R

Anicom Holdings / 8715
COVERAGE INITIATED ON:

2014.06.06

LAST UPDATE:

2020.09.07

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 Anicom Holdings / 8715
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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
Key financial data ------------------------------------------------------------------------------------------------------------------------------------- 5
Recent updates ---------------------------------------------------------------------------------------------------------------------------------------- 6
Monthly data--------------------------------------------------------------------------------------------------------------------------------------------------------7
Quarterly trends and results -----------------------------------------------------------------------------------------------------------------------------------8
Company forecast for FY03/21 ------------------------------------------------------------------------------------------------------------------------------ 15
Medium and long-term Outlook ---------------------------------------------------------------------------------------------------------------- 18
Pet insurance------------------------------------------------------------------------------------------------------------------------------------------------------ 18
Business ------------------------------------------------------------------------------------------------------------------------------------------------ 23
Business description -------------------------------------------------------------------------------------------------------------------------------------------- 23Competition ------------------------------------------------------------------------------------------------------------------------------------------------------ 31
Strengths, weaknesses ----------------------------------------------------------------------------------------------------------------------------------------- 37
Past results and Financial statements --------------------------------------------------------------------------------------------------------- 38
Income statement ----------------------------------------------------------------------------------------------------------------------------------------------- 54
Balance sheet ----------------------------------------------------------------------------------------------------------------------------------------------------- 55
Cash flow statement -------------------------------------------------------------------------------------------------------------------------------------------- 55
ROE, ROA, ROIC ------------------------------------------------------------------------------------------------------------------------------------------------- 57
Other information ---------------------------------------------------------------------------------------------------------------------------------- 58
Overview of pet insurance products ---------------------------------------------------------------------------------------------------------------------- 58
Management philosophy ------------------------------------------------------------------------------------------------------------------------------------- 60
History -------------------------------------------------------------------------------------------------------------------------------------------------------------- 62
Major shareholders --------------------------------------------------------------------------------------------------------------------------------------------- 62
News and topics ------------------------------------------------------------------------------------------------------------------------------------------------- 63
Company profile ------------------------------------------------------------------------------------------------------------------------------------------------- 64

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Executive summary
Business overview◤ Anicom Holdings is the leading pet insurance company in Japan, commanding more than a 50% share of the rapidly growing

domestic pet insurance market (which expanded at the rate of roughly 20% per annum over the past five years). Anicom’s

mainstay pet insurance products reimburse policy holders for a fixed proportion of the expenses incurred in connection withthe medical treatment (including surgery) of their pets in the event of illness or injury (for up to one year). Pet insurance issimilar 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. Anicom has four major competitors that have also
been licensed by the Financial Services Agency 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 revenues

from monthly premiums paid after the insurance contract is signed. This means top-line revenues are determined simply by
the number of insurance contracts in force and the premiums paid; insurance accounting comes into play when calculating
earnings, however. Revenues from insurance premiums are booked first, then after paying claims (the cost of revenues),
additions to underwriting reserves must be made for unearned premiums to cover claims in future periods; these reserves arecarried forward to bridge the gap between the time premiums are received and income is earned. As key performanceindicators, the company is aiming to sustain recurring profit growth of 10% a year and ROE of at least 10%.

◤ 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 payouts 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. A number of factors distinguishAnicom from competitors, including 1) its over-the-counter insurance payouts system at veterinary hospitals/clinics (which
now acts as a barrier to enter), 2) its IT system that smoothly connects with the medical claims and patient record systems ofveterinary hospitals/clinics, pet shops (with insurance solicitation web tools), insurance policy holders (via the internet), andprovides information about Anicom insurance, and 3) established relationships with many veterinary practices and pet shopsthat it has helped built up. (Anicom pet insurance is accepted by more than 90% of the Japan’s 6,935 veterinary
hospitals/clinics.)

Earnings trends◤ For FY03/20, the company reported consolidated recurring revenue of JPY41.5 bn (+15.7% YoY), recurring profit of JPY2.2bn(-3.9% YoY), and net income of JPY1.5bn (-5.3% YoY). The objectives of the company’s medium-term business plan are

average recurring revenue growth of 10% or more and average recurring profit growth of 20% or more over 3 years. In termsof its preparation for the second year of the plan and beyond, the company says it has fulfilled its objectives so far.
◤ For FY03/21, the company is forecasting full-year consolidated recurring revenue of JPY45.6bn (+10.0% YoY), recurring profitof JPY2.9bn (+32.5% YoY) and net income of JPY2.1bn (+35.1% YoY).

