2, 2002. This revenue growth was achieved despite the strengthening of the Canadian dollar relative to the U.S. dollar which reduced year over year revenue growth by 13%.

Q2 new policy sales totalled 54,598, consisting of 11,362 new core policies, 42,761 new ShelterCare policies and 475 new EmergencyCare policies vs. 19,998 new policy sales in Q2 2002, which consisted of 7,169 core policies and 12,829 ShelterCare policies, a 173% increase. New policy sales consist of new core policy sales, new ShelterCare policy sales, ShelterCare policies converted into new core policies, ShelterCare policies continued past the first 60 days of coverage and new EmergencyCare policies. Renewals of existing policies are not included as new policy sales. EmergencyCare policies are annual policies with a premium of $19.95 that provide emergency pre-authorized coverage in the event that the pet is lost, injured, and requires medical attention.

Total active policies at June 30, 2003 totalled 85,964, consisting of 55,103 core policies, 30,386 ShelterCare policies and 475 EmergencyCare policies, an increase of 117% over June 30, 2002 total policies of 39,668, which consisted of 30,592 core policies and 9,076 ShelterCare policies. Petfinder.com pays for and distributes the first 60 days of ShelterCare coverage to individuals adopting dogs and cats through its approximately 6,000 member animal shelters and rescue groups.

The significant reduction in the net loss was, in large part, the result of a change in the Company's accounting practice with respect to certain advertising costs. Advertising costs incurred in connection with policy acquisitions, formerly expensed as incurred, are now being capitalized and are amortized over the three-year minimum expected life of the policy. The Company's current retention rate on core policies is approximately 81% and 72% in Canada and the United States respectively. The costs that have been deferred consist of direct-response advertising expenditures where the related policy sale can be attributed to the marketing cost incurred. All other marketing and acquisition costs that cannot be specifically attributed to a specific direct-response advertisement continue to be expensed in the period incurred. Prior to 2003, many programs were in their infancy and the full recoveries of direct response-marketing costs through future revenue streams were uncertain and as such expensed in the period in which these costs were incurred. At the present time, future revenue streams are more predictable. The change in accounting practice resulted in the Company reducing net marketing expense by $684,489 in the quarter, and increasing deferred acquisition costs by the same amount. The Company has recorded amortization of deferred acquisition costs of $133,611 in the period.

The Company continued to make significant reductions in the acquisition cost of U.S. policies, which declined to an average of US$98 in Q2 2003 vs. US$136 for the same period in the prior year. The Company's break-even point for its acquisition cost per U.S. policy is estimated to be US$70. The Canadian acquisition cost per policy increased to $141 from $127 in Q2 2002 as a result of the launch of its 24PetWatch program, North America's first industry-neutral pet registry and recovery network tied to ISO microchip technology, and the launch of its insurance programs into Quebec. The Company calculates its acquisition cost per policy on total marketing expenditures prior to the deferral of advertising expenditures.

U.S. new core policy sales accounted for 75% of total new core policy sales in Q2 2003 generating increased revenues in U.S. dollars while 76% of employment and administration costs over the quarter were paid in Canadian dollars.

During the second quarter the Company announced a three-year extension to its ShelterCare distribution agreement as well as an endorsement agreement for its 24PetWatch pet recovery and microchip program, both with Petfinder.com.

Additionally, the Company, through its wholly owned subsidiary Pethealth Services (USA) Inc., entered the United States pet recovery industry with an initial focus on the animal shelter community. The Company rolled out its industry-neutral pet registry and recovery service in 48 states and began distributing the Allflex microchip technology throughout the state of Wisconsin. In Canada, through its wholly owned subsidiary, Pethealth Services Inc., the Company continued to expand the 24PetWatch program throughout the Province of Ontario and introduced the program in selected areas of British Columbia, Alberta, Quebec and Nova Scotia. The Company began the cross-promotion of its pet insurance programs to the pet owners registered on its Canadian and U.S. pet recovery databases in April 2003 and July 2003 respectively.

At June 30, 2003, the Company had total assets of $6,802,695 including cash resources of $2,000,522.

