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Press Releases 2004

Pethealth Inc. announces its nineteenth consecutive quarter of record revenue, and results for the year ending December 31, 2003.

OAKVILLE, ON, March 4, 2004. Pethealth Inc. ("Pethealth" or "the Company") (TSX Venture Exchange Tier 1: PTZ) today announced record financial results for the year ended December 31, 2003.

Highlights

FOR THE YEAR ENDED DECEMBER 31, 2003

• Total revenue for the year ended December 31, 2003 was $7.05-million, representing a 93% increase over revenue of $3.66-million for the year ended December 31, 2002. The Company’s growth rate is such that 2003 Q4 revenue of $2.04-million produces annualized revenue of $8.16-million.
• Gross written premiums for the year ended December 31, 2003 were $17.7-million, an increase of 87% over the $9.4-million in gross written premiums for the same period in the prior year. The company’s growth rate is such that 2003 Q4 gross written premiums of $5.1-million produces annualized gross written premiums of $20.5-million.
• At December 31, 2003, the Company had 106,260 paid policies in force, a 74% increase from the 60,977 paid policies in force at December 31, 2002.
• Core policy sales for the twelve months ended December 31, 2003 totalled 46,903, an increase of 66% over sales of 28,284 for the same period last year.
• Net loss for the twelve months ended December 31, 2003 was $1,990,298, a 60% improvement from the net loss of $4,994,772 for the year ended December 31, 2002.
• Subsequent to the year-end, the Company completed a $10-million private placement of convertible preference shares. Each $2.00, 6% Preference share is convertible into 10 common shares of the Company at the option of the holder.

FOR THE QUARTER ENDED DECEMBER 31, 2003

• Total revenue for the quarter increased to $2.04-million, an increase of 68% over Q4, 2002 revenue of $1.21-million. The December 2003 revenue of $0.69-million when annualized equals $8.3-million.
• Gross written premiums written in the quarter totalled $5.1-million, an increase of 64% over the $3.1-million reported in Q4, 2002. The December gross written premiums of $1.75-million when annualized equals $21.1-million.
• New core policy sales totalled 13,424 for the quarter ended, an increase of 66% vs. Q4, 2002 sales of 8,107. Total new policy sales for the quarter were 67,786 an 81% increase over Q4 2002.
• Net loss for the quarter fell to $349,701, a 69% improvement over the Q4, 2002 loss of $1,144,139 and an 18% improvement from the loss reported in the third quarter of 2003.

The Company had total commission and management fee revenue for 2003 of $6,399,099 compared to commission and management fee revenue of $3,362,096 in 2002, an increase of 90%. Total commission and management fee revenue for the 4th quarter increased to $1,850,390, an increase of 67% over Q4, 2002 commission and management fee revenue of $1,110,855, and a 6% increase over Q3, 2003 revenue. The Company had a net loss of $349,701, or $0.01 per share for Q4 2003, inclusive of a $57,124 charge for the prospective adoption of the fair value method of accounting for stock based employee compensation. This represents an 18% reduction from the $425,942 loss in Q3, 2003. The net loss for the twelve months ended December 31, 2003 was $1,990,298 a 60% improvement from the net loss of $4,994,772 for the year ended December 31, 2002.

Approximately 58% of the Company’s revenue is denominated in U.S. dollars whereas the Company currently reports in Canadian dollars. During 2003 the Canadian dollar appreciated significantly against the U.S. dollar. Excluding the foreign exchange impact during 2003, total revenue would have increased to $7,586,387 versus the reported revenue of $7,052,785, which is a 107% increase over prior year total. Gross written premiums would have been reported as $19.0 million, versus the reported $17.6 million, a 107% increase over the prior year.

The significant reduction in the net loss was, in 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 renewal rate on core policies is approximately 75% on the first annual renewal and 83% on the second annual renewal. 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. Future revenue streams now are more predictable. The change in accounting practice resulted in the Company reducing net marketing expense by $3,849,872 for the year, and increasing deferred acquisition costs by the same amount. The Company has recorded amortization of deferred acquisition costs of $814,548 for the year.