◤ 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 “preventative 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 will

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function as a “preventative insurance company” and look after the health of pets. Towards 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 downstream
business include a search portal for veterinary hospitals.
◤ Performance targets for FY03/22 set out under the new medium-term plan include recurring revenue of JPY50.0bn(representing a CAGR of more than 10% over the next three years), recurring profit of JPY4.0bn (representing a CAGR of morethan 20% over the next three years), and ROE of 10-12% (versus 9.1% in FY03/19). Near term, growth is expected to be
driven in large part by continued rapid growth in revenues from pet insurance, reductions in insurance claims and otherexpenses, and the increasing profitability of new businesses; in the medium term, the company is looking to make maximum
use of Big Data as it promotes the prevention cycle (genetics, environment, and veterinary healthcare) and works to establish
more new businesses.

Strengths and Weakness
Anicom’s strengths include 1) its over-the-counter insurance payouts 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 revenues 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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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
RPM
Net income
YoY
Net margin
Per 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
Monetary claims purchased
Investment securities
Tangible fixed assets
Intangible fixed assets
Other assets
Allowance for doubtful accounts
Deferred tax assets
Total assets

FY03/10 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.
Est.
9,216 11,107 13,845 16,186 18,366 22,638 26,506 28,978 32,339 35,829 41,465 45,600-14.7%
20.5%
24.7%
16.9%
13.5%
23.3%
17.1%
9.3%
11.6%
10.8%
15.7%
10.0%
9,003
10,85813,592
15,781
18,087
21,73325,37028,06831,29034,535
39,105
71
94
108
260
108
522
690
504
420
383
496
141
154
144
143
171
382
446
405
628
910
1,863
8,924 10,764 13,508 15,348 17,633 21,387 24,377 26,606 30,486 33,550 39,275
14.6%
10.1%
17.1%
-17.9%
20.6%
25.5%
13.6%
14.9%
21.3%
14.0%
9.1%
21,771
24,071
27,212
5,541
7,146
9,797
11,45013,44815,92017,393
18,967
8,479
9,112
11,153
3,072
3,312
3,392
3,632
3,982
4,905
6,699
7,273
236
367
910
311
306
319
266
203
562
285
366
292
342
337
837
733
1,250
2,129
2,372
1,853
2,278
2,189
2,900
17.3%
-1.5% 148.4% -12.4%
70.5%
70.3%
11.4% -21.9%
22.9%
-3.9%
32.5%
3.2%
3.1%
2.4%
5.2%
4.0%
5.5%
8.0%
8.2%
5.7%
6.4%
5.3%
346
421
465
640
447
829
1,399
1,568
1,320
1,610
1,525
2,060
21.7%
10.5%
37.6% -30.2%
85.5%
68.8%
12.1% -15.8%
22.0%
-5.3%
35.1%
4.1%
4.5%
3.7%
3.8%
3.8%
3.4%
4.0%
2.4%
3.7%
5.3%
5.4%

4,054
107.1
92.9
1,512.0
6.7%

4,113
103.1
92.6
1,601.9
6.6%

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%

1,652
7,563
107
212
1,986
74
11,594

3,682
7,065
96
374
1,975
187
13,382

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
45,598Reserve for insurance contract
Other liabilities
Provision for bonuses
Reserve for special laws
Total liabilities

4,626
805
32
2
5,464

5,920
824
46
2
6,793

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

Shareholders' equity
Valuation and transaction adjustments
Minority 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
Equity ratio
Combined ratio (fully earned basis)
E/I loss ratio
Expense ratio (earned premiums basis)
Solvency margin ratio

6,106
24
6,130
11,594

6,569
18
6,588
13,382

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
23,32545,5981,608-2,875
1,590

1,792-1,93638

1,879-1,04428

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

2.9%
6.7%
52.9%
48.6%
-

2.7%
6.6%
49.2%
53.4%
304.1%

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

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

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

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

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

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

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

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

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

101.9

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 on June 2009, and a 10-for-1 split in October 2011.

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R Anicom Holdings / 8715
Coverage

LAST UPDATE: 2020.09.07

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Recent updates
Highlights
On September 7, 2020, Shared Research updated the report following interviews with Anicom Holdings, Inc.

On August 25, 2020, the company announced a stock split and a partial revision of its Articles of Incorporation.
The company announced that at a meeting of its board of directors held on the same day, it resolved to conduct a stock split andpartially revise its Articles of Incorporation following the split.

▷

Purpose of stock split: to increase liquidity of the company stock and further expand its investor base.

