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.
In FY03/21, the company reported consolidated recurring revenue of JPY48.0bn (+15.9% YoY), recurring profit of JPY2.8bn (+26.0 % YoY), and net income of JPY1.6bn (+4.0% YoY). Recurring revenue and recurring profit reached new record highs. Recurring revenue met the medium-term business plan target (JPY47.7–50.0bn by FY03/22) ahead of schedule.
For FY03/22, the company forecasts consolidated recurring revenue of JPY53.0bn (+10.3% YoY), recurring profit of JPY3.3bn (+19.7% YoY), and net income attributable to owners of the parent of JPY2.3bn (+45.6% YoY). It thus expects recurring revenue to vastly exceed the target of its medium-term business plan (JPY50.0bn by FY03/22).
The company announced a new medium-term business plan, covering 2019 through 2021, in May 2019. The company made it clear that under its new medium-term plan it aims to realize its long-standing vision of becoming a “preventive insurance company,” saying it is now looking to take major steps to advance past the phase where it is simply reinforcing the foundation for the delivery of its treatment and insurance claims services for sick and injured pets, and into the next phase where it will function as a “preventive insurance company” and look after the health of pets. Toward this end, Anicom is starting up a range of new revenue-generating businesses from upstream to downstream. Upstream, the company is moving into genetic screening to support breeders; midstream to downstream, it operates animal hospitals; and downstream, new businesses include a search portal for veterinary hospitals.
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.
|Other recurring revenue||144||143||171||382||446||405||628||910||1,863||4,248|
|Operating and general administrative expenses||3,392||3,632||3,982||4,905||6,699||7,273||8,479||9,112||11,153||13,283|
|Recurring profit margin||2.4%||5.2%||4.0%||5.5%||8.0%||8.2%||5.7%||6.4%||5.3%||5.7%||6.2%|
|Shares issued (year-end; '000)||16,646||17,169||17,293||17,842||17,934||17,946||18,028||20,211||20,226||81,309|
|EPS (fully diluted)||25.7||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||-|
|Book value per share||424.8||454.6||477.0||519.6||596.6||676.1||744.3||1,092.7||1,147.0||316.5|
|Balance sheet (JPYmn)|
|Cash and deposits||5,098||4,986||4,457||4,217||7,566||15,242||19,078||29,643||24,427||31,683|
|Tangible fixed assets||93||86||118||250||1,527||1,432||1,359||1,367||1,858||2,520|
|Allowance for doubtful accounts||-5||-7||-13||-13||-16||-140||-88||-76||-75||-78|
|Deferred tax assets||353||219||116||263||433||597||623||718||1,041||898|
|Reserve for insurance contract||7,152||7,702||8,768||10,528||11,888||12,993||14,508||16,041||17,977||19,626|
|Provision for bonuses||55||69||86||103||157||172||173||191||209||247|
|Reserve for special laws||-||2||10||22||32||41||48||54||68||80|
|Valuation and transaction adjustments||3||9||-57||-1||-123||-100||-128||-150||-530||69|
|Total net assets||7,071||7,805||8,248||9,270||10,699||12,281||13,587||22,234||23,325||25,717|
|Total liabilities and equity||15,355||16,872||18,634||22,337||25,192||28,123||31,164||42,390||45,598||55,459|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||1,879||1,507||2,009||3,094||1,960||3,231||3,393||4,359||4,246||4,231|
|Cash flows from investing activities||-1,044||-1,852||-2,052||-2,963||2,489||4,233||253||-487||-10,263||-2,129|
|Cash flows from financing activities||28||85||60||135||89||-79||-10||6,693||-99||5,154|
|Combined ratio (fully earned basis)||97.5%||97.2%||95.3%||92.7%||91.2%||91.0%||94.4%||93.5%||94.9%||96.1%|
|E/I loss ratio||64.3%||67.5%||66.7%||64.4%||60.1%||58.9%||59.2%||59.0%||57.8%||58.4%|
|Expense ratio (earned premiums basis)||33.2%||29.7%||28.6%||28.3%||31.1%||32.1%||35.2%||34.5%||37.1%||37.7%|
|Solvency margin ratio||307.2%||281.3%||295.1%||288.7%||282.6%||295.6%||305.6%||379.8%||357.0%||355.5%|
On November 19, 2021, Anicom Holdings, Inc. announced its October 2021 monthly management parameters.
