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Anicom Holdings

Anicom Holdings 8715

アニコム ホールディングス
Anicom Holdings, Inc.
Recent Updates
2022-05-12
Medium-term plan covering FY2022-2024
2022-05-12
Full-year FY03/22 flash update
2022-05-11
March 2022 monthly management parameters
Get in touch
8-17-1, Nishi Shinjuku, Shinjuku-ku Tokyo, Japan 160-0023
http://www.anicom.co.jp/index.html
03-5348-3911
Summary
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.
Insurance
Key dates
2014-06-06
Coverage initiation
Full Report
2022-05-12
Full-year FY03/22 flash update
2022-05-12
Q3 FY03/22 flash update
2022-02-08
1H FY03/22 flash update
2021-11-09
Download

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

Income statementFY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21FY03/22FY03/23
(JPYmn) Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Cons.Est.
Recurring revenue16,18618,36622,63826,50628,97832,33935,82941,46548,04953,02257,000
YoY16.9%13.5%23.3%17.1%9.3%11.6%10.8%15.7%15.9%10.3%7.5%
Underwriting revenue15,78118,08721,73325,37028,06831,29034,53539,10543,31247,321
Investment revenue260108522690504420383496488679
Other recurring revenue1431713824464056289101,8634,2485,020
Recurring expenses15,34817,63321,38724,37726,60630,48633,55039,27545,29049,855
YoY13.6%14.9%21.3%14.0%9.1%14.6%10.1%17.1%15.3%10.1%
Underwriting expenses11,45013,44815,92017,39318,96721,77124,07127,21230,51233,504
Operating and general administrative expenses3,6323,9824,9056,6997,2738,4799,11211,15313,28314,656
Other2662035622853662363679101,4951,695
Recurring profit8377331,2502,1292,3721,8532,2782,1892,7583,1663,650
YoY148.4%-12.4%70.5%70.3%11.4%-21.9%22.9%-3.9%26.0%14.8%15.3%
Recurring profit margin5.2%4.0%5.5%8.0%8.2%5.7%6.4%5.3%5.7%6.0%6.4%
Net income6404478291,3991,5681,3201,6101,5251,5862,1122,464
YoY37.6%-30.2%85.5%68.8%12.1%-15.8%22.0%-5.3%4.0%33.2%16.7%
Net margin4.0%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) 17,16917,29317,84217,93417,94618,02820,21120,22681,30981,309
EPS38.026.047.478.286.973.584.775.519.626.030.3
EPS (fully diluted)35.224.144.477.586.273.084.075.419.6-
Dividend per share---5.05.05.05.05.01.32.5-
Book value per share454.6477.0519.6596.6676.1744.31,092.71,147.0316.5336.2
ROE8.6%5.6%9.5%14.0%13.7%10.3%9.1%6.7%6.5%8.0%
Balance sheet (JPYmn)
Cash and deposits4,9864,4574,2177,56615,24219,07829,64324,42731,68329,641
Investment securities9,27211,36715,10810,7395,9144,6254,6609,99911,66716,570
Tangible fixed assets861182501,5271,4321,3591,3671,8582,5202,550
Intangible assets3734775666539041,4621,5063,9563,4663,469
Other assets1,9402,1121,9454,2973,8763,9084,3444,2635,2085,481
Allowance for doubtful accounts-7-13-13-16-140-88-76-75-78-33
Deferred tax assets2191162634335976237181,041898951
Total assets16,87218,63422,33725,19228,12331,16442,39045,59855,45958,635
Reserve for insurance contract7,7028,76810,52811,88812,99314,50816,04117,97719,62621,297
Bonds payable5,0005,000
Other liabilities1,2921,5202,4112,4142,6352,8453,8674,0184,7874,647
Provision for bonuses6986103157172173191209247274
Reserve for special laws2102232414854688098
Total liabilities9,06710,38513,06614,49215,84217,57620,15622,27329,74131,319
Shareholders' equity7,7958,3069,27210,76212,23313,54622,23323,71925,64827,658
Valuation and transaction adjustments9-57-1-123-100-128-150-53069-342
Non-controlling interests----------
Total net assets7,8058,2489,27010,69912,28113,58722,23423,32525,71727,316
Total liabilities and equity16,87218,63422,33725,19228,12331,16442,39045,59855,45958,635
Cash flow statement(JPYmn)
Cash flows from operating activities1,5072,0093,0941,9603,2313,3934,3594,2464,2314,456
Cash flows from investing activities-1,852-2,052-2,9632,4894,233253-487-10,263-2,129-5,485