▷Total number of shares outstanding after split: 81,063,600 shares▷▷

Method of split: a 4-for-1 split of common stock

Effective date of split: Thursday, October 1, 2020

On August 7, 2020, the company announced earnings results for Q1 FY03/21; see the results section for details.

On the same day, the company announced June 2020 monthly management parameters (refer to Monthly data section underTrends and outlook for details).

On July 10, 2020, the company announced its entry into the grace period pertaining to reassignment to the Second Section of
the Tokyo Stock Exchange.

Reason for entry into the grace period pertaining to reassignment
The company has entered into the one-year grace period stipulated in the Tokyo Stock Exchange Securities Listing Regulations,due to the number of shareholders as at the end of March 2020 being less than the number (2,000 shareholders at the end of afinancial year) prescribed in the criteria for reassignment to the Second Section from the First Section in Rule 311, Paragraph 1,
Item 1 of those Regulations.

Grace period for reassignment
The grace period shall extend from April 1, 2020 until March 31, 2021. If the number of shareholders rises to 2,000 or higher onany day during the aforementioned period, the entry into the grace period shall be cancelled as of that day. The company
intends to consider measures to increase the number of shareholders, such as dialogue with existing shareholders (including
individual shareholders) and enhanced disclosure.

On June 25, 2020, 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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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
YoY

No. of genetic testing specimens
YoY

FY03/20
Apr
3,062

May
3,274

Jun
3,175

Jul
3,108

Aug
3,188

Sep
3,235

Oct
3,302

Nov
3,230

Dec
3,303

Jan
3,430

13.1%

13.3%

14.3%

13.6%

14.3%

15.9%

15.7%

16.2%

10.4%

10.6%

11.6%

10.8%

4,725

6,580

6,455

6,601

7,492

7,644

9,262

8,657

8,427

9,581

10,71910,806110.0%

Feb
3,296

Mar
3,499

-

-

-

-

-

-

-

-

883.3%

82.3%

117.6%

9,088

10,857

11,463

13,234

16,174

11,945

13,39915,703

13,14014,729

9,934

8,869

-

-

-

-

-

-

-

-

-

-

393.2%

70.2%

FY03/21
Apr
3,433

May
3,660

Jun
3,499

Jul
3,464

Feb

Mar

12.1%

11.8%

10.2%

11.5%

9,290

10,611

12,77011,572

96.6%

61.3%

97.8%

75.3%

8,288

7,323

9,282

10,036-8.8%-32.6%-19.0%-24.2%

Aug

Sep

Oct

Nov

Dec

Jan

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.

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

Underwriting revenue
YoY

Investment revenue
Interest and dividend income
Gains on sale of securities
Other recurring revenue
Recurring expenses
YoY% of recurring revenue

Underwriting expenses
YoY% of recurring revenue
Net premiums written
YoY% of recurring revenue
Loss adjustment expenses
YoY% of recurring revenue
Commissions and collection fees
YoY
% of recurring revenue

FY03/19

FY03/20

Q1
8,711

Q2
17,286

Q3
26,261Q435,829

12.4%

11.1%

10.3%

FY03/21

Q1
9,989

Q2
20,045Q3
30,585

Q441,465

Q1
11,689

10.8%

14.7%

16.0%

16.5%

15.7%

17.0%

8,375

16,69525,321

34,5359,511

19,04328,87939,105

10,560

11.1%

10.1%

9.7%

10.4%

13.6%

14.1%

14.1%

13.2%

11.0%

82
35
46
254

148
79
69
442

271
111
159
669

383
154
228
910

80
42
38
397

193
99
93
809

374
155
219
1,331

496
219
276
1,863

113
69
44
1,015

8,122

15,94524,42833,5509,814

19,547

29,212

39,275

11,138

8.7%
93.2%

7.4%
92.2%

8.4%
93.0%

10.1%
93.6%

20.8%
98.2%

22.6%
97.5%

19.6%
95.5%

17.1%
94.7%

13.5%
95.3%

FY03/21 Est.
FY
45,600Q1
108.2%

FY
25.6%

500

2,900

110.0%

19.0%

8.1%

10.0%

5,913
10.2%
67.9%
4,397
10.7%
50.5%
258
4.0%
3.0%
741
18.9%
8.5%
96
420
335
84
2,153
4.4%
24.7%
55
0.6%
589
112.6%
6.8%

11,428
7.9%
66.1%
9,064
10.9%
52.4%
499
0.8%
2.9%
1,490
18.4%
8.6%
111
262
414
-151
2
0.0%
4,358
4.5%
25.2%
156
0.9%
1,340
87.7%
7.8%

