Largest provider of pet insurance in Japan and a pioneer in the business. Around 80% of Japanese veterinary clinics accept Anicom insurance. Over 70% of new contracts acquired through sales at pet shops.
Anicom Holdings comprises a group of non-life insurers that sell pet insurance to general consumers to cover a certain percentage of the cost of medical treatment for illness or injury (for a period of one year) mainly in dogs, cats, and other household pets. Founded in 2000, the company now holds a 44% share of the domestic pet insurance market. Its operations include the non-life insurance business (90.0% of recurring revenue and 98.4% of recurring profit in FY03/21), Online Pet Services (3.5%, 13.4%), and other businesses (6.5%, recurring loss of JPY325mn). Starting in FY03/20, Anicom considers itself to be in its “second founding period” and is accelerating the growth of the genetic screening business and other non-insurance businesses.
Anicom’s mainstay pet insurance products reimburse policyholders for a fixed proportion of the expenses incurred in connection with the medical treatment (including surgery) of their pets in the event of illness or injury (for up to one year). Pet insurance is similar to the personal health insurance available from third-sector insurance companies, but under Japanese law is considered to be a kind of non-life insurance, that is, insurance that compensates the insured party for damages suffered as a result of unexpected events. The majority of insured pets are dogs and cats.
Products insuring against pet illness/injuries used to be offered by mutual aid associations, but following changes in the Insurance Business Act in 2005, the market was opened to new entrants and mutual aid associations reorganized as non-life insurance companies or small-amount, short-term insurance companies. The Financial Services Agency has licensed five major companies (including Anicom) to offer pet insurance as non-life insurance companies, and there are also ten small-amount, short-term insurance companies offering pet insurance that are registered with the finance bureau.
Anicom’s mainstay pet insurance sales and underwriting business is a recurring-revenue business that generates revenue from monthly premiums paid after the insurance contract is signed. This means top-line revenue is determined simply by the number of insurance contracts in force and the premiums paid; insurance accounting comes into play when calculating earnings, however. Revenue from insurance premiums is booked first, then after paying claims (the cost of revenue), additions to underwriting reserves must be made for unearned premiums to cover claims in future periods; these reserves are carried forward to bridge the gap between the time premiums are received and income is earned.
In 2008, Anicom introduced animal health insurance cards that pet owners could show at their local veterinary hospital or clinic and then be responsible for only their co-pay, this along with making customers members has underpinned growth since then and this over-the-counter insurance payout system has become the de facto industry standard. In an effort to prevent hereditary diseases in pets, Anicom is working to establish new services both upstream and downstream as a way of helping it expand sales of pet insurance, including genetic screening services, general and advanced medical treatments (such as regenerative medicine) for veterinary hospitals, and also lifetime animal care facilities. Considering FY03/20 to be the start of its second founding period, the company plans to accelerate growth in businesses other than its mainstay non-life insurance business. In January 2020, it made SIMNET Co., Ltd., a wholly owned subsidiary. SIMNET operates matching websites to help breeders and prospective pet buyers connect with each other.
A number of factors distinguish Anicom from competitors, including 1) its over-the-counter insurance payout system at veterinary hospitals/clinics (which now acts as a barrier to entry), 2) its IT system that smoothly connects with the medical claims and patient record systems of veterinary hospitals/clinics, pet shops (with insurance solicitation web tools), and policyholders (via the internet), and provides information about Anicom insurance, 3) established relationships with many veterinary practices and pet shops the system has helped built up, and 4) the establishment of de facto industry standards for preventive insurance, such as genetic screening and the Dobutsu Kenkatsu service.
All illnesses in pets are caused by a combination of genetic and environmental factors. Net claims paid in FY03/21 totaled JPY23.2bn, and Anicom recognizes that a significant portion of annual payouts are due to genetic factors, meaning that it can reduce the total payout amount by eliminating such genetic factors. In addition to its current Dobutsu Kenkatsu service, the company believes that adding new health check services for various diseases and promoting home care through diet and other measures will reduce insurance payouts in the future. It expects that providing value-added services such as Dobutsu Kenkatsu and new health check services will help it gain new policies and improve the renewal rate, while lowering the combined ratio by reducing the aggregate cost of insurance payouts and ancillary services.
Earnings trends
In FY03/22, the company reported consolidated recurring revenue of JPY53.0bn (+10.3% YoY), recurring profit of JPY3.2bn (+14.8% YoY), and net income attributable to owners of the parent of JPY2.1bn (+33.2% YoY). While demand for pet care due to the COVID-19 pandemic showed signs of settling down, there were also signs of a start to a downtrend in the loss rate. The number of new policies reached a record 229,099, and the number of policies in force broke through the 1mn market to reach 1,028,831.
For FY03/23, the company forecasts consolidated recurring revenue of JPY57.0bn (+7.5% YoY), recurring profit of JPY3.7bn (+15.3% YoY), and net income attributable to owners of the parent of JPY2.5bn (+16.7% YoY).
In its medium-term business plan covering FY03/23 to FY03/25 (announced on May 11, 2022), the company set forth FY03/25 numerical targets of recurring revenue of JPY65.0–70.0bn, recurring profit of JPY4.5–5.0bn, ROE in the 10% range, and a dividend payout ratio in the 20% range. Its vision for FY03/31 looks for recurring revenue in the JPY100bn range, recurring profit on the order of JPY10.0bn, ROE of 12–15%, and dividend on equity (DOE) in the 4% range.
Strengths and Weakness
Anicom’s strengths include 1) its over-the-counter insurance payout system that allows pet owners to show their animal health insurance cards at their local vet and make settlement, now the industry standard at veterinary hospitals and clinics; 2) the advantage of its high market share in terms of name recognition, large customer base, and huge database, all of which will facilitate moves into new businesses; and 3) the steady stream of recurring revenue from its pet insurance business. Weaknesses include 1) the high compliance costs associated with operating in a licensed industry, 2) its high loss rate (claim payment rate) relative to competitors, which puts it at a disadvantage when it comes to competing on price; and 3) high earnings volatility stemming from unexpected swings in costs, such as sharp increases in the consumption tax rate or claims rate.
Key financial data
Income statement
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
FY03/22
FY03/23
(JPYmn)
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Est.
Recurring revenue
16,186
18,366
22,638
26,506
28,978
32,339
35,829
41,465
48,049
53,022
57,000
YoY
16.9%
13.5%
23.3%
17.1%
9.3%
11.6%
10.8%
15.7%
15.9%
10.3%
7.5%
Underwriting revenue
15,781
18,087
21,733
25,370
28,068
31,290
34,535
39,105
43,312
47,321
Investment revenue
260
108
522
690
504
420
383
496
488
679
Other recurring revenue
143
171
382
446
405
628
910
1,863
4,248
5,020
Recurring expenses
15,348
17,633
21,387
24,377
26,606
30,486
33,550
39,275
45,290
49,855
YoY
13.6%
14.9%
21.3%
14.0%
9.1%
14.6%
10.1%
17.1%
15.3%
10.1%
Underwriting expenses
11,450
13,448
15,920
17,393
18,967
21,771
24,071
27,212
30,512
33,504
Operating and general administrative expenses
3,632
3,982
4,905
6,699
7,273
8,479
9,112
11,153
13,283
14,656
Other
266
203
562
285
366
236
367
910
1,495
1,695
Recurring profit
837
733
1,250
2,129
2,372
1,853
2,278
2,189
2,758
3,166
3,650
YoY
148.4%
-12.4%
70.5%
70.3%
11.4%
-21.9%
22.9%
-3.9%
26.0%
14.8%
15.3%
Recurring profit margin
5.2%
4.0%
5.5%
8.0%
8.2%
5.7%
6.4%
5.3%
5.7%
6.0%
6.4%
Net income
640
447
829
1,399
1,568
1,320
1,610
1,525
1,586
2,112
2,464
YoY
37.6%
-30.2%
85.5%
68.8%
12.1%
-15.8%
22.0%
-5.3%
4.0%
33.2%
16.7%
Net margin
4.0%
2.4%
3.7%
5.3%
5.4%
4.1%
4.5%
3.7%
3.3%
4.0%
4.3%
Per-share data
Shares issued('000 shares)
17,169
17,293
17,842
17,934
17,946
18,028
20,211
20,226
81,309
81,309
EPS
38.0
26.0
47.4
78.2
86.9
73.5
84.7
75.5
19.6
26.0
30.3
EPS (fully diluted)
35.2
24.1
44.4
77.5
86.2
73.0
84.0
75.4
19.6
-
Dividend per share
-
-
-
5.0
5.0
5.0
5.0
5.0
1.3
2.5
-
Book value per share
454.6
477.0
519.6
596.6
676.1
744.3
1,092.7
1,147.0
316.5
336.2
ROE
8.6%
5.6%
9.5%
14.0%
13.7%
10.3%
9.1%
6.7%
6.5%
8.0%
Balance sheet (JPYmn)
Cash and deposits
4,986
4,457
4,217
7,566
15,242
19,078
29,643
24,427
31,683
29,641
Investment securities
9,272
11,367
15,108
10,739
5,914
4,625
4,660
9,999
11,667
16,570
Tangible fixed assets
86
118
250
1,527
1,432
1,359
1,367
1,858
2,520
2,550
Intangible assets
373
477
566
653
904
1,462
1,506
3,956
3,466
3,469
Other assets
1,940
2,112
1,945
4,297
3,876
3,908
4,344
4,263
5,208
5,481
Allowance for doubtful accounts
-7
-13
-13
-16
-140
-88
-76
-75
-78
-33
Deferred tax assets
219
116
263
433
597
623
718
1,041
898
951
Total assets
16,872
18,634
22,337
25,192
28,123
31,164
42,390
45,598
55,459
58,635
Reserve for insurance contract
7,702
8,768
10,528
11,888
12,993
14,508
16,041
17,977
19,626
21,297
Bonds payable
5,000
5,000
Other liabilities
1,292
1,520
2,411
2,414
2,635
2,845
3,867
4,018
4,787
4,647
Provision for bonuses
69
86
103
157
172
173
191
209
247
274
Reserve for special laws
2
10
22
32
41
48
54
68
80
98
Total liabilities
9,067
10,385
13,066
14,492
15,842
17,576
20,156
22,273
29,741
31,319
Shareholders' equity
7,795
8,306
9,272
10,762
12,233
13,546
22,233
23,719
25,648
27,658
Valuation and transaction adjustments
9
-57
-1
-123
-100
-128
-150
-530
69
-342
Non-controlling interests
-
-
-
-
-
-
-
-
-
-
Total net assets
7,805
8,248
9,270
10,699
12,281
13,587
22,234
23,325
25,717
27,316
Total liabilities and equity
16,872
18,634
22,337
25,192
28,123
31,164
42,390
45,598
55,459
58,635
Cash flow statement(JPYmn)
Cash flows from operating activities
1,507
2,009
3,094
1,960
3,231
3,393
4,359
4,246
4,231
4,456
Cash flows from investing activities
-1,852
-2,052
-2,963
2,489
4,233
253
-487
-10,263
-2,129
-5,485
Cash flows from financing activities
85
60
135
89
-79
-10
6,693
-99
5,154
-112
Financial indicators
ROA (RP-based)
5.2%
4.1%
6.1%
9.0%
8.9%
6.3%
6.2%
5.0%
5.5%
5.6%
ROE
8.6%
5.6%
9.5%
14.1%
13.7%
10.3%
9.1%
6.7%
6.5%
8.0%
ROIC (pre-tax)
7.0%
5.7%
9.2%
14.3%
14.3%
9.9%
8.8%
6.7%
7.8%
8.3%
Equity ratio
46.3%
44.3%
41.5%
42.2%
43.1%
43.1%
52.1%
50.9%
46.4%
46.6%
Combined ratio (fully earned basis)
97.2%
95.3%
92.7%
91.2%
91.0%
94.4%
93.5%
94.9%
96.1%
94.8%
E/I loss ratio
67.5%
66.7%
64.4%
60.1%
58.9%
59.2%
59.0%
57.8%
58.4%
58.1%
Expense ratio (earned premiums basis)
29.7%
28.6%
28.3%
31.1%
32.1%
35.2%
34.5%
37.1%
37.7%
36.7%
Solvency margin ratio
281.3%
295.1%
288.7%
282.6%
295.6%
305.6%
379.8%
357.0%
355.5%
334.6%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Net loss ratio, net expenses ratio, and combined ratio calculated by Shared Research.
