Average pet acquisition cost is calculated in part based on acquisition cost, a non-GAAP financial measure, that we define as sales and marketing expenses, excluding stock-based compensation expense, net of sign-up fee revenue. For more information about acquisition cost and a reconciliation of sales and marketing expenses to acquisition cost, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures.”
Total subscription pets enrolled. Total subscription pets enrolled reflects the number of pets subscribed to our plan at the end of each period presented. We monitor total subscription pets enrolled because it provides an indication of the growth of our business.
Interest on the revolving line of credit accrues at a variable annual rate equal to the greater of 5.0% or 1.5% plus the prime rate. The revolving line of credit matures in July 2016, at which time it will need to be renewed or all amounts outstanding under it, including accrued interest, will become immediately due and payable.
Our obligations under the Square 1 credit facility are secured by substantially all of our assets and a pledge of certain of our subsidiaries’ stock. As of December 31, 2014, our aggregate borrowings outstanding and under the Square 1 credit facility were $14.9 million.
In addition to the assumptions used in the Black-Scholes-Merton option-pricing model, the amount of stock option expense we recognize in our consolidated statements of operations includes an estimate of stock option forfeitures. Estimated forfeitures did not have a material impact on our assumptions in 2014, 2013 or 2012.
We have audited the accompanying consolidated balance sheets of Trupanion, Inc. as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
Claims reserve includes unpaid claims and claims adjustment expenses, which includes an estimate, based on past experience, for claims incurred but not reported. Such liabilities are necessarily based on assumptions and estimates, and while management believes the amount is adequate, the ultimate liability may be in excess of or less than the amount provided. The methods for making such estimates and for establishing the resulting liability are continually reviewed, and any adjustments are reflected in the period in which they become known.
The Company had one investment with an unrealized loss of $0.1 million and a fair value of $0.9 million at December 31, 2014. This investment has been in an unrealized loss position for more than 12 months. The Company assessed the bond for credit impairment and determined that there is no intent to sell this bond and it is likely that it will hold the investment for a period of time sufficient to allow for recovery. Further, future payments on this bond are insured by a financial guarantee insurer. Therefore, the Company believes that the unrealized loss on this bond constitutes a temporary impairment.
The grant date fair value of stock option awards are estimated on the date of grant using the Black-Scholes-Merton option-pricing model. Valuation assumptions for the years ended December 31, 2014, 2013 and 2012 are presented in the following table:
The statutory net income for 2014, 2013 and 2012 and statutory capital and surplus at December 31, 2014, 2013 and 2012, for the Company’s insurance subsidiary was as follows (in thousands):