17,496
9.0%
66.6%
13,789
11.2%
52.5%
761
0.7%
2.9%
2,254
16.2%
8.6%
231
459
650
-190
3
0.0%
6,654
4.9%
25.3%
273
1.0%
1,833
43.1%
7.0%

24,071
10.6%
67.2%
18,456
11.2%
51.5%
1,003
-0.1%
2.8%
3,077
15.7%
8.6%
196
1,336
1,231
104
10
0.0%
9,112
7.5%
25.4%
356
1.0%
2,278
22.9%
6.4%

7,005
18.5%
70.1%
4,736
7.7%
47.4%
263
1.9%
2.6%
869
17.3%
8.7%
259
876
570
306
1
0.0%
2,647
22.9%
26.5%
160
1.6%
175
-70.3%
1.8%

13,644
19.4%
68.1%
9,852
8.7%
49.1%
525
5.2%
2.6%
1,747
17.2%
8.7%
385
1,134
817
316
1
0.0%
5,553
27.4%
27.7%
348
1.7%
497
-62.9%
2.5%

20,251
15.7%
66.2%
15,160
9.9%
49.6%
813
6.8%
2.7%
2,672
18.5%
8.7%
328
1,276
1,033
242
6
0.0%
8,392
26.1%
27.4%
561
1.8%
1,372
-25.2%
4.5%

27,21213.0%
65.6%
20,492
11.0%
49.4%
1,109
10.6%
2.7%
3,674
19.4%
8.9%
179
1,756
1,404
351
109
0.3%
11,153
22.4%
26.9%
800
1.9%
2,189
-3.9%
5.3%

7,688
9.8%
65.8%
5,495
16.0%
47.0%
289
9.9%
2.5%
1,059
21.9%
9.1%
122
721
539
181
3,114
17.6%
26.6%
334
2.9%
550
214.3%
4.7%

Net income

428

953

1,291

1,610

104

344

976

1,525

350

2,060

YoY
Net margin

121.8%
4.9%

90.2%
5.5%

41.2%
4.9%

22.0%
4.5%

-75.7%
1.0%-63.9%
1.7%-24.4%
3.2%

-5.3%
3.7%

236.5%
3.0%

35.1%

Provision for outstanding losses and claims

Provision for underwriting reserves
Unearned premiums
Catastrophe reserves
Investment expenses% of recurring revenue
Operating and general admin. expenses
YoY% of recurring revenue
Other recurring expenses% of recurring revenue
Recurring profit
YoY
RPM% of Est.

Q1
10,800185.7%
4.6%

32.5%
6.4%

4.5%

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

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Coverage

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Quarterly performance
Quarterly(JPYmn)Recurring revenue
YoY

Underwriting revenue
YoY

Investment revenue
Interest and dividend income
Gains on sale of securities
Other recurring revenue
Recurring expenses
YoY% of recurring revenue

Underwriting expenses
YoY% of recurring revenue
Net premiums written
YoY% of recurring revenue
Loss adjustment expenses
YoY% of recurring revenue
Commissions and collection fees
YoY
% of recurring revenue
Provision for outstanding losses and claims

Provision for underwriting reserves
Unearned premiums
Catastrophe reserves
Investment expenses% of recurring revenue
Operating and general admin. expenses
YoY% of recurring revenue

Other recurring expenses% of recurring revenue
Recurring profit
YoY
RPM
Net income
YoY
Net margin
Recurring profit (ex. catastrophe reserves)
YoY

