R

Anicom Holdings / 8715
COVERAGE INITIATED ON:

2014.06.06

LAST UPDATE:

2021.09.07

Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is toprovide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate,
objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will
always present opinions from company management as such. Our views are ours where stated. We do not try toconvince or influence, only inform. We appreciate your suggestions and feedback. Write to us at
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R
CoverageAnicom Holdings / 8715
LAST UPDATE: 2021.09.07

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

INDEX
How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent
earnings. First-time readers should start at the business section later in the report.

Executive summary ----------------------------------------------------------------------------------------------------------------------------------- 3
Business overview -------------------------------------------------------------------------------------------------------------------------------------------------3
Earnings trends-----------------------------------------------------------------------------------------------------------------------------------------------------4
Strengths and Weakness ----------------------------------------------------------------------------------------------------------------------------------------4
Key financial data ------------------------------------------------------------------------------------------------------------------------------------- 5
Recent updates ---------------------------------------------------------------------------------------------------------------------------------------- 6
Trends and outlook ----------------------------------------------------------------------------------------------------------------------------------- 7
Monthly data--------------------------------------------------------------------------------------------------------------------------------------------------------7
Quarterly trends and results -----------------------------------------------------------------------------------------------------------------------------------8
Company forecast for FY03/22 ------------------------------------------------------------------------------------------------------------------------------ 13
Medium-term business plan covering 2019-2021 (out May 2019) ---------------------------------------------------------------------------- 15
Business ------------------------------------------------------------------------------------------------------------------------------------------------ 17
Business description -------------------------------------------------------------------------------------------------------------------------------------------- 17
Non-life insurance business (pet insurance; 90.0% of recurring revenue) ------------------------------------------------------------------- 18
New businesses (other businesses; 6.5% of recurring revenue)--------------------------------------------------------------------------------- 26
Online Pet Services (3.5% of recurring revenue) ----------------------------------------------------------------------------------------------------- 29
Profitability analysis --------------------------------------------------------------------------------------------------------------------------------------------- 32
Market and value chain---------------------------------------------------------------------------------------------------------------------------- 35
Market scale ------------------------------------------------------------------------------------------------------------------------------------------------------- 35
Strengths, weaknesses ----------------------------------------------------------------------------------------------------------------------------- 38
Strengths ----------------------------------------------------------------------------------------------------------------------------------------------------------- 38
Weaknesses -------------------------------------------------------------------------------------------------------------------------------------------------------- 38
Past results and financial statements---------------------------------------------------------------------------------------------------------- 39
Income statement ----------------------------------------------------------------------------------------------------------------------------------------------- 54
Balance sheet ----------------------------------------------------------------------------------------------------------------------------------------------------- 55
Cash flow statement -------------------------------------------------------------------------------------------------------------------------------------------- 56
Other information ---------------------------------------------------------------------------------------------------------------------------------- 57
History -------------------------------------------------------------------------------------------------------------------------------------------------------------- 57
Top management ----------------------------------------------------------------------------------------------------------------------------------------------- 58
ESG initiatives----------------------------------------------------------------------------------------------------------------------------------------------------- 58
Major shareholders (as of end-March 2021) ----------------------------------------------------------------------------------------------------------- 59
News and topics ------------------------------------------------------------------------------------------------------------------------------------- 60
Company profile ------------------------------------------------------------------------------------------------------------------------------------------------- 61

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CoverageAnicom Holdings / 8715
LAST UPDATE: 2021.09.07

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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 otherhousehold 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 othernon-insurance businesses.
◤ Anicom’s mainstay pet insurance products reimburse policyholders for a fixed proportion of the expenses incurred inconnection 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 frommonthly 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 carriedforward 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 growthsince then and this over-the-counter insurance payout system has become the de facto industry standard. In an effort toprevent hereditary diseases in pets, Anicom is working to establish new services both upstream and downstream as a way ofhelping 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 thestart 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 atveterinary 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), andpolicyholders (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 forpreventive 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, thecompany believes that adding new health check services for various diseases and promoting home care through diet andother measures will reduce insurance payouts in the future. It expects that providing value-added services such as Dobutsu

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CoverageAnicom Holdings / 8715
LAST UPDATE: 2021.09.07

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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 FY03/21, 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 madeit clear that under its new medium-term plan it aims to realize its long-standing vision of becoming a “preventive insurancecompany,” 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 willfunction 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.

Strengths and Weakness
Anicom’s strengths include 1) its over-the-counter insurance payout system that allows pet owners to show their animal healthinsurance cards at their local vet and make settlement, now the industry standard at veterinary hospitals and clinics; 2) theadvantage 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.

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CoverageAnicom Holdings / 8715
LAST UPDATE: 2021.09.07

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Key financial data
Income statement(JPYmn)Recurring revenue
YoY
Underwriting revenue
Investment revenue
Other recurring revenue
Recurring expenses
YoY
Underwriting expenses
Operating and general admin. expenses
Other
Recurring profit
YoY
Recurring profit margin
Net income
YoY
Net marginPer-share data
Shares issued (year-end; '000)
EPS
EPS (fully diluted)
Dividend per share
Book value per share
ROE
Balance sheet (JPYmn)
Cash and deposits
Investment securities
Tangible fixed assets
Intangible assets
Other assets
Allowance for doubtful accounts
Deferred tax assets
Total assets

FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 FY03/22
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Est.
13,845 16,186 18,366 22,638 26,506 28,978 32,339 35,829 41,465 48,049 53,000
11.6%
10.8%
15.7%
15.9%
10.3%
24.7%
16.9%
13.5%
23.3%
17.1%
9.3%
31,29034,535
39,10543,312
13,592
15,781
18,087
21,73325,37028,068
420
383
496
488
108
260
108
522
690
504
628
910
1,863
4,248
144
143
171
382
446
405
13,508 15,348 17,633 21,387 24,377 26,606 30,486 33,550 39,275 45,290
25.5%
13.6%
14.9%
21.3%
14.0%
9.1%
14.6%
10.1%
17.1%
15.3%
21,771
24,071
27,21230,512
9,797
11,45013,44815,92017,393
18,967
3,392
3,632
3,982
4,905
6,699
7,273
8,479
9,112
11,153
13,283
236
367
910
1,495
319
266
203
562
285
366
337
837
733
1,250
2,129
2,372
1,853
2,278
2,189
2,758
3,300
22.9%
-3.9%
26.0%
19.7%
-1.5% 148.4% -12.4%
70.5%
70.3%
11.4% -21.9%
2.4%
5.2%
4.0%
5.5%
8.0%
8.2%
5.7%
6.4%
5.3%
5.7%
6.2%
1,320
1,610
1,525
1,586
2,310
465
640
447
829
1,399
1,568
22.0%
-5.3%
4.0%
45.6%
10.5%
37.6% -30.2%
85.5%
68.8%
12.1% -15.8%
4.1%
4.5%
3.7%
3.3%
4.4%
3.4%
4.0%
2.4%
3.7%
5.3%
5.4%

16,646
28.2
25.7
424.8
6.8%

17,169
38.0
35.2
454.6
8.6%

17,293
26.0
24.1
477.0
5.6%

17,842
47.4
44.4
519.6
9.5%

17,934
78.2
77.5
5.0
596.6
14.0%

17,946
86.9
86.2
5.0
676.1
13.7%

18,028
73.5
73.0
5.0
744.3
10.3%

20,211
84.7
84.0
5.0
1,092.7
9.1%

20,226
75.5
75.4
5.0
1,147.0
6.7%

81,309
19.6
19.6
1.3
316.5
6.5%

5,098
7,444
93
387
1,981
-5
353
15,355

4,986
9,272
86
373
1,940
-7
219
16,872

4,457
11,367
118
477
2,112
-13
116
18,634

4,217
15,108
250
566
1,945
-13
263
22,337

7,566
10,739
1,527
653
4,297
-16
433
25,192

15,242
5,914
1,432
904
3,876
-140
597
28,123

19,078
4,625
1,359
1,462
3,908
-88
623
31,16429,643
4,660
1,367
1,506
4,344
-76
718
42,39024,427
9,999
1,858
3,956
4,263
-75
1,041
45,59831,683
11,667
2,520
3,466
5,208
-78
898
55,459Reserve for insurance contract
Other liabilities
Provision for bonuses
Reserve for special laws
Total liabilities

7,152
1,073
55
8,283

7,702
1,292
69
2
9,067

8,768
1,520
86
10
10,385

10,5282,411
103
22
13,066

11,8882,414
157
32
14,492

12,993
2,635
172
41
15,842

14,5082,845
173
48
17,576

16,0413,867
191
54
20,156

17,9774,018
209
68
22,273

19,626
4,787
247
80
29,741

Shareholders' equity
Valuation and transaction adjustments
Non-controlling interests
Total net assets
Total liabilities and equity
Cash flow statement (JPYmn)
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Financial indicators
ROA (RP-based)
ROE
ROIC (pre-tax)
Equity ratio
Combined ratio (fully earned basis)
E/I loss ratio
Expense ratio (earned premiums basis)
Solvency margin ratio

7,067
3
7,071
15,355

7,795
9
7,805
16,872

8,306
-57
8,248
18,634

9,272
-1
9,270
22,337

10,762-123
10,69925,192

12,233-100
12,281
28,123

13,546-128
13,587
31,164

22,233-150
22,23442,39023,719-530
23,32545,59825,64869
25,71755,4591,879-1,04428

1,507-1,85285

2,009-2,05260

3,094-2,963
135

1,960
2,489
89

3,231
4,233
-79

3,393
253
-10

4,359
-487
6,693

4,246
-10,263-99

4,231-2,129
5,154

2.3%
6.8%
2.9%
46.0%
97.5%
64.3%
33.2%
307.2%

5.2%
8.6%
7.0%
46.3%
97.2%
67.5%
29.7%
281.3%

4.1%
5.6%
5.7%
44.3%
95.3%
66.7%
28.6%
295.1%

6.1%
9.5%
9.2%
41.5%
92.7%
64.4%
28.3%
288.7%

9.0%
14.1%
14.3%
42.2%
91.2%
60.1%
31.1%
282.6%

8.9%
13.7%
14.3%
43.1%
91.0%
58.9%
32.1%
295.6%

6.3%
10.3%
9.9%
43.1%
94.4%
59.2%
35.2%
305.6%

6.2%
9.1%
8.8%
52.1%
93.5%
59.0%
34.5%
379.8%

5.0%
6.7%
6.7%
50.9%
94.9%
57.8%
37.1%
357.0%

5.5%
6.5%
7.8%
46.4%
96.1%
58.4%
37.7%
355.5%

28.4-

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.

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CoverageAnicom Holdings / 8715
LAST UPDATE: 2021.09.07

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Recent updates
Highlights
On September 7, 2021, Shared Research updated the report following interviews with Anicom Holdings, Inc.

On August 20, 2021, the company announced its July 2021 monthly management parameters; see the Monthly data section
under Trends and outlook for details.

On August 6, 2021, the company announced earnings results for Q1 FY03/22; see the results section for details.

On the same day, the company announced its June 2021 monthly management parameters; see the Monthly data section underTrends and outlook for details.

On June 18, 2021, the company announced its May 2021 monthly management parameters; see the Monthly data section underTrends and outlook for details.

On June 15, 2021, Shared Research updated the report following interviews with the company.

For previous releases and developments, please refer to the News and topics section.

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CoverageAnicom Holdings / 8715
LAST UPDATE: 2021.09.07

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Trends and outlook
Monthly data
(JPYmn)Net premiums written
YoY

No. of applications for Dobutsu Kenkatsu
YoY

No. of genetic testing specimens
YoY(JPYmn)Net premiums written
YoY

No. of applications for Dobutsu Kenkatsu

FY03/21
Apr
May
3,433
3,660
12.1%

9,290

96.6%

Jun
3,499

11.8%

10,611

61.3%

Jul
3,464

10.2%

12,770

97.8%

Aug
3,577

11.5%

11,572

75.3%

32.9%

7,643

8,631

7,922

8,030

9,992

-8.8%

-32.6%-19.0%-24.2%-43.0%-25.6%-37.2%-51.3%-34.3%-46.2%-19.2%

12.7%

FY03/22
Apr
May
3,721
4,061

Jun
3,837

Jul
3,789

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

8.4%

14,116

11.0%

9.7%

9.4%

16,286

15,495

14,026

YoY

20.4%

38.2%

-12.1%-11.2%

YoY

-

-

-

YoY

23.1%

8.7%

14,356

8,409

21.2%

YoY

49.6%

10.7%

13,190

Mar
3,805

8,885

21.3%

No. of PV for animal hospital search site

53.9%

10.7%

14,332

Feb
3,650

9,217

53.5%

YoY

40.5%

10.8%

12,969Jan
3,798

10,036

10,117

No. of PV for Animal Health Encylopedia

52.0%

10.8%

12,162

Dec
3,660

9,282

9,978

No. of patent applications

66.4%

9.8%

14,081

Nov
3,579

7,323

51.9%

No. of PARM member hospitals

67.4%

10.9%

12,721

Oct
3,627

8,288

YoY

No. of genetic testing specimens

12.2%

12,545

Sep
3,588

229

239

8,161
266

8,914
298

-

11

14

16

18

-

-

-

-

-

-

-

-

-

-

-

-

713,717 887,120 905,376 815,211
322,206 327,035 299,580 296,226

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 toillness 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.

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CoverageAnicom Holdings / 8715
LAST UPDATE: 2021.09.07

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Quarterly trends and results
Quarterly performance (cumulative)
Cumulative(JPYmn)Recurring revenue

FY03/20

FY03/21
Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

9,989

20,04530,58541,465

11,68923,59535,68948,04913,25913,00053,000

11.2%

10.3%

YoY

14.7%

16.0%

16.5%

15.7%

17.0%

17.7%

16.7%

15.9%

13.4%

Underwriting revenue

9,511

19,04328,87939,105

10,56021,19032,05843,312

11,620

13.6%

14.1%

14.1%

13.2%

11.0%

11.3%

11.0%

10.8%

10.0%

80

193

374

496

113

284

365

488

263

-2.4%

30.4%

38.0%

29.5%

41.3%

47.2%

-2.4%

-1.6%

132.7%

Interest and dividend income

42

99

155

219

69

133

190

253

70

Gains on sale of securities

38

93

219

276

44

150

174

233

193

YoY

Investment revenue
YoY

Other recurring revenue% of recurring revenue
Recurring expenses

397

809

1,331

1,863

1,015

2,120

3,265

4,248

1,375

4.0%

4.0%

4.4%

4.5%

8.7%

9.0%

9.1%

8.8%

10.4%

9,814

19,547

29,212

39,275

11,13822,26533,51945,29012,561

YoY

20.8%

22.6%

19.6%

17.1%

13.5%

13.9%

14.7%

15.3%

12.8%

% of recurring revenue

98.2%

97.5%

95.5%

94.7%

95.3%

94.4%

93.9%

94.3%

94.7%

Underwriting expenses

7,005

13,644

20,251

27,212

7,688

15,12522,67030,512

8,502

YoY

18.5%

19.4%

15.7%

13.0%

9.8%

10.9%

11.9%

12.1%

10.6%

% of recurring revenue

70.1%

68.1%

66.2%

65.6%

65.8%

64.1%

63.5%

63.5%

64.1%

Net premiums written

4,736

9,852

15,16020,492

5,495

11,346

17,344

23,226

6,168

YoY

7.7%

8.7%

9.9%

11.0%

16.0%

15.2%

14.4%

13.3%

12.2%

% of recurring revenue

47.4%

49.1%

49.6%

49.4%

47.0%

48.1%

48.6%

48.3%

46.5%

Loss adjustment expenses

263

525

813

1,109

289

561

832

1,098

275

YoY

1.9%

5.2%

6.8%

10.6%

9.9%

6.9%

2.3%

-1.0%

-4.8%

% of recurring revenue

2.6%

2.6%

2.7%

2.7%

2.5%

2.4%

2.3%

2.3%

2.1%

869

1,747

2,672

3,674

1,059

2,158

3,308

4,539

1,299

YoY

17.3%

17.2%

18.5%

19.4%

21.9%

23.5%

23.8%

23.5%

22.7%

% of recurring revenue

8.7%

8.7%

8.7%

8.9%

9.1%

9.1%

9.3%

9.4%

9.8%

Provision for outstanding losses and claims

259

385

328

179

122

209

260

211

126

Provision for underwriting reserves

876

1,134

1,276

1,756

721

850

924

1,437

631

Unearned premiums

570

817

1,033

1,404

539

835

1,102

1,488

564

Catastrophe reserves

306

316

242

351

181

14

-178

-50

67

1

1

6

109

-

38

41

141

33

0.0%

0.0%

0.0%

0.3%

0.0%

0.2%

0.1%

0.3%

0.2%

Commissions and collection fees

Investment expenses% of recurring revenue
Operating and general admin. expenses

2,647

5,553

8,392

11,153

3,114

6,433

9,787

13,283

3,608

YoY

22.9%

27.4%

26.1%

22.4%

17.6%

15.8%

16.6%

19.1%

15.9%
27.2%

% of recurring revenue

26.5%

27.7%

27.4%

26.9%

26.6%

27.3%

27.4%

27.6%

Other recurring expenses

160

348

561

800

334

668

1,019

1,353

417

% of recurring revenue

1.6%

1.7%

1.8%

1.9%

2.9%

2.8%

2.9%

2.8%

3.1%

Recurring profit

FY03/22

FY03/22

Q1

Q1

Est.

175

497

1,372

2,189

550

1,330

2,169

2,758

698

660

3,300

YoY

-70.3%-62.9%-25.2%-3.9%

214.3%

167.2%

58.1%

26.0%

26.9%

20.0%

19.7%

RPM

1.8%

2.5%

4.5%

5.3%

4.7%

5.6%

6.1%

5.7%

5.3%

5.1%

6.2%

4

9

11

14

49

49

54

Extraordinary gains
Extraordinary losses
Net income
YoY
Net margin

8

26

30

42

7

293

298

400

15

104

344

976

1,525

350

718

1,300

1,586

486

2,310

-75.7%-63.9%-24.4%-5.3%

236.5%

108.7%

33.2%

4.0%

38.9%

45.6%

1.0%

1.7%

3.2%

3.7%

3.0%

3.0%

3.6%

3.3%

3.7%

4.4%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

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Quarterly performance
FY03/22

FY03/21

Quarterly

FY03/20(JPYmn)

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

9,989

10,056

10,54010,88011,68911,906

12,094

12,36013,259

YoY

14.7%

17.3%

17.4%

13.7%

17.0%

18.4%

14.7%

13.6%

13.4%

Underwriting revenue

9,511

9,532

9,836

10,226

10,560

10,63010,868

11,254

11,620

13.6%

14.6%

14.0%

11.0%

11.0%

11.5%

10.5%

10.1%

10.0%

80

113

181

122

113

171

81

123

263

Interest and dividend income

42

57

56

64

69

64

57

63

70

Gains on sale of securities

38

55

126

57

44

106

24

59

193

Recurring revenue

YoY

Investment revenue

Other recurring revenue% of recurring revenue

397

412

522

532

1,015

1,105

1,145

983

1,375

4.0%

4.1%

5.0%

4.9%

8.7%

9.3%

9.5%

8.0%

10.4%
12,561

9,814

9,733

9,665

10,063

11,138

11,127

11,254

11,771

YoY

20.8%

24.4%

13.9%

10.3%

13.5%

14.3%

16.4%

17.0%

12.8%

% of recurring revenue

98.2%

96.8%

91.7%

92.5%

95.3%

93.5%

93.1%

95.2%

94.7%

Recurring expenses

Underwriting expenses

7,005

6,639

6,607

6,961

7,688

7,437

7,545

7,842

8,502

YoY

18.5%

20.4%

8.9%

5.9%

9.8%

12.0%

14.2%

12.7%

10.6%

% of recurring revenue

70.1%

66.0%

62.7%

64.0%

65.8%

62.5%

62.4%

63.4%

64.1%

Net premiums written

4,736

5,116

5,308

5,332

5,495

5,851

5,998

5,882

6,168

YoY

7.7%

9.6%

12.3%

14.2%

16.0%

14.4%

13.0%

10.3%

12.2%

% of recurring revenue

47.4%

50.9%

50.4%

49.0%

47.0%

49.1%

49.6%

47.6%

46.5%

Loss adjustment expenses

263

262

288

296

289

272

271

266

275

YoY

1.9%

8.7%

9.9%

22.3%

9.9%

3.8%

-5.9%

-10.1%-4.8%% of recurring revenue

2.6%

2.6%

2.7%

2.7%

2.5%

2.3%

2.2%

2.2%

2.1%

869

878

925

1,002

1,059

1,099

1,150

1,231

1,299

YoY

17.3%

17.2%

21.1%

21.7%

21.9%

25.2%

24.3%

22.9%

22.7%

% of recurring revenue

8.7%

8.7%

8.8%

9.2%

9.1%

9.2%

9.5%

10.0%

9.8%

Provision for outstanding losses and claims

259

126

-57

-149

122

87

51

-49

126

Provision for underwriting reserves

876

258

142

480

721

129

74

513

631

Unearned premiums

570

247

216

371

539

296

267

386

564

Catastrophe reserves

306

10

-74

109

181

-167

-192

128

67

1

-

5

103

-

38

3

100

33

0.0%

-

0.0%

0.9%

0.0%

0.3%

0.0%

0.8%

0.2%

Commissions and collection fees

Investment expenses% of recurring revenue
Operating and general admin. expenses

2,647

2,906

2,839

2,761

3,114

3,319

3,354

3,496

3,608

YoY

22.9%

31.8%

23.6%

12.3%

17.6%

14.2%

18.1%

26.6%

15.9%
27.2%

% of recurring revenue

26.5%

28.9%

26.9%

25.4%

26.6%

27.9%

27.7%

28.3%

Other recurring expenses

160

188

213

239

334

334

351

334

417

% of recurring revenue

1.6%

1.9%

2.0%

2.2%

2.9%

2.8%

2.9%

2.7%

3.1%

Recurring profit

175

322

875

817

550

780

839

589

698

YoY

-70.3%-57.1%

77.5%

83.6%

214.3%

142.2%-4.1%-27.9%

26.9%

RPM

5.3%

1.8%

3.2%

8.3%

7.5%

4.7%

6.6%

6.9%

4.8%

Extraordinary gains

4

5

2

3

-

49

-

5

-

Extraordinary losses

8

18

4

12

7

286

5

102

15

Net income
YoY
Net margin
Recurring profit (ex. catastrophe reserves)
YoY

104

240

632

549

350

368

582

286

486

-75.7%-54.3%

87.0%

72.1%

236.5%

53.3%

-7.9%

-47.9%

38.9%

1.0%

2.4%

6.0%

5.0%

3.0%

3.1%

4.8%

2.3%

3.7%

481

332

801

926

731

613

647

717

765

-28.5%-35.7%

76.4%

25.3%

52.0%

84.6%

-19.2%-22.6%

4.7%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

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Key indicators
Cumulative
Number of policies in force
YoY
YoY change