Note: Per share data calculated as of the financial year. The company initiated a 200-for-1 split in June 2009, a 10-for-1 split in October 2011, and a 4-for-1 split in October 2020.
Recent updates
Medium-term plan covering FY2022-2024
2022-05-12
On May 11, 2022, Anicom Holdings, Inc. announced its medium-term plan covering FY2022-2024.
Anicom considers the years through FY2030 as its “second founding period.” The company sees FY03/23 to FY03/25 as the first phase of its efforts to bring the associated long-term management vision to reality. In the first phase, the key themes are advances in pet insurance and further uptake, as well as the expansion of businesses that can generate synergies. The company set forth FY03/25 numerical targets including recurring revenue of JPY65.0–70.0bn, recurring profit of JPY4.5–5.0bn, and ROE in the 10% range. Its vision for FY03/31 looks for recurring revenue in the JPY100bn range, recurring profit on the order of JPY10.0bn, ROE of 12–15%, and dividend on equity (DOE) in the 4% range.
March 2022 monthly management parameters
2022-05-11
On May 11, 2022, Anicom Holdings, Inc. announced its March 2022 monthly management parameters.
FY03/21
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Net premiums written (JPYmn)
3,433
3,660
3,499
3,464
3,577
3,588
3,627
3,579
3,660
3,798
3,650
3,805
YoY
12.1%
11.8%
10.2%
11.5%
12.2%
10.9%
9.8%
10.8%
10.8%
10.7%
10.7%
8.7%
No. of applications for Dobutsu Kenkatsu
9,290
10,611
12,770
11,572
12,545
12,721
14,081
12,162
12,969
14,332
13,190
14,356
YoY
96.6%
61.3%
97.8%
75.3%
67.4%
66.4%
52.0%
40.5%
53.9%
49.6%
23.1%
32.9%
No. of genetic testing specimens
8,288
7,323
9,282
10,036
9,217
8,885
8,409
7,643
8,631
7,922
8,030
9,992
YoY
-8.8%
-32.6%
-19.0%
-24.2%
-43.0%
-25.6%
-37.2%
-51.3%
-34.3%
-46.2%
-19.2%
12.7%
FY03/22
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Net premiums written (JPYmn)
3,721
4,061
3,837
3,789
3,938
3,949
3,979
3,882
3,973
4,106
3,972
4,123
YoY
8.4%
11.0%
9.7%
9.4%
10.1%
10.1%
9.7%
8.5%
8.6%
8.1%
8.8%
8.4%
No. of applications for Dobutsu Kenkatsu
14,116
16,286
15,495
14,026
15,911
15,785
16,438
15,115
15,031
16,812
16,302
16,945
YoY
51.9%
53.5%
21.3%
21.2%
26.8%
24.1%
16.7%
24.3%
15.9%
17.3%
23.6%
18.0%
No. of genetic testing specimens
9,978
10,117
8,161
8,914
8,555
8,963
8,592
8,686
8,660
9,285
6,928
8,680
YoY
20.4%
38.2%
-12.1%
-11.2%
-7.2%
0.9%
2.2%
13.6%
0.3%
17.2%
-13.7%
-13.1%
No. of PARM member hospitals
229
239
266
298
318
329
341
359
388
402
418
430
YoY
-
-
-
-
-
-
-
-
-
-
-
-
No. of patent applications (total)
11
14
16
18
19
20
21
22
23
24
25
27
YoY
-
-
-
-
-
-
-
-
-
-
-
-
No. of PV for Animal Health Encyclopedia
713,717
887,120
905,376
815,211
748,092
756,038
760,274
624,881
430,886
443,067
396,506
386,727
YoY
-
-
-
-
-
-
-
-
-
-
-
-
No. of PV for animal hospital search site
322,206
327,035
299,580
296,226
156,026
134,344
132,813
130,931
109,910
121,338
109,989
114,889
YoY
-
-
-
-
-
-
-
-
-
-
-
-
Source: Shared Research based on company data
Note: Dobutsu Kenkatsu provides pet insurance policyholders an annual gut microbiota measurement. The results of these tests are used to measure vulnerability to illness based on the company’s own indices. Depending on the results, the pet may receive a free health check at a designated veterinary hospital.
Note: PARM stands for Research and Development Partnership for Animal Regenerative Medicine.
February 2022 monthly management parameters
2022-03-18
On March 18, 2022, Anicom Holdings, Inc. announced its February 2022 monthly management parameters.
January 2022 monthly management parameters
2022-02-21
On February 21, 2022, Anicom Holdings, Inc. announced its January 2022 monthly management parameters.
Trends and outlook
Quarterly trends and results
Quarterly performance (cumulative)
Cumulative
FY03/20
FY03/21
FY03/22
FY03/22
(JPYmn)
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Est.
Recurring revenue
9,989
20,045
30,585
41,465
11,689
23,595
35,689
48,049
13,259
26,336
39,616
53,022
53,000
YoY
14.7%
16.0%
16.5%
15.7%
17.0%
17.7%
16.7%
15.9%
13.4%
11.6%
11.0%
10.3%
10.3%
Underwriting revenue
9,511
19,043
28,879
39,105
10,560
21,190
32,058
43,312
11,620
23,297
35,133
47,321
YoY
13.6%
14.1%
14.1%
13.2%
11.0%
11.3%
11.0%
10.8%
10.0%
9.9%
9.6%
9.3%
Investment revenue
80
193
374
496
113
284
365
488
263
384
558
679
YoY
-2.4%
30.4%
38.0%
29.5%
41.3%
47.2%
-2.4%
-1.6%
132.7%
35.2%
52.9%
39.1%
Interest and dividend income
42
99
155
219
69
133
190
253
70
142
243
316
Gains on sale of securities
38
93
219
276
44
150
174
233
193
241
313
360
Other recurring revenue
397
809
1,331
1,863
1,015
2,120
3,265
4,248
1,375
2,654
3,923
5,020
% of recurring revenue
4.0%
4.0%
4.4%
4.5%
8.7%
9.0%
9.1%
8.8%
10.4%
10.1%
9.9%
9.5%
Recurring expenses
9,814
19,547
29,212
39,275
11,138
22,265
33,519
45,290
12,561
24,726
37,127
49,855
YoY
20.8%
22.6%
19.6%
17.1%
13.5%
13.9%
14.7%
15.3%
12.8%
11.1%
10.8%
10.1%
% of recurring revenue
98.2%
97.5%
95.5%
94.7%
95.3%
94.4%
93.9%
94.3%
94.7%
93.9%
93.7%
94.0%
Underwriting expenses
7,005
13,644
20,251
27,212
7,688
15,125
22,670
30,512
8,502
16,732
24,940
33,504
YoY
18.5%
19.4%
15.7%
13.0%
9.8%
10.9%
11.9%
12.1%
10.6%
10.6%
10.0%
9.8%
% of recurring revenue
70.1%
68.1%
66.2%
65.6%
65.8%
64.1%
63.5%
63.5%
64.1%
63.5%
63.0%
63.2%
Net premiums written
4,736
9,852
15,160
20,492
5,495
11,346
17,344
23,226
6,168
12,586
19,186
25,559
YoY
7.7%
8.7%
9.9%
11.0%
16.0%
15.2%
14.4%
13.3%
12.2%
10.9%
10.6%
10.0%
% of recurring revenue
47.4%
49.1%
49.6%
49.4%
47.0%
48.1%
48.6%
48.3%
46.5%
47.8%
48.4%
48.2%
Loss adjustment expenses
263
525
813
1,109
289
561
832
1,098
275
552
832
1,080
YoY
1.9%
5.2%
6.8%
10.6%
9.9%
6.9%
2.3%
-1.0%
-4.8%
-1.6%
0.0%
-1.6%
% of recurring revenue
2.6%
2.6%
2.7%
2.7%
2.5%
2.4%
2.3%
2.3%
2.1%
2.1%
2.1%
2.0%
Commissions and collection fees
869
1,747
2,672
3,674
1,059
2,158
3,308
4,539
1,299
2,599
3,894
5,193
YoY
17.3%
17.2%
18.5%
19.4%
21.9%
23.5%
23.8%
23.5%
22.7%
20.4%
17.7%
14.4%
% of recurring revenue
8.7%
8.7%
8.7%
8.9%
9.1%
9.1%
9.3%
9.4%
9.8%
9.9%
9.8%
9.8%
Provision for outstanding losses and claims
259
385
328
179
122
209
260
211
126
241
247
165
Provision for underwriting reserves
876
1,134
1,276
1,756
721
850
924
1,437
631
753
779
1,505
Unearned premiums
570
817
1,033
1,404
539
835
1,102
1,488
564
866
1,056
1,391
Catastrophe reserves a)
306
316
242
351
181
14
-178
-50
67
-112
-277
114
Investment expenses
1
1
6
109
-
38
41
141
33
33
61
66
% of recurring revenue
0.0%
0.0%
0.0%
0.3%
0.0%
0.2%
0.1%
0.3%
0.2%
0.1%
0.2%
0.1%
Operating and general administrative expenses
2,647
5,553
8,392
11,153
3,114
6,433
9,787
13,283
3,608
7,165
10,915
14,656
YoY
22.9%
27.4%
26.1%
22.4%
17.6%
15.8%
16.6%
19.1%
15.9%
11.4%
11.5%
10.3%
% of recurring revenue
26.5%
27.7%
27.4%
26.9%
26.6%
27.3%
27.4%
27.6%
27.2%
27.2%
27.6%
27.6%
Other recurring expenses
160
348
561
800
334
668
1,019
1,353
417
795
1,209
1,628
% of recurring revenue
1.6%
1.7%
1.8%
1.9%
2.9%
2.8%
2.9%
2.8%
3.1%
3.0%
3.1%
3.1%
Recurring profit
175
497
1,372
2,189
550
1,330
2,169
2,758
698
1,609
2,488
3,166
3,300
YoY
-70.3%
-62.9%
-25.2%
-3.9%
214.3%
167.2%
58.1%
26.0%
26.9%
21.0%
14.7%
14.8%
19.7%
Recurring profit margin
1.8%
2.5%
4.5%
5.3%
4.7%
5.6%
6.1%
5.7%
5.3%
6.1%
6.3%
6.0%
6.2%
Extraordinary gains
4
9
11
14
49
49
54
Extraordinary losses
8
26
30
42
7
293
298
400
15
43
50
170
Net income
104
344
976
1,525
350
718
1,300
1,586
486
1,281
1,909
2,112
2,310
YoY
-75.7%
-63.9%
-24.4%
-5.3%
236.5%
108.7%
33.2%
4.0%
38.9%
78.4%
46.8%
33.2%
45.6%
Net margin
1.0%
1.7%
3.2%
3.7%
3.0%
3.0%
3.6%
3.3%
3.7%
4.9%
4.8%
4.0%
4.4%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Quarterly performance
Quarterly
FY03/20
FY03/21
FY03/22
(JPYmn)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Recurring revenue
9,989
10,056
10,540
10,880
11,689
11,906
12,094
12,360
13,259
13,077
13,280
13,406
YoY
14.7%
17.3%
17.4%
13.7%
17.0%
18.4%
14.7%
13.6%
13.4%
9.8%
9.8%
8.5%
Underwriting revenue
9,511
9,532
9,836
10,226
10,560
10,630
10,868
11,254
11,620
11,677
11,836
12,188
YoY
13.6%
14.6%
14.0%
11.0%
11.0%
11.5%
10.5%
10.1%
10.0%
9.8%
8.9%
8.3%
Investment revenue
80
113
181
122
113
171
81
123
263
121
174
121
Interest and dividend income
42
57
56
64
69
64
57
63
70
72
101
73
Gains on sale of securities
38
55
126
57
44
106
24
59
193
48
72
47
Other recurring revenue
397
412
522
532
1,015
1,105
1,145
983
1,375
1,279
1,269
1,097
% of recurring revenue
4.0%
4.1%
5.0%
4.9%
8.7%
9.3%
9.5%
8.0%
10.4%
9.8%
9.6%
8.2%
Recurring expenses
9,814
9,733
9,665
10,063
11,138
11,127
11,254
11,771
12,561
12,165
12,401
12,728
YoY
20.8%
24.4%
13.9%
10.3%
13.5%
14.3%
16.4%
17.0%
12.8%
9.3%