FY03/19

FY03/20

Q1
8,711

Q2
8,575

Q3
8,975

8,375

8,320

8,626

82
35
46
254

66
44
23
188

123
32
90
227

12.4%

11.1%

9.8%

9.2%

Q4
9,568

Q2
10,056

Q3
10,540Q4
10,880Q1
11,689

9,511

9,532

9,836

10,226

10,560

181
56
126
522

122
64
57
532

113
69
44
1,015

8.8%

12.2%

14.7%

9.0%

12.1%

13.6%

9,214
112
43
69
241

FY03/21

Q1
9,989

80
42
38
397

17.3%

14.6%

113
57
55
412

17.4%

14.0%

13.7%

11.0%

17.0%

11.0%

8,122

7,823

8,483

9,122

9,814

9,733

9,665

10,063

11,138

8.7%
93.2%

6.1%
91.2%

10.4%
94.5%

14.7%
95.3%

20.8%
98.2%

24.4%
96.8%

13.9%
91.7%

10.3%
92.5%

13.5%
95.3%

10.2%
67.9%

5.4%
64.3%

11.1%
67.6%

15.1%
68.7%

18.5%
70.1%

20.4%
66.0%

8.9%
62.7%

5.9%
64.0%

9.8%
65.8%

10.7%
50.5%

11.1%
54.4%

11.7%
52.6%

11.4%
48.8%

7.7%
47.4%

9.6%
50.9%

12.3%
50.4%

14.2%
49.0%

16.0%
47.0%

4.0%

-2.4%

0.4%

-2.4%

1.9%

8.7%

9.9%

22.3%

9.9%

3.0%

2.8%

2.9%

2.5%

2.6%

2.6%

2.7%

2.7%

2.5%

741
18.9%
8.5%
96
420
335
84
2,153

749
18.0%
8.7%
15
-158
79
-235
2
0.0%
2,205

764
12.2%
8.5%
120
197
236
-39
1
0.0%
2,296

823
14.1%
8.6%
-35
877
581
294
7
0.1%
2,458

869
17.3%
8.7%
259
876
570
306
1
0.0%
2,647

878
17.2%
8.7%
126
258
247
10
2,906

925
21.1%
8.8%
-57
142
216
-74
5
0.0%
2,839

1,002
21.7%
9.2%
-149
480
371
109
103
0.9%
2,761

1,059
21.9%
9.1%
122
721
539
181
3,114

5,913

4,397

258

5,515

4,667

241

6,068

4,725

262

6,575

4,667

242

7,005

4,736

263

6,639

5,116

262

6,607

5,308

288

6,961

5,332

296

7,688

5,495

289

4.41%
24.72%

4.60%
25.71%

5.76%
25.58%

14.97%
25.69%

22.94%
26.50%

31.79%
28.90%

23.65%
26.94%

12.33%
25.38%

239
2.2%
817
83.6%
7.5%
549
72.1%
5.0%

334
2.9%
550
214.3%
4.7%
350
236.5%
3.0%

673
101.5%

516
77.9%

454
-17.5%

739
-5.5%

481
-28.5%

332-35.7%

801
76.4%

926
25.3%

731
52.0%

55
0.6%
589
112.6%
6.8%
428
121.8%
4.9%

101
1.2%
751
71.9%
8.8%
525
70.5%
6.1%

117
1.3%
493
-13.1%
5.5%
338-18.2%
3.8%

83
0.9%
445
-22.2%
4.7%
319-21.4%
3.3%

160
1.6%
175
-70.3%
1.8%
104-75.7%
1.0%

188
1.9%
322
-57.1%
3.2%
240-54.3%
2.4%

213
2.0%
875
77.5%
8.3%
632
87.0%
6.0%

17.64%
26.64%

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
FY03/19

Cumulative

Q1
713,896

Number of policies in force
YoY
YoY change

Number of newly acquired policies

Q2
729,842

FY03/20Q3
741,641Q4
753,332Q1
766,774Q2
781,368

FY03/21Q3
796,167Q4
816,254Q1
842,754

FY03/21FY Est.
885,000

9.7%

9.4%

8.7%

7.8%

7.4%

7.1%

7.4%

8.4%

9.9%

8.4%

63,34662,92559,12854,76652,87851,52654,52662,92275,98068,746

183,600

37,72675,852

112,753

150,625

40,20480,533

121,183

167,318

53,456

YoY

8.8%

7.7%

5.4%

5.1%

6.6%

6.2%

7.5%

11.1%

33.0%

9.7%

YoY change

3,059

5,438

5,799

7,260

2,478

4,681

8,430

16,693

13,252

16,282

22,39644,576

69,67895,85926,76252,49778,348104,396

26,956

114,854

773

1,599

2,423

3,204

795

1,672

3,204

3,407

889

3,586

6,417

6,466

Deaths and cancellations

YoY% of policies in force (monthly basis)

13.2%
1.0%

Number of payout cases
YoY

6.9%

Number of hospitals accepting Anicom

6,304

YoY

3.1%

13.8%
1.0%

6.1%

15.9%
1.0%

6.3%

6,353

6,378

3.4%

19.1%
1.1%

6.6%

6,417

19.5%
1.2%

2.8%

6,448

17.8%
1.1%

12.4%
1.1%

4.6%

32.2%

1.7%

6,463

8.9%
1.1%

6.3%

0.7%
1.1%

3.2%

2.4%

2.3%

0.6%

0.8%

0.4%

33,304
19,657
93.5%
59.0%
34.5%

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

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
5,907
95.4%
58.7%
36.7%
FY03/21