Number of newly acquired policies

FY03/20

FY03/21

FY03/22

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

766,774

781,368

796,167

816,254842,754

870,987

896,247

921,873

952,078

7.4%

7.1%

7.4%

8.4%

9.9%

11.5%

12.6%

12.9%

13.0%

52,87851,52654,52662,92275,98089,619100,080

105,619

109,324

40,20480,533

121,183

167,318

53,456107,295

159,368

213,368

60,730

YoY

6.6%

6.2%

7.5%

11.1%

33.0%

33.2%

31.5%

27.5%

13.6%

YoY change

2,478

4,681

8,430

16,693

13,252

26,762

38,18546,050

7,274

795

1,672

2,558

3,407

889

1,857

2,829

3,752

6,448

6,463

2.3%

1.7%

Number of payout cases
YoY

Number of hospitals accepting Anicom
YoY

Earned premiums
Claims paid (incl. loss adjustment expenses)
Combined ratio
E/I loss ratio
Expense ratio (earned premium basis)
Quarterly

2.8%

8,941
5,259
95.8%
58.8%
37.0%

4.6%

5.6%

972

6,417

6.3%

6,466

11.8%

11.1%

10.6%

10.1%

0.6%

0.8%

0.4%

0.3%

1.4%

1.2%

1.7%

18,226
27,846
10,763
16,302
96.9% 95.8%
59.1%
58.5%
37.8%
37.3%
FY03/20

37,701
21,781
94.9%
57.8%
37.1%

10,021
5,906
95.6%
58.9%
36.7%

20,35530,956
12,116
18,436
96.7% 96.8%
59.5%
59.3%
37.2%
37.5%
FY03/2141,82424,535
96.1%
58.4%
37.7%

11,056
6,569
98.0%
59.4%
38.6%
FY03/22

6,477

6,485

6,505

6,541

9.3%

6,587

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

766,774

781,368

796,167

816,254842,754

870,987

896,247

921,873

952,078

13,442

14,594

14,79920,08726,50028,23325,26025,62630,20540,20440,32940,65046,13553,456

53,83952,07354,00060,730

YoY

6.6%

5.8%

10.2%

21.8%

33.0%

33.5%

28.1%

17.0%

13.6%

QoQ increase

2,332

125

321

5,485

7,321

383

-1,766

1,927

6,730

795

877

886

849

889

968

972

923

972

2.8%

6.2%

7.5%

8.7%

11.8%

10.4%

9.7%

8.7%

9.3%

11,056

Number of policies in force
QoQ increase

Number of newly acquired policies

Number of payout cases
YoY

Earned premiums

8,941

9,285

9,620

9,855

10,021

10,334

10,601

10,868Claims paid (incl. loss adjustment expenses)

5,259

5,504

5,539

5,479

5,906

6,210

6,320

6,099

6,569

Combined ratio

95.8%

97.8%

94.1%

91.9%

95.4%

97.5%

97.4%

94.3%

97.8%

E/I loss ratio

58.8%

59.3%

57.6%

55.6%

58.7%

59.8%

59.4%

55.9%

59.2%

Expense ratio (earned premium basis)

37.0%

38.5%

36.5%

36.3%

36.7%

37.7%

38.0%

38.4%

38.6%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

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Q1 FY03/22 results
Earnings summary▷

Recurring revenue:

JPY13.3bn (+13.4% YoY; 25.0% of the full-year company forecast)▷

Recurring expenses:

JPY12.6bn (+12.8% YoY)

Recurring profit:

JPY698mn (+26.9% YoY; 21.2%)

Net income*:

JPY486mn (+38.9% YoY; 21.0%)▷▷*Net income attributable to owners of the parent
Q1 FY03/22 recurring revenue was up JPY1.6bn (+13.4% YoY) to JPY13.3bn, thanks to YoY increases of JPY1.1bn in underwriting
revenue, JPY150mn in investment revenue, and JPY360mn in other recurring revenue. Despite an uncertain economic outlook as
the COVID-19 pandemic continued, demand for pet care and ownership stayed strong. The company had 952,078 policies inforce (+13.0% YoY), with a record-high 60,730 new policies (13.6% YoY).
Recurring profit was up JPY148mn YoY. The number of policies in force and underwriting revenue showed steady growth, andearned premiums increased JPY1.0bn YoY. Investment revenue was up JPY150mn YoY. On the other hand, there were increases inveterinary hospital visits and the average payout per claim, due to people spending more time at home and higher medical
examination fees due to the COVID-19 pandemic. This resulted in a JPY663mn YoY increase in claims paid. Also, agency fees grew
JPY240mn YoY. However, there was a boost to profit as provision for catastrophe reserves declined by JPY114mn YoY. Other
recurring revenue outside the insurance business, including animal hospital management, breeder matching, and genetic testing
grew steadily by JPY360mn YoY. The recurring profit margin was 5.3%, up 0.6pp YoY from 4.7%.

Recurring revenue
Q1 FY03/22 underwriting revenue was JPY11.6bn (+10.0% YoY). Growth in underwriting revenue was underpinned by a 13.0%
YoY increase in the number of policies in force and 13.6% YoY increase in new policies. Other non-insurance businesses,
including genetic testing services and veterinary hospital operations, generated recurring revenue of JPY1.4bn (+10.4% YoY),
thanks also to the consolidation of SIMNET. Q1 FY03/22 recurring revenue accordingly totaled JPY13.3bn (+13.4% YoY).
Recurring revenue was at 102.0% of the initial Q1 projection of JPY13.0bn, and 25.0% of the initial full-year projection of
JPY53.0bn.
Demand for pets remains robust, due in part to the fact that people are spending more time at home because of the pandemic.
Prices of pets have remained high. The company is strongly promoting initiatives targeting breeders in order to capture newcustomers and is enhancing sales measures using SIMNET’s breeder matching site Minna no Breeder.
SIMNET’s revenue is based on a fixed percentage of the price of pets that have been matched multiplied by the number ofmatches. Prices of pets have been rising in response to rising demand, which contributes to revenue, but as prices remain high,the company believes increasing the number of matches will be the greater factor in growing revenue.
Investment revenue grew 132.7% YoY to JPY263mn as returns from investment trusts and REITs as well as from bonds remainedsolid.
Other recurring revenue includes recurring revenue from non-insurance businesses such as the breeder matching site, animal
hospital operations, and genetic testing. Anicom aims for 10% of recurring revenue to come from non-insurance businesses, andin Q1 FY03/22 this goal was met with non-insurance businesses generating 10.4% of total recurring revenue, up 1.7pp from
8.7% in Q1 FY03/21. In Q1 FY03/22, the JPY932mn in recurring revenue from non-insurance businesses broke down as: (1)veterinary hospital support services JPY67mn (+14.3% YoY), (2) insurance agency business JPY3mn (+10.0% YoY), (3) advanced
veterinary medicine clinical research services JPY473mn (+23.9% YoY), and (4) other businesses JPY236mn (+177.0% YoY).
Revenue from veterinary clinic/hospital operations is included under advanced veterinary medicine clinical research services,while revenue from genetic testing is included under other businesses.

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Also, from FY03/21, Online Pet Services was included in the segment breakdown of recurring revenue. Revenue from thisbusiness in Q1 FY03/22 was JPY432mn (up 15.5% or JPY58mn YoY), representing the contribution of SIMNET’s breeder matchingand other services.

Recurring expenses
Total underwriting expenses of JPY8.5bn were up 10.6% YoY; this included net claims paid of JPY6.2bn, up 12.2% YoY on
increases in the frequency of hospital visits and number of policies in force, and commissions and collection fees paid to agents of
JPY1.3bn, up 22.7% YoY on an increase in the number of new policies and escalating competition. Provision for reserve foroutstanding losses and claims was JPY126mn (+3.3% YoY). Net commission and collection expenses increased due to new policy
acquisition, but more claims payments led to provision for catastrophe reserves declining by JPY114mn YoY, and provision forunderwriting reserves was 12.5% lower YoY at JPY631mn. Total recurring expenses of JPY12.6bn were up 12.8% YoY with SG&A
expenses of JPY3.6bn (+15.9% YoY), and on a consolidated basis the SG&A expense ratio rose 0.6pp YoY to 27.2%.

Recurring profit
Recurring profit was up JPY148mn YoY at JPY698mn. This put recurring profit at 105.8% of the initial Q1 FY03/22 projection of
JPY660mn, and 21.2% of the initial full-year projection of JPY3.3bn.

Net income
Net income rose 38.9% YoY to JPY486mn. This was 21.0% of the full-year projection of JPY2.3bn.

KPIs
▷

▷
▷
▷
▷

Number of new policies: The total number of new policies in the newborn and general categories combined was 60,730(+13.6% YoY). The renewal rate of existing policies edged up by 0.3pp YoY to 87.6%, and the number of policies in force was952,078 at end-June 2021 (+13.0% YoY).
E/I loss ratio (includes loss adjustment expenses): The loss ratio, a recurring expense parameter, rose 0.5pp YoY to 59.4%(Shared Research estimate).
Expense ratio: The expense ratio was up 1.9pp YoY to 38.6%.
Combined ratio: The combined ratio was 98.0% (Shared Research estimate), up 2.4pp YoY.
The number of animal hospitals accepting Anicom pet insurance increased by 110 YoY to 6,587.

Priority measures
Introduction of clinical practice flowcharts
Anicom seeks to reduce insurance payouts by optimizing (standardizing) noninsurance medical care, raising pet owners’
awareness of appropriate clinical practice, and providing appropriate treatment. To that end, it has created “symptom-specificflowcharts” and “standard clinical practice flowcharts,” and is working toward dissemination of the former among pet owners
and the latter among animal hospitals.
For pet owners, the aim is to provide symptom-specific details of home care and information with which to decide whether tovisit the veterinarian, and if a visit to the veterinarian is needed, provide information that enables pet owners to go throughtreatment with sufficient knowledge, also providing referrals to recommended hospitals based on symptoms, and helping to
make appointments. For animal hospitals, the company looks to provide information on standard clinical practice and help
eliminate excessive, wrong, or otherwise improper treatment. With the introduction also of regenerative medicine flowcharts,
Anicom aims to promote penetration of regenerative medicine, which cures the incurable.
The Veterinary Clinic Search Site also was revamped so that each owner can find the best hospital for their pet based on thesymptoms using clinical practice flowcharts. The search user interface was improved to highlight the benefits individual hospitals
offer and enhance convenience to pet owners.
For details on previous quarterly and annual results, please refer to the Historical performance section.

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Company forecast for FY03/22
Company forecast for FY03/22
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.

Forecast assumptions▷ 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
Factors affecting profit(JPYmn)Earnedpremiums

7,000

-

6,000
5,000
4,000

Claims
paid

2,049
Cons.
recurringprofit

3,932

Other
recurring
revenue

Agencycommissions

717

Catastrophe
reserves

153-

Investment
revenue Investment
expenses

77

141

1,536

Other
recurring
expenses

570

SG&A
expenses

1,654

Cons.
recurringprofit

3,000
2,000
1,000

2,758

3,300

Source: Shared Research based on company data

Strategy▷ In response to an increase in insurance payouts, Anicom will implement preventive measures such as appropriate referrals toveterinary hospitals based on early detection of disease predictors (using gut microbiota measurement, AI technology, andother 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).

Major initiatives


Genetic screening
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 anddevelop and offer new treatment methods.

Regenerative medicine

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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.

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Medium-term business plan covering 2019-2021 (out May 2019)
More than replacing performance targets, company makes clear commitment to shareholders
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.

Performance targets▷

Recurring revenue: FY03/22 recurring revenue of around JPY50bn, three-year CAGR of over 10% (from JPY35.8bn in FY03/19)▷

ROE: Approximately 10–12%▷▷▷

Recurring profit: FY03/22 recurring profit of around JPY4.0bn, three-year CAGR of over 20% (from JPY2.3bn in FY03/19)

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

Progress on medium-term business plan
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.
Progress on medium-term plan
MTP 1st year

Recurring revenue(JPYmn)Recurring profit(JPYmn)ROE
Key performance indicators
Number of policies in force
Number of new policies
Renewal rate
Number of claims paid('000)
Number of hospitals accepting Anicom
E/I loss rate
Operating expense ratio (earned premiums basis)
Combined ratio (earned premiums basis)
Solvency margin (parent)

MTP 2nd year

FY03/19

FY03/20

FY03/21

Act.

Act.

Act.

Initial Est.
% of Est.
45,600105.4%
2,900
95.1%

35,8292,278
9.1%

41,4652,189
6.7%

48,0492,758
6.5%

753,332
150,625

816,254
167,318

921,873
213,368

885,000
183,600

3,204
6,417

3,407
6,466

3,752
6,541

3,586
6,650
57.6%

87.7%

59.0%
34.5%
93.5%
379.8%

87.2%

57.8%
37.1%
94.9%
357.0%

87.7%

58.4%
37.7%
96.1%
355.5%

MTP final year

87.0%

37.2%
94.8%
Approx. 370%

104.2%
116.2%+0.7pp104.6%
98.4%+0.8pp+0.5pp+1.3ppApprox. -14.5%

FY03/22Est.

53,0003,300

MTP
About 50,000
About 4,000
10–12%

1,010,000
223,000

87.1%

4,000
6,650

58.0%
57–59%
38.0%
34–37%
96.0%
Approx. 350% Approx. 380%

Source: Shared Research based on company data

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.

Strategy
Pet insurance
In the mainstay pet insurance business, the company set out to expand revenue, reduce costs, and upgrade its systems to makethem more robust.

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Six major initiatives under new medium-term business plan
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.

Expand marketing efforts through general sales channel
Increase sales through general sales channel, making it at least as important as newborn sales channel.

Expand marketing efforts through 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.

Increase investment revenue
Invest in properties with a theme of coexisting with animals and undertake various other measures aimed at increasing returns on
its securities portfolio.

Bring down claim payments
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.

Increase customer satisfaction
Expand services that will further build relationships with customers. Conduct efforts such as improving call center operations andmaking business operations more customer-focused.

Upgrade IT systems
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.

New businesses: Drivers of corporate value creation in a second founding period
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 estatedevelopment (downstream), and pet food.

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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 businessspecializing 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 traditionallyused. 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 apreventive 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 ofpreventive 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 newpolicies and improve the renewal rate, while lowering the combined ratio by reducing the aggregate cost of insurance payouts
and ancillary services.
Performance
Underwriting revenue(JPYmn)Investment revenue

Other recurring revenue

48,04950,00041,46540,00030,00022,63820,00010,0000(JPYmn)Recurring profit (right axis)

7,267

10,800
4,317

7,228

6,442

FY03/08

FY03/09

9,216
141
71

9,003

FY03/10

11,107154
94

13,845144
108

10,85813,592

FY03/11

FY03/12

16,186143
260

18,366
171
108

382
522

26,506446
690

28,978405
504

32,339628
420

35,829

1,863

910

496

5,000

4,248
488

383

4,000
3,000
2,000
1,000

15,781

18,087

21,73325,37028,06831,29034,535

39,10543,312

FY03/13

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

FY03/210

Source: Shared Research based on company data

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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, andsurgery 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, andsurgery, and can be applied to medical treatment at any veterinary hospital or clinic in Japan. Depending on the premiums thepolicyholder 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 tohospitalization and surgery. In October 2019, it also launched Dobutsu Kempo Senior, a product specifically for dogs and catseight 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.

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Insurance products

Product nameSales channel

Product features

Dobutsu Kempo Family

General agencies
Pet shops
Direct sales

Guarantees either 50% or 70% of medical fees for sickness or injuries of ananimal during a one-year coverage period; policyholders choose either 50%
or 70% when they sign a contract.

Dobutsu Kempo Petit

General agencies
Pet shops
Direct sales

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 theremaining 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.

Pet shops

Dobutsu Kempo Smile Baby expires after one month; before expiration,
policyholders make an application for additional one-year coverage forpayouts of either 50% or 70%; policyholders can choose the coverage ratio
when they sign a contract.

Pet shops

Covers dogs, cats, birds, rabbits, ferrets, momongas, squirrels, hamsters,
mice, guinea pigs, hedgehogs, turtles, lizards, chinchillas, and snakes, soldthrough 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.

Pet shops

Covers dogs and cats aged eight or older (no upper limit) traditionally out ofrange 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 thecontract during a one-year coverage period.

Dobutsu Kempo Smile Family

Dobutsu Kempo Happy

Dobutsu Kenkatsu SeniorSource: 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, theprice declines after one year of age. Subsequently, the premium rises each year. The new premium is applied when the policy isrenewed 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.