10.2%
8.1%
% of recurring revenue
98.2%
96.8%
91.7%
92.5%
95.3%
93.5%
93.1%
95.2%
94.7%
93.0%
93.4%
94.9%
Underwriting expenses
7,005
6,639
6,607
6,961
7,688
7,437
7,545
7,842
8,502
8,230
8,208
8,564
YoY
18.5%
20.4%
8.9%
5.9%
9.8%
12.0%
14.2%
12.7%
10.6%
10.7%
8.8%
9.2%
% of recurring revenue
70.1%
66.0%
62.7%
64.0%
65.8%
62.5%
62.4%
63.4%
64.1%
62.9%
61.8%
63.9%
Net premiums written
4,736
5,116
5,308
5,332
5,495
5,851
5,998
5,882
6,168
6,418
6,600
6,373
YoY
7.7%
9.6%
12.3%
14.2%
16.0%
14.4%
13.0%
10.3%
12.2%
9.7%
10.0%
8.3%
% of recurring revenue
47.4%
50.9%
50.4%
49.0%
47.0%
49.1%
49.6%
47.6%
46.5%
49.1%
49.7%
47.5%
Loss adjustment expenses
263
262
288
296
289
272
271
266
275
277
280
248
YoY
1.9%
8.7%
9.9%
22.3%
9.9%
3.8%
-5.9%
-10.1%
-4.8%
1.8%
3.3%
-6.8%
% of recurring revenue
2.6%
2.6%
2.7%
2.7%
2.5%
2.3%
2.2%
2.2%
2.1%
2.1%
2.1%
1.8%
Commissions and collection fees
869
878
925
1,002
1,059
1,099
1,150
1,231
1,299
1,300
1,295
1,299
YoY
17.3%
17.2%
21.1%
21.7%
21.9%
25.2%
24.3%
22.9%
22.7%
18.3%
12.6%
5.5%
% of recurring revenue
8.7%
8.7%
8.8%
9.2%
9.1%
9.2%
9.5%
10.0%
9.8%
9.9%
9.8%
9.7%
Provision for outstanding losses and claims
259
126
-57
-149
122
87
51
-49
126
115
6
-82
Provision for underwriting reserves
876
258
142
480
721
129
74
513
631
122
26
726
Unearned premiums
570
247
216
371
539
296
267
386
564
302
190
335
Catastrophe reserves a)
306
10
-74
109
181
-167
-192
128
67
-179
-165
391
Investment expenses
1
-
5
103
-
38
3
100
33
-
28
5
% of recurring revenue
0.0%
-
0.0%
0.9%
0.0%
0.3%
0.0%
0.8%
0.2%
-
0.2%
0.0%
Operating and general administrative expenses
2,647
2,906
2,839
2,761
3,114
3,319
3,354
3,496
3,608
3,557
3,750
3,741
YoY
22.9%
31.8%
23.6%
12.3%
17.6%
14.2%
18.1%
26.6%
15.9%
7.2%
11.8%
7.0%
% of recurring revenue
26.5%
28.9%
26.9%
25.4%
26.6%
27.9%
27.7%
28.3%
27.2%
27.2%
28.2%
27.9%
Other recurring expenses
160
188
213
239
334
334
351
334
417
378
414
419
% of recurring revenue
1.6%
1.9%
2.0%
2.2%
2.9%
2.8%
2.9%
2.7%
3.1%
2.9%
3.1%
3.1%
Recurring profit
175
322
875
817
550
780
839
589
698
911
879
678
YoY
-70.3%
-57.1%
77.5%
83.6%
214.3%
142.2%
-4.1%
-27.9%
26.9%
16.8%
4.8%
15.1%
Recurring profit margin
1.8%
3.2%
8.3%
7.5%
4.7%
6.6%
6.9%
4.8%
5.3%
7.0%
6.6%
5.1%
Extraordinary gains
4
5
2
3
-
49
-
5
-
-
-
-
Extraordinary losses
8
18
4
12
7
286
5
102
15
28
7
120
Net income
104
240
632
549
350
368
582
286
486
795
628
203
YoY
-75.7%
-54.3%
87.0%
72.1%
236.5%
53.3%
-7.9%
-47.9%
38.9%
116.0%
7.9%
-29.0%
Net margin
1.0%
2.4%
6.0%
5.0%
3.0%
3.1%
4.8%
2.3%
3.7%
6.1%
4.7%
1.5%
Recurring profit (ex. catastrophe reserves)
481
332
801
926
731
613
647
717
765
732
714
1,069
YoY
-28.5%
-35.7%
76.4%
25.3%
52.0%
84.6%
-19.2%
-22.6%
4.7%
19.4%
10.4%
49.1%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Key indicators
Cumulative
FY03/20
FY03/21
FY03/22
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Q1
Q1–Q2
Q1–Q3
Q1–Q4
Number of policies in force
766,774
781,368
796,167
816,254
842,754
870,987
896,247
921,873
952,078
981,606
1,004,913
1,028,831
YoY
7.4%
7.1%
7.4%
8.4%
9.9%
11.5%
12.6%
12.9%
13.0%
12.7%
12.1%
11.6%
YoY change
52,878
51,526
54,526
62,922
75,980
89,619
100,080
105,619
109,324
110,619
108,666
106,958
Number of newly acquired policies
40,204
80,533
121,183
167,318
53,456
107,295
159,368
213,368
60,730
119,347
173,357
229,099
YoY
6.6%
6.2%
7.5%
11.1%
33.0%
33.2%
31.5%
27.5%
13.6%
11.2%
8.8%
7.4%
YoY change
2,478
4,681
8,430
16,693
13,252
26,762
38,185
46,050
7,274
12,052
13,989
15,731
Renewal rate
87.0%
87.0%
87.1%
87.2%
87.3%
87.5%
87.7%
87.7%
87.6%
87.7%
87.8%
87.8%
Number of payout cases ('000)
795
1,672
2,558
3,407
889
1,857
2,829
3,752
972
2,003
3,048
4,019
YoY
2.8%
4.6%
5.6%
6.3%
11.8%
11.1%
10.6%
10.1%
9.3%
7.9%
7.7%
7.1%
Number of hospitals accepting Anicom
6,448
6,463
6,417
6,466
6,477
6,485
6,505
6,541
6,587
6,629
6,651
6,681
YoY
2.3%
1.7%
0.6%
0.8%
0.4%
0.3%
1.4%
1.2%
1.7%
2.2%
2.2%
2.1%
Earned premiums
8,941
18,226
27,846
37,701
10,021
20,355
30,956
41,824
11,056
22,431
34,077
45,930
Claims paid (incl. loss adjustment expenses)
5,259
10,763
16,302
21,781
5,906
12,116
18,436
24,535
6,569
13,379
20,265
26,804
Combined ratio
95.8%
96.9%
95.8%
94.9%
95.6%
96.7%
96.8%
96.1%
98.0%
97.6%
96.7%
94.8%
E/I loss ratio
58.8%
59.1%
58.5%
57.8%
58.9%
59.5%
59.3%
58.4%
59.4%
59.6%
59.2%
58.1%
Expense ratio (earned premiums basis)
37.0%
37.8%
37.3%
37.1%
36.7%
37.2%
37.5%
37.7%
38.6%
38.0%
37.5%
36.7%
Quarterly
FY03/20
FY03/21
FY03/22
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Total number of policies in force
766,774
781,368
796,167
816,254
842,754
870,987
896,247
921,873
952,078
981,606
1,004,913
1,028,831
QoQ increase
13,442
14,594
14,799
20,087
26,500
28,233
25,260
25,626
30,205
29,528
23,307
23,918
Number of newly acquired policies
40,204
40,329
40,650
46,135
53,456
53,839
52,073
54,000
60,730
58,617
54,010
55,742
YoY
6.6%
5.8%
10.2%
21.8%
33.0%
33.5%
28.1%
17.0%
13.6%
8.9%
3.7%
3.2%
QoQ increase
2,332
125
321
5,485
7,321
383
-1,766
1,927
6,730
-2,113
-4,607
1,732
Number of payout cases ('000)
795
877
886
849
889
968
972
923
972
1,031
1,045
971
YoY
2.8%
6.2%
7.5%
8.7%
11.8%
10.4%
9.7%
8.7%
9.3%
6.5%
7.5%
5.2%
Earned premiums
8,941
9,285
9,620
9,855
10,021
10,334
10,601
10,868
11,056
11,375
11,646
11,853
Claims paid (incl. loss adjustment expenses)
5,259
5,504
5,539
5,479
5,906
6,210
6,320
6,099
6,569
6,810
6,886
6,539
Combined ratio
95.8%
97.8%
94.1%
91.9%
95.4%
97.5%
97.4%
94.3%
97.8%
97.0%
95.3%
89.6%
E/I loss ratio
58.8%
59.3%
57.6%
55.6%
58.7%
59.8%
59.4%
55.9%
59.2%
59.6%
58.9%
55.0%
Expense ratio (earned premiums basis)
37.0%
38.5%
36.5%
36.3%
36.7%
37.7%
38.0%
38.4%
38.6%
37.4%
36.4%
34.6%
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Full-year FY03/22 results
Recurring revenue: JPY53.0bn (+10.3% YoY; 100% of the full-year company forecast)
Recurring expenses: JPY49.9bn (+10.1% YoY)
Recurring profit: JPY3.2bn (+14.8% YoY; 95.9%)
Net income attributable to owners of the parent: JPY2.1bn (+33.2% YoY; 91.4%)
Earnings summary
Recurring revenue was up
JPY5.0bn (+10.3% YoY) to JPY53.0bn, thanks to increases of JPY4.0bn in
underwriting revenue, JPY191mn in investment revenue, and JPY772mn in other
recurring revenue. The company had 1,028,831 policies in force (+11.6% YoY), and 229,099 new policies (+7.4% YoY). While demand for pet care due to the COVID-19 pandemic showed signs of settling down, there were also signs of a start to a downtrend in the loss rate.
Recurring profit was up
JPY408mn YoY to JPY3.2bn. The number of policies in force and underwriting revenue showed
steady growth, with earned premiums increasing JPY4.1bn YoY. Expenses such as
claims paid (+JPY2.3bn YoY) and agency fees (+JPY654mn YoY) grew. Provision for catastrophe reserves increased by JPY164mn YoY. Other
recurring revenue outside the insurance business, including animal hospital
management, breeder matching, and genetic testing, grew steadily by JPY772mn
YoY. The recurring profit margin was 6.0%, up 0.3pp YoY from 5.7% in FY03/21.
FY03/23 company forecast: Consolidated recurring revenue, JPY57.0bn (+7.5% YoY); recurring profit, JPY3.7bn (+15.3% YoY); and net income attributable to owners of the parent, JPY2.5bn (+16.7% YoY).
Medium-term plan disclosed:
The company announced FY03/25 numerical targets of recurring revenue of JPY65.0–70.0bn, recurring profit of JPY4.5–5.0bn, ROE in the 10% range, and a dividend payout ratio in the 20% range. Its vision for FY03/31 looks for recurring revenue in the JPY100bn range, recurring profit on the order of JPY10.0bn, ROE of 12–15%, and dividend on equity (DOE) in the 4% range.
Company forecast for FY03/23
Numerical targets
FY03/23 company forecast: Consolidated recurring revenue, JPY57.0bn (+7.5% YoY); recurring profit, JPY3.7bn (+15.3% YoY); and net income attributable to owners of the parent, JPY2.5bn (+16.7% YoY).
Shared Research plans to update this report after interviewing management regarding its assumptions and strategies underlying its FY03/23 earnings forecast.
Medium-term business plan
Numerical targets
On May 11, 2022, the company announced its medium-term business plan (covering FY03/23 to FY03/25). It set forth FY03/25 numerical targets of recurring revenue of JPY65.0–70.0bn, recurring profit of JPY4.5–5.0bn, ROE in the 10% range, and a dividend payout ratio in the 20% range. Its vision for FY03/31 looks for recurring revenue in the JPY100bn range, recurring profit on the order of JPY10.0bn, ROE of 12–15%, and dividend on equity (DOE) in the 4% range.
Shared Research plans to update this report after interviewing management regarding its assumptions and strategies underlying its medium-term business plan.