Cash flows from financing activities856013589-79-106,693-995,154-112
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%
ROE8.6%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 ratio46.3%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 ratio67.5%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 ratio281.3%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
AprMayJunJulAugSepOctNovDecJanFebMar
Net premiums written (JPYmn)3,4333,6603,4993,4643,5773,5883,6273,5793,6603,7983,6503,805
YoY12.1%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 Kenkatsu9,29010,61112,77011,57212,54512,72114,08112,16212,96914,33213,19014,356
YoY96.6%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 specimens8,2887,3239,28210,0369,2178,8858,4097,6438,6317,9228,0309,992
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
AprMayJunJulAugSepOctNovDecJanFebMar
Net premiums written (JPYmn)3,7214,0613,8373,7893,9383,9493,9793,8823,9734,1063,9724,123
YoY8.4%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 Kenkatsu14,11616,28615,49514,02615,91115,78516,43815,11515,03116,81216,30216,945
YoY51.9%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 specimens9,97810,1178,1618,9148,5558,9638,5928,6868,6609,2856,9288,680
YoY20.4%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 hospitals229239266298318329341359388402418430
YoY------------
No. of patent applications (total)111416181920212223242527
YoY------------
No. of PV for Animal Health Encyclopedia713,717887,120905,376815,211748,092756,038760,274624,881430,886443,067396,506386,727
YoY------------
No. of PV for animal hospital search site322,206327,035299,580296,226156,026134,344132,813130,931109,910121,338109,989114,889
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)
CumulativeFY03/20FY03/21FY03/22FY03/22
(JPYmn) Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4Est.
Recurring revenue9,98920,04530,58541,46511,68923,59535,68948,04913,25926,33639,61653,02253,000
YoY14.7%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 revenue9,51119,04328,87939,10510,56021,19032,05843,31211,62023,29735,13347,321
YoY13.6%14.1%14.1%13.2%11.0%11.3%11.0%10.8%10.0%9.9%9.6%9.3%
Investment revenue80193374496113284365488263384558679
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 income42991552196913319025370142243316
Gains on sale of securities389321927644150174233193241313360
Other recurring revenue3978091,3311,8631,0152,1203,2654,2481,3752,6543,9235,020
% of recurring revenue4.0%4.0%4.4%4.5%8.7%9.0%9.1%8.8%10.4%10.1%9.9%9.5%
Recurring expenses9,81419,54729,21239,27511,13822,26533,51945,29012,56124,72637,12749,855
YoY20.8%22.6%19.6%17.1%13.5%13.9%14.7%15.3%12.8%11.1%10.8%10.1%
% of recurring revenue98.2%97.5%95.5%94.7%95.3%94.4%93.9%94.3%94.7%93.9%93.7%94.0%
Underwriting expenses7,00513,64420,25127,2127,68815,12522,67030,5128,50216,73224,94033,504
YoY18.5%19.4%15.7%13.0%9.8%10.9%11.9%12.1%10.6%10.6%10.0%9.8%
% of recurring revenue70.1%68.1%66.2%65.6%65.8%64.1%63.5%63.5%64.1%63.5%63.0%63.2%
Net premiums written4,7369,85215,16020,4925,49511,34617,34423,2266,16812,58619,18625,559
YoY7.7%8.7%9.9%11.0%16.0%15.2%14.4%13.3%12.2%10.9%10.6%10.0%
% of recurring revenue47.4%49.1%49.6%49.4%47.0%48.1%48.6%48.3%46.5%47.8%48.4%48.2%
Loss adjustment expenses2635258131,1092895618321,0982755528321,080
YoY1.9%5.2%6.8%10.6%9.9%6.9%2.3%-1.0%-4.8%-1.6%0.0%-1.6%
% of recurring revenue2.6%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 fees8691,7472,6723,6741,0592,1583,3084,5391,2992,5993,8945,193
YoY17.3%17.2%18.5%19.4%21.9%23.5%23.8%23.5%22.7%20.4%17.7%14.4%
% of recurring revenue8.7%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 claims259385328179122209260211126241247165
