Trupanion (NASDAQ:TRUP) fell 18% as California on Tuesday sent an objection letter on the pet insurance company's proposed rate increase.
California is cutting the pending rate increase to 12.6% from the 28% rate that Trupanion (TRUP) requested, according to Stifel analyst Jonathan D. Block.
"The balance sheet is clearly under pressure, and questions of potential financing needs are pressing for Trupanion; and with the loss ratio continuing to run hot, a (much) lower-than-expected California rate increase is a material blow to rightsizing the loss ratio, in our opinion," Block, who has a hold rating on TRUP, wrote in a note on Wednesday.
A New York proposed rate increase remains outstanding, according to Block, who has a $25 price target on Trupanion (TRUP).
"Altogether, we view this as a net-negative for Trupanion as balance sheet uncertainty increases following this outcome in California, all while veterinary inflation remains persistent," Stifel's Block wrote.
Trupanion (TRUP) is expected to participate in meetings with investors at the Jefferies 2023 Consumer Conference in Nantucket, Massachusetts this Tuesday and Wednesday.