Business
Business description
Leader in domestic pet insurance industry, going all out to establish a preventive insurance company
Three individuals, including Nobuaki Komori, established a mutual aid association for pets in July 2000 and named it anicom. They also set up a separate company in the same month to handle administrative duties for the mutual aid association. This company obtained a non-life insurance license in 2007 and began operations in January 2008. It now leads the industry with a 44% share of the domestic pet insurance market.
Wholly owned subsidiaries operating under the umbrella of Anicom Holdings are Anicom Insurance (non-life insurance business specializing in pet insurance), Anicom Pafe (veterinary hospital support business), Anicom Frontier (insurance agency business), Anicom Specialty Medical Institute (veterinary medicine clinical and research services), and SIMNET (operating breeder matching websites).
Celltrust Animal Therapeutics Co., Ltd., was a joint venture established in 2016 by Anicom Holdings (49%) and Fujifilm Corporation (51%). As of March 31, 2021, all operations were transferred to Anicom Specialty Medical Institute Inc., which will continue the work Celltrust Animal Therapeutics had been doing until that time, including the development and provision of advanced, reliable medical technologies and services in the field of veterinary medicine, centered on regenerative medicine and cell therapy.
Anicom’s pet insurance business generates a steady flow of recurring revenue from insurance policyholders paying their monthly premiums. And because the monthly premiums it receives depend on the number of insurance policies in force, the company can expect steady growth in revenue from insurance premiums as long as the number of policies continues to increase. In FY03/18 the company began moving away from its traditional sales strategy that depended heavily on pet shops, turning its focus to developing the newborn market through sales channels other than the pet shop and general channels that it had traditionally used. This rapidly expanded the pet insurance business. In FY03/21, the non-life insurance business operated by Anicom Insurance accounted for 90.0% of consolidated recurring revenue (94.5% in FY03/20).
Considering FY03/20 to be the start of its second founding period, the company intends to accelerate the efforts it has been conducting to date. During this second founding period, as has been its goal since it was founded, Anicom aims to become a preventive insurance group that analyzes illnesses and injuries based on a range of data and looks after the health of pets. During the three years covered by its medium-term business plan (FY03/20–FY03/22), the company is accelerating the development of preventive businesses (including the Dobutsu Kenkatsu service and genetic screening) to expand its earnings in the pet insurance business.
It expects that providing value-added services such as Dobutsu Kenkatsu and new health check services will help it gain new policies and improve the renewal rate, while lowering the combined ratio by reducing the aggregate cost of insurance payouts and ancillary services.
Performance
Source: Shared Research based on company data
Non-life insurance business (pet insurance; 90.0% of recurring revenue)
Products and services
Pet insurance
Pet insurance is a product providing full or partial coverage for medical expenses incurred for hospital visits, hospitalization, and surgery due to illness or injury of pets (what is covered and the percentage of coverage depends on the insurance product). Since there is no public insurance system for the medical care of pets, the entire burden of treatment falls on pet owners. The reason pet insurance is necessary is that the average life expectancy of pets is increasing due to improvements in pets’ living environments and medical care technologies. The risk of developing diseases increases as pets age, leading to higher medical costs.
Each pet insurance company and product has its own conditions for policy purchase, but all have one thing in common: the pet must be in good health. Anicom says the claim rate for both dogs and cats is lowest at the age of three or four and trends upward thereafter, particularly for illnesses that appear more easily with age, including tumors and endocrine, circulatory, and urinary diseases.
The company’s main product, Dobutsu Kempo Family, covers medical expenses incurred for hospital visits, hospitalization, and surgery, and can be applied to medical treatment at any veterinary hospital or clinic in Japan. Depending on the premiums the policyholder pays, a policy covers either 50% or 70% of the treatment cost. In October 2017, the company began offering Dobutsu Kempo Petit, which reduced premiums to about a third of the conventional product by limiting coverage to hospitalization and surgery. In October 2019, it also launched Dobutsu Kempo Senior, a product specifically for dogs and cats eight or more years of age at the time of a new policy purchase.
Dobutsu Kempo Family initially covered dogs, cats, birds, rabbits, and ferrets. In 2016, Anicom added squirrels and flying squirrels, hamsters, mice, guinea pigs, hedgehogs, turtles, and lizards to the list of covered animals. In March 2019, it went on to add chinchillas and snakes. Dobutsu Kempo Family now covers the largest number of species of any product in the pet insurance industry.
The company will underwrite new policies for dogs and cats of any age. Since pet insurance is a non-life insurance product, it must be renewed annually, but in principle can be renewed for the full life of the pet. Anicom controls its loss ratio by placing limits on the insurance amount and number of days covered for all of its products.
Insurance products
Product name
Sales channel
Product features
Dobutsu Kempo Family
General agencies
Guarantees either 50% or 70% of medical fees for sickness or injuries of an animal during a one-year coverage period; policyholders choose either 50% or 70% when they sign a contract.
Pet shops
Direct sales
Dobutsu Kempo Petit
General agencies
Guarantees 70% of medical fees for sickness or injuries of a dog or a cat during a one-year coverage period (limited to hospitalization and surgery); policyholders can choose only 70%.
Pet shops
Direct sales
Dobutsu Kempo Baby
Pet shops
Covers animals less than 1 year of age sold at pet shops; provides 100% coverage during the first one month, and either 50% or 70% during the remaining 11-month period; policyholders can choose the coverage ratio when they sign a contract.
Dobutsu Kempo Smile Baby
Directly by pet shops
Pet shops themselves provide guarantees under contracts with Anicom Insurance; covers animals less than one year of age; provides 100% coverage for pet owners for free during the first one month.
Dobutsu Kempo Smile Family
Pet shops
Dobutsu Kempo Smile Baby expires after one month; before expiration, policyholders make an application for additional one-year coverage for payouts of either 50% or 70%; policyholders can choose the coverage ratio when they sign a contract.
Dobutsu Kempo Happy
Pet shops
Covers dogs, cats, birds, rabbits, ferrets, momongas, squirrels, hamsters, mice, guinea pigs, hedgehogs, turtles, lizards, chinchillas, and snakes, sold through pet shops and aged less than two years; guarantees either 50% or 70% of medical fees covered in the contract for those 15 pets; policyholders choose the coverage ratio when they sign a contract.
Dobutsu Kenkatsu Senior
Pet shops
Covers dogs and cats aged eight or older (no upper limit) traditionally out of range of new contracts; focuses on guaranteeing medical fees for hospitalization and surgery, with choice of ancillary service Dobutsu Kenkatsu Family; guarantees either 50% or 70% of medical fees covered in the contract during a one-year coverage period.
Source: Shared Research based on company data
Note 1: Animals covered included dogs, cats, birds, rabbits, and ferrets; flying squirrels, squirrels, hamsters, mice, guinea pigs, hedgehogs, turtles, lizards, chinchillas, and snakes are only covered by renewed policies.
Note 2: There are limits to daily insurance payouts/ The maximum payouts are JPY10,000 a day under the 50% plan and JPY14,000 a day under the 70% plan for hospital visits or stays. For surgery, the maximum payout is JPY100,000 under the 50% and JPY140,000 under 70% plan. The company pays for hospital visits or stays up to 20 days and two surgeries a year.
Note 3: Maximum insurance payout limited to JPY14,000 per day for hospital stays and JPY500,000 per surgery
Note 4: The maximum payouts are JPY20,000 for hospital visits or stays. For surgery, the maximum payout is JPY200,000. The company pays for hospital visits or stays up to 20 days and two surgeries a year.
Dobutsu Kempo Family was revised in November 2014. The company added a “standard” plan, which limits the number of hospital visits and stays. The existing plan, which does not have such a limit, is called a “wide” plan.
The company began offering Dobutsu Kempo Happy for chinchillas and snakes on March 1, 2019, covering 15 pet types in total.
The company began offering Dobutsu Kempo Senior on September 17, 2019.
Premiums
Premiums for pet insurance differ depending on the species (dog, cat, bird, rabbit, ferret, squirrel or flying squirrel, hamster, mouse, guinea pig, hedgehog, turtle, lizard, chinchilla, or snake) and age of the pet. In the case of a one-year-old Chihuahua (70% coverage plan with full range of coverage), the annual premium would be about JPY34,000. For a five-year-old Golden Retriever, it would be about JPY71,000. The company’s premium system puts dogs into five categories by size (roughly broken down by breed), from A (small dogs) to E (large dogs). The larger the dog, the higher the premium.
The premium for pets that are less than one year of age is high because such animals are vulnerable to sickness. However, the price declines after one year of age. Subsequently, the premium rises each year. The new premium is applied when the policy is renewed annually. The basic fee for birds is flat. The policyholder can select the coverage ratio (50% or 70%), with the premium being set in line with the ratio.
Annual premiums according to breeds (70% Standard Plan; in JPY; revised in December 2018)
(JPY)
Dog A
Dog B
Dog C
Dog D
Dog E
Cats
Birds
Rabbits
Ferrets
0 yrs
35,630
39,160
42,700
48,870
55,970
36,320
30,750
35,680
36,690
1 yr
33,940
37,270
40,750
46,630
53,610
34,590
30,750
36,470
37,370
2 yrs
34,450
37,510
41,500
47,490
55,220
34,740
30,750
39,980
45,400
3 yrs
36,630
39,010
43,890
50,270
59,210
35,200
30,750
44,160
59,400
4 yrs
43,750
48,720
52,490
64,100
75,540
36,520
5 yrs
47,330
52,150
56,420
71,010
84,650
37,840
6 yrs
52,180
56,520
61,620
77,840
93,810
39,710
7 yrs
58,180
61,630
67,930
85,400
101,880
42,120
Source: Shared Research based on company data Dog A: Japanese Spitz, Chihuahua, etc.; mixed-breed dogs weighing less than 10kg
Dog B: Miniature Dachshund, Shiba, Papillon, Toy Poodle, etc.; mixed-breed dogs weighing between 10kg and 20kg
Dog C: Maltese, Akita, Beagle, Chow, Poodle, Pomeranian, Yorkshire Terrier, etc.; mixed-breed dogs weighing between 20kg and 30kg
Dog D: Shih Tzu, Golden Retriever, Collie, Dachshund, French Bulldog, etc.; mixed-breed dogs weighing between 30kg and 45kg
Dog E: Siberian Husky, Tosa, American Cocker Spaniel, Bulldog, etc.; mixed-breed dogs weighing 45kg or more
Rising average age of pets and policy renewal
Increase in the average age of pets raises average premium written and claims paid
Dogs account for more than 80% of the Anicom’s pet insurance policies. The older the dog, the higher the premium, so an increase in the average age leads to an increase in average premium revenue. The following table shows the number and percentage of policies by age for dogs in FY03/19.