Number of policies in force

Q1
713,896Q2
729,842Q3
741,641Q4
753,332Q1
766,774Q2
781,368Q3
796,167Q4
816,254Q1
842,754

Number of newly acquired policies

37,72638,12636,90137,87240,20440,32940,65046,13553,456

Quarterly

QoQ increase

15,33015,946

11,799

11,691

13,442

14,594

14,79920,087

8.8%

6.7%

1.0%

4.0%

6.6%

5.8%

10.2%

21.8%

QoQ increase

1,315

400

-1,225

971

2,332

125

321

5,485

7,321

22,39622,18025,102

26,181

26,76225,73525,851

26,04826,956

YoY

13.2%

14.4%

19.9%

28.6%

19.5%

16.0%

3.0%

-0.5%

0.7%

% of policies in force (monthly basis)

1.0%

1.0%

1.1%

1.2%

1.2%

1.1%

1.1%

1.1%

1.1%

Number of payout cases
YoY

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

2.8%

94.8%
57.6%
37.2%

26,500YoY

Deaths and cancellations

6,650

6,477

16,281
24,671
9,675
14,782
93.3%
93.9%
59.4%
59.9%
33.9%
34.0%
FY03/19

Combined ratio
E/I loss ratio
Expense ratio (earned premium basis)

5.3%

11.8%

8,040
4,751
93.2%
59.1%
34.1%

Earned premiums
Claims paid (incl. loss adjustment expenses)

19.8%
13.0%

33.0%

773

826

824

781

795

877

1,532

203

889

6.9%

5.4%

6.8%

7.3%

2.8%

6.2%

85.9%

-74.0%

11.8%

8,040
4,751
93.2%
59.1%
34.1%

8,241
4,924
93.4%
59.7%
33.7%

8,390
5,107
95.1%
60.9%
34.2%

8,632
4,875
92.6%
56.5%
36.1%

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

9,285
5,504
97.8%
59.3%
38.5%

9,620
5,539
94.1%
57.6%
36.5%

9,855
5,479
91.9%
55.6%
36.3%

10,021
5,907
95.4%
58.7%
36.7%

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

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 wrote 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 newpolicies 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%.

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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 revenues 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).
Revenues from veterinary clinic/hospital operations appear to be included under advanced veterinary medicine clinical researchservices, while revenues from genetic testing appear 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.
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
revenues. 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 channels
and general channels 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 the end of Q1, up 9.9% versus the end of 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.

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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 revenues. 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.

Quarterly performance
No. of policies in force ('000)(JPYmn)

1,000
800

400

312
105

0

186
47

8

4

Q1
Q3
FY03/11231 267

321
113

18

187

379

293

491

404

627 673567 572 589
437

395 407 358

493

Q1
Q3
FY03/14Q1Q3
FY03/15

E/I loss ratio
66.0%67.3%
65.5%
62.3%
61.5%

50%

48.2%

40%

44.8%
41.1%
39.7%

Q1
Q3
FY03/16

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%

56.5%55.3%
53.0%

100%
90%

550 80%

445

70%

322

277

174

112

751

175

60%
50%

Q1
Q3
FY03/13

73.4%

70%

20%

321

98

Q1
Q3
FY03/1280%

30%

Combined ratio (right axis)

-81

-200

60%

714

90.1%

600

200

Recurring profit (JPYmn)

102.6%
875
100.2%
99.5%
99.4%
98.8%
97.9%
97.8%
97.2%
97.2%
97.1%
96.7%
81795.4%
96.2%
95.8%
95.7%
95.4%
95.1%
94.4%
94.2%
94.1%
93.9%
93.4%
93.2%
94.1%
93.0%
92.9%
92.6%
92.4%
92.2%
92.0%
91.0%
90.8%
90.5% 836
90.1%
91.9%
89.9%
89.7% 91.1%
88.2%
87.9%

62.1%

58.7%

60.6%

60.3%

60.1%
60.8%
59.4%
57.6%

Q1
Q3
FY03/19

Q1
Q3
FY03/2040%Q1
FY03/21

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%

55.6%

59.3%

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%

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

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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)
11,138

