What happened

Trupanion's (TRUP 3.48%) stock price had plummeted 15.6% this week as of Friday morning at 9:45 a.m. ET, according to S&P Global Market Intelligence. Trupanion was trading at about $22 per share on Friday at that time, down about 54% year to date.

So what

It has been a trying year for the pet insurance company. Inflation and higher veterinarian costs have hurt its bottom line, resulting in a $0.60-per-share net loss in the quarter, which missed analysts' consensus estimates. This has generally made it tough sledding for Trupanion despite revenue growth.

The decline occurred earlier in the week, mostly related to macroeconomic news. The markets were down on Tuesday because investors were jittery about Fed Chair Jerome Powell's testimony before Congress this week. He appeared Wednesday and said the Fed was not done with its rate-raising cycle but added that it would proceed with caution. Also, news that China and England raised rates this week had an impact on investors.

But Trupanion got a boost late Thursday, and its stock price surged more than 7% Friday morning on some good news. The company announced that its rate increase requests in California and New York were approved by regulators.

  • In California, a 12% rate increase was approved. This is on top of an 8% rate increase last November in the nation's most populous state.
  • In New York, regulators approved Trupanion's proposed 18% rate increase. This follows an approved 6% rate increase last November.

With these approvals, Trupanion expects to have 19.7% pricing action flowing through its book by the end of August and 21.6% pricing action by the end of September.

Margi Tooth, president of Trupanion, said:

We are very pleased with the recent rate approvals from two of our largest states, New York and California. These rate approvals, which are necessary in today's rising cost of veterinary care environment, demonstrate a big step forward toward achieving our value proposition, which we believe to be the highest in the industry. We believe the rising cost of veterinary care will only increase the need for Trupanion in the months and years ahead and we look forward to being there for our members and their pets.

Now what

These are two big developments for a company that has already been growing. It had 1.6 million enrolled pets in the first quarter, up 28% year over year, and $256 million in revenue, up 24% year over year. However, as mentioned, it also posted a net loss due to inflation of veterinary costs.

But these rate-increase approvals should offset some of the impact of inflation. The company did not include these rate increases in its fiscal-year 2023 guidance, but look for potential updated guidance in the second quarter.

Overall, this should be a good development for a growing company with a huge addressable market and a price-to-sales ratio of just 0.93. Put this one on your radar.