Number and percentage of policies by age for dogs
FY03/05
FY03/06
FY03/07
FY03/08
FY03/09
FY03/10
FY03/11
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
0 yrs
29,887
43,553
67,457
74,255
42,928
61,448
59,116
61,336
59,451
66,805
63,762
69,200
74,239
79,760
73,980
1 yr
19,889
34,007
43,900
47,065
37,752
29,215
46,712
47,603
50,217
49,221
53,282
49,916
54,154
58,682
64,680
2 yrs
9,879
22,260
36,356
40,493
33,112
34,616
28,700
43,987
45,344
47,910
46,248
49,362
46,676
50,927
54,931
3 yrs
5,642
11,522
24,205
35,082
29,784
31,176
34,064
29,008
42,977
44,089
45,930
43,835
47,200
45,008
48,948
4 yrs
3,149
7,040
13,100
24,154
26,051
28,271
31,142
33,960
29,295
42,270
42,436
44,059
42,125
45,732
43,234
5 yrs
2,694
4,668
8,688
13,989
17,929
24,555
28,078
31,138
33,817
29,249
40,832
40,860
42,537
41,114
44,160
6 yrs
1,896
3,456
5,558
9,019
10,754
17,067
24,357
28,018
31,182
33,590
28,837
39,443
39,646
41,531
39,907
7 yrs
1,537
2,640
4,309
6,050
7,166
10,386
17,248
24,317
27,961
30,802
33,282
28,711
38,654
39,155
40,549
8 yrs
1,226
2,322
3,454
4,753
5,097
6,930
10,594
17,410
24,187
27,706
28,865
31,056
27,032
36,381
36,410
9 yrs
543
1,305
2,438
3,207
3,826
4,998
7,051
10,809
17,483
24,038
25,973
26,965
29,320
25,499
33,812
10 yrs
181
590
1,385
2,236
2,751
3,752
5,228
7,409
11,088
17,515
22,409
24,087
25,191
27,324
23,594
11 yrs
38
203
635
1,233
1,688
2,348
3,363
4,717
6,756
10,162
15,958
20,499
22,202
23,211
25,006
12 yrs
0
48
226
532
1,001
1,382
2,000
2,945
4,179
5,978
9,008
14,194
18,399
19,903
20,743
Total
76,561
133,614
211,711
262,068
219,839
256,144
297,653
342,657
383,937
429,335
456,822
482,187
507,375
534,227
549,954
FY03/05
FY03/06
FY03/07
FY03/08
FY03/09
FY03/10
FY03/11
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
0 yrs
39.0%
32.6%
31.9%
28.3%
19.5%
24.0%
19.9%
17.9%
15.5%
15.6%
14.0%
14.4%
14.6%
14.9%
13.5%
1 yr
26.0%
25.5%
20.7%
18.0%
17.2%
11.4%
15.7%
13.9%
13.1%
11.5%
11.7%
10.4%
10.7%
11.0%
11.8%
2 yrs
12.9%
16.7%
17.2%
15.5%
15.1%
13.5%
9.6%
12.8%
11.8%
11.2%
10.1%
10.2%
9.2%
9.5%
10.0%
3 yrs
7.4%
8.6%
11.4%
13.4%
13.5%
12.2%
11.4%
8.5%
11.2%
10.3%
10.1%
9.1%
9.3%
8.4%
8.9%
4 yrs
4.1%
5.3%
6.2%
9.2%
11.9%
11.0%
10.5%
9.9%
7.6%
9.8%
9.3%
9.1%
8.3%
8.6%
7.9%
5 yrs
3.5%
3.5%
4.1%
5.3%
8.2%
9.6%
9.4%
9.1%
8.8%
6.8%
8.9%
8.5%
8.4%
7.7%
8.0%
6 yrs
2.5%
2.6%
2.6%
3.4%
4.9%
6.7%
8.2%
8.2%
8.1%
7.8%
6.3%
8.2%
7.8%
7.8%
7.3%
7 yrs
2.0%
2.0%
2.0%
2.3%
3.3%
4.1%
5.8%
7.1%
7.3%
7.2%
7.3%
6.0%
7.6%
7.3%
7.4%
8 yrs
1.6%
1.7%
1.6%
1.8%
2.3%
2.7%
3.6%
5.1%
6.3%
6.5%
6.3%
6.4%
5.3%
6.8%
6.6%
9 yrs
0.7%
1.0%
1.2%
1.2%
1.7%
2.0%
2.4%
3.2%
4.6%
5.6%
5.7%
5.6%
5.8%
4.8%
6.1%
10 yrs
0.2%
0.4%
0.7%
0.9%
1.3%
1.5%
1.8%
2.2%
2.9%
4.1%
4.9%
5.0%
5.0%
5.1%
4.3%
11 yrs
0.0%
0.2%
0.3%
0.5%
0.8%
0.9%
1.1%
1.4%
1.8%
2.4%
3.5%
4.3%
4.4%
4.3%
4.5%
12 yrs
0.0%
0.0%
0.1%
0.2%
0.5%
0.5%
0.7%
0.9%
1.1%
1.4%
2.0%
2.9%
3.6%
3.7%
3.8%
Total
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Source: Shared Research based on Anicom’s 2020 White Paper on Household Animals (number of expired and surrendered one-year policies by animal type and age)
Need to capture market for animals less than one year old
While insurance premium goes up with the pet’s age, so do annual medical expenses. The company is trying to increase the soundness of its portfolio by increasing the number of policies for animals that are less than one year old. As the loss ratio rose more than the company anticipated, it introduced various measures (products with limits on the number and length of hospital visits, healthy pet discounts), and in FY03/18 it decided to raise insurance premiums for nearly all policies for pets over eight years old (from July 2017). In addition, the company is trying to maintain a sound portfolio by cultivating the newborn market outside of pet shop sales agents. The company continued along this line in FY03/19, making changes to the terms of policies starting December 1, 2018, but has not provided a detailed breakdown of insurance premiums by breed classification since the premium hike.
Policy renewal rate holding around 87%
A rising policy renewal rate also helps stabilize the company’s portfolio. The first-year renewal rate is about 70% for newborns, and exceeds 90% from the second year. The overall renewal rate has been around 87% (coming in at 87.7% in FY03/21).
Renewal rate
FY03/11
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Renewal rate
86.6%
87.6%
88.1%
89.3%
88.7%
88.2%
88.2%
88.2%
87.7%
87.2%
87.7%
Source: Shared Research based on company data
While one reason for a policyholder to cancel a policy is the death of the pet, considering that the average life expectancy of pets is about 13 years and the ratio of policies for pets 12 years and older is only about 3.8% at Anicom (as of FY03/19), the company believes cancellations due to death are limited. By increasing the ratio of renewals at the end of the first year and implementing preventive measures that resonate with policyholders, the company should be able to maintain a high renewal rate.
Average of JPY340,000 spent on pet dogs annually
There are different attitudes toward pet insurance between those who consider pets as mere “animals” and those who consider them as family members. Those who consider dogs as animals often do not take them to vets when they get sick. Thus, there is little incentive for them to acquire pet insurance. On the other hand, those who acquire pets as family members tend to buy insurance and take the pets to hospitals. A survey conducted by Anicom shows that its respondents spent an average of JPY340,000 on dogs and JPY165,000 on cats in 2020 for all their needs, including pet insurance premiums.
Survey on annual spending on pets
(JPY)
Dogs
Cats
2018
2019
2020
YoY
2018
2019
2020
YoY
Treatment for sickness or injuries
56,691
44,869
60,430
34.7%
29,631
23,919
31,848
33.1%
Foods and snacks
57,049
52,497
64,745
23.3%
42,925
49,713
42,925
-13.7%
Supplements
11,311
8,737
11,861
35.8%
4,694
2,783
5,668
103.7%
Training
6,446
7,273
7,204
-0.9%
22
2
1
-50.0%
Shampoo and grooming
44,508
42,323
48,692
15.0%
3,002
2,623
3,635
38.6%
Pet insurance premiums
48,153
50,155
46,895
-6.5%
30,653
30,155
34,929
15.8%
Vaccination and health checks
30,250
27,653
32,463
17.4%
12,424
12,814
14,029
9.5%
Pet hotels and pet sitters
7,743
8,339
3,991
-52.1%
3,563
3,469
1,609
-53.6%
Daily necessities
13,339
20,601
13,750
-33.3%
13,113
12,118
13,766
13.6%
Clothing
11,105
13,156
11,640
-11.5%
408
753
674
-10.5%
Playground, etc.
3,795
4,157
2,880
-30.7%
-
6
0
-100.0%
Collars and leashes
5,112
5,387
5,949
10.4%
1,929
2,354
1,614
-31.4%
Disaster prevention
602
1,082
703
-35.0%
633
1,431
982
-31.4%
Transportation
15,998
5,457
14,908
173.2%
2,057
1,357
891
-34.3%
Utilities (for pets)
19,152
15,113
12,449
-17.6%
15,920
15,183
12,264
-19.2%
Total
331,615
306,801
338,561
10.4%
160,975
158,680
164,835
3.9%
Source: Shared Research, based on company’s “Survey of Annual Spending on Pets”
Process for taking out an insurance policy
When Anicom receives applications from its general sales channel (detail below) other than pet shops, the company conducts screening based on the animal’s breed, age, health conditions, and health records submitted by the owner. The pets that pass the screening are required to go through a waiting period of 1.5–2.0 months before the policy is signed. The waiting period is required to prevent payouts for any preexisting conditions. The company does not screen store-bought pets that are less than one year old. The company considers such pets virtually risk-free.
OTC insurance payout settlement
Anicom was the first in Japan to establish a system for an over-the-counter (OTC) insurance payout settlement that allows policyholders to pay only their co-payments by presenting their insurance cards at the counter, similar to how the national health insurance system for humans works. The OTC payout settlement is the basis of the company’s business model in that it emphasizes the ease of use of insurance in relation to pet medical care, where it tends to be used frequently and in small amounts. There are still only three companies in Japan that offer OTC payout settlements at hospitals: Anicom, ipet, and Pet & Family. These settlement systems also help the hospitals attract customers.
Anicom provides “Anicom Receptor,” a management system for treatment records, to animal hospitals. The system allows hospitals to offer payout settlement services. The hospital provides fee details for clients and submits payment requests to Anicom, which reviews the requests and sends the money to the hospital. The system improves administrative efficiency and makes it easier for hospitals to handle insurance payments. It is also designed to prevent fraudulent claims and miscalculations.
With the conventional business model in which policyholders mail their claims to the insurer, each case incurs administrative costs such as bank transfer fees, postage, and assessment costs. The OTC payout system reduces these administrative costs. Of the 3mn insurance claims filed annually, about 85% are settled over the counter.
Hospitals supported by Anicom
The number of supported hospitals, which Anicom has been working to increase ever since it began operations, now exceeds 6,541 (more than 50% of all veterinary hospitals and clinics in Japan), an overwhelmingly large number compared to the competitors. Furthermore, when veterinarians open new hospitals, they are more likely to choose an alliance with a widely used insurance company. This gives Anicom a strong competitive edge.
There were 9,090 veterinary hospitals and clinics in Japan as of end-December 2020, according to new business notifications submitted to the Ministry of Agriculture, Forestry and Fisheries. Of those, 6,835 cater to small animals (i.e., pets). Anicom’s pet insurance pays for treatment provided by any animal hospital in Japan. Furthermore, 6,541 institutions, or 96% of veterinary hospitals and clinics catering to small animals, accept health insurance cards issued by Anicom (as of end-March 2021). Over-the-counter settlement is an important tool for veterinary hospitals and clinics to attract customers, and is becoming the de facto industry standard.
This is how the system works: Anicom issues animal health insurance cards to policyholders, who show their card at the hospitals/clinics when they bring in their pets for treatment. The pet owners who have insurance cards are only liable for copayments at hospital counters. This system is a key point of differentiation for Anicom’s services in relation to its competitors.
Further, in Japan, there is an annual churn rate of around 200 to 300 animal hospitals, as older institutions close to be replaced by a similar number of new institutions. Anicom estimates that most of these new hospitals accept the company’s insurance cards. Hospitals benefit from the company’s settlement system since it improves the convenience for pet owners. The remaining 1,000 hospitals are also expected to soon start accepting the company’s insurance cards.
Dobutsu Kenkatsu (gut microbiota measurement + health check)
As an ancillary service for its pet insurance, the company measures gut microbiota of pets to assess their health status. By measuring gut microbiota, it is possible to determine a dog’s intestinal health age and its risk of developing allergies. Since the measurement is conducted annually, it is also useful in health management. Based on research data encompassing tens of thousands of gut microbiota measurements and disease data obtained from insurance claim statistics, the company can assess a pet’s susceptibility to disease. The gut microbiota measurement itself is not used to diagnose disease, but depending on the results of the measurement, the pet may be able to undergo a free health check (blood test) at a veterinary hospital or clinic designated by the company.
Product oriented toward older, healthy pets with coverage limited to hospitalization and surgery
To increase the uptake of pet insurance for the approximately 18mn animals already kept as pets, Anicom launched Dobutsu Kempo Senior, Japan’s first insurance product targeting older pets. This product is for animals eight or more years of age, and there is no upper age limit for underwriting. By focusing only on hospitalization and surgery and excluding hospital visits from coverage, the company has been able to set premiums that are affordable even for elderly people. The product is intended to cover unforeseen events such as hospitalization and surgery, which tend to be expensive. Depending on the results of gut microbiota measurement, provided as an ancillary service, the policyholder can move to a Dobutsu Kempo Family policy, which includes coverage for hospital visits, at the time of the second renewal.
Sales channels
Newborn channel
This is the company’s largest channel. It is oriented toward pets, mostly those sold by pet shops, under one year old (6–700,000 pets per year). It targets people who are about to buy a pet, primarily through pet shop agencies, and is characterized by high ratios of policy purchase and low loss ratios due to the young age of the pets. Pet shop agencies sell more than 80% of the company’s new policies. Anicom enters into agency agreements with major pet shop chains nationwide (comprising about 2,000 pet shops), which then sell pet insurance policies when they sell pets. In addition to pet shops, the company is also developing channels for cat adoption fairs and breeders, placing emphasis on selling insurance in various situations in which people meet new pets.
