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Hartville Group, Inc. Announces Financial Results for the ThirdQuarter of 2008

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^{Published in Health and Fitness on Monday, November 17th 2008 at 14:54 GMT by Market Wire}  

CANTON, Ohio--([ BUSINESS WIRE ])--Hartville Group, Inc. (OTCBB:HVLL), a provider of health insurance plans for domestic pets, today announced financial results for the Company's three and nine month periods ended September 30, 2008.

As of September 30, 2008, the number of pets insured by Hartville was 82,441, up 40% from the 58,853 pet lives covered as of September 30, 2007. In the third quarter of 2008, Hartville added 3,362 net pet policies, an increase of 4% from 79,079 pets at June 30, 2008. The year-over-year and sequential increases in pet lives covered demonstrate the continued success of Hartville Group's marketing programs.

Reflecting rapid growth in pet lives insured and the recognition of a bonus commission due to superior underwriting results, gross revenue for the three months ended September 30, 2008 increased by 127% to $6 million, up from $2.7 million for the comparable period of 2007. Hartville Group's operating income in the third quarter of 2008 increased to $0.3 million, from $1.5 million loss in the third quarter of 2007. The net income for the third quarter of 2008 was $0.3 million, or $0.03 per fully diluted share based on 12.4 million shares, compared to a net loss of $2 million, or $(0.53) per fully diluted share based on 3.8 million shares.

As of September 30, 2008, Hartville Group had $2.8 million in cash and equivalents, up from $2.4 million as of year end. In February of 2008, Hartville Group received $2.25 million in an equity funding by existing investors. With this funding, Hartville Group expects to ultimately achieve positive cash flow and earnings, assuming the current operating environment and external economic factors do not deteriorate substantially.

Dennis C. Rushovich, Chief Executive Officer of Hartville Group commented on the quarter, "We are again very pleased with our operating performance in the quarter, as we grew our pet lives insured by 40%, compared to the third quarter of last year. This most recent quarter represents the eighth consecutive quarter of significant policy expansion for Hartville. Moreover, we are pleased to report our first quarter of profitability in net income and operating income, which is attributable to the recognition of a bonus commission due to superior underwriting results, as well as to continued careful management of operating expenses and acquisition costs. While we expect to continue to invest aggressively in marketing and operations going forward, we believe this quarter's results substantiate our long-term positive outlook for the profitability of our programs and operations as we continue to expand in the underserved US pet insurance market."

BUSINESS SEGMENT RESULTS

Reinsurance Company

Premiums retained by Hartville Re in the third quarter of 2008 were $3.2 million, 82% higher than premiums retained of $1.8 million for the third quarter of 2007. After adjusting for a previous retrocession agreement which impacted retained premiums in the third quarter of 2007, premiums retained would have increased by 61% in the third quarter of 2008, from adjusted premiums retained of $2 million in the third quarter of 2007.

Retained losses (claims paid plus claims reserve movement) for the three months ending September 30, 2008 of $1.2 million were 25% higher than losses of $1 million for the comparative period of 2007. Adjusting third quarter 2007 retained losses for the retroceded losses of $0.1 million, losses would have been $1.1 million, for an 11% increase.

With the maturing of our business with the current underwriter, we have determined that our incurred losses have been less than we had previously reserved. However the agreement we and our underwriter have with our agency is that any losses between 50% and 55% be paid as a bonus commission.

Insurance Agency and Holding Company

Commission income earned by Petsmarketing for the three months ending September 30, 2008 increased by 218% to $2.8 million, compared to commission income earned of $0.9 million for the prior year period. As mentioned above, the agreement with our underwriter provides for a bonus if the loss ratio is below the target 55%, up to a maximum of 5 percentage points. The Agency recognized a bonus commission of $1.1 million in this quarter because the overall loss ratio is now anticipated to be lower than the originally projected 55%. Approximately $0.8 million of this bonus commission is scheduled to be received in January 2009.

General and administrative expense for the third quarter of 2008 increased by 7% to $2.8 million. General and administrative expenses increased primarily due to the following factors:

• Marketing expenses as reported increased by approximately $120,000. However, the marketing expenses for the activity in third quarter 2008 were expensed, whereas for the third quarter 2007 the amounts were capitalized. If the third quarter 2007 marketing expenses had been expensed, just as they were in 2008, then the marketing expense would have been approximately $1,009,000 compared to $920,000 for the third quarter 2008, reflecting a decrease of approximately $89,000 in marketing expenses.
• Compensation increased by approximately $35,000 as the result of change in the infrastructure with increased sales and overall number of pets. For the three months ended September 30, 2007 there was $35,000 expense for stock compensation to our Chief Marketing Officer, which means that cash-related compensation increased by $70,000 from September 30, 2007 to September 30, 2008.
• Compensation increased by approximately $67,000 due to higher expense for stock options.

Other income decreased by $46,000 to $32,000 in the third quarter of 2008, compared to $78,000 in the prior-year period, due to lower interest income on cash and accounts receivable.

Other expenses for the three months ended September 30, 2008 were only $2,000, compared to $0.5 million for the comparative period of 2007. The decrease in other expenses was due to the conversion of debt in October 2007 which eliminated amortization expenses on prepaid interest and discount on debt.

Nine-Month Financial Results

Gross revenue for the nine-month period ended September 30, 2008 was $14.8 million, up 211% from gross revenue of $7 million in the prior year period. The net loss for the nine-month period ended September 30, 2008 narrowed to $1.9 million, or $(0.16) per fully diluted share based on 12 million shares outstanding, compared to a net loss of $6.3 million, or $(1.68) per fully diluted share based on 3.7 million shares outstanding.

About Hartville Corporation

Hartville Group, Inc. ("Hartville Group") is a holding company whose wholly owned subsidiaries include Hartville Re Ltd. ("Hartville") and Petsmarketing Insurance.com Agency, Inc. ("the Agency"). Hartville is a reinsurance company that is registered in the Cayman Islands, British West Indies. Hartville was formed to reinsure pet health insurance that is being marketed by the Agency. The Agency is primarily a marketing and administration company concentrating on the sale of its proprietary health insurance plans for domestic pets. The Company accepts applications, underwrites and issues policies. For more information on Hartville Group and its insurance offerings, please visit [ http://www.hartvillegroup.com ].

Forward-Looking Statement

Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in the Company's Form 10-KSB, Form 8-K and Form 10-Q reports. The Company undertakes no obligation to update or revise any forward-looking statement.

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