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Annual premiums according to breeds (70% Standard Plan; in JPY; revised in December 2018)

Age
0
1
2
3
4
5
6
7

Dog A
35,63033,94034,45036,63043,75047,33052,18058,180Dog B
39,16037,27037,51039,01048,72052,15056,52061,630Dog C
42,70040,75041,50043,89052,49056,42061,62067,930Dog D Dog E
48,870 55,970
46,630 53,610
47,490 55,220
50,270 59,210
64,100 75,540
71,010 84,650
77,840 93,810
85,400 101,880

Cat
36,32034,59034,74035,20036,52037,84039,71042,120Bird
30,75030,75030,75030,750

Rabbit35,68036,47039,98044,160Ferret36,69037,37045,40059,400Source: 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 andpercentage of policies by age for dogs in FY03/19.
Number and percentage of policies by age for dogs
0 yrs
1 yr
2 yrs
3 yrs
4 yrs
5 yrs
6 yrs
7 yrs
8 yrs
9 yrs
10 yrs
11 yrs
12 yrsTotal

FY03/05
29,887
19,889
9,879
5,642
3,149
2,694
1,896
1,537
1,226
543
181
38
0
76,561

0 yrs
1 yr
2 yrs
3 yrs
4 yrs
5 yrs
6 yrs
7 yrs
8 yrs
9 yrs
10 yrs
11 yrs
12 yrsTotal

FY03/05 FY03/06 FY03/07 FY03/08 FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19
39.0%
32.6%
31.9%
28.3%
19.5%
24.0%
19.9%
17.9%
15.5%
15.6%
14.0%
14.4%
14.6%
14.9%
13.5%
26.0%
25.5%
20.7%
18.0%
17.2%
11.4%
15.7%
13.9%
13.1%
11.5%
11.7%
10.4%
10.7%
11.0%
11.8%
12.9%
16.7%
17.2%
15.5%
15.1%
13.5%
9.6%
12.8%
11.8%
11.2%
10.1%
10.2%
9.2%
9.5%
10.0%
7.4%
8.6%
11.4%
13.4%
13.5%
12.2%
11.4%
8.5%
11.2%
10.3%
10.1%
9.1%
9.3%
8.4%
8.9%
4.1%
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%
3.5%
3.5%
4.1%
5.3%
8.2%
9.6%
9.4%
9.1%
8.8%
6.8%
8.9%
8.5%
8.4%
7.7%
8.0%
2.5%
2.6%
2.6%
3.4%
4.9%
6.7%
8.2%
8.2%
8.1%
7.8%
6.3%
8.2%
7.8%
7.8%
7.3%
2.0%
2.0%
2.0%
2.3%
3.3%
4.1%
5.8%
7.1%
7.3%
7.2%
7.3%
6.0%
7.6%
7.3%
7.4%
1.6%
1.7%
1.6%
1.8%
2.3%
2.7%
3.6%
5.1%
6.3%
6.5%
6.3%
6.4%
5.3%
6.8%
6.6%
0.7%
1.0%
1.2%
1.2%
1.7%
2.0%
2.4%
3.2%
4.6%
5.6%
5.7%
5.6%
5.8%
4.8%
6.1%
0.2%
0.4%
0.7%
0.9%
1.3%
1.5%
1.8%
2.2%
2.9%
4.1%
4.9%
5.0%
5.0%
5.1%
4.3%
0.0%
0.2%
0.3%
0.5%
0.8%
0.9%
1.1%
1.4%
1.8%
2.4%
3.5%
4.3%
4.4%
4.3%
4.5%
0.0%
0.0%
0.1%
0.2%
0.5%
0.5%
0.7%
0.9%
1.1%
1.4%
2.0%
2.9%
3.6%
3.7%
3.8%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%

FY03/06
43,55334,00722,26011,522
7,040
4,668
3,456
2,640
2,322
1,305
590
203
48
133,614

FY03/07
67,45743,90036,35624,205
13,100
8,688
5,558
4,309
3,454
2,438
1,385
635
226
211,711

FY03/08
74,25547,06540,49335,082
24,154
13,989
9,019
6,050
4,753
3,207
2,236
1,233
532
262,068

FY03/0942,92837,752
33,112
29,784
26,051
17,92910,754
7,166
5,097
3,826
2,751
1,688
1,001
219,839

FY03/1061,44829,21534,616
31,17628,271
24,555
17,067
10,386
6,930
4,998
3,752
2,348
1,382
256,144

FY03/11
59,116
46,712
28,70034,064
31,142
28,07824,357
17,248
10,594
7,051
5,228
3,363
2,000
297,653

FY03/1261,33647,60343,98729,00833,96031,13828,01824,317
17,41010,809
7,409
4,717
2,945
342,657

FY03/1359,451
50,21745,34442,97729,29533,81731,182
27,961
24,187
17,483
11,0886,756
4,179
383,937

FY03/1466,80549,22147,91044,08942,27029,24933,59030,802
27,70624,03817,515
10,162
5,978429,335

FY03/15
63,76253,282
46,24845,93042,436
40,832
28,83733,282
28,86525,97322,40915,958
9,008
456,822

FY03/16
69,20049,91649,362
43,83544,05940,86039,44328,711
31,056
26,96524,087
20,49914,194482,187

FY03/17
74,23954,154
46,67647,20042,12542,53739,64638,65427,032
29,32025,191
22,202
18,399507,375

FY03/18
79,76058,68250,92745,00845,732
41,114
41,531
39,15536,381
25,49927,324
23,211
19,903534,227

FY03/19
73,98064,68054,931
48,94843,234
44,16039,90740,54936,41033,812
23,59425,006
20,743549,954

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 thesoundness 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 outsideof 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).

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Renewal rate

Renewal rate

FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
86.6%
87.6%
88.1%
89.3%
88.7%
88.2%
88.2%
88.2%
87.7%
87.2%
87.7%

Source: Shared Research based on company data

While one reason for a policyholder to cancel a policy is the death of the pet, considering that the average life expectancy of pets
is about 13 years and the ratio of policies for pets 12 years and older is only about 3.8% at Anicom (as of FY03/19), the company
believes cancellations due to death are limited. By increasing the ratio of renewals at the end of the first year and implementing
preventive measures that resonate with policyholders, the company should be able to maintain a high renewal rate.

Average of JPY340,000 spent on pet dogs annually
There are different attitudes toward pet insurance between those who consider pets as mere “animals” and those who consider
them as family members. Those who consider dogs as animals often do not take them to vets when they get sick. Thus, there islittle 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)
Treatment for sickness or injuries
Foods and snacks
Supplements
Training
Shampoo and grooming
Pet insurance premiums
Vaccination and health checks
Pet hotels and pet sitters
Daily necessities
Clothing
Playground, etc.
Collars and leashes
Disaster prevention
Transportation
Utilities (for pets)
Total

2018
56,691
57,04911,311
6,446
44,50848,15330,2507,743
13,339
11,105
3,795
5,112
602
15,99819,152
331,615

Dogs
2019
2020
44,86960,43052,49764,7458,737
11,861
7,273
7,204
42,323
48,69250,15546,89527,65332,4638,339
3,991
20,601
13,75013,156
11,640
4,157
2,880
5,387
5,949
1,082
703
5,457
14,908
15,113
12,449306,801 338,561

YoY
34.7%
23.3%
35.8%
-0.9%
15.0%
-6.5%
17.4%
-52.1%-33.3%-11.5%-30.7%
10.4%-35.0%
173.2%-17.6%
10.4%

2018
29,631
42,925
4,694
22
3,002
30,653
12,424
3,563
13,113
408
1,929
633
2,057
15,920160,975

Cats
YoY
2019
2020
23,91931,848 33.1%
49,71342,925 -13.7%
2,783
5,668 103.7%
2
1 -50.0%
2,623
3,635 38.6%
30,15534,929 15.8%
9.5%
12,814
14,0293,469
1,609 -53.6%
12,11813,766 13.6%
753
674 -10.5%
6
0 -100.0%
2,354
1,614 -31.4%
1,431
982 -31.4%
1,357
891 -34.3%
15,183
12,264 -19.2%
158,680 164,835
3.9%

Source: Shared Research, based on company’s “Survey of Annual Spending on Pets”

Process for taking out an insurance policy
When Anicom receives applications from its general sales channel (detail below) other than pet shops, the company conducts
screening based on the animal’s breed, age, health conditions, and health records submitted by the owner. The pets that pass
the screening are required to go through a waiting period of 1.5–2.0 months before the policy is signed. The waiting period isrequired 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 healthinsurance 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 toAnicom, which reviews the requests and sends the money to the hospital. The system improves administrative efficiency andmakes it easier for hospitals to handle insurance payments. It is also designed to prevent fraudulent claims and miscalculations.

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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 thecompetitors. Furthermore, when veterinarians open new hospitals, they are more likely to choose an alliance with a widely usedinsurance 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 defacto industry standard.
This is how the system works: Anicom issues animal health insurance cards to policyholders, who show their card at thehospitals/clinics when they bring in their pets for treatment. The pet owners who have insurance cards are only liable forcopayments 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 bya 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.

Source: Shared Research based on company data

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 themeasurement 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, andthere is no upper age limit for underwriting. By focusing only on hospitalization and surgery and excluding hospital visits fromcoverage, the company has been able to set premiums that are affordable even for elderly people. The product is intended tocover unforeseen events such as hospitalization and surgery, which tend to be expensive. Depending on the results of gut

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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 highratios of policy purchase and low loss ratios due to the young age of the pets. Pet shop agencies sell more than 80% of thecompany’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
Breeders market, small-scale online pet shops (various breeds)(half the market)

Pet shop agencies and general agencies (500 dog breeds)(half the market)

Number of pets: 600,000 to 700,000

50,000 to 100,000
Breeders market

Anicom's agencies(2/3 of insurance policies)
Approx. 100,000

A few tens of thousands
Adoption market

Other

Direct customers, other

Potential customers for Anicom

50% of pets
insuredRemaining 50%
uninsured

Non agencies(1/3 of policies)
Non agencies(1/3 of policies)

Potential customers for Anicom

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, thecompany 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 throughthis 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.

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Major expense categories as % of recurring revenue (left) and in comparison with number of new policies (right)
Net claims paid
Loss adjustment expenses (right axis)
Commissions and collection fees (right axis)

70%

10%
9%

60%

8%

50%

7%

40%

6%

30%

5%

20%

4%

10%

3%

0%

2%

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21

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) andover-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 thechannel’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 tofurther accelerate growth in the pet insurance business. And now under its new medium-term business plan the company isworking to establish this general sales channel as a major source of sales of new policies and future revenue.
Pet insurance market and sales channels

New markets
1. Newborns market

2. Family market

Pet dogs and cats
Approx. 600–700 thousand

Pet dogs and cats
Approx. 20mn

Pet shopagencies

Breeders
direct sales
Online sales

Financial institutions

Corporations

Pet-related

Direct sales

Banks and shinkin banks

Workplace

Animal hospitals

OnlineNonlife insurance

Corporate agencies

Pet shops

Call centers

Brokerages

Cooperative unions

Insurance agencies

Car dealerships

Source: Shared Research based on company estimates based on data from the Japan Pet Food Association and Fuji-Keizai

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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 thecompany’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 productlineup 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 eachyear, and Dobutsu Hotline, which allows policyholders to consult with a veterinarian using the LINE messaging app.

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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 valueof the lengthening of a healthy lifespan, more specific details were indicated regarding in what way the company will be apartner engaged in animals’ life stages from upstream (before becoming ill, before being born) to midstream (lengthening of ahealthy 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 therollout 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

Source: Company data

In its new business strategy announced in May 2017, the company outlined a range of initiatives: 1) upstream, it said it would
work toward eradicating hereditary diseases in pets; 2) midstream, it said it would develop a business related to symbiotic
bacteria; 3) downstream, it said it would develop new areas of veterinary medicine. For the upstream effort, the company aimed
to identify genes causing hereditary diseases and provide consulting services to domestic breeders based on genetic analysis tocommercialize the prevention of hereditary diseases. For the midstream effort, it aimed to make health checks using gut

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microbiota screening a common part of pet health care and launch a food business based on symbiotic bacteria and a lifestyleconsulting business. Downstream, it aimed to commercialize a portal site for searching veterinary hospitals and clinics, findpractical applications for advanced medical treatments (cell therapy and regenerative medicine) and increase their use, andexpand the veterinary hospital business overseas.

Initiatives for the second founding period
Starting in FY03/20, Anicom considers itself to be in its second founding period. It is currently implementing its 2019–2021
medium-term business plan. Major initiatives include 1) a breeding support business targeting the eradication of hereditarydiseases, 2) its animal gut microbiota measurement service launched in December 2018, and 3) offering of preventive andadvanced healthcare in the medical setting.

Upstream/midstream
Expansion of genetic testing business:
Genetic screening for animals is one of Anicom’s initiatives as it seeks to become a preventive insurance company. In the past,
breeding was based solely on the experience of breeders, but with advancements in science and technology, various types ofscreening are now available at low cost, and hereditary diseases can be reduced at the breeding stage.
Hereditary diseases are more prevalent when large-scale professional breeders attempt to maintain pure bloodlines in popular
dog breeds. If hereditary diseases can be eliminated, it will directly extend animals’ healthy lifespans. By providing genetic testing
services to all breeders, from large-scale professional breeders to private breeders and those operated by pet shops, the company
can not only help eradicate hereditary diseases in puppies, it can also help to prolong healthy lifespans by providing healthcheckups at appropriate times for animals with an awareness of high-risk diseases for each breed. For its part, Anicom stands tobenefit from a lower loss ratio while pet owners can enjoy healthy pets and lower insurance premiums, and breeders enjoy astrong reputation (i.e., for breeding healthy animals), which will lead to more revenue opportunities. Under its new
medium-term plan as well, the company aims to achieve concrete results from the initiatives already underway.
However, Anicom points out that there are drawbacks in promoting genetic screening alone. Leaving behind those animals withcausative genes for hereditary diseases and selecting only those with no causative genes for hereditary diseases may lead toinbreeding. The company is conducting research on causative genes for such diseases, development of mechanisms to prevent
disease onset and therapeutic methods, methods for end-of-life care, and the level of inbreeding. The goal is to avoid hereditarydiseases that can be obviated through genetic testing before and after breeding.
Because the genetic tests are performed in the Anicom group’s own lab (Anicom Specialty Medical Institute, established in 2014),
they contribute to the top line and the bottom line by reducing insurance payouts. Working mainly with breeders and pet shops,
Anicom performed genetic tests on about 148,000 animals in FY03/20. Then, in FY03/21, it enhanced its genetic screening
system by introducing robots.

Commercialization of breeder support businessOn the breeder support front, Anicom provides on-site support services to help breeders resolve various problems (including
decline in the number of breeders, decrease in the number of animals supplied due to aging of the population, and issues withthe breeding environment), thereby helping them increase their own profit opportunities, and taking additional steps to help
breeders avoid new hereditary diseases in their animals and otherwise promote animal health. The company uses accumulated
data to manage the level of inbreeding and avoid the incidence of new hereditary diseases and deformities. It provides
comprehensive support for breeding in a total package of advising on appropriate breeding timing, artificial insemination, spermbanks, and medical care.
For example, degenerative myelopathy (DM) is an incurable disease developing frequently in the Welsh Corgi breed, which often
leads to death about 18 months after onset. However, some individuals do not have this genetic abnormality (noncarriers).
Theoretically, DM can be eradicated by breeding among noncarriers. By providing this kind of breeding support, the company

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hopes to promote a distribution of healthy dogs and cats free of hereditary diseases. It also aims to reduce the number of animals
with hereditary diseases by identifying the genes related to various diseases.

Midstream/downstream
Promotion of healthy lifestyles
By analyzing massive customer data, Anicom can recommend healthier lifestyles and reduce its insurance payouts. It also aims touse such data in the development of pet foods and devices. Main activities include analyzing the relationships between lifestyleand disease based on customer data, promoting disease prevention awareness through owned media and social media, andconducting development, joint research, and other collaborations on preventive foods and devices.
In FY03/21, subsidiary Anicom Pafe utilized expertise it has accumulated through gut microbiota measurement and genetic
screening to begin providing custom pet foods tailored to individual animals’ health status as determined by testing. This custom
pet food, Kimi no Gohan (translated literally as “your food”), is intended to suit the individual pet’s physical needs and support
their health and longevity.

Promotion and expansion of Dobutsu Kenkatsu service
Application numbers for the company’s Dobutsu Kenkatsu service were generally in line with the company’s expectations at justover 100,000 in FY03/21. With the rollout of Dobutsu Kenkatsu, the company has also seen increases in the numbers of both new
pet insurance policies sold and renewals, and has also seen an increase in the renewal rate of policies sold through the newborn
channel. By making it possible to refer pet owners to good hospitals at the health exam stage, Dobutsu Kenkatsu helps prevent
diseases from becoming severe and thereby serves to reduce insurance payouts and lowers Anicom’s loss ratio.

Promotion of veterinary clinic succession
Anicom began providing advanced veterinary medical treatment at Anicom Specialty Medical Institute in January 2014. Startingin FY03/18, it also began operating a chain of general veterinary clinics it had acquired, most of which are located inside of pet
shops and specialize in preventive care, and are attended to by veterinarians part-time. These clinics began slowly contributing toearnings in FY03/18. As of end-March 2021, the company operates 54 veterinary clinics, offering preventive and general medical
services. It aims to establish the next generation of preventive methods by using data obtained through clinic operations(including medical data from insurance claims and medical records).
The company is working to develop and expand its veterinary clinic business (including clinics specializing in preventive
medicine), increase the number of hospitals and clinics using its medical record management system, and improve customer
convenience in regard to appointments and referrals. It is looking to establish preventive veterinary medicine protocols in the
future, making using of data from claims paid and medical records acquired in the course of this businesses. In this relation, thecompany also noted that it established a capital alliance with E Pet Life to help it with its appointment and data transmission
system for its veterinary clinics.

In May 2018, the company announced that it had agreed to take a stake in E Pet Life Inc. (capital: JPY300mn) and launch a collaboration with its EPARK
business. E Pet Life operates EPARK Pet Life, an information portal for animal hospitals and grooming salons. The company said that the collaboration
would facilitate development in a number of areas with the company’s existing businesses including pet insurance, telephone consultations, andmedical records management.
Shared Research is focusing on the portal site’s role in disseminating animal hospital information as well as its animal hospital reservation service. We arepositive on the potential of a service that provides information to pet owners on the most suitable veterinary services for their pet’s illness, i.e.,
appropriate hospital referrals, prevention of excessive treatment, and lowering the loss ratio.

Downstream
Establishment of Research and Development Partnership for Animal Regenerative Medicine
Celltrust Animal Therapeutics Co., Ltd., a joint venture between Anicom and Fujifilm Corporation, established the Research andDevelopment Partnership for Animal Regenerative Medicine (PARM) in December 2019. The Partnership was established for the
purpose of creating protocols for the as yet un-standardized processes involved in cell therapy services for dogs and cats, and

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putting in place best-practices guidelines that would allow veterinary physicians at various kinds of medical facilities to provide
safe and effective cell therapy services for dogs and cats. The alliance was established as a nonprofit organization, certified by the
Minister of Agriculture, Forestry and Fisheries and the Minister of Economy, Trade and Industry. By bringing together the efforts
of veterinary doctors and others in the field, PARM aims to conduct experiments that will help create protocols for each process incell therapy services (cultivation, transportation, administration, and follow-up observation) and, by establishing thesebest-practice guidelines, hopes to establish a voluntary regulatory framework to facilitate the expansion of cell therapy services in
the field of veterinary medicine. As of March 31, 2021, all operations of Celltrust Animal Therapeutics were transferred to Anicom
Specialty Medical Institute.

Expansion of practical applications of cell therapy and regenerative medicine
The Research and Development Partnership for Animal Regenerative Medicine (PARM) has begun delivering mesenchymal stem
cells to veterinary hospitals nationwide. It currently provides cell therapy services for 14 canine and 12 feline diseases, including
chronic enteropathy. Veterinary hospitals that are members of the partnership have been able to start cell therapy without an
initial capital outlay and despite the small number of cases involved. The actual treatment does not require cell culturing or
thawing of frozen cells, and cell therapy can be conducted immediately with the delivered cells.

Special services for elderly people and their aging pets
Downstream, the company is looking to move into both general and advanced veterinary medical care, become an introducing
agency for pet cemeteries, and also build lifetime care facilities for pets. In the area of advanced veterinary medicine, Anicom
established Japan’s first veterinary hospital specializing in regenerative therapy in 2016 with the aim of popularizing regenerative
therapy and cell therapy for pets, which would in turn hopefully lead to the development of new insurance products designed tocover advanced medical treatments for pets. Going forward, the company is also looking to address the problem of aging owners
and aging pets by development homes for aging dogs, lifetime care facilities, and other facilities that provide care when owners
or their pets die.

Pursuit of various business alliances
With people and pets growing old together, the company is looking at developing special facilities to care for old dogs andprovide end-of-life care, and other facilities that will provide care when pet owners or their pets die. Toward this end, during
FY03/20 the company entered into a business alliance with Forest Hills, Inc., and Advanced Net Co., Ltd., with the aim ofdeveloping new services such as pet-friendly hotels and pet-friendly residential properties. It built anico flora Higashi-Nakano(Tokyo), a pet-friendly rental residential complex that proposes comfortable living spaces for people and animals, and began
accepting tenant applications in February 2021.

Other
In February 2021, the company announced that it had obtained a patent in Japan (patent no. 6734457) for a disease prediction
system and method using facial photos of pets. This patent is a world first. Anicom has already been using its own diseasestatistics based on analysis of pet insurance claim data to inform pet owners and raise awareness of the diseases that may affecttheir pets, depending on breed, age, gender, and other factors.
The patented system uses AI technology to predict the likelihood a pet will develop eye, ear, or skin disorders within a certain
period of time, based only on a facial photo of the pet. As an example, when a prediction was made on the likelihood of a toy
poodle developing an eye infection within one year using its facial photo, the accuracy was about 70%. This patent related todisease prediction represents a major leap forward in the company’s focus on prevention.

Online Pet Services (3.5% of recurring revenue)
Acquisition of SIMNET shares
In December 2019, Anicom acquired all shares of SIMNET Co., Ltd., which plans, develops, and operates internet services related
to pets. Minna no Pet Online Co., Ltd., a wholly owned subsidiary of SIMNET (established in March 2001), operates breeder
matching websites including Minna no Breeder (for dogs) and Minna no Koneko Breeder (for cats).

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SIMNET has the largest share of the breeder matching services market and has also been serving as a pet insurance agency for
Anicom Insurance, Inc. Anicom will be able to utilize the platform of SIMNET’s breeder matching sites, giving it opportunities tomore directly communicate with breeders about the various support services it offers.

Minna no Breeder
Minna no Breeder is one of the largest websites for breeders in Japan, providing information on puppies from domestic breeders.
Using the site, consumers can buy healthy puppies directly from breeders at lower prices than they would be quoted at pet
shops. As of end-May 2021, there were 2,508 breeders listed on the site who all meet SIMNET’s strict standards. There were
1,862 puppies listed at end-May, and cumulative sales contracts had reached 170,000.
Registration on the website allows breeders 1) to post information on their puppies for viewing by more potential customers, 2)
post breeding dog information for viewing by more breeders, and 3) send information more directly to people seeking puppies
at the puppy finder section. Registered users do not need to pay annual fees or registration fees for puppies or breeding dogs (nofees are charged until the parties actually enter into a contract for breeding or to purchase a puppy).
The process for purchasing a puppy is as follows.


The user searches on the Minna no Breeder website for a puppy that meets their needs.

When the user finds a puppy that interests them, they contact the breeder by clicking on “Request for contact or to meetthe puppy in person” on the puppy’s details page. The breeder will send the user a message through the site’s contact
system.