|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|
|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|
|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|
|Net premiums written (JPYmn)||3,721||4,061||3,837||3,789||3,938||3,949||3,979|
|No. of applications for Dobutsu Kenkatsu||14,116||16,286||15,495||14,026||15,911||15,785||16,438|
|No. of genetic testing specimens||9,978||10,117||8,161||8,914||8,555||8,963||8,592|
|No. of PARM member hospitals||229||239||266||298||318||329||341|
|No. of patent applications (total)||11||14||16||18||19||20||21|
|No. of PV for Animal Health Encyclopedia||713,717||887,120||905,376||815,211||748,092||756,038||760,274|
|No. of PV for animal hospital search site||322,206||327,035||299,580||296,226||156,026||134,344||132,813|
|Interest and dividend income||42||99||155||219||69||133||190||253||70||142|
|Gains on sale of securities||38||93||219||276||44||150||174||233||193||241|
|Other recurring revenue||397||809||1,331||1,863||1,015||2,120||3,265||4,248||1,375||2,654|
|% of recurring revenue||4.0%||4.0%||4.4%||4.5%||8.7%||9.0%||9.1%||8.8%||10.4%||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%|
|% of recurring revenue||70.1%||68.1%||66.2%||65.6%||65.8%||64.1%||63.5%||63.5%||64.1%||63.5%|
|Net premiums written||4,736||9,852||15,160||20,492||5,495||11,346||17,344||23,226||6,168||12,586|
|% of recurring revenue||47.4%||49.1%||49.6%||49.4%||47.0%||48.1%||48.6%||48.3%||46.5%||47.8%|
|Loss adjustment expenses||263||525||813||1,109||289||561||832||1,098||275||552|
|% of recurring revenue||2.6%||2.6%||2.7%||2.7%||2.5%||2.4%||2.3%||2.3%||2.1%||2.1%|
|Commissions and collection fees||869||1,747||2,672||3,674||1,059||2,158||3,308||4,539||1,299||2,599|
|% of recurring revenue||8.7%||8.7%||8.7%||8.9%||9.1%||9.1%||9.3%||9.4%||9.8%||9.9%|
|Provision for outstanding losses and claims||259||385||328||179||122||209||260||211||126||241|
|Provision for underwriting reserves||876||1,134||1,276||1,756||721||850||924||1,437||631||753|
|Catastrophe reserves a)||306||316||242||351||181||14||-178||-50||67||-112|
|% of recurring revenue||0.0%||0.0%||0.0%||0.3%||0.0%||0.2%||0.1%||0.3%||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|
|% of recurring revenue||26.5%||27.7%||27.4%||26.9%||26.6%||27.3%||27.4%||27.6%||27.2%||27.2%|
|Other recurring expenses||160||348||561||800||334||668||1,019||1,353||417||795|
|% of recurring revenue||1.6%||1.7%||1.8%||1.9%||2.9%||2.8%||2.9%||2.8%||3.1%||3.0%|
|Recurring profit margin||1.8%||2.5%||4.5%||5.3%||4.7%||5.6%||6.1%||5.7%||5.3%||6.1%||5.8%||6.2%|
|Interest and dividend income||42||57||56||64||69||64||57||63||70||72|
|Gains on sale of securities||38||55||126||57||44||106||24||59||193||48|
|Other recurring revenue||397||412||522||532||1,015||1,105||1,145||983||1,375||1,279|
|% of recurring revenue||4.0%||4.1%||5.0%||4.9%||8.7%||9.3%||9.5%||8.0%||10.4%||9.8%|
|% of recurring revenue||98.2%||96.8%||91.7%||92.5%||95.3%||93.5%||93.1%||95.2%||94.7%||93.0%|
|% of recurring revenue||70.1%||66.0%||62.7%||64.0%||65.8%||62.5%||62.4%||63.4%||64.1%||62.9%|
|Net premiums written||4,736||5,116||5,308||5,332||5,495||5,851||5,998||5,882||6,168||6,418|
|% of recurring revenue||47.4%||50.9%||50.4%||49.0%||47.0%||49.1%||49.6%||47.6%||46.5%||49.1%|