The newborn market consists of pet shops and breeders. Anicom’s main sales channel to reach this market right now is pet shop agencies. Anicom’s strength lies in the general market and the pet shop portion of the newborn market. Of the 124,000 new policies sold by the company in FY03/17, 101,000, or 82%, came through pet shops. The remaining 18%, or 23,000 policies, mostly came from the general market. The company has not disclosed any new figures regarding this breakdown since FY03/18.
Overview of newborn-pet market
Source: Shared Research based on company data
Since pets that have just been welcomed into a household often fall ill due to the stress of a sudden change of environment, the company offers a plan that covers 100% of medical expenses during the first month, and this helps spur interest in buying a policy. In addition, the loss ratio in the medium term is lower than that of the general channel due to the younger age of the pets, which contributes to improved management efficiency.
Since its inception the company has been working to increase the number of new policies sold through the newborn channel (mainly pet shops) and also increase the proportion of new pets sold that were covered by its pet insurance. Since FY03/16 it has been investing aggressively to achieve this goal, which has led to further increases in the number of new policies sold through this channel but has also driven up related costs (sales commissions and collection expenses) and its expense ratio. The expenses mainly include agency fees and advertising/sales promotion costs.
Major expense categories as % of recurring revenue (left) and in comparison with number of new policies (right)
Source: Shared Research based on company data
General channel
The general channel comprises online sales routes (through the company’s own websites and online agencies) and over-the-counter sales at banks or other places pet insurance is sold. The general market is said to comprise approximately 20mn animals, most of which are already kept as pets (about 18mn nationwide), which is why the market is so large. The channel’s two main routes are the direct sales route (directly sales via the company’s websites and call center) and the general agency route, encompassing pet-related companies, financial institutions, cooperatives, insurance agencies, online agencies, and veterinary hospital/clinic agencies. Major agencies include Sony Assurance, Asahi Mutual Life Insurance, Benesse, regional cooperatives, Yanase, regional banks, and credit unions.
Customers can purchase policies for dogs and cats of any age. Despite the large market size, it is necessary to consider the channel’s impact on loss ratios, since the age of pets at the time policies are purchased is higher than in the newborn channel.
While, traditionally, direct sales do not require the company to pay agency commissions, the company had believed the loss ratio also tends to be higher. However, after confirming that the loss ratio at the general sales channel is about the same level as that at pet shop agencies, the company shifted its strategy in FY03/18 and began building up the general sales channel in order to further accelerate growth in the pet insurance business. And now under its new medium-term business plan the company is working to establish this general sales channel as a major source of sales of new policies and future revenue.
Pet insurance market and sales channels
Source: Shared Research based on company estimates based on data from the Japan Pet Food Association and Fuji-Keizai
About 40% of pet shops in Japan serve as Anicom sales agents (company estimates)
According to the March 29, 2019 Economic Census for Business Activity (complied by the Ministry of Finance and the Ministry of the Economy, Trade, and Industry), there are 5,041 shops that sell pets and related goods in Japan. Anicom had agency contracts with 1,295 pet shops at end-2012, 1,490 (about a third of all pet shops) at end-March 2015, and 1,997 (about 40% of all pet shops) at end-March 2018. It can also be calculated that the company’s sales agencies account for roughly 60% of the number of new pet insurance policies sold at pet shops (There were about 100,000 newborn policies sold in FY03/17 (mostly via pet shops). Assuming the percentage of pet owners buying insurance is roughly 50% means that about 200,000 policies were sold via the company’s pet shop sales agents. Assuming about half of the 600,000–700,000 newborns sold each year are via pet shop means: about 200,000 divided by 300,000 to 350,000 equals about 60%.)
Agency agreement with Meiji Yasuda Life Insurance
In September 2020, the company entered an agency agreement for the sale of non-life insurance with Meiji Yasuda Life Insurance, which in October 2020 began handling pet insurance on behalf of Anicom Insurance. Pet insurance products sold by Anicom Insurance under the names Dobutsu Kempo Family, Dobutsu Kempo Senior, and Dobutsu Kempo Petit have been added to the product lineup of “Simple Insurance Series Light! By Meiji Yasuda Life Insurance.” Egao no Pet has been added in this product lineup by Meiji Yasuda Life Insurance, targeting mainly female employees and senior citizens.
The “Family” product (new policies can be purchased until one month before the pet turns eight) covers 50% or 70% of medical expenses incurred for hospital visits, hospitalization, and surgery, while the “Senior” product (new policies can be purchased when the pet is eight or more years of age) covers 50% or 70% of medical expenses incurred for hospitalization and surgery only. The “Petit” product (new policies can be purchased until one month before the pet turns eight) covers 70% of medical expenses incurred for hospitalization and surgery. Any of these products can, in principle, be renewed for the full life of the pet. Anicom Insurance also offers the proprietary ancillary services Dobutsu Kenkatsu, which provides a free gut microbiota measurement each year, and Dobutsu Hotline, which allows policyholders to consult with a veterinarian using the LINE messaging app.
New businesses (other businesses; 6.5% of recurring revenue)
Initiatives for becoming a preventive insurance company
As for new business strategy, Shared Research believes that the transition to the preventive services industry, President Nobuaki Komori’s wish since the time the company was founded, has been moving forward and is becoming more detailed and refined at the same time. Under the previous medium-term business plan announced in May 2017, in addition to the medium-term VISION of offering, as an infrastructure player in the animal industry, a world free of concern for hereditary disorders, and the new value of the lengthening of a healthy lifespan, more specific details were indicated regarding in what way the company will be a partner engaged in animals’ life stages from upstream (before becoming ill, before being born) to midstream (lengthening of a healthy lifespan) to downstream (after becoming ill). At the same time, it was clear the various initiatives to date fit in nicely as parts of the strategy.
Preventive insurance business: With its breeder support services, the company is looking to use its genetic screening service to help eradicate genetic diseases and quickly identify and prevent diseases that can easily be contracted by pets. At the veterinary hospital level, in additional to preventive diagnostic services the company is looking to create guidelines and standardize diagnostic methods, then use its portal website to deliver information on preventive medical services for pets and direct pet owners to appropriate clinic/hospital. Already, Anicom has upgraded its IT system for veterinary clinics/hospitals with the launch of its cloud-based medical records management system (anirece cloud), which increases system functionality and helps hold down excessive charges for medical treatment with new features such as the display of the average cost of treatment for each type of medical condition. Although these and similar measures do not have the same quick impact on revenue as an increase in insurance premiums would, Shared Research sees them as a means of strengthening the foundation of the company’s insurance business and potentially differentiating itself from competitors. With the rollout of anirece cloud, the company is looking to go beyond simply treating pets and use it to create the backbone a system that draws on open medical records and the medical history of breeding animals and their offspring.
Synergies between pet insurance and new businesses
Executive summary
Business overview
Anicom Holdings comprises a group of non-life insurers that sell pet insurance to general consumers to cover a certain percentage of the cost of medical treatment for illness or injury (for a period of one year) mainly in dogs, cats, and other household pets. Founded in 2000, the company now holds a 44% share of the domestic pet insurance market. Its operations include the non-life insurance business (90.0% of recurring revenue and 98.4% of recurring profit in FY03/21), Online Pet Services (3.5%, 13.4%), and other businesses (6.5%, recurring loss of JPY325mn). Starting in FY03/20, Anicom considers itself to be in its “second founding period” and is accelerating the growth of the genetic screening business and other non-insurance businesses.
Anicom’s mainstay pet insurance products reimburse policyholders for a fixed proportion of the expenses incurred in connection with the medical treatment (including surgery) of their pets in the event of illness or injury (for up to one year). Pet insurance is similar to the personal health insurance available from third-sector insurance companies, but under Japanese law is considered to be a kind of non-life insurance, that is, insurance that compensates the insured party for damages suffered as a result of unexpected events. The majority of insured pets are dogs and cats.
Products insuring against pet illness/injuries used to be offered by mutual aid associations, but following changes in the Insurance Business Act in 2005, the market was opened to new entrants and mutual aid associations reorganized as non-life insurance companies or small-amount, short-term insurance companies. The Financial Services Agency has licensed five major companies (including Anicom) to offer pet insurance as non-life insurance companies, and there are also ten small-amount, short-term insurance companies offering pet insurance that are registered with the finance bureau.
Anicom’s mainstay pet insurance sales and underwriting business is a recurring-revenue business that generates revenue from monthly premiums paid after the insurance contract is signed. This means top-line revenue is determined simply by the number of insurance contracts in force and the premiums paid; insurance accounting comes into play when calculating earnings, however. Revenue from insurance premiums is booked first, then after paying claims (the cost of revenue), additions to underwriting reserves must be made for unearned premiums to cover claims in future periods; these reserves are carried forward to bridge the gap between the time premiums are received and income is earned.
In 2008, Anicom introduced animal health insurance cards that pet owners could show at their local veterinary hospital or clinic and then be responsible for only their co-pay, this along with making customers members has underpinned growth since then and this over-the-counter insurance payout system has become the de facto industry standard. In an effort to prevent hereditary diseases in pets, Anicom is working to establish new services both upstream and downstream as a way of helping it expand sales of pet insurance, including genetic screening services, general and advanced medical treatments (such as regenerative medicine) for veterinary hospitals, and also lifetime animal care facilities. Considering FY03/20 to be the start of its second founding period, the company plans to accelerate growth in businesses other than its mainstay non-life insurance business. In January 2020, it made SIMNET Co., Ltd., a wholly owned subsidiary. SIMNET operates matching websites to help breeders and prospective pet buyers connect with each other.
A number of factors distinguish Anicom from competitors, including 1) its over-the-counter insurance payout system at veterinary hospitals/clinics (which now acts as a barrier to entry), 2) its IT system that smoothly connects with the medical claims and patient record systems of veterinary hospitals/clinics, pet shops (with insurance solicitation web tools), and policyholders (via the internet), and provides information about Anicom insurance, 3) established relationships with many veterinary practices and pet shops the system has helped built up, and 4) the establishment of de facto industry standards for preventive insurance, such as genetic screening and the Dobutsu Kenkatsu service.
All illnesses in pets are caused by a combination of genetic and environmental factors. Net claims paid in FY03/21 totaled JPY23.2bn, and Anicom recognizes that a significant portion of annual payouts are due to genetic factors, meaning that it can reduce the total payout amount by eliminating such genetic factors. In addition to its current Dobutsu Kenkatsu service, the company believes that adding new health check services for various diseases and promoting home care through diet and other measures will reduce insurance payouts in the future. It expects that providing value-added services such as Dobutsu Kenkatsu and new health check services will help it gain new policies and improve the renewal rate, while lowering the combined ratio by reducing the aggregate cost of insurance payouts and ancillary services.
Earnings trends
In FY03/22, the company reported consolidated recurring revenue of JPY53.0bn (+10.3% YoY), recurring profit of JPY3.2bn (+14.8% YoY), and net income attributable to owners of the parent of JPY2.1bn (+33.2% YoY). While demand for pet care due to the COVID-19 pandemic showed signs of settling down, there were also signs of a start to a downtrend in the loss rate. The number of new policies reached a record 229,099, and the number of policies in force broke through the 1mn market to reach 1,028,831.
For FY03/23, the company forecasts consolidated recurring revenue of JPY57.0bn (+7.5% YoY), recurring profit of JPY3.7bn (+15.3% YoY), and net income attributable to owners of the parent of JPY2.5bn (+16.7% YoY).
In its medium-term business plan covering FY03/23 to FY03/25 (announced on May 11, 2022), the company set forth FY03/25 numerical targets of recurring revenue of JPY65.0–70.0bn, recurring profit of JPY4.5–5.0bn, ROE in the 10% range, and a dividend payout ratio in the 20% range. Its vision for FY03/31 looks for recurring revenue in the JPY100bn range, recurring profit on the order of JPY10.0bn, ROE of 12–15%, and dividend on equity (DOE) in the 4% range.