If the user wishes to meet the puppy and breeder, they can arrange a convenient date (the Act on Welfare andManagement of Animals requires that the consumer meet the puppy in person before purchasing).

The user informs the breeder of their intention to buy, and together they decide on a date of delivery and method of
payment.

Once the delivery date has been decided, the prospective buyer can apply for the “free pet insurance” and “contract
bonus.”

Once the puppy is received, the user provides a breeder review.

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Minna no Breeder(Featured: Breeder recommended puppies)

Source: Minna no Breeder website

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Profitability analysis
Recurring revenue(JPYmn)Recurring revenue
YoY
Underwriting revenue
Investment revenue
Other recurring revenue
Recurring expenses
YoY
Underwriting expenses
Investment expenses
Operating and general admin. expenses
Recurring profit
YoY
RPM

FY03/10 FY03/11
9,216
11,107-14.7%
20.5%
9,003
10,858
71
94
141
154
8,924
10,764-17.9%
20.6%
5,541
7,146
8
3,072
3,312
292
342
17.3%
3.1%
3.2%

FY03/12
13,845
24.7%
13,592
108
144
13,508
25.5%
9,797
31
3,392
337
-1.5%
2.4%

FY03/13 FY03/14
16,186
18,366
16.9%
13.5%
15,781
18,087
260
108
143
171
15,34817,63313.6%
14.9%
11,45013,448
18
3,632
3,982
837
733
148.4%-12.4%
4.0%
5.2%

FY03/15
22,63823.3%
21,733522
382
21,38721.3%
15,920
21
4,905
1,250
70.5%
5.5%

FY03/16
26,50617.1%
25,370690
446
24,37714.0%
17,393
182
6,699
2,129
70.3%
8.0%

FY03/17
28,9789.3%
28,068504
405
26,606
9.1%
18,967
0
7,273
2,372
11.4%
8.2%

FY03/18
32,33911.6%
31,290420628
30,486
14.6%
21,771
8
8,479
1,853
-21.9%
5.7%

FY03/19
35,82910.8%
34,535383
910
33,55010.1%
24,071
10
9,112
2,278
22.9%
6.4%

FY03/20
41,465
15.7%
39,105496
1,863
39,27517.1%
27,212
109
11,153
2,189
-3.9%
5.3%

FY03/2148,04915.9%43,312
488
4,248
45,29015.3%
30,512
141
13,283
2,758
26.0%
5.7%

Source: Shared Research, based on company data

In the non-life insurance industry, recurring revenue refers to sales. Recurring revenue consists of underwriting revenue,
investment revenue, and other recurring revenue. Investment is an important part of non-life insurance operations. Therefore,
investment revenue is included in recurring revenue.

Underwriting revenue
Anicom’s underwriting revenue consists of net premiums written, reversal of reserve for outstanding losses and claims, andreversal of underwriting reserves. However, net premiums written is the main component since the company does not offer
savings-type insurance. The company’s pet insurance policies are valid for one year and are subject to renewal each year.
The company revised its pet insurance pricing structure in June 2014. This was the first price revision since the company obtained
its non-life insurance license in January 2008. Another rate revision, along with changes in policy terms, was implemented in
November 2014 and again December 2019.
Recurring revenue composition(JPYmn)Recurring revenue
YoY
Underwriting revenue
Net premiums written

Rev ersal of reserv es for outstanding losses and claims

Investment revenue
Interest and dividend income
Gain on sale of investment securities
Other recurring revenue
Anicom mutual aid assoc. revenue
Reversal of unearned Anicom revenue
Reversal of unpaid Anicom benefits
Other

FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21
9,216
11,107
13,845
16,186
18,366
22,63826,50628,97832,33935,82941,46548,049-14.7%
20.5%
24.7%
16.9%
13.5%
23.3%
17.1%
9.3%
11.6%
10.8%
15.7%
15.9%
9,003
10,85813,592
15,781
18,087
21,73325,37028,06831,29034,535
39,10543,312
8,981
10,85813,592
15,781
18,087
21,73325,37028,06831,29034,535
39,10543,312
71
94
108
260
108
522
690
504
420
383
496
488
71
78
92
113
18
289
334
320
255
154
219
253
0
15
16
147
89
232
355
184
165
228
276
233
141
154
144
143
171
382
446
405
628
910
1,863
4,248
61
141
154
144
143
110
382
446
405
628
910
1,863
4,215

Source: Shared Research based on company data

Investment policy
Liquidity is the highest priority for Anicom in managing its insurance assets since the company’s policies are valid for one year.
Notwithstanding, the company is beginning to place more emphasis on investment yield now that number of policies is showing
steady growth and the company can generate stable premium revenue. However, high-risk investments would affect Anicom’s
solvency margin. Thus, the company is seeking low-risk investments.

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Coverage

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Overview of expenses
Underwriting expenses(JPYmn)Underwriting expenses
Net claims paid
Loss adjustment expenses
Commissions and collection fees
Provision for outstanding losses and claims
Provision for underwriting reserves
Percentage of net premiums written
Underwriting expenses
Net claims paid
Loss adjustment expenses
Commissions and collection fees
Provision for outstanding losses and claims
Provision for underwriting reserves

FY03/10
5,541
3,767
317
538
0
919

FY03/11
7,146
4,829
392
629
152
1,141

FY03/12
9,797
7,304
480
780
348
883

FY03/13
11,450
9,465
581
853
140
409

FY03/14
13,448
10,693
660
1,029
149
916

FY03/15
15,92012,149
741
1,269
144
1,616

FY03/16
17,393
13,547
895
1,590
122
1,237

FY03/17
18,967
14,901
965
1,995
181
923

FY03/18
21,771
16,591
1,004
2,660
212
1,302

FY03/19
24,071
18,456
1,003
3,077
196
1,336

FY03/20
27,212
20,492
1,109
3,674
179
1,756

FY03/2130,512
23,226
1,098
4,539
211
1,437

61.7%
41.9%
3.5%
6.0%
0.0%
10.2%

65.8%
44.5%
3.6%
5.8%
1.4%
10.5%

72.1%
53.7%
3.5%
5.7%
2.6%
6.5%

72.6%
60.0%
3.7%
5.4%
0.9%
2.6%

74.4%
59.1%
3.6%
5.7%
0.8%
5.1%

73.3%
55.9%
3.4%
5.8%
0.7%
7.4%

68.6%
53.4%
3.5%
6.3%
0.5%
4.9%

67.6%
53.1%
3.4%
7.1%
0.6%
3.3%

69.6%
53.0%
3.2%
8.5%
0.7%
4.2%

69.7%
53.4%
2.9%
8.9%
0.6%
3.9%

69.6%
52.4%
2.8%
9.4%
0.5%
4.5%

70.4%
53.6%
2.5%
10.5%
0.5%
3.3%

Expense items
Notes(JPYmn)Underwriting expenses
Net claims paid
Loss adjustment expenses
Commissions and collection fees
Provision for outstanding losses
and claims
Provision for underwriting reserves
Unearned premium
Catastrophe reserves

Closely linked with the number of policies in force.
Should be considered together with the provision for outstanding losses and claims.
Mainly personnel expenses.
Commissions paid to agencies. Closely linked with the value of newly signed policies(Commissions for newly signed policies are more generous than those for renewals.)
An estimate for claims payable in general, except in pet insurance, where there are nosuch estimates, and this item reflects "claims in progress". Should be considered
together with net claims paid.
A combination of the following two items:
YoY increase in the annual sum of the figures calculated each month by the 1/12
methodThe difference between the reversal of the reserves at previous year end and 3.2%of the net premiums written (provision). The reversal is possible when the loss ratio
exceeds 50%, up to the reserve amount at the beginning of the fiscal year.

Source: Shared Research based on company data

Many expense items are linked with the number of policies and the value of new policies written. However, there are items that
could be adjusted through changes in product offerings, such as net claims paid (including a provision for reserve foroutstanding losses and claims).

Loss ratio
Data that can be used in tracking the company’s expenses include net loss ratio, E/I loss ratio, and net expense ratio, as well as a
combination of the three ratios. Loss ratio corresponds to the CoGS ratio at non-financial companies. Loss ratio consists of net loss
ratio and E/I loss ratio. Net loss ratio is close to a cash basis, while E/I loss ratio is close to an accrual basis. The net loss ratio can beobtained from the revenue statement.
The company’s loss ratio had increased after it changed its product offering in October 2010 (when the company introduced aplan that covers 90% of expenses). However, the ratio has improved dramatically as a result of the measures listed below.
Measures to improve loss ratio
Start dateAug. 2012

Measures
Terminated sales of 90% coverage policy

Results
Completed at end-Jul. 2013; eliminated contracts with relatively high loss ratio; brought immediate effects;
long-lasting effects also observed

Aug. 2013

Limited switch to high-coverage policy(from 50% to 70%)

Restricted switches from low-premium policies when pet is young, to higher premiums when pet is older withhigher risks; effects expected in the long term

Oct. 2013

Applied longer waiting period from online
application to coverage

Prevented selling high-risk policies (contracts with possible increase in loss ratio)

Jan. 2014

Suspended sales of 70% coverage via online
application (through Sep. 2014)

Same as above

Jun. 2014

Revised premium rates

Made up for negative profitability effects of consumption tax hike (which affects pet medical costs andoperating expenses, but not premium revenues); full results to be seen from FY03/16

Nov. 2014

Introduced policy with limited hospital visit days Controlled frequent use of insurance coverage in high-risk policies; existing low-risk policies were not affected,
but long-term effects were likely to be seen as risks increase as pets age

Nov. 2014

Introduced healthy pet discounts

Discounted premiums by policyholder based on number of claims, in expectation of improved fairness among
policyholders, higher renewal rate, claim restriction effects, leading to lower loss ratio

Jul. 2017

Revised premium rates (for pets 8-years andolder, by cluster)

Revised up premiums for 8-years and older, given unexpected rise in loss ratio in some aged clusters; roughly
5% to 10% increase, depending on cluster; slower loss ratio increase due to pets' aging expected

Dec. 2018

Revised product details and premium rates for
Dobutsu Kempo Family and Dobutsu Kempo
Petit(1) Launched an ancillary service of Dobutsu Kenkatsu, offering screening and checkups for gut microbiota,(2) revised premiums and breed classifications, and (3) expanded the range of pets covered

Source: Shared Research based on company data

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E/I loss ratio target of 57–59%
The company targets an E/I loss ratio of 57-59%.
Changes in various ratios
E/I loss ratio
Expense ratio (earned premiums basis)
Combined ratio (earned premiums basis)
Net loss ratio
Net expense ratio
Combined ratio
Solvency margin ratio
Renewal ratea)b)a) + b)c)d)c) + d)FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21
48.6%
53.4%
64.3%
67.5%
66.7%
64.4%
60.1%
58.9%
59.2% 59.0% 57.8% 58.4%
33.2%
29.7%
28.6%
28.3%
31.1%
32.1%
35.2% 34.5% 37.1% 37.7%
97.5%
97.2%
95.3%
92.7%
91.2%
91.0%
94.4% 93.5% 94.9% 96.1%
24.4%
45.5%
48.1%
57.3%
63.7%
62.8%
59.3%
56.9%
56.5%
56.2% 56.3% 55.2% 56.2%
48.0%
40.2%
36.3%
30.9%
28.5%
27.3%
28.4%
32.7%
33.0%
35.6% 35.3% 37.9% 41.1%
72.4%
85.7%
84.4%
88.2%
92.2%
90.1%
87.7%
89.6%
89.5%
91.8% 91.6% 93.2% 97.3%- 304.1% 307.2% 281.3% 295.1% 288.7% 282.6% 295.6% 305.6% 379.8% 357.0% 355.5%
84.1%
86.6%
87.6%
88.1%
89.3%
88.7%
88.2%
88.2%
88.2% 87.7% 87.2% 87.7%

Note: E/I loss ratio = (Net claims paid + Increase in reserve for outstanding losses and claims + Loss adjustment expenses) ÷ Earned premiums
Note: Net loss ratio = (Net claims paid + Loss adjustment expenses) ÷ Net premiums written
Note: Net expense ratio = (Commissions and collection fees + Underwriting expenses) ÷ Net premiums written
Note: Combined ratio = Net loss ratio + Net expense ratio

Commissions to sales agents
Commissions paid to sales agents are around 15% in the initial year as of 2014. However, the commissions decline to about 5% in
the second year and thereafter at the time of contract renewal. Commission rates have continued to rise amid intensifying
competition. We note that commission payments vary depending on the number of new policies and the percentage of sales
made through sales agents.

Changes in cost structure accompanying preventive insurance
All illnesses in pets are caused by a combination of genetic and environmental factors. Anicom says that diseases caused bygenetic factors are even more common in pets than in humans. Net claims paid in FY03/21 totaled JPY23.2bn, and the company
recognizes that a significant portion of annual payouts are due to genetic factors.
However, hereditary diseases can be prevented through genetic screening and other technologies, so Anicom has launched agenetic screening business and is striving to eradicate hereditary diseases. Ultimately, if it can eliminate the genetic factors fromthe equation, it can control its annual insurance payouts.
In the past, each of the company’s policyholders would make an average of five claims a year, with the average claim amountbeing JPY6,000. Currently, with the use of Dobutsu Kenkatsu (gut microbiota measurement and health checks), even if thefrequency of medical consultations increases, the price per consultation declines, leading to a drop in the total amount of
insurance payouts. This change is due to the early detection of diseases through the Dobutsu Kenkatsu service. In addition to its
current Dobutsu Kenkatsu service, the company believes that adding new health check services for various diseases andpromoting 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 newpolicies and improve the renewal rate, while lowering the combined ratio by reducing the aggregate cost of insurance payouts
and ancillary services.

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CoverageAnicom Holdings / 8715
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Market and value chain
Market scale
As pioneer in pet insurance, Anicom drives growth and market expansion
Anicom is a pioneer in pet insurance in Japan, contributing to the expansion of Japan’s pet insurance market through the creationof a mechanism to assist the operation of pet shops and animal hospitals. The number of Anicom insurance policies in force at
end-FY03/21 was 921,873, representing a CAGR of 9.5% over the last five years. The pet insurance market in Japan is projected to
grow from JPY84.1bn in 2019 to JPY99.3bn in 2020, according to recent estimates published in the “Pet-related Marketing
Handbook” 2021 by Fuji Keizai. Based on the market figures from Fuji Keizai, Anicom’s JPY43.3bn in underwriting revenue in
FY03/21 gave it a market share of 44% in 2020. Although competition within the pet insurance industry is increasing, Anicom isstill the clear market leader.

Pet insurance covers 12% of pets
Although Anicom has been responsible for much of the growth in the Japanese pet insurance market over the years, there are still
relatively few pets covered by insurance at this time. According to figures from a 2020 Japan Pet Food Association survey of dog
and cat ownership, there are roughly 18.1mn dogs and cats kept by Japanese households as pets, and only about 12% of these
are covered by insurance. The UK has 16.5mn dogs and cats (8.5mn dogs, 8mn cats; about 25% of the human population in2017), which is similar to Japan, but pet insurance covers more than 25% of UK pets, more than double the proportion in Japan.
This means there is plenty of room for growth in Japan.

Competition
There are a total of 14 companies competing in the pet insurance market as of May 2019, including five non-life insurancecompanies and nine small-amount, short-term insurance companies. Small-amount, short-term insurance companies were given
the regulatory go-ahead to enter pet insurance business on April 1, 2006, but out of the 109 small-amount, short-term insurancecompanies registered with the finance bureau as of April 2021, only 10 are currently offering pet insurance (Small Amount &Short Term Insurance Association of Japan). The difference between non-life insurance companies (that must be licensed by the
Financial Services Agency) and small-amount, short-term insurance companies (that only need to registered with the financial
bureau) is mainly one of size and safety net provisions that come in play in the event of bankruptcy.
Differences between non-life insurance companies and small-amount, short-term insurance companies
Regulation of
entry

Operating both
Minimumlife and non-life
capitalinsurance
requirements
businesses

System forpolicyholders
protection

Asset management

No limitations inprincipal

Non-life insurance operator

Licensing by
Financial
Services Agency

JPY1.0bn

Not allowedNone(security deposit
to Legal Affairs
Bureau required)

Small-amount short-term
insurance operator

Registration at
Finance Bureau

JPY10.0mn

AllowedIn place

Limited to bankdeposits, JGBs, local
bonds, other

Source: Shared Research, based on data from the Financial Services Agency

The table below lists the five non-life insurance companies (including Anicom) that are licensed by the Financial Services Agency
and the nine small-amount, short-term insurance companies that offer pet insurance. The industry’s No. 3 player, Pet & Family
Insurance, began moving into the non-life insurance business on April 1, 2019. Under the SBI Insurance Group we find pet
insurance handled by both SBI Ikiki SSI and Japan Animal Club.

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Competitive landscape in pet insurance business in Japan
Insurance company
Non-life insurance
Anicom Insurance
ipet Insurance
Pet & Family Small-amount Shortterm Insurance Company
AXA General Insurance
au insurance
Small-amount short-term insurance
Aeon S.S. Insurance
e-Pet S.S. Insurance
SBI Insurance Group (SBI Ikiiki SSI
and SBI Prism SSI [former Japan
FPC

Claim payment

Description

Possible at hospital
Possible at hospital
Possible at hospital

Online application
Online application
Online application; no changes in premiums for pet aged 10 or older; shifted to
non-life insurance business in Apr. 2019
Online application; free 24-H consultation by veterinarian
Online application; free 24-H consultation by veterinarian

Japan Animal Club (a subsidiary
under SBI Nihon SSI)
Nihon Pet SSI (renamed in Jan.
2020; former Garden SSI)
Pets First SSI
Pets Best JapanPet Medical Support
Rakuten SS Insurance

Online application; covers pet hotel charges when owners are hospitalized
Online application
Online application accepted for pets aged up to 11 year 11 months; offers plansfor birds and reptiles
Online application; premiums increase happens only twice in lifetime (three times
for mid to large dogs)
Online application. Plans for birds and reptiles available.
Online application; 90% coverage plan available
Online application; coverage starts right on the day of purchase at selected pet
shops
Online application; flexible health insurance policies
Online application; free 24-H consultation by veterinarian
Rakuten acquired Motto Gyutto SSI which merged with Ansin SSI in Sep. 2016

Source: Shared Research based on company data

Number of policies in force, underwriting revenue
In terms of the number of policies in force, in FY03/21 Anicom was the No. 1 player in the industry with 921,873, ipet Insurance
was No. 2 with 622,069, and Pet & Family Insurance (under T&D Holdings) was No. 3. Rakuten SSI (formerly Motto Gyutto SSI,
which was formerly under UCC Holdings), Pet & Family Insurance, SBI Insurance Group (SBI Ikiiki SSI and SBI Prism SSI [formerly
Japan Animal Club]) each have more than 100,000 policies in force.

Average premium (insurance premiums÷number of policies)
This formula is not very useful since premiums differ greatly depending on the age of animals, and the age composition has agreat influence on the average premium. For example, companies that have recently started to offer insurance tend to havecontracts for younger animals with the result that the average insurance premium may appear lower.

Net loss ratio
Anicom appears to have the highest net loss ratio. However, Anicom’s coverage is broader than its competitors and this makes its
net loss ratio higher. This reflects Anicom’s plan of promoting products that will lead to higher policy renewal ratios. In addition,
pets insured by Anicom have a higher average age since the company has been in business longer than its rivals. This situation issimilar to the average insurance premium formula mentioned above.