For the year ended December 31, 2003, the Company wrote a record 234,154 new insurance policies consisting of 45,457 new core policies, 187,251 new ShelterCare policies, and 1,446 new EmergencyCare policies to increase the paid policies in force to 106,260. New policy sales consist of new core policy sales, new ShelterCare policy sales, ShelterCare policies converted into PetCare policies, ShelterCare policies continued past the first sixty days of coverage, and new EmergencyCare policies. The Company does not include the renewals of existing policies in its calculation of new policy sales. EmergencyCare policies are annual policies with an annual premium of $19.95 that provide emergency pre-authorized coverage to microchipped pets in the event that the pet is lost, injured, and requires medical attention.

Total paid policies in force as of December 31, 2003 totalled 106,260, comprised of 68,411 core policies, 36,470 ShelterCare policies, and 1,379 EmergencyCare policies representing a 71% increase in core policies and an increase of 74% total paid policies in force from the same period in the prior year. At December 31, 2002 the Company reported 60,977 paid policies in force consisting of 40,803 core policies and 20,174 ShelterCare policies. Petfinder.com pays for the first 60 days of ShelterCare coverage to individuals adopting dogs and cats through its approximately 6,900 member animal shelters and rescue groups.

U.S. new core policy sales accounted for 74% of total new core policy sales in 2003 (56% in 2002) generating increased revenues in U.S. dollars while 79% (78 % in 2002) of employment and administration costs over the year were paid in Canadian dollars.

In early 2001 the Company entered the U.S. market, which saw an initial increase in the acquisition cost per policy. From Q2 2001 until Q4 2003 the Company’s acquisition cost per policy has declined by 72%. Similar to the acquisition costs, the quarterly administrative costs per policy increased on entry into the U.S. market. From Q2 2001 until Q4 2003 the Company’s administration cost per policy has declined by 67%.

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 manufacturer-neutral pet registry and recovery service in 48 states and began distributing the Allflex microchip technology throughout the states of Wisconsin and Oregon as part off its initial deployment. In Canada, through its wholly owned subsidiary, Pethealth Services Inc., the Company continued to expand the 24PetWatch cross promotion of pet insurance to its customers, which will continue to be a major factor for the Company.

At December 31, 61,922 pets had been registered on the 24PetWatch database, 6,187 have purchased a core pet insurance policy.

At December 31, 2003, the Company had total assets of $6,759,216 including cash resources of $419,567. As announced on January 21, 2004, the Company completed a private placement financing of 5,000,000 Series 1 Convertible Preference Shares of Pethealth (“ Preferred Shares ”) at a price of $2.00 per Preferred Share for aggregate gross proceeds to Pethealth of $10,000,000 and the net proceeds of $9,369,650 after deducting agent fees and share issuance costs. The proceeds are to be used to broaden the microchip technology rollout, expand the Company’s distribution channels, establish an underwriting risk retention vehicle and for general working capital purposes.

“Our fourth quarter caps off another significant year of growth in our business” said Mark Warren, President & C.E.O. of Pethealth Inc. “The completion of our 10-million dollar private placement early in January 2004 gives us the ability to leverage the current operations while expanding and developing our distribution channels, including the 24PetWatch pet registry database service introduced during 2003, as we continue to drive towards profitability. We are very excited about the opportunities in 2004. Achieving greater than 5,000 core pet insurance policy sales in January 2004 for the first time has certainly set the tone for the year.”

Financial Highlights:

*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.

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. In addition to the PetCare Pet Insurance Programs, Pethealth offers its pet insurance programs under a variety of names, including QuickCare, ShelterCare and Union Plus Pet Insurance. In the United States, the PetCare Pet Insurance Programs are underwritten by Lincoln General Insurance Company, York, PA, through PetCare Insurance Brokers Ltd., PetCare Insurance Agency, Ltd., both wholly owned subsidiaries of the Company, and Avalon Risk Management Inc. In Canada, the Company’s pet insurance is underwritten by ING Novex, a member of ING Group, and Kingsway General Insurance Company and offered through PetCare Insurance Brokers, Ltd. In addition, Pethealth, through its wholly owned subsidiaries Pethealth Services Inc. and Pethealth Services (USA) Inc., 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.

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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