Provision for underwriting reserves8761,1341,2761,7567218509241,4376317537791,505
Unearned premiums5708171,0331,4045398351,1021,4885648661,0561,391
Catastrophe reserves a)30631624235118114-178-5067-112-277114
Investment expenses116109-384114133336166
% of recurring revenue0.0%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 expenses2,6475,5538,39211,1533,1146,4339,78713,2833,6087,16510,91514,656
YoY22.9%27.4%26.1%22.4%17.6%15.8%16.6%19.1%15.9%11.4%11.5%10.3%
% of recurring revenue26.5%27.7%27.4%26.9%26.6%27.3%27.4%27.6%27.2%27.2%27.6%27.6%
Other recurring expenses1603485618003346681,0191,3534177951,2091,628
% of recurring revenue1.6%1.7%1.8%1.9%2.9%2.8%2.9%2.8%3.1%3.0%3.1%3.1%
Recurring profit1754971,3722,1895501,3302,1692,7586981,6092,4883,1663,300
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 margin1.8%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 gains491114494954
Extraordinary losses82630427293298400154350170
Net income1043449761,5253507181,3001,5864861,2811,9092,1122,310
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 margin1.0%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
QuarterlyFY03/20FY03/21FY03/22
(JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
Recurring revenue9,98910,05610,54010,88011,68911,90612,09412,36013,25913,07713,28013,406
YoY14.7%17.3%17.4%13.7%17.0%18.4%14.7%13.6%13.4%9.8%9.8%8.5%
Underwriting revenue9,5119,5329,83610,22610,56010,63010,86811,25411,62011,67711,83612,188
YoY13.6%14.6%14.0%11.0%11.0%11.5%10.5%10.1%10.0%9.8%8.9%8.3%
Investment revenue8011318112211317181123263121174121
Interest and dividend income4257566469645763707210173
Gains on sale of securities385512657441062459193487247
Other recurring revenue3974125225321,0151,1051,1459831,3751,2791,2691,097
% of recurring revenue4.0%4.1%5.0%4.9%8.7%9.3%9.5%8.0%10.4%9.8%9.6%8.2%
Recurring expenses9,8149,7339,66510,06311,13811,12711,25411,77112,56112,16512,40112,728
YoY20.8%24.4%13.9%10.3%13.5%14.3%16.4%17.0%12.8%9.3%10.2%8.1%
% of recurring revenue98.2%96.8%91.7%92.5%95.3%93.5%93.1%95.2%94.7%93.0%93.4%94.9%
Underwriting expenses7,0056,6396,6076,9617,6887,4377,5457,8428,5028,2308,2088,564
YoY18.5%20.4%8.9%5.9%9.8%12.0%14.2%12.7%10.6%10.7%8.8%9.2%
% of recurring revenue70.1%66.0%62.7%64.0%65.8%62.5%62.4%63.4%64.1%62.9%61.8%63.9%
Net premiums written4,7365,1165,3085,3325,4955,8515,9985,8826,1686,4186,6006,373
YoY7.7%9.6%12.3%14.2%16.0%14.4%13.0%10.3%12.2%9.7%10.0%8.3%
% of recurring revenue47.4%50.9%50.4%49.0%47.0%49.1%49.6%47.6%46.5%49.1%49.7%47.5%
Loss adjustment expenses263262288296289272271266275277280248
YoY1.9%8.7%9.9%22.3%9.9%3.8%-5.9%-10.1%-4.8%1.8%3.3%-6.8%
% of recurring revenue2.6%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 fees8698789251,0021,0591,0991,1501,2311,2991,3001,2951,299
YoY17.3%17.2%21.1%21.7%21.9%25.2%24.3%22.9%22.7%18.3%12.6%5.5%
% of recurring revenue8.7%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 claims259126-57-1491228751-491261156-82
Provision for underwriting reserves8762581424807211297451363112226726
Unearned premiums570247216371539296267386564302190335
Catastrophe reserves a)30610-74109181-167-19212867-179-165391
Investment expenses1-5103-38310033-285
% of recurring revenue0.0%-0.0%0.9%0.0%0.3%0.0%0.8%0.2%-0.2%0.0%
Operating and general administrative expenses2,6472,9062,8392,7613,1143,3193,3543,4963,6083,5573,7503,741
YoY22.9%31.8%23.6%12.3%17.6%14.2%18.1%26.6%15.9%7.2%11.8%7.0%
% of recurring revenue26.5%28.9%26.9%25.4%26.6%27.9%27.7%28.3%27.2%27.2%28.2%27.9%
Other recurring expenses160188213239334334351334417378414419
% of recurring revenue1.6%1.9%2.0%2.2%2.9%2.8%2.9%2.7%3.1%2.9%3.1%3.1%
Recurring profit175322875817550780839589698911879678