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Status of competition
FY03/11
340,628
79,993

FY03/12396,234
107,434

FY03/13446,414137,188

FY03/14504,969
158,146

FY03/15544,815
196,964

FY03/16
585,962
249,330

FY03/17635,670
300,203

19,934
24,147464,70231,32830,921565,91744,40736,914
664,923

60,841
40,627
764,583

76,43045,850864,059

96,43452,534984,260

Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance
Total for the five companies

FY03/11
10,858
2,485
808
546
659
15,357

FY03/12
13,592
3,281
928
869
904
19,574

FY03/13
15,781
4,285
1,115
1,259
1,122
23,562

FY03/1418,087
5,100
1,233
1,855
1,242
27,518

FY03/15
21,733
6,363
1,717
2,353
1,424
33,590Premium per policy

Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance

FY03/11
34,39435,42327,015
26,916

FY03/1236,89235,01027,25528,904

FY03/1337,45635,033
27,83830,060FY03/1438,02334,54030,48930,253

Underwriting revenue
share among
the five companies

Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance

FY03/11
70.7%
16.2%
5.3%
3.6%
4.3%

FY03/12
69.4%
16.8%
4.7%
4.4%
4.6%

FY03/13
67.0%
18.2%
4.7%
5.3%
4.8%

Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance
Total for the five companies

FY03/11
11,107
2,493
814
547
661
15,622

FY03/12
13,845
3,283
934
871
905
19,838Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance
Total for the five companies

FY03/11
342
307
20
-194
116
590

No. of policies in force

Underwriting revenue

Recurring revenue

Recurring profit

Recurring profit margin

Net loss ratio

115,827
72,963
1,124,663

FY03/18
698,566
355,5131,338
131,000
71,955
1,258,372

FY03/19753,332
423,352
8,950
146,183
103,277
1,435,094

FY03/20816,254508,225
100,896
161,058
140,136
1,726,569

1,543,942

FY03/16
25,370
8,126
2,195
2,969
1,650
40,310FY03/17
28,06810,067
2,558
3,601
1,959
46,253

FY03/18
31,29012,212
2,821
4,492
1,774
52,589FY03/19
34,535
14,831

FY03/20
39,105
18,115

FY03/2143,312
22,4125,207
2,218
49,366

5,798
3,664
66,682

FY03/15
41,40535,83730,78530,804

FY03/16
44,872
36,41530,79031,407

FY03/1745,952
36,63831,08926,848

FY03/18
46,90337,24836,39824,480FY03/19
47,57238,08437,56825,314

FY03/20
49,82838,89137,74230,105

FY03/2149,83839,657-

FY03/14
65.7%
18.5%
4.5%
6.7%
4.5%

FY03/15
64.7%
18.9%
5.1%
7.0%
4.2%

FY03/16
62.9%
20.2%
5.4%
7.4%
4.1%

FY03/17
60.7%
21.8%
5.5%
7.8%
4.2%

FY03/18
59.5%
23.2%
5.4%
8.5%
3.4%

FY03/19
70.0%
30.0%

FY03/20
58.6%
27.2%

FY03/21
65.9%
34.1%

10.5%
4.5%

8.7%
5.5%

FY03/13
16,186
4,287
1,121
1,260
1,124
23,979FY03/1418,366
5,103
1,236
1,856
1,243
27,804

FY03/15
22,638
6,365
1,720
2,354
1,425
34,502

FY03/16
26,506
8,128
2,198
2,970
1,650
41,452

FY03/17
28,978
10,071
2,563
3,601
1,975
47,188

FY03/18
32,33912,268
2,824
4,492
1,857
53,780FY03/19
35,82914,941
5,793
5,207
2,218
63,988

FY03/20
41,465
18,334
9,634
5,798
3,851
79,082

FY03/2148,04922,878

FY03/12
337
618
2
-554
79
482

FY03/13
837
392
-13
-571
134
778

FY03/14
733
444
29
-527
210
888

FY03/15
1,250-1,460
39
-546
253
-463

FY03/16
2,129
308
55
-423
184
2,253

FY03/17
2,372
297
32
20
82
2,803

FY03/18
1,853
561
-34
93
282
2,755

FY03/19
2,278
297
144
-235
2,484

FY03/20
2,189
413
-395
-382
1,825

FY03/21
2,758
381
-

Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance
Average

FY03/11
3.1%
12.3%
2.4%
-35.5%
17.5%
3.8%

FY03/12
2.4%
18.8%
0.2%
-63.6%
8.7%
2.4%

FY03/13
5.2%
9.1%
-1.2%
-45.3%
11.9%
3.2%

FY03/14
4.0%
8.7%
2.3%
-28.4%
16.9%
3.2%

FY03/15
5.5%-22.9%
2.3%-23.2%
17.8%-1.3%

FY03/16
8.0%
3.8%
2.5%
-14.2%
11.1%
5.4%

FY03/17
8.2%
2.9%
1.2%
0.5%
4.2%
5.9%

FY03/18
5.7%
4.6%
-1.2%
2.1%
15.2%
5.1%

FY03/19
6.4%
2.0%
2.8%
-10.6%
3.9%

FY03/20
5.3%
2.3%
-6.8%
-9.9%
2.3%

FY03/21
5.7%
1.7%
-

Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance
Average

FY03/11
48.1%
33.1%
40.1%
39.9%
15.7%
35.4%

FY03/12
57.3%
33.8%
40.2%
43.4%
17.2%
38.4%

FY03/13
63.7%
34.3%
38.2%
42.6%
23.2%
40.4%

FY03/14
62.8%
34.1%
42.4%
41.0%
28.4%
41.7%

FY03/15
59.3%
34.6%
38.7%
45.7%
28.7%
41.4%

FY03/16
56.9%
36.7%
39.1%
46.8%
33.7%
42.6%

FY03/17
56.5%
38.8%
38.2%
48.5%
45.5%

FY03/18
56.2%
39.9%
38.4%
47.3%
48.3%
46.0%

FY03/19
56.3%
42.4%
51.7%
41.7%
48.0%

FY03/20
55.2%
44.5%
59.9%
53.2%

FY03/21
56.2%
47.2%
-

Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance
Total for the five companies

FY03/21921,873622,069

65,72470,927

3,139

4.4%

51.7%

Source: Shared Research based on company data

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CoverageAnicom Holdings / 8715
LAST UPDATE: 2021.09.07

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Strengths, weaknesses
Strengths
Payout settlement system becoming industry standard (insurance card, health records)
The company operates an insurance payout system in which pet owners show their animal health insurance card at hospitalcounters and make copayments. The system not only provides convenience to policyholders but also helps the company reduce
administrative expenses.
The company’s animal health insurance cards were accepted by 6,541 veterinary hospitals and clinics as of end-March 2021.
Excluding veterinary hospitals for farm animals, Anicom pet insurance is accepted at more than 90% of veterinary hospitals inJapan.

Name recognition, industry data, customer base, and market share provide resources to expand into new business areas
The company holds 44% share of Japan’s pet insurance market. This formidable share is a major advantage since customer trust isvital in the insurance business. Starting in FY03/20, Anicom considers itself to be in its second founding period and is accelerating
the establishment of preventive insurance mechanisms such as its genetic screening business and Dobutsu Kenkatsu service.
Shared Research believes that if the company can turn these businesses into de facto industry standards, it will have an evengreater competitive edge.

Stable source of recurring revenue
The company’s pet insurance policies have an average renewal rate of 87.7% (in FY03/21). The renewal rate for the second year
exceeds 90%. Maintenance of a high renewal rate is generating a stable stream of recurring revenue.

Weaknesses
Earnings vulnerable to sudden cost increases, such as a tax hike or a surge in the loss ratio
The company has high variable costs and a low marginal profit ratio, so earnings are vulnerable in the short term to a sudden
increase in costs, such as the consumption tax rate and the loss ratio.

Restricted by the Insurance Business Law
The company is engaged in the non-life insurance business, and is subject to restrictions in its business activities dictated by
Japan’s Insurance Business Law. When the company embarks on new businesses, it may find itself in competition with companies
that are not subject to the same restrictions. Hence, it may be at a competitive disadvantage in some situations. For example, thepace of new business rollout may be slowed or it may suffer impact from consolidated solvency margin ratio rules in its new
business development. Such restrictions may lead to weakness in the execution of new businesses. On the other hand, its soundequity base and licensing by the Financial Services Agency under the Insurance Business Law also may be regarded as a source ofstrength.

Higher loss ratio than rivals
Anicom has a high loss ratio compared with its competitors. This is proof of a strong customer focus in its insurance products(insurance payments to customers are high). However, there is the possibility that competitors may try to exploit thiscost-difference weakness by going onto the offensive with low-price strategies. At the present stage, rivals are still small and theirprofitability is low, so the impact of competition is not yet large. Anicom is also focusing efforts on lowering its loss ratio.
However, it will be necessary to closely monitor trends in this area.

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CoverageAnicom Holdings / 8715
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Past results and financial statements
Full-year FY03/21 results▷

Recurring revenue:

JPY48.0bn (+15.9% YoY; 105.4% of the full-year company forecast)▷

Recurring expenses:

JPY45.3bn (+15.3% YoY)

Recurring profit:

JPY2.8bn (+26.0% YoY; 95.1%)

Net income*:

JPY1.6bn (+4.0% YoY; 77.0%)▷▷*Net income attributable to owners of the parent

Earnings summary
Despite an uncertain economic outlook as the COVID-19 pandemic continued, demand for pet care and ownership stayed strong
in full-year FY03/21. The company had 921,873 policies in force (+105,619 or +12.9% YoY). Anicom underwrote 213,368 newpolicies during the fiscal year (+27.5% YoY). Recurring revenue was JPY48.0bn (+15.9% YoY), exceeding the initial target of
JPY45.6bn (achievement of target: 105.4%), due to growth in the number of new policies and the strong performance of
SIMNET.
Recurring profit was JPY2.8bn (+26.0% YoY), which was 95.1% of the full-year forecast of JPY2.9bn. The number of policies inforce and underwriting revenue showed steady growth, and earned premiums increased JPY4.1bn YoY. Expenses such as claims
paid (+JPY2.8bn YoY) and agency fees (+JPY865mn YoY) grew, but provision for catastrophe reserves declined by JPY401mn YoY,
and other recurring revenue outside the insurance business, including hospital management, breeder matching, and genetic
testing grew by JPY2.4bn YoY, aided by the consolidation of SIMNET. As a result, recurring profit rose JPY569mn YoY. The
recurring profit margin was 5.7%, up 0.4pp YoY from 5.3% in FY03/20.

Recurring revenue
Full-year FY03/21 recurring revenue was JPY48.0bn (+15.9% YoY), with underwriting revenue of JPY43.3bn (+10.8% YoY).
Growth in underwriting revenue was underpinned by a 12.9% YoY increase in the number of policies in force. Growth was also
underpinned by higher average premiums per policy, reflecting revisions to insurance policy terms and rates implemented in
December 2018 and increases in premiums linked to the rising age of insured pets. Other non-insurance businesses, including
genetic testing services and veterinary hospital operations, generated recurring revenue of JPY4.2bn (+128.0% YoY) due mainly
to the consolidation of SIMNET; booked under other recurring revenue. Recurring revenue was at 105.4% of the initial full-year
projection of JPY45.6bn.
Demand for pets remains robust, due in part to the fact that people are spending more time at home because of the pandemic.
Prices of pets have remained high. The company is strongly promoting initiatives targeting breeders in order to capture newcustomers and is enhancing sales measures using SIMNET’s breeder matching site Minna no Breeder.
SIMNET’s revenue is based on a fixed percentage of the price of pets that have been matched multiplied by the number ofmatches. Prices of pets have been rising in response to rising demand, which contributes to revenue, but as prices remain high,the company believes increasing the number of matches will be the greater factor in growing revenue.
Investment revenue fell 1.6% YoY to JPY488mn as returns mainly from receivables, investment trusts, and REITs remained solid.
Under its medium-term business plan, Anicom is targeting consolidated recurring revenue at the JPY50.0bn level in the final yearof the plan (FY03/22), with 10% of this expected to come from non-insurance businesses (other recurring revenue).
Non-insurance businesses generated 8.8% of total recurring revenue in FY03/21, up 4.3pp from 4.5% in FY03/20. Under the
supplementary information section of its financial statement, the company breaks down recurring revenue from non-insurance
businesses as follows: (1) veterinary hospital support services JPY249mn (+12.0% YoY), (2) insurance agency business JPY15mn(flat YoY), (3) advanced veterinary medicine clinical research services JPY1.4bn (+61.5% YoY), and (4) other businesses JPY975mn

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Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp(+35.2% YoY). Revenue from veterinary clinic/hospital operations is included under advanced veterinary medicine clinicalresearch services, while revenue from genetic testing is included under other businesses.
Also, from Q2 FY03/21, Online Pet Services was included in the segment breakdown of recurring revenue. Revenue from thisbusiness in full-year FY03/21 was JPY1.6bn, representing the contribution of SIMNET’s breeder matching and other services.
Other recurring revenue increased by JPY2.4bn compared to the same period of the previous year, including the JPY1.6bn fromSIMNET.

Recurring expenses
Total recurring expenses of JPY45.3bn were up 15.3% YoY with SG&A expenses of JPY13.3bn (+19.1% YoY). Total underwriting
expenses of JPY30.5bn were up 12.1% YoY; this included net claims paid of JPY23.2bn, up 13.3% YoY on increases in thefrequency of hospital visits and number of policies in force, commissions and collection fees paid to agents of JPY4.5bn, up 23.5%
YoY on an increase in the number of new policies and escalating competition, provision for reserve for outstanding losses andclaims of JPY211mn (+17.9% YoY), and provision for underwriting reserves of JPY1.4bn (-18.2% YoY) as an increase in the numberof new policies led to growth in unearned premiums. SG&A expenses include the impact of goodwill amortization due to the
SIMNET consolidation and takeover of hospitals. On a consolidated basis, the SG&A ratio rose 0.7pp YoY to 27.6%, despite theacquisition of new policies and steady applications for Dobutsu Kenkatsu.

Recurring profit
Recurring profit was up JPY569mn YoY at JPY2.8bn. This put recurring profit at 95.1% of the initial full-year projection of JPY2.9bn.
There was steady growth in the number of policies in force and underwriting revenue, accompanied by a JPY4.1bn rise in earned
premiums, JPY2.4bn rise in other recurring revenue, offset by a JPY2.8bn increase in claims paid, JPY865mn increase in agency
commissions/fees, JPY553mn rise in other recurring expenses, and JPY2.1bn increase in SG&A expenses related to theconsolidation of SIMNET. The recurring profit margin was 5.7%, up 0.4pp from 5.3% in FY03/20. By quarter, the recurring profit
margin was 4.7% in Q1, 6.6% in Q2, 6.9% in Q3, and 4.8% in Q4. Q1 and Q2 are typically busy periods at veterinary hospitals,
partly due to rabies vaccinations, so there are many payout cases. With this seasonality, Q3 and Q4 usually see improvement in
the recurring profit margin as hospital visits decline.

Extraordinary profit/loss
In Q2, Anicom booked an impairment loss of JPY278mn on software as an extraordinary loss. There were delays to some aspectsof system cutover timing during the process of replacing and upgrading core systems, so the company applied impairment
treatment (normally, there is a switch from a temporary software account to a permanent one coinciding with system cutover,and depreciation is typically applied over five years).

Net income
Net income rose 4.0% YoY to JPY1.6bn. This was 77.0% of the full-year projection of JPY2.1bn.

KPIs
▷

▷
▷
▷
▷

Number of new policies: The total number of new policies in the newborn and general categories combined was 213,368(+27.5% YoY). The renewal rate of existing policies edged up by 0.5pp YoY to 87.7%, and the number of policies in force was921,873 at end-March 2021 (+12.9% YoY).
E/I loss ratio (includes loss adjustment expenses): The loss ratio, a recurring expense parameter, rose 0.6pp YoY to 58.4%.
Expense ratio: The expense ratio was up 0.6pp YoY to 37.7%.
Combined ratio: The combined ratio was 96.1%, up 1.2pp YoY.
The number of animal hospitals accepting Anicom pet insurance increased by 75 from end-FY03/20 to 6,541.

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Results in second year of medium-term business plan
The two-year recurring revenue CAGR was 15.8%, which was better than anticipated by the medium-term plan. The company
achieved numerical targets ahead of schedule.
Recurring profit growth was restrained by comparison (two-year CAGR of 10%) due to increases in unearned premiums andagency commissions as the company prioritized the acquisition of new policies in light of growing demand for pet care during
the COVID-19 pandemic, along with more claims due to more frequent hospital visits. When the medium-term plan wasformulated, the company stated that it would aim for profit growth while investing for business expansion. However, with therising demand for pet care, the company prioritized expanding revenue at a much faster pace than planned, including byincreasing its portfolio of policies in force, rather than reaping profit in earnest.
ROE fell to 6.5% in FY03/21 (from 6.7% in FY03/20), and the equity spread was 0.2% (assuming a 6.3% cost of capital). The
company intends to maintain its financial strength and continue to pay dividends, even as it keeps allocating capital to expand
business and increase corporate value.

Cumulative Q3 FY03/21 results▷

Recurring revenue:

JPY35.7bn (+16.7% YoY; 78.3% of the full-year company forecast)▷

Recurring expenses:

JPY33.5bn (+14.7% YoY)

Recurring profit:

JPY2.2bn (+58.1% YoY; 74.8%)

Net income*:

JPY1.3bn (+33.2% YoY; 63.1%)▷▷*Net income attributable to owners of the parent

Earnings summary
Despite an uncertain economic outlook as the COVID-19 pandemic continued, demand for pet care and ownership stayed strongin cumulative Q3 FY03/21. The company had 896,247 policies in force (+100,080 or +12.6% YoY). Anicom underwrote 159,368
new policies in cumulative Q3. Recurring revenue was JPY35.7bn (+16.7% YoY), exceeding the initial cumulative Q3 target of
JPY33.8bn (progress versus target: 105.6%), due to growth in the number of new policies and the strong performance of SIMNET.
Progress toward the full-year target of JPY45.6bn was 78.3%.
Recurring profit was JPY2.2bn (+58.1% YoY), which was 74.8% of the full-year forecast of JPY2.9bn. The number of policies inforce and underwriting revenue showed steady growth, and earned premiums increased JPY3.1bn YoY. Expenses such as claims
paid (+JPY2.1bn YoY) and agency fees (+JPY636mn YoY) grew, but provision for catastrophe reserves declined by JPY420mn YoY,
and other recurring revenue outside the insurance business, including hospital management, breeder matching, and genetic
testing grew by JPY1.9bn YoY, aided by the consolidation of SIMNET. As a result, recurring profit rose JPY797mn YoY. The
recurring profit margin was 6.1%, up 1.6pp YoY from 4.5% in cumulative Q3 FY03/20.
The company added the Online Pet Services business to its reportable segments starting with Q2, following the consolidation of
SIMNET in FY03/20.

Recurring revenue
Cumulative Q3 recurring revenue was JPY35.7bn (+16.7% YoY), with underwriting revenue of JPY32.1bn (+11.0% YoY). Growthin underwriting revenue was underpinned by a 12.6% YoY increase in the number of policies in force, with 159,368 new policies
added (+31.5% YoY). Growth was also underpinned by higher average premiums per policy, reflecting revisions to insurance
policy terms and rates implemented in December 2018 and increases in premiums linked to the rising age of insured pets. Other
non-insurance businesses, including the genetic testing services and veterinary hospital operations, generated recurring revenueof JPY3.3bn (+145.3% YoY) due mainly to the consolidation of SIMNET; booked under other recurring revenue. Recurring
revenue was at 105.6% of the initial cumulative Q3 projection of JPY33.8bn.

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Demand for pets remains robust, due in part to the fact that people are spending more time at home because of the pandemic.
Although demand settled down somewhat in Q3 compared to Q1 and Q2, prices of pets have remained high. The company isstrongly promoting initiatives targeting breeders in order to capture new customers and is enhancing sales measures using
SIMNET’s breeder matching site Minna no Breeder.
SIMNET’s revenue is based on a fixed percentage of the price of pets that have been matched multiplied by the number ofmatches. Prices of pets have been rising in response to rising demand, which contributes to revenue, but as prices remain high,the company believes increasing the number of matches will be the greater factor in growing revenue.
Investment revenue fell 2.4% YoY to JPY365mn as returns mainly from receivables, investment trusts, and REITs remained solid.
Under its medium-term business plan, Anicom is targeting consolidated recurring revenue of JPY50.0bn in the final year of theplan (FY03/22), with 10% of this expected to come from non-insurance businesses (other recurring revenue). Non-insurance
businesses generated 9.1% of total recurring revenue in cumulative Q3, up 4.7pp from 4.4% in cumulative Q3 FY03/20. Under
the supplementary information section of its financial statement, the company breaks down cumulative Q3 recurring revenue
from non-insurance businesses as follows: (1) veterinary hospital support services JPY183mn (+11.3% YoY), (2) insurance agency
business JPY11mn (-4.3% YoY), (3) advanced veterinary medicine clinical research services JPY1.1bn (+75.2% YoY), and (4) otherbusinesses JPY803mn (+54.1% YoY). Revenue from veterinary clinic/hospital operations is included under advanced veterinary
medicine clinical research services, while revenue from genetic testing is included under other businesses.
Also, from Q2 FY03/21, Online Pet Services was included in the segment breakdown of recurring revenue. Revenue from thisbusiness in cumulative Q3 was JPY1.2bn, representing the contribution of SIMNET. Other recurring revenue increased by
JPY1.9bn compared to the same period of the previous year, including the JPY1.2bn from SIMNET.

Recurring expenses
Total recurring expenses of JPY33.5bn were up 14.7% YoY with SG&A expenses of JPY9.8bn (+16.6% YoY). Total underwriting
expenses of JPY22.7bn were up 11.9% YoY; this included net claims paid of JPY17.3bn, up 14.4% YoY on increases in the numberof policies in force, commissions and collection fees paid to agents of JPY3.3bn (+23.8% YoY), provision for reserve foroutstanding losses and claims of JPY260mn (-20.7% YoY), and provision for underwriting reserves of JPY924mn (-27.6% YoY).
SG&A expenses include the impact of goodwill amortization due to the SIMNET consolidation and takeover of hospitals. On a
consolidated basis, the SG&A ratio was flat YoY at 27.4%, despite robust acquisition of new policies and an increase inapplications for Dobutsu Kenkatsu.