27%

8,000

27%

26%
24%

24%

6,000
4,000

Investment expenses

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

23%

3,614 3,8263,831

4,077 4,2804,269
23%

22%

21%

2,000
0

Q1
FY03/12Q3Q1
FY03/13

Q3

22%

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

22%
21%

Q3

5,205 5,419

5,9795,913

75%

6,284
25%

6,657
25%

6,981

7,474 7,375

7,683 7,954

8,122 7,823

27% 27% 26%
25% 25%

24%

8,483

9,122

28%

26% 26% 26%

27%

26%

26%

27%

24%

25%

22%
20%

20%

Q1
FY03/15

Q3

32%
30%

29%

22%

18%
Q1
FY03/16

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

80%

26%
6,6626,684

25%
23%

22%

5,580

6,222

27%

9,814 9,733 9,66510,063

Q3

Q1
FY03/17

Q3

70%

900

7%

55%

6%

500

50%

5%

400

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

Q1
FY03/20Q3

16%Q1
FY03/21
1.4
1.2
1.0

600

0.8
0.6

300

4%

40%

Q3

700

60%

45%

Q1
FY03/19

800

8%

65%

Q3

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

10% 1,000
9%Q1
FY03/18

0.4

200

0.2

100

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%

20%
10% 17% 16%
0%

15% 15%
4% 5%

-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%

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.

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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%

FY03/20
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%

FY03/21
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

For details on previous quarterly and annual results, please refer to the Historical performance section.

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Company forecast for FY03/21
Company forecast for FY03/21
For FY03/21, the company is forecasting consolidated recurring revenue of JPY45.6bn (+10.0% YoY), recurring profit of JPY2.9bn(+32.5%), and net income of JPY2.1bn (+32.5%).
Even though consumer sentiment as a whole may be depressed in the wake of the coronavirus pandemic, the company believes
pet-related demand will remain strong, and this assumption underlies its outlook for continued growth in recurring revenues andearnings in FY03/21. In addition to its expectation of continued growth in the number of policies in force and expansion of new
businesses, the company’s forecast also reflects the addition of recently acquired SIMNET to the Anicom group; the company has
not disclosed any figures in this regard, but Shared Research believes SIMNET’s contribution to earnings will be very small.
With regard to the year recurring profit forecast of JPY2.9bn, the company noted that it is anticipating a recurring profit of
JPY500mn in Q1, then sees recurring profit rising to JPY1.1bn by the end of Q2, JPY1.7bn by the end of Q3, ultimately finishing
the year at JPY2.9bn.

Company targets for key performance indicators
The key performance indicators underlying the company’s forecast for FY03/21 are detailed in the figure below. In FY03/20, thecompany could reasonably project its loss ratio because it had just raised premiums, which allowed it to estimate thedenominator used to calculate the loss ratio. However, in FY02/21, we understand that Anicom do not have a similarly clear basis
upon which to make its projections and thus relied on past results and trends in key performance indicators.
Key performance indicators
FY03/19
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)

FY03/20753,332
150,625

816,254
167,318

3,204
6,417

3,407
6,466

34.5%

37.1%

87.7%

59.0%

87.2%

57.8%

Combined ratio (earned premiums basis)

93.5%

94.9%

Solvency margin (parent)

379.8%

357.0%

YoY
Rate of change
8.4%
62,922

YoY change

16,693

11.1%

203
49
-1.2pp+2.6pp+1.4pp-22.8pp

6.4%

-

0.8%

FY03/21 Est.

885,000
183,600

87.0%

3,586
6,650

57.6%

37.2%
94.8%
370.0%

Source: Shared Research based on company data

Factors expected to drive changes in recurring profit in FY03/21
The figure below shows estimates for FY03/21 results using figures from the company’s results presentation materials. Earned
premiums are projected to increase by JPY3.3bn YoY. On the surface, this appears to be less than the JPY4.4bn increase in earned
premiums recorded the previous year, but this is only due to the premium rate hike enacted in December 2018, which led to asmaller reversal of catastrophe reserve provisioning and smaller contributions to earnings despite the boost to top-line revenues.
Because nothing similar to this is expected in FY03/21, it will be relatively easy for the expansion of its insurance business base tolead to higher revenues and earnings in FY03/21 (even though reversals of catastrophe reserve provisioning might be expected
to some extent).

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Factors expected to drive changes in recurring profit in FY03/21(JPYmn)

8,000
7,000
Premiums
earned

6,000
5,000
4,000
3,000
2,000

Other
recurring
revenue

Claims
paid

528

1,764
Recurringprofit(Cons.)
FY03/19

1,000

3,275

Other
recurring

Investment
expenses

Catastrophe
reservse

342
Agencycommissions

0

SG&A
expenses

2,239
2,399

109

0
Investment
revenue

Recurringprofit(Cons. Est.)
FY03/20

2,900

2,189

0

Consolidated(JPYmn)Recurring revenue

FY03/19Act.