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 margin1.8%3.2%8.3%7.5%4.7%6.6%6.9%4.8%5.3%7.0%6.6%5.1%
Extraordinary gains4523-49-5----
Extraordinary losses8184127286510215287120
Net income104240632549350368582286486795628203
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 margin1.0%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)4813328019267316136477177657327141,069
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
CumulativeFY03/20FY03/21FY03/22
Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4Q1Q1–Q2Q1–Q3Q1–Q4
Number of policies in force766,774781,368796,167816,254842,754870,987896,247921,873952,078981,6061,004,9131,028,831
YoY7.4%7.1%7.4%8.4%9.9%11.5%12.6%12.9%13.0%12.7%12.1%11.6%
YoY change52,87851,52654,52662,92275,98089,619100,080105,619109,324110,619108,666106,958
Number of newly acquired policies40,20480,533121,183167,31853,456107,295159,368213,36860,730119,347173,357229,099
YoY6.6%6.2%7.5%11.1%33.0%33.2%31.5%27.5%13.6%11.2%8.8%7.4%
YoY change2,4784,6818,43016,69313,25226,76238,18546,0507,27412,05213,98915,731
Renewal rate87.0%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)7951,6722,5583,4078891,8572,8293,7529722,0033,0484,019
YoY2.8%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 Anicom6,4486,4636,4176,4666,4776,4856,5056,5416,5876,6296,6516,681
YoY2.3%1.7%0.6%0.8%0.4%0.3%1.4%1.2%1.7%2.2%2.2%2.1%
Earned premiums8,94118,22627,84637,70110,02120,35530,95641,82411,05622,43134,07745,930
Claims paid (incl. loss adjustment expenses)5,25910,76316,30221,7815,90612,11618,43624,5356,56913,37920,26526,804
Combined ratio95.8%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 ratio58.8%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%
QuarterlyFY03/20FY03/21FY03/22
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
Total number of policies in force766,774781,368796,167816,254842,754870,987896,247921,873952,078981,6061,004,9131,028,831
QoQ increase13,44214,59414,79920,08726,50028,23325,26025,62630,20529,52823,30723,918
Number of newly acquired policies40,20440,32940,65046,13553,45653,83952,07354,00060,73058,61754,01055,742
YoY6.6%5.8%10.2%21.8%33.0%33.5%28.1%17.0%13.6%8.9%3.7%3.2%
QoQ increase2,3321253215,4857,321383-1,7661,9276,730-2,113-4,6071,732
Number of payout cases ('000)7958778868498899689729239721,0311,045971
YoY2.8%6.2%7.5%8.7%11.8%10.4%9.7%8.7%9.3%6.5%7.5%5.2%
Earned premiums8,9419,2859,6209,85510,02110,33410,60110,86811,05611,37511,64611,853
Claims paid (incl. loss adjustment expenses)5,2595,5045,5395,4795,9066,2106,3206,0996,5696,8106,8866,539
Combined ratio95.8%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 ratio58.8%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 nameSales channelProduct features
Dobutsu Kempo FamilyGeneral agenciesGuarantees 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 PetitGeneral agenciesGuarantees 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 BabyPet shopsCovers 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 BabyDirectly by pet shopsPet 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 FamilyPet shopsDobutsu 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 HappyPet shopsCovers 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 SeniorPet shopsCovers 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 ADog BDog CDog DDog ECatsBirdsRabbitsFerrets
0 yrs35,63039,16042,70048,87055,97036,32030,75035,68036,690
1 yr33,94037,27040,75046,63053,61034,59030,75036,47037,370
2 yrs34,45037,51041,50047,49055,22034,74030,75039,98045,400
3 yrs36,63039,01043,89050,27059,21035,20030,75044,16059,400
4 yrs43,75048,72052,49064,10075,54036,520
5 yrs47,33052,15056,42071,01084,65037,840
6 yrs52,18056,52061,62077,84093,81039,710
7 yrs58,18061,63067,93085,400101,88042,120