Strengths and Weakness
Anicom’s strengths include 1) its over-the-counter insurance payout system that allows pet owners to show their animal health insurance cards at their local vet and make settlement, now the industry standard at veterinary hospitals and clinics; 2) the advantage of its high market share in terms of name recognition, large customer base, and huge database, all of which will facilitate moves into new businesses; and 3) the steady stream of recurring revenue from its pet insurance business. Weaknesses include 1) the high compliance costs associated with operating in a licensed industry, 2) its high loss rate (claim payment rate) relative to competitors, which puts it at a disadvantage when it comes to competing on price; and 3) high earnings volatility stemming from unexpected swings in costs, such as sharp increases in the consumption tax rate or claims rate.
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Net loss ratio, net expenses ratio, and combined ratio calculated by Shared Research.
Note: Per share data calculated as of the financial year. The company initiated a 200-for-1 split in June 2009, a 10-for-1 split in October 2011, and a 4-for-1 split in October 2020.
Recent updates
Medium-term plan covering FY2022-2024
On May 11, 2022, Anicom Holdings, Inc. announced its medium-term plan covering FY2022-2024.
Anicom considers the years through FY2030 as its “second founding period.” The company sees FY03/23 to FY03/25 as the first phase of its efforts to bring the associated long-term management vision to reality. In the first phase, the key themes are advances in pet insurance and further uptake, as well as the expansion of businesses that can generate synergies. The company set forth FY03/25 numerical targets including recurring revenue of JPY65.0–70.0bn, recurring profit of JPY4.5–5.0bn, and ROE in the 10% range. Its vision for FY03/31 looks for recurring revenue in the JPY100bn range, recurring profit on the order of JPY10.0bn, ROE of 12–15%, and dividend on equity (DOE) in the 4% range.
March 2022 monthly management parameters
On May 11, 2022, Anicom Holdings, Inc. announced its March 2022 monthly management parameters.
Note: Dobutsu Kenkatsu provides pet insurance policyholders an annual gut microbiota measurement. The results of these tests are used to measure vulnerability to illness based on the company’s own indices. Depending on the results, the pet may receive a free health check at a designated veterinary hospital.
Note: PARM stands for Research and Development Partnership for Animal Regenerative Medicine.
February 2022 monthly management parameters
On March 18, 2022, Anicom Holdings, Inc. announced its February 2022 monthly management parameters.
January 2022 monthly management parameters
On February 21, 2022, Anicom Holdings, Inc. announced its January 2022 monthly management parameters.
Trends and outlook
Quarterly trends and results
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Figures may differ from company materials due to differences in rounding methods.
Full-year FY03/22 results
Earnings summary
Recurring revenue was up JPY5.0bn (+10.3% YoY) to JPY53.0bn, thanks to increases of JPY4.0bn in underwriting revenue, JPY191mn in investment revenue, and JPY772mn in other recurring revenue. The company had 1,028,831 policies in force (+11.6% YoY), and 229,099 new policies (+7.4% YoY). While demand for pet care due to the COVID-19 pandemic showed signs of settling down, there were also signs of a start to a downtrend in the loss rate.
Recurring profit was up JPY408mn YoY to JPY3.2bn. The number of policies in force and underwriting revenue showed steady growth, with earned premiums increasing JPY4.1bn YoY. Expenses such as claims paid (+JPY2.3bn YoY) and agency fees (+JPY654mn YoY) grew. Provision for catastrophe reserves increased by JPY164mn YoY. Other recurring revenue outside the insurance business, including animal hospital management, breeder matching, and genetic testing, grew steadily by JPY772mn YoY. The recurring profit margin was 6.0%, up 0.3pp YoY from 5.7% in FY03/21.
FY03/23 company forecast: Consolidated recurring revenue, JPY57.0bn (+7.5% YoY); recurring profit, JPY3.7bn (+15.3% YoY); and net income attributable to owners of the parent, JPY2.5bn (+16.7% YoY).
Medium-term plan disclosed:
The company announced FY03/25 numerical targets of recurring revenue of JPY65.0–70.0bn, recurring profit of JPY4.5–5.0bn, ROE in the 10% range, and a dividend payout ratio in the 20% range. Its vision for FY03/31 looks for recurring revenue in the JPY100bn range, recurring profit on the order of JPY10.0bn, ROE of 12–15%, and dividend on equity (DOE) in the 4% range.
Company forecast for FY03/23
Numerical targets
FY03/23 company forecast: Consolidated recurring revenue, JPY57.0bn (+7.5% YoY); recurring profit, JPY3.7bn (+15.3% YoY); and net income attributable to owners of the parent, JPY2.5bn (+16.7% YoY).
Shared Research plans to update this report after interviewing management regarding its assumptions and strategies underlying its FY03/23 earnings forecast.
Medium-term business plan
Numerical targets
On May 11, 2022, the company announced its medium-term business plan (covering FY03/23 to FY03/25). It set forth FY03/25 numerical targets of recurring revenue of JPY65.0–70.0bn, recurring profit of JPY4.5–5.0bn, ROE in the 10% range, and a dividend payout ratio in the 20% range. Its vision for FY03/31 looks for recurring revenue in the JPY100bn range, recurring profit on the order of JPY10.0bn, ROE of 12–15%, and dividend on equity (DOE) in the 4% range.
Shared Research plans to update this report after interviewing management regarding its assumptions and strategies underlying its medium-term business plan.
Business
Business description
Leader in domestic pet insurance industry, going all out to establish a preventive insurance company
Three individuals, including Nobuaki Komori, established a mutual aid association for pets in July 2000 and named it anicom. They also set up a separate company in the same month to handle administrative duties for the mutual aid association. This company obtained a non-life insurance license in 2007 and began operations in January 2008. It now leads the industry with a 44% share of the domestic pet insurance market.
Wholly owned subsidiaries operating under the umbrella of Anicom Holdings are Anicom Insurance (non-life insurance business specializing in pet insurance), Anicom Pafe (veterinary hospital support business), Anicom Frontier (insurance agency business), Anicom Specialty Medical Institute (veterinary medicine clinical and research services), and SIMNET (operating breeder matching websites).
Anicom’s pet insurance business generates a steady flow of recurring revenue from insurance policyholders paying their monthly premiums. And because the monthly premiums it receives depend on the number of insurance policies in force, the company can expect steady growth in revenue from insurance premiums as long as the number of policies continues to increase. In FY03/18 the company began moving away from its traditional sales strategy that depended heavily on pet shops, turning its focus to developing the newborn market through sales channels other than the pet shop and general channels that it had traditionally used. This rapidly expanded the pet insurance business. In FY03/21, the non-life insurance business operated by Anicom Insurance accounted for 90.0% of consolidated recurring revenue (94.5% in FY03/20).
Considering FY03/20 to be the start of its second founding period, the company intends to accelerate the efforts it has been conducting to date. During this second founding period, as has been its goal since it was founded, Anicom aims to become a preventive insurance group that analyzes illnesses and injuries based on a range of data and looks after the health of pets. During the three years covered by its medium-term business plan (FY03/20–FY03/22), the company is accelerating the development of preventive businesses (including the Dobutsu Kenkatsu service and genetic screening) to expand its earnings in the pet insurance business.
It expects that providing value-added services such as Dobutsu Kenkatsu and new health check services will help it gain new policies and improve the renewal rate, while lowering the combined ratio by reducing the aggregate cost of insurance payouts and ancillary services.
Non-life insurance business (pet insurance; 90.0% of recurring revenue)
Products and services
Pet insurance
Pet insurance is a product providing full or partial coverage for medical expenses incurred for hospital visits, hospitalization, and surgery due to illness or injury of pets (what is covered and the percentage of coverage depends on the insurance product). Since there is no public insurance system for the medical care of pets, the entire burden of treatment falls on pet owners. The reason pet insurance is necessary is that the average life expectancy of pets is increasing due to improvements in pets’ living environments and medical care technologies. The risk of developing diseases increases as pets age, leading to higher medical costs.
Each pet insurance company and product has its own conditions for policy purchase, but all have one thing in common: the pet must be in good health. Anicom says the claim rate for both dogs and cats is lowest at the age of three or four and trends upward thereafter, particularly for illnesses that appear more easily with age, including tumors and endocrine, circulatory, and urinary diseases.
The company’s main product, Dobutsu Kempo Family, covers medical expenses incurred for hospital visits, hospitalization, and surgery, and can be applied to medical treatment at any veterinary hospital or clinic in Japan. Depending on the premiums the policyholder pays, a policy covers either 50% or 70% of the treatment cost. In October 2017, the company began offering Dobutsu Kempo Petit, which reduced premiums to about a third of the conventional product by limiting coverage to hospitalization and surgery. In October 2019, it also launched Dobutsu Kempo Senior, a product specifically for dogs and cats eight or more years of age at the time of a new policy purchase.
Dobutsu Kempo Family initially covered dogs, cats, birds, rabbits, and ferrets. In 2016, Anicom added squirrels and flying squirrels, hamsters, mice, guinea pigs, hedgehogs, turtles, and lizards to the list of covered animals. In March 2019, it went on to add chinchillas and snakes. Dobutsu Kempo Family now covers the largest number of species of any product in the pet insurance industry.
The company will underwrite new policies for dogs and cats of any age. Since pet insurance is a non-life insurance product, it must be renewed annually, but in principle can be renewed for the full life of the pet. Anicom controls its loss ratio by placing limits on the insurance amount and number of days covered for all of its products.
Note 1: Animals covered included dogs, cats, birds, rabbits, and ferrets; flying squirrels, squirrels, hamsters, mice, guinea pigs, hedgehogs, turtles, lizards, chinchillas, and snakes are only covered by renewed policies.
Note 2: There are limits to daily insurance payouts/ The maximum payouts are JPY10,000 a day under the 50% plan and JPY14,000 a day under the 70% plan for hospital visits or stays. For surgery, the maximum payout is JPY100,000 under the 50% and JPY140,000 under 70% plan. The company pays for hospital visits or stays up to 20 days and two surgeries a year.
Note 3: Maximum insurance payout limited to JPY14,000 per day for hospital stays and JPY500,000 per surgery
Note 4: The maximum payouts are JPY20,000 for hospital visits or stays. For surgery, the maximum payout is JPY200,000. The company pays for hospital visits or stays up to 20 days and two surgeries a year.
Dobutsu Kempo Family was revised in November 2014. The company added a “standard” plan, which limits the number of hospital visits and stays. The existing plan, which does not have such a limit, is called a “wide” plan.
The company began offering Dobutsu Kempo Happy for chinchillas and snakes on March 1, 2019, covering 15 pet types in total.
The company began offering Dobutsu Kempo Senior on September 17, 2019.
Premiums
Premiums for pet insurance differ depending on the species (dog, cat, bird, rabbit, ferret, squirrel or flying squirrel, hamster, mouse, guinea pig, hedgehog, turtle, lizard, chinchilla, or snake) and age of the pet. In the case of a one-year-old Chihuahua (70% coverage plan with full range of coverage), the annual premium would be about JPY34,000. For a five-year-old Golden Retriever, it would be about JPY71,000. The company’s premium system puts dogs into five categories by size (roughly broken down by breed), from A (small dogs) to E (large dogs). The larger the dog, the higher the premium.
The premium for pets that are less than one year of age is high because such animals are vulnerable to sickness. However, the price declines after one year of age. Subsequently, the premium rises each year. The new premium is applied when the policy is renewed annually. The basic fee for birds is flat. The policyholder can select the coverage ratio (50% or 70%), with the premium being set in line with the ratio.
Dog A: Japanese Spitz, Chihuahua, etc.; mixed-breed dogs weighing less than 10kg
Dog B: Miniature Dachshund, Shiba, Papillon, Toy Poodle, etc.; mixed-breed dogs weighing between 10kg and 20kg
Dog C: Maltese, Akita, Beagle, Chow, Poodle, Pomeranian, Yorkshire Terrier, etc.; mixed-breed dogs weighing between 20kg and 30kg
Dog D: Shih Tzu, Golden Retriever, Collie, Dachshund, French Bulldog, etc.; mixed-breed dogs weighing between 30kg and 45kg
Dog E: Siberian Husky, Tosa, American Cocker Spaniel, Bulldog, etc.; mixed-breed dogs weighing 45kg or more
Rising average age of pets and policy renewal
Increase in the average age of pets raises average premium written and claims paid
Dogs account for more than 80% of the Anicom’s pet insurance policies. The older the dog, the higher the premium, so an increase in the average age leads to an increase in average premium revenue. The following table shows the number and percentage of policies by age for dogs in FY03/19.