Recurring profit
Recurring profit was up JPY797mn YoY at JPY2.2bn. This put recurring profit at 127.6% of the initial cumulative Q3 projection of
JPY1.7bn. There was steady growth in the number of policies in force and underwriting revenue, accompanied by a JPY3.1bn risein earned premiums, JPY1.9bn rise in other recurring revenue, and JPY420mn fall in catastrophe reserves, offset by a JPY2.1bn
increase in claims paid, JPY636mn increase in agency commissions/fees, JPY458mn rise in other recurring expenses, and JPY1.4bn
increase in SG&A expenses related to the consolidation of SIMNET. The recurring profit margin was 6.1% in cumulative Q3, up
1.6pp from 4.5% in cumulative Q3 FY03/20. By quarter, the recurring profit margin was 4.7% in Q1, 6.6% in Q2, and 6.9% in Q3.
Q1 and Q2 are typically busy periods at veterinary hospitals, partly due to rabies vaccinations, so there are many payout cases.
With this seasonality, Q3 and Q4 usually see improvement in the recurring profit margin as hospital visits decline.

Extraordinary profit/loss
In Q2, Anicom booked an impairment loss of JPY278mn on software as an extraordinary loss. There were delays to some aspectsof system cutover timing during the process of replacing and upgrading core systems, so the company applied impairment
treatment (normally, there is a switch from a temporary software account to a permanent one coinciding with system cutover,and depreciation is typically applied over five years).

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Net income
Net income rose 33.2% YoY to JPY1.3bn. This was 63.1% of the full-year projection.

Adjusted profit
Adjusted profit is a metric specific to the Anicom group that it uses to get a better read on the profitability of its pet insurance
business. The calculation of adjusted profit starts with recurring profit and then eliminates the impact of additions to catastrophe
reserves, net gains/losses on investments, and net earnings/losses from non-insurance businesses. Calculated in this manner,adjusted profit came to JPY955mn (versus JPY1.2bn in cumulative Q3 FY03/20.

KPIs▷

Number of new policies: The total number of new policies in the newborn and general categories combined was 159,368(+31.5% YoY). The was 86.8% of the full-year projection of 183,600 new policies. The renewal rate of existing policies edged
up by 0.6pp YoY to 87.7%, and the number of policies in force was 896,247 at end-Q3 (+12.6% YoY), surpassing the full-yeartarget of 885,000 policies in force (reaching 101.3% of plan). The breakdown between 50% payout and 70% payout plans for▷

all policies outstanding was 6:4, with 50% plans predominating. The 70% plan accounts for over half of new policies.
E/I loss ratio (includes loss adjustment expenses): The loss ratio, a recurring expense parameter, rose 0.8pp YoY to 59.3%. This
stemmed from an increase in veterinary hospital visits, primarily due to people spending more time at home due to the
COVID-19 pandemic. The company expects the number of hospital visits to settle down, but Shared Research understands that

▷
▷
▷
▷
▷

it will be difficult to bring the full-year ratio down to 57.6% as planned in the face of the ongoing pandemic.
Expense ratio: The expense ratio was up 0.2pp YoY to 37.5%. The company controlled expenses while continuing to invest
aggressively in growing in scale.
Combined ratio: The combined ratio was 96.8%, up 1.0pp YoY.
The number of animal hospitals accepting Anicom pet insurance increased by 39 from end-FY03/20 to 6,505.
Number of applications for Dobutsu Kenkatsu (gut microbiota measurement): 108,721 (+42,878 YoY)
Number of genetic tests: 77,714 (-37,289 YoY)

TopicsMoves toward second establishment period
The company saw FY03/20 as the start of its second establishment period, and is executing its medium-term plan covering 2019–
21. The key initiatives are a breeding support business aimed at eradicating genetic diseases, a service that measures animal gut
microbiota launched in December 2018, and the provision of preventive medicine and advanced treatment in medical settings.

Results of genetic testing
Since its full-scale rollout in 2019, genetic testing is steadily being taken up by pet shops and breeders, and results are starting toemerge in terms of a lower incidence of genetic diseases. The percentage of Welsh Corgis tested deemed to be affected (have agenetic mutation and a high risk of illness) by degenerative myelopathy (DM) has declined from 42% to 16%.

Results of preventive insurance: Recovery in renewal rate
Anicom is working to spur the take-up of preventive insurance which will promote health among members. With the provision ofhealth check services in addition to early disease detection through Dobutsu Kenkatsu, it is looking to develop the type of
insurance rather than non-refundable insurance. It thinks the spread of preventive insurance will boost value added for thecustomer, helping it to underwrite new policies and improve renewal rates. Further, if the aggregate cost of insurance payouts
and ancillary services declines, the company thinks that its combined ratio will decline in the medium term.
Following revision of premiums in December 2018, Anicom says the overall renewal rate declined about 0.7pp through June
2019. However, from April 2019 to December 2020, the number of applications for Dobutsu Kenkatsu grew from about 5,000

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per month to about 13,000 per month, with the renewal rate improving by about 1pp during the same period. As a result, theincrease in Dobutsu Kenkatsu applications helped return the renewal rate to the level it was at prior to the revision of premiums.
The largest impact came from a rise in renewal rate for policies on newborns.

Acquisition of patent no. 6734457 for disease forecast system using facial photos of pets
The patent for a system that uses artificial intelligence (AI) to estimate the likelihood a pet will develop eye, ear, or skin disorders
within a certain period of time, based only on a facial photo of the pet, is a world first. As an example of the system’s function,
when estimates of the likelihood toy poodles would develop an eye infection within one year were made using facial photos,
estimate accuracy was determined to be about 70%. Development of the system will continue so that it will be able to accurately
estimate disease risk for individual animals based on breed, age, and other more detailed information. Anicom plans to use thispatented system to realize individualized prevention regimes.
Not satisfied with being a mere pet insurance company, Anicom has worked to establish itself as a prevention-oriented insurancecompany by developing services its peers cannot imitate to add value to its offerings and by combining various group services.
This AI patent is one such endeavor. The company does not intend to get caught up in pet insurance price competition, instead
aiming to provide high value-added services, so that merely purchasing Anicom insurance can help pet owners protect their petsfrom disease or injury and promote their health, encouraging them to purchase policies despite relatively high premiums.

Increasing practical use and uptake of cell therapy and regenerative medicine
The Research and Development Partnership for Animal Regenerative Medicine (PARM), established by Anicom and Fujifilm
Corporation in December 2019, cultivates and develops mesenchymal stem cells for shipping to partner veterinary hospitals.
PARM currently promotes cell therapy services for 14 canine and 12 feline diseases, including chronic enteropathy. The
partnership has become fully operational in FY03/21, currently with 140 partner hospitals. The partnership aims to increase boththe number of partners and the number of orders. Anicom plans to incorporate the partnership’s revenue contribution into otherrecurring revenue.

Response to revised Act on Welfare and Management of Animals
In June 2021, a revised Act on Welfare and Management of Animals with numerical standards regarding proper breeding business
management is scheduled to come into effect. Specific measures cover facility structure and size, personnel requirements, andlimits on number of times an animal may give birth over its lifetime. Anicom expects a major impact on the pet industry, withincreased costs for breeders and pet shops, and a decline in the number of breeding animals. When the revised act was
introduced, it included transitional measures regarding breeder-related exemptions, personnel count, and the number of times
an animal may give birth over its lifetime, mitigating the short-term impact on the supply side (for pets including cats and dogs).
In the sense that supply volume will not fall significantly, Shared Research understands there will not be a substantial impact on
Anicom. The company aims to support the establishment of a healthy breeding environment and a sound pet industry while
facilitating compliance with laws and regulations and earnings growth at business operators. To this end, it is ready to provide
wide-ranging support in the areas of equipment, mating efficiency, and health management.

Ministerial Ordinance Regarding Breeding Management Standards under Act on Welfare and Management of Animals: Summary of transitional
measures (source: Ministry of the Environment, Central Environment Council for Animal Protection and Management [No. 58])
Rules related to facility structure and size
As a certain amount of time is required for the replacement of breeding cages, rules will apply from June 2021 for new businesses and from June 2022
for existing businesses.
Rules related to personnel count
As a certain amount of time is required to prevent the abandonment, killing, or inappropriate keeping of dogs and cats that have nowhere else to go, or
to reduce the number of animals per employee by securing new employees or transferring animals to other businesses, the number of animals
permitted will be reduced in stages, five at a time. In the case of Type 2 animal handling businesses, full enforcement will be delayed one year, since
there may be an increase in transfers from breeders and other Type 1 animal handling businesses. Full enforcement for new businesses will begin with
June 2021. For existing businesses, full enforcement for Type 1 businesses will begin with June 2024 and for Type 2 businesses with June 2025.
Rules related to breeding methods
Based on the assumption that injection of microchips will become mandatory, making it possible to ensure the effectiveness of age verification andconfirmation of the number of breeding cycles as recorded in the breeding ledger, rules related to females’ mating age and number of births will be

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applied from June 2022 (ledger entries regarding the number of births will become mandatory from June 2021, and the rules will be applied from June
2022 after a system is established to confirm compliance status), but rules related to annual medical checks and caesarian sections will be applied from
June 2021.

Basic agreement on business alliance with Ping An Property & Casualty Insurance Company of China
The company has announced a basic agreement regarding a business alliance with Ping An Property & Casualty Insurance ofChina. By participating in the domestic pet insurance business in China, it will engage in research into pet illness and develop its
expertise in veterinary medicine and develop business in the areas of pet related finance and health together with the Ping An
group. Anicom will advise Ping An Insurance on pet insurance Ping An sells in China. The two partners are also considering
establishing a new company.
Quarterly performance(JPYmn)No. of policies in force ('000)

97.1%
97.2%
102.6%
92.4%

1,000
800

90.1%

600
400

409

421

433

446

462

491

478

505

517

526

536

545

555

Recurring profit (JPYmn)

Combined ratio (right axis)

95.1%
95.4%97.5% 97.4%
97.8% 94.1%
91.1%
95.8%
95.7% 96.7%
91.9%
93.4%
100%
94.2%
94.4%
93.2%
92.9%
92.6%
92.2%
90.8%
89.7%
88.2%
896
871
90%
816 843
767 781 796
730 742 753
683 699 714
80%
667
651
610 623 636
576 586 597

97.9%
97.2%
95.4%
93.9%
91.0%
90.5%
90.1%
99.5%
87.9%

565

70%

200

60%

0

50%

-200

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
FY03/13

FY03/14

FY03/15

FY03/16

FY03/17

E/I loss ratio

80%

73.4%

70%

69.0%

68.1%

65.5%

63.1%

69.5%
66.3%

66.7%

FY03/18

FY03/19

Expense ratio (earned premiums basis)

FY03/21

Reviseed premium for pets
aged eight or older

68.9%
62.1%

64.2%

62.1%

58.7%

60%

60.6%

60.3%
57.6%

59.4%

60.1%

60.8%
55.6%

60.3% 61.2% 59.1%

56.3%

59.1%

50%

59.7% 60.9%
56.5%

58.8%

59.3%
57.6%

55.6%

58.7% 59.8% 59.4%

introduced a new ancillary service,
Dobutsu Kenkatsu; revised premiums

40%
30%
20%

FY03/20

40%

31.6%

29.2% 29.1%

29.3% 30.5%

33.9%
28.3% 27.7% 27.9% 28.7% 28.3%

26.8%

29.2% 28.4% 29.5%

32.2% 32.8% 31.0% 32.1% 32.6%

35.4% 35.5% 35.3% 34.5% 34.1%

33.7% 34.2%

36.1% 37.0%

38.5%
37.7% 38.0%
36.3% 36.7%
36.5%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21

Source: Shared Research based on company data

Recurring expenses (top) and cost structure (bottom)(JPYmn)12,00010,000
8,000
6,000
4,000
2,000
0

80%

Operating and general admin. expenses

Investment expenses

Underwriting expenses

Operating and general admin. expense ratio (right axis)

11,138 11,12711,254

9,122

9,814 9,733 9,66510,063

8,483
27%
7,954 8,122 7,823
29%
7,474 7,375 7,683
26%
28% 28%
6,662 6,684
6,657 6,981
6,284
6,222
27%
24%
5,979 5,913
27%
27% 27% 26%
26%
23%
5,580
26% 26% 26%
5,205 5,419
25%
4,784
25%
25%
4,582
4,502
25%
25%
25%
4,077 4,280 4,269
24%
3,614 3,826 3,831
23%
23%
22%
22%
22% 21%
22%
22%
21%
21%
20%
27%

Q1
FY03/13Q3Q1
FY03/14Q3

Q1
FY03/15Q3Q1
FY03/16

Q3

Net claims paid
Loss adjustment expenses (right axis)
Commissions and collection fees (right axis)

70%
60%
50%
40%
30%

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21

Q1
FY03/17Q3

10% 1,800

Q1
FY03/18Q3Q1
FY03/19

No. of policies in force ('000) (a)Q3

Q1
FY03/20Q3Q1
FY03/21

Q3

32%
30%
28%
26%
24%
22%
20%
18%
16%

Commissions and collection fees (JPYmn) (b)1.8

9% 1,600

1.6

8% 1,400

1.4

7% 1,200
1,000
6%
800
5%
600
4%
400
3%
200
2%
0

1.2

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21

1.0
0.8
0.6
0.4
0.2
0.0

Source: Shared Research based on company data

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New policies
No. of new policies

40%

No. of new policies via pet shop agencies

No. of new policies via general agencies

30%

33% 33%20%
10%15% 15%

0%
-10%

-7%

-20%

-1% -1%4%6%

3%-8% -9%-5% -6%

2%

6%

11%

15%

12%

14% 14%10%

15% 17% 16% 15%

22%
9% 7%

1%

4% 7% 6%

28%

10%

-30%
-40%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/2156,00052,00048,00044,00040,00036,00032,00028,00024,00020,00016,00012,000Q1
FY03/12

No. of new policies (newborns)

Commissions and collection fees as % of recurring revenue (right axis)

10%
9%
8%
7%
6%
5%

Q1
FY03/13Q1
FY03/14Q1
FY03/15Q1
FY03/16Q1
FY03/17Q1
FY03/18Q1
FY03/19Q1
FY03/20

4%Q1
FY03/21

Source: Shared Research based on company data

1H FY03/21 results▷

Recurring revenue:

JPY23.6bn (+17.7% YoY; progress of 106.3% vs. 1H company forecast, 51.7% of full-year forecast)▷

Recurring expenses:

JPY22.3bn (+13.9% YoY)

Recurring profit:

JPY1.3bn (+167.2% YoY; progress of 120.9% and 45.9%)

Net income*:

JPY718mn (+108.7% YoY; progress of 90.9% and 34.9%)▷▷*Net income attributable to owners of the parent

Earnings summary
Despite subdued consumer sentiment as the impact from the COVID-19 pandemic lingered, demand for pet care and ownershipstayed strong in 1H FY03/21. The company had 870,987 policies in force (+89,619 or +11.5% YoY). Anicom underwrote 107,295
new policies in 1H, setting a new record. Recurring revenue was JPY23.6bn (+17.7% YoY), meeting the initial target of JPY22.2bn(progress verses target: 106.3%), due to growth in the number of new policies and the strong performance of SIMNET.
Recurring profit was JPY1.3bn (+167.2% YoY, 45.9% of full-year forecast), meeting the initial target of JPY1.1bn (120.9% versus
the initial target). The number of policies in force and underwriting revenue showed steady growth, and earned premiums
increased JPY2.1bn YoY. Expenses such as claims paid (+JPY1.4bn YoY) and agency fees (+JPY411mn YoY) grew, but provision forcatastrophe reserves declined by JPY302mn YoY, and other recurring revenue outside the insurance business, including hospitalmanagement, breeder matching, and genetic testing grew by JPY1.3bn YoY, aided by the consolidation of SIMNET. As a result,
recurring profit rose JPY833mn YoY. The recurring profit margin was 5.6%, up 3.1pp YoY from 2.5% in 1H FY03/20.
From Q2 FY03/21, the company added the Online Pet Services business to its reportable segments following the consolidation of
SIMNET in FY03/20.

Recurring revenue
1H recurring revenue was JPY23.6bn, up 17.7% YoY, with underwriting revenue of JPY21.2bn (+11.3% YoY). Growth inunderwriting revenue was underpinned by a 11.5% YoY increase in the number of policies in force, with 107,295 new policies
added (+33.2% YoY). Growth was also underpinned by higher average premiums per policy, reflecting revisions to insurance
policy terms and rates implemented in December 2018 and increases in premiums linked to the rising age of insured pets. Other

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non-insurance businesses, including the genetic testing services and veterinary hospital operations, generated recurring revenueof JPY2.1bn (+162.1% YoY) due mainly to the consolidation of SIMNET; booked under other recurring revenue.
Under its medium-term business plan, Anicom is targeting consolidated recurring revenue of JPY50.0bn in the final year of theplan (FY03/22), with 10% of this expected to come from non-insurance businesses (other recurring revenue). Non-insurance
businesses generated 9.0% of total recurring revenue in 1H, up 5.0pp from 4.0% in 1H FY03/20. Under the supplementary
information section of its financial statement, the company breaks down 1H recurring revenue from non-insurance businesses asfollows: (1) veterinary hospital support services JPY121mn (+11.0% YoY), (2) insurance agency business JPY7mn (flat YoY), (3)advanced veterinary medicine clinical research services JPY735mn (+116.2% YoY), and (4) other businesses JPY478mn (+39.4%
YoY). Revenue from veterinary clinic/hospital operations is included under advanced veterinary medicine clinical research services,while revenue from genetic testing is included under other businesses.
Also, from Q1 FY03/21, Online Pet Services was included in the segment breakdown of recurring revenue. Revenue from thisbusiness in 1H was JPY772mn, representing the contribution of SIMNET. Other recurring revenue increased by JPY1.3bncompared to the same period of the previous year, including JPY772mn from SIMNET.
Investment revenue rose 47.2% YoY to JPY284mn on solid returns from domestic equities, investment trusts, and domestic REITs.

Recurring expenses
Total recurring expenses of JPY22.3bn were up 13.9% YoY with SG&A expenses of JPY6.4bn (+15.8% YoY). Total underwriting
expenses of JPY15.1bn were up 10.9% YoY; this included net claims paid of JPY11.3bn, up 15.2% YoY on increases in the numberof policies in force, commissions and collection fees paid to agents of JPY2.2bn (+23.5% YoY), provision for reserve foroutstanding losses and claims of JPY209mn (-45.7% YoY), and provision for underwriting reserves of JPY850mn (-25.0% YoY).
SG&A expenses include the impact of goodwill amortization due to the SIMNET consolidation and takeover of hospitals.

Recurring profit
Recurring profit was up JPY833mn YoY, with steady growth in the number of policies in force and underwriting revenue. Growth
was underpinned by a JPY2.1bn rise in earned premium, a rise of JPY1.3bn in other recurring revenue, and fall of JPY302mn incatastrophe reserves, offset by a JPY1.4bn increase in claims paid, JPY411mn increase in agency commissions/fees, JPY320mn risein other recurring expenses, and JPY880mn increase in SG&A expenses related to the consolidation of SIMNET. The recurring
profit margin was 5.6% in 1H, up 3.1pp from 2.5% in 1H FY03/20.

Net income
Net income doubled YoY (up 108.7%) to JPY718mn, but was just 90.9% of the company’s 1H forecast and 34.9% of the full-year
forecast. This reflected the booking of an impairment loss of JPY278mn on software as an extraordinary loss. There were delays tosome aspects of system cutover timing during the process of replacing and upgrading core systems, so the company applied
impairment treatment (normally, there is a switch from a temporary software account to a permanent one coinciding with systemcutover, and depreciation is typically applied over five years).

Adjusted profit
Adjusted profit is a metric specific to the Anicom group that it uses to get a better read on the profitability of its pet insurance
business. The calculation of adjusted profit starts with recurring profit and then eliminates the impact of additions to catastrophe
reserves, net gains/losses on investments, and net earnings/losses from non-insurance businesses. Calculated in this manner,adjusted profit came to JPY690mn, up from JPY579mn in 1H FY03/20.

Trends in key parameters▷

Number of new policies: The total number of new policies in the newborn and general categories combined was 107,295(+33.2% YoY). The renewal rate of existing policies edged up by 0.5pp YoY to 87.5%, and the number of policies in force was
870,987 at end-1H (+11.5% YoY) amid strong demand for pets. Progress was 58% versus the full-year forecast of 183,600 new

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policies. The breakdown between 50% payout and 70% payout plans for all policies outstanding was 6:4, with 50% plans▷

predominating. The 70% plan accounts for over half of new policies.
E/I loss ratio (includes loss adjustment expenses): The loss ratio, a recurring expense parameter, rose 0.4pp YoY to 59.5%. This
stemmed from an increase in veterinary hospital visits, primarily due to people spending more time at home due to the
COVID-19 pandemic.

▷

Expense ratio: The expense ratio was down 0.6pp YoY to 37.2%. The company controlled expenses while continuing to invest▷

Combined ratio: The combined ratio was 96.7%, down 0.2pp YoY.

▷

Number of applications for Dobutsu Kenkatsu (gut microbiota measurement): 69,509 (up 30,012 YoY)▷▷

aggressively in growing in scale.

The number of animal hospitals accepting Anicom pet insurance increased by 22 from end-FY03/20 to 6,485.