|Loss adjustment expenses||263||262||288||296||289||272||271||266||275||277|
|% of recurring revenue||2.6%||2.6%||2.7%||2.7%||2.5%||2.3%||2.2%||2.2%||2.1%||2.1%|
|Commissions and collection fees||869||878||925||1,002||1,059||1,099||1,150||1,231||1,299||1,300|
|% of recurring revenue||8.7%||8.7%||8.8%||9.2%||9.1%||9.2%||9.5%||10.0%||9.8%||9.9%|
|Provision for outstanding losses and claims||259||126||-57||-149||122||87||51||-49||126||115|
|Provision for underwriting reserves||876||258||142||480||721||129||74||513||631||122|
|Catastrophe reserves a)||306||10||-74||109||181||-167||-192||128||67||-179|
|% of recurring revenue||0.0%||-||0.0%||0.9%||0.0%||0.3%||0.0%||0.8%||0.2%||-|
|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|
|% of recurring revenue||26.5%||28.9%||26.9%||25.4%||26.6%||27.9%||27.7%||28.3%||27.2%||27.2%|
|Other recurring expenses||160||188||213||239||334||334||351||334||417||378|
|% of recurring revenue||1.6%||1.9%||2.0%||2.2%||2.9%||2.8%||2.9%||2.7%||3.1%||2.9%|
|Recurring profit margin||1.8%||3.2%||8.3%||7.5%||4.7%||6.6%||6.9%||4.8%||5.3%||7.0%|
|Recurring profit (ex. catastrophe reserves)||481||332||801||926||731||613||647||717||765||732|
|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|
|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|
|Number of payout cases ('000)||795||1,672||2,558||3,407||889||1,857||2,829||3,752||972||2,003|
|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|
|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|
|E/I loss ratio||58.8%||59.1%||58.5%||57.8%||58.9%||59.5%||59.3%||58.4%||59.4%||59.6%|
|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%|
|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|
|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|
|Number of payout cases ('000)||795||877||886||849||889||968||972||923||972||1,031|
|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|
|E/I loss ratio||58.8%||59.3%||57.6%||55.6%||58.7%||59.8%||59.4%||55.9%||59.2%||59.6%|
|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%|
Recurring revenue was up JPY2.7bn (+11.6% YoY) to JPY26.3bn, thanks to increases of JPY2.1bn in underwriting revenue, JPY100mn in investment revenue, and JPY534mn in other recurring revenue. The company had 981,606 policies in force (+12.7% YoY), with 119,347 new policies (11.2% YoY).
Recurring profit was up
JPY279mn YoY to JPY1.6bn. The number of policies in force and underwriting revenue showed
steady growth, and earned premiums increased JPY2.1bn YoY. Expenses such as
claims paid (+JPY1.3bn YoY) and agency fees (+JPY441mn YoY) grew.
Number of new policies: The total number of new policies in the newborn and general categories combined was 119,347 (+11.2% YoY). The renewal rate of existing policies edged up by 0.2pp YoY to 87.7%, and the number of policies in force was 981,606 at end-September 2021 (+12.7% YoY).
E/I loss ratio (includes loss adjustment expenses): The loss ratio, a recurring expense parameter, rose 0.1pp YoY to 59.6% (Shared Research estimate).
Expense ratio: The expense ratio was up 0.8pp YoY to 38.0%.
Combined ratio: The combined ratio was 97.6% (Shared Research estimate), up 0.9pp YoY.
The number of animal hospitals accepting Anicom pet insurance increased by 144 YoY to 6,629.
