Latest / The Buyout Show with Fexingo: Private Equity, Roll-Ups, and Business Acquisitions / Private Equity Is Buying Up Pet Insurance Companies
Transcript
- Lucas: So here's a number that stopped me: US pet insurance premiums hit roughly $5.2 billion in 2025, up from about $1.5 billion just five years earlier. That's more than tripling. Luna: And I'm guessing that kind of growth attracts some attention from the buyout crowd. Lucas: Exactly. This is Episode 84 of The Buyout Show, and today we're looking at how private equity is buying up pet insurance companies. It's a classic roll-up thesis: fragmented market, recurring revenue, and an emotional hook that makes customers reluctant to switch. Luna: Let's start with the thesis. Why is pet insurance such an attractive target right now? Lucas: A few reasons. First, pet ownership has been rising steadily — about 70 percent of US households now have a pet, up from around 60 percent a decade ago. Second, veterinary costs have been climbing faster than general inflation. Specialty surgeries, MRI scans, cancer treatments for dogs — those aren't cheap. So pet owners are more willing to insure. Luna: But the insurance itself is still relatively new compared to human health insurance. I think penetration is only around 5 percent of pet owners in the US, versus maybe 20 percent in the UK. Lucas: Right, huge runway. And that's exactly what PE firms see. If you can consolidate the smaller regional players, invest in technology and underwriting, you can capture a growing slice of a market that could double again in five years. Luna: So who are the big players doing this? Lucas: The most prominent name is probably JAB Holding Company — the same firm behind Keurig Dr Pepper and Panera Bread. They have a pet care division called JAB Pet. Through it, they've acquired several insurers, including Petplan in the US and a few European carriers. Their strategy is to build a global pet insurance platform. Luna: Right, they also own Compassion-First, which is a big veterinary hospital chain. So they cover both sides — the care and the insurance. Lucas: Exactly. Then you have firms like Aquiline Capital Partners, which invested in a roll-up called Figo Pet Insurance. And there's a company called ManyPets, which was backed by investors like Greyhound Capital. So there's a lot of deal flow. Luna: But I want to get into the specifics of one deal. You mentioned a recent acquisition? Lucas: Yeah, let's talk about a deal that closed in late 2025. A mid-sized private equity firm called Gryphon Investors acquired a company called Pets Best, which is a pet insurer based in the US. Pets Best had been around since 2005, but they were still relatively small — maybe 200 million in premiums. Gryphon bought them and immediately merged them with another portfolio company called Embrace Pet Insurance. So now you have a combined entity with more scale, better data, and hopefully better margins. Luna: And I'm guessing the deal multiple was in that 10 to 14 times EBITDA range, typical for insurance? Lucas: Probably right around there. Pet insurers trade at a premium because of the growth story. You're buying a book of recurring premiums, and the churn is low — people don't like to switch insurers for their pets because of pre-existing condition exclusions. Luna: That's the dark side of the thesis, right? Once your pet is insured, you're locked in because any new insurer would consider its conditions pre-existing. Lucas: Exactly. That creates huge stickiness. The average customer lifetime value is high. So PE firms can acquire a small insurer, keep the renewal rates high, and improve the underwriting to boost profitability. Then they either sell to a larger strategic or take the company public. Luna: But we should talk about the risks. Veterinary costs are rising fast. If claims costs outpace premium growth, margins get squeezed. Lucas: That's the big risk. In fact, some pet insurers have had to raise premiums significantly in the past two years. For example, Nationwide, which is a big player, raised rates on some policies by 15 to 20 percent in 2024. That can cause customer pushback. Luna: And regulators are starting to look at this too. Pet insurance is regulated at the state level in the US, but it's still relatively light. If consumer complaints rise, that could change. Lucas: Right. But from a PE perspective, the regulatory risk is still lower than in human health insurance. You don't have the Affordable Care Act, no network adequacy requirements, no lifetime caps — well, actually some policies have caps, but you get the point. Luna: So the playbook is: buy a bunch of small insurers, consolidate back-office, use data analytics to price better, and then either sell to a larger carrier or IPO. Lucas: Exactly. And there's also the possibility of vertical integration. Some PE firms own both veterinary clinics and insurers. Imagine if you could steer insured pets to your own clinics. That would capture more of the value chain. Luna: That's getting into some antitrust territory maybe. But for now, it's mostly horizontal consolidation. Lucas: Yeah, the market is still fragmented enough that there are dozens of independent insurers with under $50 million in premiums. Those are prime targets. Luna: Let's talk about a specific region. I know Europe is ahead in pet insurance penetration. In Sweden, for example, something like 40 percent of dogs are insured. Lucas: Right. So US firms are also looking abroad. JAB already has a big European presence. But there are also regional roll-ups in the UK, Germany, and France. The thesis is the same: buy small, combine, cut costs, grow. Luna: And what about the customer experience? Does consolidation lead to worse service? Lucas: It can. If you're integrating multiple legacy IT systems, claims processing can get clunky. But the goal is to improve it with technology — AI for claims triage, automated payouts for routine stuff. The PE firms argue that scale lets them invest in better tech. Luna: I'm still a bit skeptical. When I look at the dental roll-ups we covered earlier, prices went up and customer satisfaction went down in some cases. Lucas: That's a fair parallel. And pet insurance is still a relatively young industry. But the underlying demand is strong. People love their pets and will spend money on them. The question is whether pe backed companies can avoid the pitfalls of overly aggressive cost-cutting. Luna: We should mention that there's also an IPO pipeline. ManyPets was reportedly considering an IPO in 2024 but pulled back due to market conditions. Could that reopen? Lucas: Probably. The market for insurance IPOs has been quiet, but if interest rates stabilize, we could see a wave of exits. Pet insurance is a good story for public markets because it's a growth industry with recurring revenue. Luna: So for listeners who are pet owners, what should they watch for? Lucas: Watch your renewal notices. If your insurer gets acquired, expect possible rate increases or policy changes. Also, if you're shopping for insurance, consider a smaller independent carrier that might offer better customer service — but be aware that they might get bought. Luna: And if you're an investor, you could look at publicly traded pet insurers like Trupanion, which is still independent. But that's a different conversation. Lucas: You know, talking about this, I'm struck by how the business model relies on emotional attachment. It's not like insuring a car where you might shop around on price. People will pay almost anything to save their dog. Luna: Yeah, and that's what makes it such a fascinating roll-up target. The economics are driven by behavior, not just math. Lucas: If these conversations have moved your work forward in some small way, we want to mention something. We deliberately keep this show ad-free — no sponsors, no commercials. It's just the two of us digging into a topic each episode. Luna: Yeah, and that's a choice we believe in. If you'd like to support that approach, there's a simple way: buy me a coffee dot com slash fexingo. Lucas: It's not a membership or subscription — just a one-time gesture if you find value here. No pressure, genuinely. It helps keep the lights on and the show independent. Luna: And speaking of independence, that's what we're watching in pet insurance too. Will consolidation lead to a few big players, or will there always be room for smaller, more personal carriers? Lucas: My bet is we'll see a few large national carriers emerge, but local or niche players could survive if they offer specialized coverage — like for exotic pets or working dogs. The next few years will tell. Luna: Alright, that's a wrap on pet insurance. Thanks for listening, and we'll be back next time with another buyout story.