Number of genetic tests: 53,031 (down 19,730 YoY)

TopicsMoves toward second establishment period
The company saw FY03/20 as the start of its second establishment period, and is executing its medium-term plan covering 2019–
21. The key initiatives are a breeding support business aimed at eradicating genetic diseases, a service that measures animal gut
microbiota launched in December 2018, and the provision of preventive medicine and advanced treatment in medical settings.

Results of genetic testing
Since its full-scale rollout in 2019, genetic testing is steadily being taken up by pet shops and breeders, and results are starting toemerge in terms of a lower incidence of genetic diseases. The percentage of Welsh Corgis tested deemed to be affected (have agenetic mutation and a high risk of illness) by degenerative myelopathy (DM) has declined from 42% to 16%.

Results of preventive insurance
Anicom is working to spur the take-up of preventive insurance which will promote health among members. With the provision ofhealth check services in addition to early disease detection through Dobutsu Kenkatsu, it is looking to develop the type of
insurance rather than non-refundable insurance. It thinks the spread of preventive insurance will boost value added for thecustomer, helping it to underwrite new policies and improve renewal rates. Further, if the aggregate cost of insurance payouts
and ancillary services declines, the company thinks that its combined ratio will decline in the medium term. In fact, Anicom said
that the renewal rate for new policies from the newborn channel rose by 3–4pp from end-FY03/20 due to increased applications
for Dobutsu Kenkatsu.

Response to revised Act on Welfare and Management of Animals
In June 2021, a revised Act on Welfare and Management of Animals with numerical standards regarding proper breeding business
management is scheduled to come into effect. Specific measures cover facility structure and size, personnel requirements, andlimits on number of times an animal may give birth over its lifetime. Anicom expects a major impact on the pet industry, withincreased costs for breeders and pet shops, and a decline in the number of breeding animals. It aims to support the establishmentof a healthy breeding environment and a sound pet industry while facilitating compliance with laws and regulations and earnings
growth at business operators. To this end, it is ready to provide wide-ranging support in the areas of equipment, mating
efficiency, and health management.

Basic agreement on business alliance with Ping An Property & Casualty Insurance Company of China
The company has announced a basic agreement regarding a business alliance with Ping An Property & Casualty Insurance ofChina. By participating in the domestic pet insurance business in China, it will engage in research into pet illness and develop its
expertise in veterinary medicine and develop business in the areas of pet related finance and health together with the Ping An
group. Anicom will advise Ping An Insurance on pet insurance Ping An sells in China. The two partners are also considering
establishing a new company.

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Quarterly performance(JPYmn)100.2%
99.4%
98.8%

1,000

No. of policies in force ('000)

102.6%

Recurring profit (JPYmn)

97.1%

92.0%

800

714

90.1%

600
400

312

200

321

231 26798

8

0Combined ratio (right axis)

875
99.5%97.9%
97.8%
97.2%
97.2%
81795.4%97.5%
95.8%
95.7%96.7%94.4%
95.4%
95.1%
94.2%
93.9%
93.2%93.4%
94.1%
92.9%
92.6%
92.4%
92.2%
91.0%
90.8%
90.5% 836
90.1%
91.9%
91.1%
89.7%
780
88.2%
87.9%

321
113

18

187

379

293

491

404

751

627 673567 572 589
437

395 407 358

550

445

70%

175

60%
50%

-81

-200

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21E/I loss ratio

80%

73.4%

70%

62.3%

66.0% 67.3%

68.1%

65.5%

90%
80%

322

277

174

112

493

100%

63.1%

61.5%

69.0% 69.5%
66.3%

66.7%

Expense ratio (earned premiums basis)

40%

Reviseed premium for pets
aged eight or older

68.9%
62.1%

64.2%

62.1%

60.6%

58.7%

60%

60.3%
57.6%

60.1%
60.8%
59.4%

55.6%

60.3% 61.2% 59.1%

50%

56.3%

59.7% 60.9%
59.1%
58.8%
56.5%

59.3%
57.6%

55.6%

58.7% 59.8%

introduced a new ancillary service,
Dobutsu Kenkatsu; revised premiums

40%
36.5%

30%

34.2%

32.1%

20%

30.5% 31.6% 29.2%29.1%29.3% 30.5%

33.9%
28.3% 27.7%27.9% 28.7% 28.3%

26.8%

29.2% 28.4% 29.5%

32.2% 32.8% 31.0% 32.1% 32.6%

35.4%35.5%35.3% 34.5% 34.1%

33.7% 34.2%

36.1% 37.0%

38.5%
37.7%
36.3% 36.7%
36.5%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21

Source: Shared Research based on company data

Recurring expenses (top) and cost structure (bottom)(JPYmn)Operating and general admin. expenses

12,00010,000Underwriting expenses

Operating and general admin. expense ratio (right axis)
11,13811,127

27%

8,000

27%

26%
24%

24%

6,000
4,000

Investment expenses

3,2813,3123,4423,473
22%

23%

3,6143,8263,831
22%

2,000

4,077

4,784
4,2804,2694,5024,582
23%

22%

21%

21%

22%
21%

5,2055,419

5,9795,913

26%
6,6626,684

6,284
25%

25%
23%

22%

5,580

6,222

27%
6,657
25%

6,981

7,4747,375
27% 27%

8,1227,823
7,6837,954
26%
25% 25%

24%

8,483

9,122

9,8149,7339,66510,063
29%

26% 26% 26%

26%

30%
28%

28%

27%

26%

27%

24%

25%

22%

22%

20%

20%

18%

0

16%

Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/2180%

No. of policies in force ('000) (a)Commissions and collection fees (JPYmn) (b)(b) / (a) (JPY'000/policy, right axis)

10% 1,200

Net claims paid
Loss adjustment expenses (right axis)

75%

32%

9%

70%

8%

65%
60%

7%

55%

6%

50%

5%

45%

4%

40%
35%

3%

30%

2%

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21

1,000

1.4
1.2
1.0

800

0.8

600

0.6

400

0.4

200

0.2

0

0.0

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21

Source: Shared Research based on company data

New policies
No. of new policies

40%

No. of new policies via pet shop agencies

No. of new policies via general agencies

30%

33% 33%20%
10% 17% 16%
0%
-10%
-20%

15% 15%4% 5%-7%-1% -1%4%6%

3%-8% -9%-5% -6%

2%

6%

11%

15%

12%

14%14%

10%

15% 17% 16% 15%

22%
9% 7%

1%

4%

7% 6%

10%

-30%
-40%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21

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Coverage

56,00052,00048,00044,00040,00036,00032,00028,00024,00020,00016,00012,000Anicom Holdings / 8715
LAST UPDATE: 2021.09.07

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

No. of new policies (newborns)

Commissions and collection fees as % of recurring revenue (right axis)

10%
9%
8%
7%
6%
5%

Q1
FY03/12Q3Q1
FY03/13Q3Q1
FY03/14Q3

Q1
FY03/15Q3Q1
FY03/16Q3

Q1
FY03/17Q3Q1
FY03/18Q3Q1
FY03/19Q3

Q1
FY03/20Q3

4%Q1
FY03/21

Source: Shared Research based on company data

Q1 FY03/21 results (out August 7, 2020)▷

Recurring revenue:

JPY11.7bn (+17.0% YoY)▷

Recurring expenses:

JPY11.1bn (+13.5% YoY)

Recurring profit:

JPY550mn (+214.3% YoY)

Net income*:

JPY350mn (+236.5% YoY)▷▷*Net income attributable to owners of the parent

Earnings summary
The company had 842,754 policies in force (+75,980, +9.9% YoY). Anicom underwrote 53,456 new policies in Q1, a quarterly
record. Recurring revenue was JPY11.7bn (+17.0% YoY), meeting the initial target of JPY10.8bn, due to growth in the number of
new policies and the strong performance of SIMNET. The company thinks that solid growth in demand for pet care products andservices reflects shifts in spending due to consumers staying home, government benefits, and lack of overseas travel.
Recurring profit was JPY550mn (+214.3% YoY, 19.0% of full-year forecast), meeting the initial target of JPY500mn. The number ofpolicies in force and underwriting revenue showed steady growth, and earned premiums increased JPY1.1bn YoY. Expenses suchas claims paid (+JPY648mn YoY) and agency fees (+JPY190mn YoY) grew, but provision for catastrophe reserves declined by
JPY124mn YoY, and other recurring revenue outside the insurance business, including hospital management, breeder matching,and genetic testing grew by JPY617mn YoY, aided by the consolidation of SIMNET. As a result, recurring profit rose JPY375mn YoY.
The recurring profit margin was 4.7%, up 2.9pp YoY from 1.8%.

Recurring revenue
Q1 recurring revenue was JPY11.7bn up 17.0% YoY with underwriting revenue of JPY10.6bn (+11.0% YoY). Growth inunderwriting revenue was underpinned by a combination of a 9.9% YoY increase in the number of policies in force, with 53,456
new policies added (+33.0% YoY). Growth was also underpinned by higher average premiums per policy, reflecting revisions toinsurance policy terms and rates implemented in December 2018 and increases in premiums linked to the rising age of insured
pets. Other non-insurance businesses, including the genetic testing services and veterinary hospital operations, generated
recurring revenue of JPY1.0bn (+155.7% YoY) due to the consolidation of SIMNET; booked under other recurring revenue.
Under its medium-term business plan, Anicom is targeting consolidated recurring revenue of JPY50.0bn in the final year of theplan (FY03/22), with 10% of this expected to come from non-insurance businesses (other recurring revenue). Non-insurance
businesses generated 8.7% of total revenue in Q1, up from 4.0% in the previous year. Under the supplementary information
section of its financial statement, the company breaks down Q1 recurring revenue from non-insurance businesses as follows: (1)veterinary hospital support services JPY59mn (+9.8% YoY), (2) insurance agency business JPY3mn (-12.0% YoY), (3) advanced
veterinary medicine clinical research services JPY381mn (+111.3% YoY) and (4) other businesses JPY193mn (+24.2% YoY).
Revenue from veterinary clinic/hospital operations appears to be included under advanced veterinary medicine clinical researchservices, while revenue from genetic testing appears to be included under other businesses. The monthly figures reported byAnicom show that the number of genetic tests declined to 8,288 in April and 7,323 in May due to the impact of the COVID-19
pandemic, but recovered to 9,282 in June. Shared Research believes that the number of tests is now steadily increasing.

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Also, from Q1 FY03/21, Online Pet Services was included in the segment breakdown of recurring revenue. Revenue from thisbusiness in Q1 was JPY374mn, representing the contribution of SIMNET. Other recurring revenue increased by JPY618mn
compared to the same period of the previous year, including JPY374mn from SIMNET. Sales and profit figures are not disclosed
for SIMNET.

Recurring expenses
Total recurring expenses of JPY11.1bn were up 13.5% YoY with SG&A expenses of JPY3.1bn (+17.6% YoY). Total underwriting
expenses of JPY7.6bn were up 9.8% YoY; this included net claims paid of JPY5.5bn, up 16.0% YoY on increases in the number ofpolicies in force, commissions and collection fees paid to agents of JPY1.1bn (+21.9% YoY), additions to provision for outstanding
losses and claims of JPY122mn (-52.9% YoY), and additions to provision for underwriting reserves of JPY721mn (-17.7% YoY).

Recurring profit
Full-year recurring profit of JPY550mn was up 214.3% YoY with steady growth in the number of policies in force and underwriting
revenue. Growth was underpinned by a JPY1.1bn rise in earned premium income, offset by a JPY648mn increase in claims paid,
JPY190mn increase in agency commissions/fees and JPY467mn increase in SG&A expenses related to the consolidation of
SIMNET. The recurring profit margin was 4.7% in Q1, up 3.0pp from Q1 FY03/20.

Adjusted profit
Adjusted profit is a metric specific to the Anicom group that it uses to get a better read on the profitability of its pet insurance
business. The calculation of adjusted profit starts with recurring profit and then eliminates the impact of additions to catastrophe
reserves, net gains/losses on investments, and net earnings/losses from non-insurance businesses. Calculated in this manner,adjusted profit came to JPY449mn, up from JPY369mn in Q1 FY03/20.

Trends in key parameters▷▷

New policies written: During the year the number of new pet insurance policies written through both its newborn channel andgeneral channel came to 53,456 (+33.0% YoY). With the renewal rate for existing policies increasing 0.3pp to 87.3%, thenumber of policies in force came to 842,754 at end-Q1, up 9.9% versus end-Q1 FY3/20.
E/I loss ratio: The loss ratio, a recurring expense parameter, fell 0.1pp YoY to 58.7%. This was due to product portfolio
improvement caused by an increase in new policies. The E/I loss ratio tends to improve in 1H and drop in 2H.

For hospital visits and stays, the company has encouraged customers to transition from its original “wide” plan, which does not limit the number ofhospital visits and stays, to a standard plan that has such limits (the gut microbiota checkup service is only attached to the standard plan). Since thestandard plan is less expensive than the “wide” version, a transition toward the standard plan means downward pressure on revenue. On the other
hand, the company expects having more customers in the standard plan will suppress future claims paid and pull the loss ratio down, resulting inhigher profits.

▷

Expense ratio: The expense ratio was down 0.3pp YoY to 36.7%. According to the company, it was able to hold down a major▷

Combined ratio: The combined ratio was 95.4%, down 0.4pp YoY.

▷

increase in SG&A expenses despite higher application costs for Dobutsu Kenkatsu.

The number of animal hospitals accepting Anicom pet insurance increased by 11 from end-FY03/20 to 6,477.

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Coverage

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Quarterly performance
No. of policies in force ('000)(JPYmn)1,000 93.0%94.1%96.2%

Recurring profit (JPYmn)

97.1%

714

90.1%

600
400

312

200

105

186
47

0

8

4

Combined ratio (right axis)

875
99.5%
97.9%
97.8%
97.2%
97.2%
96.7%
81795.4%
95.8%
95.7%
95.4%
95.1%
94.4%
94.2%
93.9%
93.4%
93.2%
94.1%
92.9%
92.6%
92.4%
92.2%
91.0%
90.8%
90.5% 836
90.1%
91.9%
89.7% 91.1%
88.2%
87.9%

92.0%

89.9%

800

102.6%

100.2%
99.4%
98.8%

321

231 267

98

321
113

18

187

379

293

491

404

567 572 589
437

395 407 358

493

70%

322
175

60%
50%

-81

-200

Q1
Q3
FY03/11Q1
Q3
FY03/12Q1Q3
FY03/13Q1Q3
FY03/14Q1Q3
FY03/15

E/I loss ratio

80%

73.4%
66.0%67.3%
65.5%
62.3%
61.5%

70%
60%

Q1
Q3
FY03/16

48.2%

40%

44.8%
41.1%
39.7%

Q1
Q3
FY03/17Q1Q3
FY03/18

Expense ratio (earned premiums basis)

69.0% 69.5%
68.9%
66.7%
66.3%
64.2%
63.1%
62.1%

68.1%

62.1%
60.6%

58.7%

56.5%55.3%
53.0%

50%

90%

550 80%

445

277

174

112

751

627 673

100%

60.3%

60.1%
60.8%
59.4%
57.6%

Q1
Q3
FY03/1940%
Q1
FY03/21Q1
Q3
FY03/20

Reviseed premium for pets
aged eight or older

59.7% 60.9%
60.3%61.2%59.1%
59.1%
58.8%
56.5%
56.3%

59.3%

55.6%

58.7%
57.6%
55.6%

introduced a new ancillary service,
Dobutsu Kenkatsu; revised premiums

38.5%
36.5%
36.3%36.7%
36.1%37.0%
35.4%35.5%35.3%34.5%34.1%
36.5%
34.6%
34.2%
33.9%
33.7%34.2%
32.2%32.8%31.0%32.1%32.6%
32.1%
30.5%31.6%29.2%29.1%29.3%30.5%
29.2%28.4%29.5%
28.3%27.7%27.9%28.7%28.3%
26.8%

30%
20%

Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
FY03/11
FY03/12
FY03/13
FY03/14
FY03/15
FY03/16
FY03/17
FY03/18
FY03/19
FY03/20
FY03/21

Source: Shared Research based on company data

Recurring expenses (top) and cost structure (bottom)(JPYmn)Operating and general admin. expenses

12,00010,000
8,000

27%

27%

26%
24%

24%
3,2813,312 3,4423,473
22%

23%

3,614 3,8263,83122%Q1
FY03/12

80%
75%

Q3

Q1
FY03/13

4,077 4,2804,269
23%
21%

2,000
0

Underwriting expenses

Operating and general admin. expense ratio (right axis)
11,138

6,000
4,000

Investment expenses

Q3

22%

Q1
FY03/144,502 4,582 4,784
21%

Q3

22%
21%

5,205 5,419

5,580

6,222

26%
6,6626,684

6,284
25%

25%
23%

22%

Q1
FY03/15

5,9795,913

27%
6,657
25%

6,981

7,474 7,375
27% 27%

8,122 7,823
7,683 7,954
26%
25% 25%

24%

8,483

9,122

9,814 9,733 9,66510,063

28%

26%

27%

27%
25%

26%
24%
22%

22%

20%

20%

Q3

30%

29%

26% 26% 26%

32%

18%
Q1
FY03/16

Net claims paid
Loss adjustment expenses (right axis)
Commissions and collection fees (right axis)

70%
65%

Q3

Q1
FY03/17

10% 1,000
9%
8%

900
800
700

60%

7%

55%

6%

500

50%

5%

400

45%
40%

4%

35%

3%

30%

2%

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20

600

300
200
100
0

Q3

Q1
FY03/18Q3Q1
FY03/19Q3

Q1
FY03/20

No. of policies in force ('000) (a)Commissions and collection fees (JPYmn) (b)(b) / (a) (JPY'000/policy, right axis)

Q3

16%
Q1
FY03/21
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0

Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21

Source: Shared Research based on company data

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New policies
No. of new policies

40%

No. of new policies via pet shop agencies

No. of new policies via general agencies

30%

33%

20%
10% 17% 16%
0%

15% 15%
4% 5%

-10%

-7%

-20%

-1% -1%6%4%

3%-8% -9%-5% -6%

2%

6%

11%

15%

12%

14%14%

10%

15% 17% 16% 15%

22%
9% 7%

1%

4%

7% 6%

10%

-30%
-40%

Q1
FY03/1256,00052,00048,00044,00040,00036,00032,00028,00024,00020,00016,00012,000Q3

Q1
FY03/13Q3Q1
FY03/14Q3

Q1
FY03/15

Q3

No. of new policies (newborns)

Q1
FY03/16Q3

Q1
FY03/17Q3Q1
FY03/18Q3Q1
FY03/19Q3

Q1
FY03/20Q3Q1
FY03/21

Commissions and collection fees as % of recurring revenue (right axis)

10%
9%
8%
7%
6%
5%

Q1
FY03/12Q3Q1
FY03/13Q3Q1
FY03/14Q3

Q1
FY03/15Q3Q1
FY03/16Q3

Q1
FY03/17Q3Q1
FY03/18Q3Q1
FY03/19Q3

Q1
FY03/20Q3Q1
FY03/21

4%

Source: Shared Research based on company data

Consolidated recurring expense/profit parameters
From Q1 FY03/21, the company has started to disclose the consolidated SG&A ratio and recurring profit margin as metrics forconsolidated recurring expenses and profits. In the past, it has tended to disclose management metrics on a non-consolidated
basis (loss ratio, operating expense ratio, number of policies in force, etc.) Since, for example, subsidiaries’ internal transactions
were included in the non-consolidated business expense ratio, the non-consolidated business expense ratio tended to bedisproportionately large. Hence the company believes that disclosure on a consolidated basis is a more accurate performanceindicator and will publish this in future. Disclosure of data on the previous basis will also continue.

▷▷

The company has successfully controlled an increase in consolidated SG&A expenses, despite an increase in new policies andan increase in applications for Dobutsu Kenkatsu.
In terms of the consolidated recurring profit margin, insurance claims in the insurance business improved from Q3 to Q4
following an increase in Q1 and Q2, which are busy periods in veterinary hospitals for vaccinations such as rabies. The
seasonality of the business means that claims costs improve as the frequency of hospital visits decreases. SIMNET members
have been included from Q1 FY03/21.