For FY03/22, the company forecasts consolidated recurring revenue of JPY53.0bn (+10.3% YoY), recurring profit of JPY3.3bn (+19.7% YoY), and net income attributable to owners of the parent of JPY2.3bn (+45.6% YoY). It thus expects recurring revenue to vastly exceed the target of its medium-term business plan.
With regard to the recurring profit forecast of JPY3.3bn, the company noted that it anticipates recurring profit of JPY660mn in Q1, then sees recurring profit rising to JPY1.5bn by end-Q2, JPY2.3bn by end-Q3, ultimately finishing the year at JPY3.3bn.
It believes it would be prudent to steadily capture new demand seen recently in the pet insurance market and will therefore pursue top line growth in FY03/22, avoiding any curbs on new policy acquisition.
New policy acquisition: Continuing strong policy acquisition, reflecting the rising demand for pets
Impact of COVID-19 pandemic: Ongoing uptrend in claims as the frequency of hospital visits remains high
Earnings from other than pet insurance: Steady increase
Competition in policy acquisition: Ongoing uptrend in acquisition costs due to high commissions paid to large pet shops
In response to an increase in insurance payouts, Anicom will implement preventive measures such as appropriate referrals to veterinary hospitals based on early detection of disease predictors (using gut microbiota measurement, AI technology, and other means) and widespread use of standardized medical care.
In response to competition for policies, the company aims to make a further shift to acquisition methods that do not rely on high-cost agencies (by strengthening its general sales channel).
The company aims to monetize the genetic screening business as an independent business, which will lead to reduction in payouts. Furthermore, it aims to expand its newborn sales channel in the breeder support business.
Gut microbiota measurement
The company aims to reduce payouts and improve the renewal rate. In addition, it plans to develop and sell pet foods and develop and offer new treatment methods.
Anicom aims to monetize the regenerative medicine business as an independent business, which will lead to reduction in payouts. The company will also expand the scope of application and develop new technologies.
Flowchart for standardized medical care
The flowchart will lead to reduction in payouts. The company also aims to improve customer satisfaction and expand its appointment service.
Utilization of AI
The company aims to reduce payouts and provide proprietary insurance services. In addition, it will develop new services such as individual pet identification.
Starting with FY03/20, Anicom has switched to a fixed method of setting numerical targets for its medium-term business plan covering three years and will evaluate achievement at the end of that three-year period. This shift from the rolling plan it previously used accompanies the company’s announcement that is going all out to realize its goal of becoming a “preventive insurance company” and is based on the company’s desire to demonstrate that it is making a serious, unambiguous commitment to shareholders and investors.
Recurring revenue: FY03/22 recurring revenue of around JPY50bn, three-year CAGR of over 10% (from JPY35.8bn in FY03/19)
Recurring profit: FY03/22 recurring profit of around JPY4.0bn, three-year CAGR of over 20% (from JPY2.3bn in FY03/19)
ROE: Approximately 10–12%
Solvency margin: Approximately 380% (non-consolidated non-life insurance company basis), 400% in the longer term
Shareholder return policy: Based on principles of financial soundness and asset efficiency, maintain ongoing and stable profit distributions over the longer term
In FY03/21, the second year of the medium-term plan, Anicom achieved 105.4% of its recurring revenue projection, but just 95.1% of its recurring profit projection. In terms of key performance indicators, the numbers of both policies in force and new policies were above plan, but both the E/I loss ratio and expense ratio fell short of targets.