"We are very pleased to report record results this quarter," said Mark Warren, President & C.E.O. of Pethealth Inc. "New policy sales growth remains very robust and the significant increase in our revenue numbers comes despite that fact the Canadian dollar has appreciated by over 12% for the year to date.

Financial Highlights:
(Unaudited)

	For the Quarter Ended
	June 30 2003	June 30 2002	Change %
Gross Premiums Written *	4,148,466	2,091,768	98
Commissions and Management Fees	1,492,625	755,403	98
Administrative, Interest and Other Income	154,553	67,976	127
Total Revenue	1,647,178	823,379	100%
Marketing Expenses	699,434	1,075,074	(35)
Employment Expenses	973,109	653,746	49
Administration Expenses	585,445	513,253	14
Amortisation and Foreign Exchange	132,283	98,862	33
Net Loss	743,093	1,517,556	(51)
EPS	(0.01)	(0.01)
Cash Resources	2,000,522	1,090,562	83
Total Assets	6,802,695	2,134,606	219
Total Active Policies	85,964	39,668	117
Total Active Core Policies	55,578	30,592	82
Total Active ShelterCare Policies	30,386	9,076	235

	For the Six Months Ended
	June 30 2003	June 30 2002	Change %
Gross Premiums Written *	7,808,998	3,670,675	113
Commissions and Management Fees	2,811,288	1,313,269	114
Administrative, Interest and Other Income	288,878	116,057	149
Total Revenue	3,100,166	1,429,326	117
Marketing Expenses	1,235,161	1,852,214	(33)
Employment Expenses	1,745,818	1,172,584	49
Administration Expenses	1,148,308	927,339	24
Amortisation and Foreign Exchange	185,554	180,567	3
Net Loss	1,214,675	2,703,378	(55)
EPS	(0.01)	(0.01)
Cash Resources	2,000,522	1,090,562	83
Total Assets	6,802,695	2,134,606	219
Total Active Policies	85,964	39,668	117
Total Active Core Policies	55,578	30,592	82
Total Active ShelterCare Policies	30,386	9,076	235

*The Company, together with Avalon Risk Management Inc. in the United States, writes Gross Premiums and remits the carriers' portion to its pet insurance carriers. The Company's revenue consists of Commissions, Management Fees, Administrative and Interest Income.

	For the Quarter Ended
	June 30 2003	March 31 2003	Change %
Total Revenue	1,647,178	1,452,988	13
Total Polices Sold	54,598	46,854	17
Total Active Polices	85,964	72,737	18

About Pethealth

Founded in February 1998, Pethealth is Canada's number one provider of pet insurance and is number two in North America, currently offering its PetCare pet insurance programs in 10 provinces, 45 states and Washington, D.C. Pethealth offers its pet insurance programs under a variety of names, including QuickCare, the PetCare Pet Insurance Programs, Union Plus Pet Insurance, and betterpethealth. In the United States, the PetCare Pet Insurance Programs are underwritten by Lincoln General Insurance Company, York, PA, through Avalon Risk Management Inc. In Canada, the Company's pet insurance is offered to owners of dogs and cats through its wholly owned subsidiary, PetCare Insurance Brokers Ltd. ING Insurance Company of Canada, a member of the ING Group, and Kingsway General Insurance Company underwrite PetCare products in Canada. The PetCare programs also carry the exclusive endorsements of a number of industry leaders, including veterinary medical associations representing approximately four out of five practicing veterinarians in Canada. In addition, Pethealth, through its wholly owned subsidiaries Pethealth Services Inc. and Pethealth Services (USA) Inc., sells and distributes Allflex pet microchip supplies to the companion animal market in North America and operates the related pet recovery registry under the trade name 24PetWatch. Pethealth is based in Oakville, Ontario. Institutional investors include Dynamic Mutual Funds, through its Dynamic Venture Opportunities Fund.

The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Statements contained in this news release, if not historical, are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from the results described in forward-looking statements.

Not for dissemination in the United States of America or to United States news wire services.

For further information contact:
Mark Warren, President and CEO of Pethealth at (905) 842-2615
Glen Tennison, Chief Financial Officer of Pethealth at (905) 842-2615

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