Consolidated recurring expense/profit metrics
Consolidated performance
Quarterly (JPYmn)
SG&A expense ratio
YoY
Recurring profit margin
YoY

FY03/19Q1
24.7%-1.90%
6.8%
3.20%

Q2
25.7%
-1.30%
8.8%
3.20%

Q3
25.6%
-0.70%
5.5%-1.40%

FY03/21

FY03/20
Q4
25.7%
0.60%
4.7%
-2.00%

Q1
26.5%
1.80%
1.8%
-5.00%

Q2
28.9%
3.20%
3.2%
-5.60%

Q3
26.9%
1.30%
8.3%
2.80%

Q4
25.4%
-0.30%
7.5%
2.80%

Q1
26.6%
0.10%
4.7%
2.90%

Q2

Q3

Q4

Source: Shared Research based on company data

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Income statement
Income statement(JPYmn)Recurring revenue
YoY
Underwriting revenue
Net premiums written
Rev ersal of reserv es for outstanding losses and claims

Investment revenue
Interest and dividend income
Gain on sale of securities
Other recurring revenue
Equity in earnings of affiliates
Other
Recurring expenses
YoY
Underwriting expenses
Net claims paid
Loss adjustment expenses
Commissions and collection fees
Provision for outstanding losses and claims
Provision for underwriting reserves
Investment expenses
Loss on sale of securities
Loss on valuation of securities
Operating and general administrative expenses
Other recurring expenses
Interest paid
Provision for doubtful accounts
Stock issuance expenses
Amortization of organization expenses
Amortization of business startup expenses
Amort. of deferred assets under Article 113
Other recurring expenses
Recurring profit
YoY
RPM
Extraordinary gains
Extraordinary losses
Total income taxes
Net income
YoY
Net margin

FY03/11Cons.
11,10720.5%
10,85810,858
94
78
15
154

FY03/12Cons.
13,845
24.7%
13,592
13,592
108
92
16
144

FY03/13Cons.
16,186
16.9%
15,781
15,781
260
113
147
143

FY03/14Cons.
18,36613.5%
18,08718,087
108
18
89
171

FY03/15Cons.
22,63823.3%
21,733
21,733
522
289
232
382

FY03/16Cons.
26,50617.1%
25,37025,370
690
334
355
446

FY03/17
Cons.
28,9789.3%
28,06828,068
504
320
184
405

FY03/18
Cons.
32,33911.6%
31,29031,290
420
255
165
628

FY03/19
Cons.
35,82910.8%
34,53534,535
383
154
228
910

FY03/20Cons.
41,465
15.7%
39,105
39,105
496
219
276
1,863

154
10,764
20.6%
7,146
4,829
392
629
152
1,141
8
2
6
3,312
296
102
161
32
342
17.3%
3.1%
14
-93
421
21.7%
3.8%

144
13,508
25.5%
9,797
7,304
480
780
348
883
31
30
3,392
287
5
102
161
18
337
-1.5%
2.4%
1
7
-133
465
10.5%
3.4%

143
15,34813.6%
11,450
9,465
581
853
140
409
3,632
264
2
76
161
23
837
148.4%
5.2%
2
194
640
37.6%
4.0%

171
17,63314.9%
13,448
10,693
660
1,029
149
916
18
18
3,982
183
6
161
15
733
-12.4%
4.0%
8
276
447
-30.2%
2.4%

382
21,38721.3%
15,92012,149
741
1,269
144
1,616
21
21
4,905
540
6
484
48
1,250
70.5%
5.5%
18
403
829
85.5%
3.7%

446
24,37714.0%
17,393
13,547
895
1,590
122
1,237
182
101
80
6,699
100
4
96
2,129
70.3%
8.0%
27
83
674
1,399
68.8%
5.3%

405
26,606
9.1%
18,967
14,901
965
1,995
181
923
0
0
7,273
364
124
122
2,372
11.4%
8.2%
203
610
1,568
12.1%
5.4%

628
30,486
14.6%
21,771
16,591
1,004
2,660
212
1,302
8
8
0
8,479
227
110
1,853
-21.9%
5.7%
13
519
1,320
-15.8%
4.1%

910
33,55010.1%
24,071
18,456
1,003
3,077
196
1,336
10
6
3
9,112
356
108
247
2,278
22.9%
6.4%
16
19
665
1,610
22.0%
4.5%

1,863
39,27517.1%
27,212
20,492
1,109
3,674
179
1,756
109
28
80
11,153
800
10
790
2,189
-3.9%
5.3%
14
42
637
1,525
-5.3%
3.7%

FY03/21Cons.
48,04915.9%43,31243,312
488
253
233
4,248
33
4,215
45,29015.3%
30,512
23,226
1,098
4,539
211
1,437
141
38
103
13,283
1,353
8
1,344
2,758
26.0%
5.7%
54
400
826
1,586
4.0%
3.3%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

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Balance sheet(JPYmn)Cash and deposits
Securities
Loans receivable
Tangible fixed assets
Land
Buildings
Lease assets
Other tangible fixed assets
Intangible assets
Software
Software in progress
Other
Other assets
Accounts receivable
Accrued premiums
Suspense payments
Other
Deferred tax assets
Allowance for doubtful accounts
Total assets
Reserve for insurance contract

Reserves for outstanding losses and claims

Underwriting reserves
Corporate bonds
Other liabilities
Income taxes payable
Accounts payable–otherSuspense receipts
Other
Provision for bonuses
Reserves under special laws
Reserves for price fluctuations
Total Liabilities
Net
Shareholders' equity
assetsCapital stock
Capital surplus
Retained earnings
Treasury stock
Valuation and translation adjustments
Valuation difference on securities
Total net assets
Total liabilities and capital

FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21
31,683
4,986
4,457
4,217
7,566
15,242
19,07829,64324,427
3,682
5,098
5,914
4,625
4,660
9,999
11,667
10,73911,367
15,108
9,272
7,065
7,444
294
196
225
127
92
2,520
250
1,527
1,432
1,359
1,367
1,858
86
118
96
93
508
508
806
809
508
518
34
31
27
33
89
462
433
412
440
447
970
5
3
1
4
6
17
27
34
31
7
160
542
484
420
391
548
699
55
83
54
56
374
387
373
477
566
653
904
1,462
1,506
3,956
3,466
125
178
159
263
305
532
642
845
811
1,165
783
213
214
261
33
195
473
592
271
281
246
208
86
66
143
102
2,518
2,318
1,975
1,981
1,940
2,112
1,945
4,297
3,876
3,908
4,344
4,263
5,208
575
839
935
1,121
1,118
2,041
1,388
1,689
1,895
1,923
2,068
112
143
191
232
260
365
445
508
534
83
63
1,451
1,490
1,771
1,351
1,396
906
186
172
245
357
629
533
455
501
606
926
1,154
187
353
219
116
263
433
597
623
718
1,041
898
-7
-13
-13
-16
-140
-88
-76
-75
-78
-5
31,16442,39045,59855,45925,192
28,123
22,337
16,872
18,634
15,355
13,382
5,920
7,152
7,702
8,768
10,528
11,88812,993
14,50816,041
17,977
19,626
2,539
653
1,001
1,142
1,291
1,435
1,558
1,739
1,952
2,148
2,328
9,093
10,330
11,253
12,556
13,893
15,64917,087
7,476
6,151
6,560
5,267
5,000
1,292
1,520
2,411
2,414
2,635
2,845
3,867
4,018
4,787
1,073
824
329
463
273
610
600
694
234
341
398
447
777
855
856
1,093
1,543
1,550
2,018
1,783
432
541
652
759
956
1,073
1,172
1,298
1,484
1,603
157
191
242
312
678
156
143
181
228
264
291
46
55
69
86
103
157
172
173
191
209
247
68
80
32
41
48
54
2
2
10
22
54
68
80
2
2
10
22
32
41
48
22,27329,741
14,492
15,842
17,576
20,156
6,793
8,283
9,067
10,385
13,066
8,306
9,272
10,762
12,233
13,54622,23323,71925,648
6,569
7,067
7,795
4,178
4,194
4,443
4,238
4,282
4,350
4,396
4,402
7,950
7,981
8,202
8,092
4,240
1,286
4,292
4,333
7,840
7,871
4,068
4,084
4,128
4,172
-1,677-1,211
-571
-147
681
2,080
3,539
4,770
6,443
7,868
9,353
-1
-0
-0
-0
-0
-0
-0
18
3
9
-57
-1
-123
-100
-128
-150
-530
69
-530
69
-57
-1
-123
-100
-128
-150
18
3
9
6,588
7,071
7,805
8,248
9,270
10,69912,281
13,587
22,23423,32525,717
13,382
15,355
16,872
18,634
22,33725,192
28,12331,16442,39045,59855,459Source: Shared research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

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Cash flow statement
Cash flow statement(JPYmn)Cash flows from operating activities (1)Cash flows from investing activities (2)Free cash flow (1+2)
Cash flows from financing activities
Depreciation and amortization (A)Capital expenditures (B)Change in working capital (C)Simple FCF (NI + A + B - C)

FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
1,792
1,879
1,507
2,009
3,094
1,960
3,231
3,393
4,359
4,246
4,231
-1,936-1,044-1,852-2,052-2,963
2,489
4,233
253
-487
-10,263-2,129
-144
835
-345
-43
131
4,449
7,464
3,646
3,872
-6,017
2,102
38
28
85
60
135
89
-79
-10
6,693
-99
5,154
73
82
92
99
166
367
479
533
552
765
932
-226
-95
-71
-87
-188
-1,578
-840
-871
-567
-1,181-1,164
268
452
661
459
807
188
1,207
982
1,595
1,109
1,354

Source: Shared research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

Uses of JPY6.6bn of new capital raised by the company in FY03/19
Anicom raised approximately JPY6.6bn in new capital in FY03/19. Uses of those funds in FY03/20 are detailed in the figure below.
Breakdown of uses of funds raised
Specific uses
Total JPY3.0bn
Funding to continue expanding
market share of pet insurance
business while building solid andflexible financial position

Breakdown of uses
・In addition to pet shop channel, expand online channel andother general channels (add sales offices, step up support
for agent, advertising spending under strategic marketing
initiative)
・Ensure solid and flexible financial position for pet insurance
business on stand-alone basis

Total JPY1.5bn

・Upgrades to core IT systems
・Create online platform to connect per shops and breeders・Veterinary hospitals systems (including reservation andreferral functions)・Improve system for data integration

Funding investments in systems andother infrastructure to reinforce pet
insurance business・Genetic screening, breeder support to eradicate hereditarydiseases
Spending to build and increase・Acquisition of Simnet
earnings of pet infrastructure business ・Take over existing veterinary practice from retiring doctors

Total JPY2.2bn(57 veterinary hospitals at end FY03/20)
・Genetic and regenerative medicine research andcommercialization
・Pet business-related M&A and capital/business alliances

Source: Shared research based on company data

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Other information
History
Date
July
2000
December
2004
January
2005
February
2005
January
2006
December
2007

March

Description
BSP, Inc. (currently Anicom Holdings, Inc.) was established to handle administrative duties for anicom’s Dobutsu Kempo mutual pet insurance
Anicom Pafe, Inc. was established
BSP was renamed Anicom International, Inc.
Anicom Frontier, Inc. was established
Anicom Insurance Planning, Inc. was established to prepare for the founding of an insurance company
Anicom Insurance Planning was renamed Anicom Insurance Inc. The Financial Services Agency allowed the Anicom Insurance to reorganize
under a holding company. Anicom Insurance obtained a non-life insurance license
2008 Anicom Insurance began non-life insurance operations
2008 Anicom International was renamed Anicom Holdings Inc.
2010 Listed shares on the Tokyo Stock Exchange’s Mothers market

January

2014 Japan Animal Specialty Medical Institute Inc. was established

June
July

2014 Listed shares on the First Section of the Tokyo Stock Exchange
2015 Anicom Capital, Inc. was established

April2016 Celltrust Animal Therapeutics Co., Ltd. was established as a joint venture (Anicom 49%, FujiFilm 51%) for regenerative medicine for animals

MarchJanuary

2017 Established Anicom Hong Kong Co., Ltd., a joint venture (49% stake) with the aim of providing animal healthcare services in China
2020 Acquired all shares in Simnet Co., Ltd. and made it a wholly owned subsidiary

January
June

Source: Shared Research based on company data

Ani (Anima: soul in Latin) + communication = ∞ (infinity)

At the base of Anicom’s corporate activity is this formula: Ani (Anima: “soul” in Latin) + communication = ∞ (infinity). This

comes from the belief that what seems impossible can become possible when living souls cooperate with one another and work
toward the shared purpose.

Making medical records accessible for health insurance purposes; transitioning into a preventive industry
Making medical records accessible for insurance purposes
Nobuaki Komori, who currently serves as president of Anicom, joined Tokio Marine & Fire Insurance (now Tokio Marine &Nichido Fire Insurance Co., Ltd.) in 1992. In 1996, Komori was transferred to the government’s Economic Planning Agency forthree years on a temporary assignment. In April 2004, he established anicom (an organization that promotes animal health) andbecame chairman.
While he was at the Economic Planning Agency, Komori proposed the establishment of a system in which medical records ofindividual patients would be made accessible for public health insurance purposes. He argued for three years that such a system
would eliminate overlapping medical examinations and reduce wasteful expenditure, allowing the government to avoid raisingtaxes. However, his proposal was rejected on grounds that Japan’s public health insurance system was part of social security andthat it should not be dictated by economic considerations alone.
While this plan did not work out, Komori wanted to apply it to pets. That is how anicom was established in 2000. The founding
members include Komori, Yumiko Momose, who is now a managing director of Anicom, and one other (now deceased).

Transitioning into preventive industry
Through experience gained in his previous insurance company and government agency roles, President Komori formed thefollowing insight. “Insurance is paid out due to the occurrence of some kind of accident. Someone surely suffers as a result of this
accident. Insurance companies gather a huge amount of data on such accidents, and this data can be analyzed to reveal common
accident causes. In this light, the future role of an insurance company should be use and provide this data for accident prevention
rather than just using it to assess the level of payouts. By doing so accidents could be prevented and people’s suffering from
accidents could be reduced.”
In automobile insurance, there is a body of statistical data showing under what circumstances traffic accidents are most likely tooccur. The data, for example, include information on highways, intersections, and weather conditions, as well as the color of thevehicle and the day of the week. The industry determines insurance premiums using such data. President Nobuaki Komori

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believes that the industry should use such data to predict traffic accidents before they happen and warn policyholders. In otherwords, more emphasis should be placed on preventive efforts.

Toshi (commonly means investment, but could also mean to “ignite the will”)
The Japanese word for “human being” is ningen, which is made up of Chinese characters for “person” and “between.” President
Nobuaki Komori used to wonder what it all meant. Komori has recently realized that human being is a go-between. He wants tobecome a bridge between people.
Komori seems to love play on words. He has also coined the word toshi, made up of two Chinese characters that together mean
to “ignite the will.” The pronunciation of this word, however, is the same as the word for “investment.”

Top management
Nobuaki Komori
1992

Joined Tokio Marine & Fire Insurance Co., Ltd. (now Tokio Marine & Nichido Fire Insurance Co., Ltd.)

2000

Established Anicom and became president and representative director

2017

Became director at AHB Inc. (current position)

2018

Became director, chairman, and executive officer at Anicom Insurance, Inc. (current position)

2018

Became representative director and president and CEO at Anicom Holdings (current position)

2020

Became director at Anicom Specialty Medical Institute Inc. (current position)

ESG initiatives
Environment
Aiming to be “doctor to the Earth”
Based on its corporate philosophy of mutual understanding and cooperation not only between humans and animals, but among
all living things, Anicom is engaged in initiatives and research for the protection and conservation even of bacteria,
microorganisms, and plants. Example: Anicom supports the World Wildlife Fund Japan.

Continuing environmentally conscious activities
The company is working to reduce the environmental burden of logistics activities and paper consumption by promoting thedigitization of documents and forms, including its policy provisions, booklets, application forms, invoices, and notices tocustomers. It is also working to address the issue of animal droppings by continuing a campaign to get pet owners to pick up
trash with their pets, in cooperation with other related bodies.

SocialProtecting the dignity of animals
As a company involved with animals, Anicom has established an internal “Declaration on the Dignity of Animals” and is taking
action to eliminate the killing of and cruelty toward animals and improve the environment for raising them. Examples: It isinvolved in the construction and operation of homes for senior dogs and end-of-life care facilities and, in cooperation with
Marubeni Power Retail Corporation, has developed a new electric power plan (Shippo Ouen Plan).

Promoting the active participation of women and supporting all manner of families
As of March 2020, approximately 60% of employees, 20% of managers, and five executives are women. There are many womenactive throughout the group. In addition, Anicom is in the process of revising its policy provisions to include same-sex partners in
the definition of “spouse.”

Promoting initiatives to raise awareness of human rights
To respect the basic human rights of all people, the company will formulate a basic human rights policy and promote activities toprevent harassment.

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Strengthening partnerships with industry, government, and academia
Anicom enters agreements with companies, local governments, and vocational schools, and, collaborating with industry,
government, and academia, works to solve social challenges in regard to the coexistence of humans and animals.

Governance
Maintaining current robust governance structure
In addition to building a robust governance structure by having outside directors make up the majority (4:3) of the Board of
Directors, the company has newly appointed a woman to a director position to ensure diversity of the Board. The Nomination,
Compensation, and Governance Committee, comprised of mainly outside directors, deliberates the nomination andcompensation of representative directors, as well as the overall effectiveness of governance, including internal controls.

Aiming for effective governance through active discussions at meetings of the Board of Directors and Management Committee
The company provides outside directors with thorough explanations in advance to ensure in-depth discussions at meetings.

Major shareholders (as of end-March 2021)
Top 10 shareholders

Shares held Shareholding('000)
ratio

Custody Bank of Japan, Ltd. (Trust account)

9,773

12.0%

The Master Trust Bank of Japan, Ltd. (Trust account)

6,539

8.0%

KOMORI Asset Management Co., Ltd.
Taiyo Fund, L.P.

4,680

5.8%

3,535

4.4%

CBC Co., Ltd.
The Bank of New York Mellon 140051

3,024

3.7%

2,631

3.2%

STATE STREET BANK AND TRUST COMPANY FOR STATE STREET BANK INTERNATIONAL
GMBH, LUXEMBOURG BRANCH ON BEHALF OF ITS CLIENTS: CLIENT OMNI OM25

2,545

3.1%

TAIYO HANEI FUND, L.P.

2,142

2.6%

BNYM AS AGT/CLTS 10 Percent

1,896

2.3%

Nobuaki Komori

1,784

2.2%

Sum

38,54947.3%

Source: Shared Research based on company data

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News and topics
September 2020
On September 30, 2020, the company announced that it had entered a basic agreement in relation to a business alliance with
Ping An Property & Casualty Insurance Company of China, Ltd.

Overview of a basic agreement▷

Counterpart: Ping An Property & Casualty Insurance Company of China, Ltd., a non-life insurance subsidiary of Ping An▷

Purpose: Ping An is to launch a new pet insurance business, and will use the company group’s expertise in that area. By playing▷▷

Insurance (Group) Company of China, Ltd.

a part in the pet insurance business in China, as well as jointly establishing finance and health in the pet-related field together
with Ping An, both companies aim to achieve further business growth.
Basic agreement conclusion date: August 25, 2020
Details of the agreement
 Anicom is to advise Ping An Insurance on pet insurance the latter sells in China.
 Shanghai Anicom Veterinary Hospital, an affiliate of the company, will be a designated hospital for the purposes of the pet
insurance and a hospital supporting over-the-counter insurance payouts, as well as being contracted for a supporting rolein the assessment of pet insurance premiums in China.
 Anicom and Ping An Insurance are to consider the establishment of a new company in China, responsible for thedevelopment of new pet insurance products in China, being contracted to provide support in the assessment of claims,
and accrediting and auditing designated hospitals.

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Company profile
Company Name

Head Office
8-17-1, Nishi Shinjuku, Shinjuku-ku

Anicom Holdings, Inc.

Tokyo, Japan
160-0023

Phone+81-3-5348-3911

Listed On
Tokyo Stock Exchange First section(was TSE Mothers until June 9, 2014)

EstablishedExchange Listing

July 5, 2000

March 3, 2010

WebsiteFiscal Year-End

http://www.anicom.co.jp/index.html(in Japanese)

March

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ONO SOKKI Co., Ltd.

TOYOBO CO., LTD.

CRE, Inc.

JTEC Corporation

ONWARD HOLDINGS CO.,LTD.

Toyo Ink SC Holdings Co., Ltd.

CREEK & RIVER Co., Ltd.

J Trust Co., Ltd

Pan Pacific International Holdings Corporation

Toyo Tanso Co., Ltd.

Daiichi Kigenso Kagaku Kogyo Co., Ltd.

Japan Best Rescue System Co., Ltd.

PARIS MIKI HOLDINGS Inc.

Tri-Stage Inc.

Daiki Axis Co.,Ltd.

JINS HOLDINGS Inc.

PCA CORPORATIONTSURUHA Holdings

Daiseki Co., Ltd.

JP-HOLDINGS, INC.

PIGEON CORPORATIONVISION INC.

Daiwabo Holdings Co.,Ltd.

KAMEDA SEIKA CO., LTD.

Premium Water Holdings

VISIONARY HOLDINGS CO., LTD.

Demae-Can CO., LTD.

Kanamic Network Co., LTD.

P3, inc.

V-cube,Inc.

DIC Corporation

KANEMATSU CORPORATIONQB Net Holdings Co., Ltd.

World Holdings Co., Ltd.

Digital Arts Inc.

kaonavi, inc.

RACCOON HOLDINGS, Inc.

WOW WORLD Inc.

Digital Garage Inc.

KFC Holdings Japan, Ltd.

Raysum Co., Ltd.

YELLOW HAT LTD.

Doshisha Corporation

KI-Star Real Estate Co., Ltd.

RESORTTRUST, INC.

YOSHINOYA HOLDINGS CO., LTD.

Dream Incubator Inc.

KLab Inc.

ROUND ONE Corporation

ZAPPALLAS, INC.

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