|MTP 1st year||MTP 2nd year||MTP final year|
|Act.||Act.||Act.||% of Est.||Est.||MTP|
|Recurring revenue||(JPYmn)||35,829||41,465||48,049||45,600||105.4%||53,000||About 50,000|
|Recurring profit||(JPYmn)||2,278||2,189||2,758||2,900||95.1%||3,300||About 4,000|
|Key performance indicators|
|Number of policies in force||(policies)||753,332||816,254||921,873||885,000||104.2%||1,010,000|
|Number of new policies||(policies)||150,625||167,318||213,368||183,600||116.2%||223,000|
|Number of claims paid||('000)||3,204||3,407||3,752||3,586||104.6%||4,000|
|Number of hospitals accepting Anicom||(hospitals)||6,417||6,466||6,541||6,650||98.4%||6,650|
|E/I loss rate||(%)||59.0%||57.8%||58.4%||57.6%||+0.8pp||58.0%||57–59%|
|Operating expense ratio (earned premiums basis)||(%)||34.5%||37.1%||37.7%||37.2%||+0.5pp||38.0%||34–37%|
|Combined ratio (earned premiums basis)||(%)||93.5%||94.9%||96.1%||94.8%||+1.3pp||96.0%|
|Solvency margin (parent)||(%)||379.8%||357.0%||355.5%||Approx. 370%||Approx. -14.5%||Approx. 350%||Approx. 380%|
The company self-assessed its progress on its medium-term plan and estimates that it would be able to achieve its recurring profit target of JPY4.0bn (three-year CAGR of 20%) if progress toward the recurring revenue target of JPY47.7bn were as expected (three-year CAGR of 10%). That is to say, it believes it could realize the targets by curbing the acquisition of new policies, thereby easing the expense burden.
However, rather than focusing on profit in the short term, Anicom believes it would be prudent to steadily capture the new demand for insurance seen recently (as general consumers show interest in buying pets in response to more time spent at home due to the COVID-19 pandemic) and will therefore pursue top line growth in FY03/22, avoiding any curbs on new policy acquisition.
In the mainstay pet insurance business, the company set out to expand revenue, reduce costs, and upgrade its systems to make them more robust.
Under its new medium-term plan, the company plans to undertake the following six major initiatives with the aim of more completely actualizing the previous medium-term plan.
Increase sales through general sales channel, making it at least as important as newborn sales channel.
Increase revenue and earnings with sales strategy centered around genetic screening services. Make business approaches to pet shops, breeders, organizations involved in pet adoption, and matching websites.
Invest in properties with a theme of coexisting with animals and undertake various other measures aimed at increasing returns on its securities portfolio.
Work to bring down claims payments with the help of Big Data analysis, especially analysis of data from gut microbiota medical checkups, using this to prevent illnesses or diagnose them as early as possible and find the most appropriate medical treatments and payment methods.
Expand services that will further build relationships with customers. Conduct efforts such as improving call center operations and making business operations more customer-focused.
Build a solid foundation for systems that can maintain Big Data database, and rebuild core system.
FY03/22 performance targets at Anicom’s pet insurance business include 1) CAGR of roughly 10% for insurance underwriting revenue and investment revenue combined; 2) loss ratio of 57%-59% versus 58.4% in FY03/21; 3) expense ratio of 34%-37% versus 37.7% in FY03/21; and 4) solvency margin of roughly 380% rising to 400% over the long term.
Starting in FY03/20, Anicom considers itself to be in its “second founding period” and is aiming to expand businesses other than pet insurance. Initiatives can be grouped roughly into three categories encompassing businesses from upstream to downstream.
▷ Promote veterinary hospital and clinic succession and practical applications for cell therapy and regenerative medicine.
▷ Expand the genetic screening business, commercialize the breeding support business, and expand matching websites (upstream/midstream).
▷ Develop businesses that take elderly people and pets into consideration, such as end-of-life animal care facilities, real estate development (downstream), and pet food.
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.
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.
|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.|
|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%.|
|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.|
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.
|(JPY)||Dog A||Dog B||Dog C||Dog D||Dog E||Cats||Birds||Rabbits||Ferrets|
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.
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.
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.
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.
|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%|
|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%|
|Collars and leashes||5,112||5,387||5,949||10.4%||1,929||2,354||1,614||-31.4%|
|Utilities (for pets)||19,152||15,113||12,449||-17.6%||15,920||15,183||12,264||-19.2%|
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.
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.
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.
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.
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.
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.
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.
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%.)
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.
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.