Need to capture market for animals less than one year old
While insurance premium goes up with the pet’s age, so do annual medical expenses. The company is trying to increase the soundness of its portfolio by increasing the number of policies for animals that are less than one year old. As the loss ratio rose more than the company anticipated, it introduced various measures (products with limits on the number and length of hospital visits, healthy pet discounts), and in FY03/18 it decided to raise insurance premiums for nearly all policies for pets over eight years old (from July 2017). In addition, the company is trying to maintain a sound portfolio by cultivating the newborn market outside of pet shop sales agents. The company continued along this line in FY03/19, making changes to the terms of policies starting December 1, 2018, but has not provided a detailed breakdown of insurance premiums by breed classification since the premium hike.
Policy renewal rate holding around 87%
A rising policy renewal rate also helps stabilize the company’s portfolio. The first-year renewal rate is about 70% for newborns, and exceeds 90% from the second year. The overall renewal rate has been around 87% (coming in at 87.7% in FY03/21).
While one reason for a policyholder to cancel a policy is the death of the pet, considering that the average life expectancy of pets is about 13 years and the ratio of policies for pets 12 years and older is only about 3.8% at Anicom (as of FY03/19), the company believes cancellations due to death are limited. By increasing the ratio of renewals at the end of the first year and implementing preventive measures that resonate with policyholders, the company should be able to maintain a high renewal rate.
Average of JPY340,000 spent on pet dogs annually
There are different attitudes toward pet insurance between those who consider pets as mere “animals” and those who consider them as family members. Those who consider dogs as animals often do not take them to vets when they get sick. Thus, there is little incentive for them to acquire pet insurance. On the other hand, those who acquire pets as family members tend to buy insurance and take the pets to hospitals. A survey conducted by Anicom shows that its respondents spent an average of JPY340,000 on dogs and JPY165,000 on cats in 2020 for all their needs, including pet insurance premiums.
Process for taking out an insurance policy
When Anicom receives applications from its general sales channel (detail below) other than pet shops, the company conducts screening based on the animal’s breed, age, health conditions, and health records submitted by the owner. The pets that pass the screening are required to go through a waiting period of 1.5–2.0 months before the policy is signed. The waiting period is required to prevent payouts for any preexisting conditions. The company does not screen store-bought pets that are less than one year old. The company considers such pets virtually risk-free.
OTC insurance payout settlement
Anicom was the first in Japan to establish a system for an over-the-counter (OTC) insurance payout settlement that allows policyholders to pay only their co-payments by presenting their insurance cards at the counter, similar to how the national health insurance system for humans works. The OTC payout settlement is the basis of the company’s business model in that it emphasizes the ease of use of insurance in relation to pet medical care, where it tends to be used frequently and in small amounts. There are still only three companies in Japan that offer OTC payout settlements at hospitals: Anicom, ipet, and Pet & Family. These settlement systems also help the hospitals attract customers.
Anicom provides “Anicom Receptor,” a management system for treatment records, to animal hospitals. The system allows hospitals to offer payout settlement services. The hospital provides fee details for clients and submits payment requests to Anicom, which reviews the requests and sends the money to the hospital. The system improves administrative efficiency and makes it easier for hospitals to handle insurance payments. It is also designed to prevent fraudulent claims and miscalculations.
With the conventional business model in which policyholders mail their claims to the insurer, each case incurs administrative costs such as bank transfer fees, postage, and assessment costs. The OTC payout system reduces these administrative costs. Of the 3mn insurance claims filed annually, about 85% are settled over the counter.
Hospitals supported by Anicom
The number of supported hospitals, which Anicom has been working to increase ever since it began operations, now exceeds 6,541 (more than 50% of all veterinary hospitals and clinics in Japan), an overwhelmingly large number compared to the competitors. Furthermore, when veterinarians open new hospitals, they are more likely to choose an alliance with a widely used insurance company. This gives Anicom a strong competitive edge.
There were 9,090 veterinary hospitals and clinics in Japan as of end-December 2020, according to new business notifications submitted to the Ministry of Agriculture, Forestry and Fisheries. Of those, 6,835 cater to small animals (i.e., pets). Anicom’s pet insurance pays for treatment provided by any animal hospital in Japan. Furthermore, 6,541 institutions, or 96% of veterinary hospitals and clinics catering to small animals, accept health insurance cards issued by Anicom (as of end-March 2021). Over-the-counter settlement is an important tool for veterinary hospitals and clinics to attract customers, and is becoming the de facto industry standard.
This is how the system works: Anicom issues animal health insurance cards to policyholders, who show their card at the hospitals/clinics when they bring in their pets for treatment. The pet owners who have insurance cards are only liable for copayments at hospital counters. This system is a key point of differentiation for Anicom’s services in relation to its competitors.
Further, in Japan, there is an annual churn rate of around 200 to 300 animal hospitals, as older institutions close to be replaced by a similar number of new institutions. Anicom estimates that most of these new hospitals accept the company’s insurance cards. Hospitals benefit from the company’s settlement system since it improves the convenience for pet owners. The remaining 1,000 hospitals are also expected to soon start accepting the company’s insurance cards.
Dobutsu Kenkatsu (gut microbiota measurement + health check)
As an ancillary service for its pet insurance, the company measures gut microbiota of pets to assess their health status. By measuring gut microbiota, it is possible to determine a dog’s intestinal health age and its risk of developing allergies. Since the measurement is conducted annually, it is also useful in health management. Based on research data encompassing tens of thousands of gut microbiota measurements and disease data obtained from insurance claim statistics, the company can assess a pet’s susceptibility to disease. The gut microbiota measurement itself is not used to diagnose disease, but depending on the results of the measurement, the pet may be able to undergo a free health check (blood test) at a veterinary hospital or clinic designated by the company.
Product oriented toward older, healthy pets with coverage limited to hospitalization and surgery
To increase the uptake of pet insurance for the approximately 18mn animals already kept as pets, Anicom launched Dobutsu Kempo Senior, Japan’s first insurance product targeting older pets. This product is for animals eight or more years of age, and there is no upper age limit for underwriting. By focusing only on hospitalization and surgery and excluding hospital visits from coverage, the company has been able to set premiums that are affordable even for elderly people. The product is intended to cover unforeseen events such as hospitalization and surgery, which tend to be expensive. Depending on the results of gut microbiota measurement, provided as an ancillary service, the policyholder can move to a Dobutsu Kempo Family policy, which includes coverage for hospital visits, at the time of the second renewal.
Sales channels
Newborn channel
This is the company’s largest channel. It is oriented toward pets, mostly those sold by pet shops, under one year old (6–700,000 pets per year). It targets people who are about to buy a pet, primarily through pet shop agencies, and is characterized by high ratios of policy purchase and low loss ratios due to the young age of the pets. Pet shop agencies sell more than 80% of the company’s new policies. Anicom enters into agency agreements with major pet shop chains nationwide (comprising about 2,000 pet shops), which then sell pet insurance policies when they sell pets. In addition to pet shops, the company is also developing channels for cat adoption fairs and breeders, placing emphasis on selling insurance in various situations in which people meet new pets.
The newborn market consists of pet shops and breeders. Anicom’s main sales channel to reach this market right now is pet shop agencies. Anicom’s strength lies in the general market and the pet shop portion of the newborn market. Of the 124,000 new policies sold by the company in FY03/17, 101,000, or 82%, came through pet shops. The remaining 18%, or 23,000 policies, mostly came from the general market. The company has not disclosed any new figures regarding this breakdown since FY03/18.
Since pets that have just been welcomed into a household often fall ill due to the stress of a sudden change of environment, the company offers a plan that covers 100% of medical expenses during the first month, and this helps spur interest in buying a policy. In addition, the loss ratio in the medium term is lower than that of the general channel due to the younger age of the pets, which contributes to improved management efficiency.
Since its inception the company has been working to increase the number of new policies sold through the newborn channel (mainly pet shops) and also increase the proportion of new pets sold that were covered by its pet insurance. Since FY03/16 it has been investing aggressively to achieve this goal, which has led to further increases in the number of new policies sold through this channel but has also driven up related costs (sales commissions and collection expenses) and its expense ratio. The expenses mainly include agency fees and advertising/sales promotion costs.
General channel
The general channel comprises online sales routes (through the company’s own websites and online agencies) and over-the-counter sales at banks or other places pet insurance is sold. The general market is said to comprise approximately 20mn animals, most of which are already kept as pets (about 18mn nationwide), which is why the market is so large. The channel’s two main routes are the direct sales route (directly sales via the company’s websites and call center) and the general agency route, encompassing pet-related companies, financial institutions, cooperatives, insurance agencies, online agencies, and veterinary hospital/clinic agencies. Major agencies include Sony Assurance, Asahi Mutual Life Insurance, Benesse, regional cooperatives, Yanase, regional banks, and credit unions.
Customers can purchase policies for dogs and cats of any age. Despite the large market size, it is necessary to consider the channel’s impact on loss ratios, since the age of pets at the time policies are purchased is higher than in the newborn channel.
While, traditionally, direct sales do not require the company to pay agency commissions, the company had believed the loss ratio also tends to be higher. However, after confirming that the loss ratio at the general sales channel is about the same level as that at pet shop agencies, the company shifted its strategy in FY03/18 and began building up the general sales channel in order to further accelerate growth in the pet insurance business. And now under its new medium-term business plan the company is working to establish this general sales channel as a major source of sales of new policies and future revenue.
About 40% of pet shops in Japan serve as Anicom sales agents (company estimates)
According to the March 29, 2019 Economic Census for Business Activity (complied by the Ministry of Finance and the Ministry of the Economy, Trade, and Industry), there are 5,041 shops that sell pets and related goods in Japan. Anicom had agency contracts with 1,295 pet shops at end-2012, 1,490 (about a third of all pet shops) at end-March 2015, and 1,997 (about 40% of all pet shops) at end-March 2018. It can also be calculated that the company’s sales agencies account for roughly 60% of the number of new pet insurance policies sold at pet shops (There were about 100,000 newborn policies sold in FY03/17 (mostly via pet shops). Assuming the percentage of pet owners buying insurance is roughly 50% means that about 200,000 policies were sold via the company’s pet shop sales agents. Assuming about half of the 600,000–700,000 newborns sold each year are via pet shop means: about 200,000 divided by 300,000 to 350,000 equals about 60%.)
Agency agreement with Meiji Yasuda Life Insurance
In September 2020, the company entered an agency agreement for the sale of non-life insurance with Meiji Yasuda Life Insurance, which in October 2020 began handling pet insurance on behalf of Anicom Insurance. Pet insurance products sold by Anicom Insurance under the names Dobutsu Kempo Family, Dobutsu Kempo Senior, and Dobutsu Kempo Petit have been added to the product lineup of “Simple Insurance Series Light! By Meiji Yasuda Life Insurance.” Egao no Pet has been added in this product lineup by Meiji Yasuda Life Insurance, targeting mainly female employees and senior citizens.
The “Family” product (new policies can be purchased until one month before the pet turns eight) covers 50% or 70% of medical expenses incurred for hospital visits, hospitalization, and surgery, while the “Senior” product (new policies can be purchased when the pet is eight or more years of age) covers 50% or 70% of medical expenses incurred for hospitalization and surgery only. The “Petit” product (new policies can be purchased until one month before the pet turns eight) covers 70% of medical expenses incurred for hospitalization and surgery. Any of these products can, in principle, be renewed for the full life of the pet. Anicom Insurance also offers the proprietary ancillary services Dobutsu Kenkatsu, which provides a free gut microbiota measurement each year, and Dobutsu Hotline, which allows policyholders to consult with a veterinarian using the LINE messaging app.
New businesses (other businesses; 6.5% of recurring revenue)
Initiatives for becoming a preventive insurance company
As for new business strategy, Shared Research believes that the transition to the preventive services industry, President Nobuaki Komori’s wish since the time the company was founded, has been moving forward and is becoming more detailed and refined at the same time. Under the previous medium-term business plan announced in May 2017, in addition to the medium-term VISION of offering, as an infrastructure player in the animal industry, a world free of concern for hereditary disorders, and the new value of the lengthening of a healthy lifespan, more specific details were indicated regarding in what way the company will be a partner engaged in animals’ life stages from upstream (before becoming ill, before being born) to midstream (lengthening of a healthy lifespan) to downstream (after becoming ill). At the same time, it was clear the various initiatives to date fit in nicely as parts of the strategy.