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
FY03/05FY03/06FY03/07FY03/08FY03/09FY03/10FY03/11FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19
0 yrs29,88743,55367,45774,25542,92861,44859,11661,33659,45166,80563,76269,20074,23979,76073,980
1 yr19,88934,00743,90047,06537,75229,21546,71247,60350,21749,22153,28249,91654,15458,68264,680
2 yrs9,87922,26036,35640,49333,11234,61628,70043,98745,34447,91046,24849,36246,67650,92754,931
3 yrs5,64211,52224,20535,08229,78431,17634,06429,00842,97744,08945,93043,83547,20045,00848,948
4 yrs3,1497,04013,10024,15426,05128,27131,14233,96029,29542,27042,43644,05942,12545,73243,234
5 yrs2,6944,6688,68813,98917,92924,55528,07831,13833,81729,24940,83240,86042,53741,11444,160
6 yrs1,8963,4565,5589,01910,75417,06724,35728,01831,18233,59028,83739,44339,64641,53139,907
7 yrs1,5372,6404,3096,0507,16610,38617,24824,31727,96130,80233,28228,71138,65439,15540,549
8 yrs1,2262,3223,4544,7535,0976,93010,59417,41024,18727,70628,86531,05627,03236,38136,410
9 yrs5431,3052,4383,2073,8264,9987,05110,80917,48324,03825,97326,96529,32025,49933,812
10 yrs1815901,3852,2362,7513,7525,2287,40911,08817,51522,40924,08725,19127,32423,594
11 yrs382036351,2331,6882,3483,3634,7176,75610,16215,95820,49922,20223,21125,006
12 yrs0482265321,0011,3822,0002,9454,1795,9789,00814,19418,39919,90320,743
Total76,561133,614211,711262,068219,839256,144297,653342,657383,937429,335456,822482,187507,375534,227549,954
FY03/05FY03/06FY03/07FY03/08FY03/09FY03/10FY03/11FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19
0 yrs39.0%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 yr26.0%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 yrs12.9%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 yrs7.4%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 yrs4.1%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 yrs3.5%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 yrs2.5%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 yrs2.0%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 yrs1.6%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 yrs0.7%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 yrs0.2%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 yrs0.0%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 yrs0.0%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%
Total100.0%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
FY03/11FY03/12FY03/13FY03/14FY03/15FY03/16FY03/17FY03/18FY03/19FY03/20FY03/21
Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.Act.
Renewal rate86.6%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)DogsCats
201820192020YoY201820192020YoY
Treatment for sickness or injuries56,69144,86960,43034.7%29,63123,91931,84833.1%
Foods and snacks57,04952,49764,74523.3%42,92549,71342,925-13.7%
Supplements11,3118,73711,86135.8%4,6942,7835,668103.7%
Training6,4467,2737,204-0.9%2221-50.0%
Shampoo and grooming44,50842,32348,69215.0%3,0022,6233,63538.6%
Pet insurance premiums48,15350,15546,895-6.5%30,65330,15534,92915.8%
Vaccination and health checks30,25027,65332,46317.4%12,42412,81414,0299.5%
Pet hotels and pet sitters7,7438,3393,991-52.1%3,5633,4691,609-53.6%
Daily necessities13,33920,60113,750-33.3%13,11312,11813,76613.6%
Clothing11,10513,15611,640-11.5%408753674-10.5%
Playground, etc.3,7954,1572,880-30.7%-60-100.0%
Collars and leashes5,1125,3875,94910.4%1,9292,3541,614-31.4%
Disaster prevention6021,082703-35.0%6331,431982-31.4%
Transportation15,9985,45714,908173.2%2,0571,357891-34.3%
Utilities (for pets)19,15215,11312,449-17.6%15,92015,18312,264-19.2%
Total331,615306,801338,56110.4%160,975158,680164,8353.9%
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