FY03/20Est.

YoY change

41,46545,6004,135

Underwriting revenue

37,701

40,976

3,275

Investment revenue

496

496

-

1,863

4,102

2,239

39,27542,7003,425

27,212

29,3172,105

Net claims paid

21,781

23,545

1,764

Commissions and collection fees

3,674

4,016

342

Provision for underwriting reserves

1,756

1,756

-

109

109

-

11,153

13,552

2,399

800

1,328

528

Recurring profit

2,189

2,900

711

Net income

1,525

2,060

535

Other recurring revenue
Recurring expenses
Underwriting expenses

Investment expenses
Operating and general admin. expenses
Other recurring expenses

Source: Shared Research, based on company data

In contrast to the sizeable jump in underwriting revenue, agency commissions are expected to rise by only JPY342mn. The muted
rise in agency commissions is attributable in large part to the last year’s acquisition of SIMNET, which previously accounted for alarge portion of the agency commissions that the company paid out. At the investment revenue level, the company is projecting
a YoY decline of JPY46mn versus the previous year’s investment revenue figure JPY446mn, but this is mainly a reflection of theassumption under its medium-term business plan that investment revenue will run around JPY400mn per annum. Under
investment expenses, the company is assuming a YoY decrease of JPY109mn, reflecting the dropout of the JPY109mn increase ininvestment expenses last year as a result of the downturn in the market in response to the coronavirus pandemic.
While other recurring revenue is projected to increase by JPY2.2bn YoY, SG&A expenses are projected to increase by JPY2.4bn.
Much of the increase in other recurring revenue and expenses reflects SIMNET’s full-year contribution to consolidated results thisyear following its acquisition last year, but Anicom’s growing veterinary hospital succession business and genetic testing businessare expected to make sizable contributions to revenue growth as well. On the expense front, of the JPY2.4bn increase in SG&A
expenses, almost half is expected to be accounted for by administrative costs and goodwill amortization related to SIMNET, withmost of the reminder coming from increases in personnel and rental costs at the pet insurance and other businesses.
SIMNET’s goodwill amortization was JPY33mn in Q1 FY03/21. The amount of goodwill arising in FY03/20 was JPY2.0bn. This will
be depreciated over 15 years using the straight-line method (according to the FY03/20 annual securities report).

Major initiatives
Insurance business
Major initiatives during FY03/21 include (1) expanding sales channels, including online channels such as matching websites,
breeders, intermediaries, and veterinary hospitals/clinics; (2) expanding product and service lineup, including expanding sales of
Dobutsu Kenpo Senior, increasing user satisfaction with its Dobutsu Kenkatsu service, and expanding other original services; (3)expanding preventative medical services and optimizing insurance payouts; (4) upgrading and reinforcing core IT systems tomeet future needs; and (5) increasing synergies between SIMNET and other group companies.

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Asset management division
Major initiatives during FY03/21 include (1) expanding portfolio of marketable securities under management and maintainflexibility so as to be able to quickly respond to changing market conditions; and (2) acquiring and developing properties thatwill contribute to group businesses, including pet-friendly residential properties and pet-friendly multipurpose facilities.

Non-insurance businesses
Major initiatives during FY03/21 include (1) at its genetic testing business, expanding number of test performed, establish morecustom panels to expand the range of characteristics for which genetic tests performed, and commercialize breeder support
operations; (2) promote pet health exams (gut microbiota exam, etc.), commercialize sales of related pet food and supplies; (3)promote veterinary hospital succession; (4) expand and promote practical application of cell therapy and regenerative medicine;and (5) expand synergies between SIMNET and other group companies, including development of breeding support businessand expansion of specialty pet health store business.

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Medium and long-term Outlook
Medium-term business plan covering 2019-2021 (announced May 2019)
Moving from rolling-plan to fixed plan: More than replacing performance targets, company makes clear
commitment to shareholders
In the past Anicom announced a three-year rolling plan that it updated every year at the time of its full-year results announcement.
However, starting in FY03/20 it has switched to a fixed three-year plan and will evaluate achievement at the end of that three-year
period. Although the regular annual update of performance targets that accompanied the rolling-plans had its merits in terms oftimely disclosure, it was weak when it came to clearly showing the targets management was really aiming for. The timing of thischange to coincide with the company’s announcement that was going all out to realize its goal of becoming a “preventative
insurance company” was based on the company’s desire to demonstrate that it was 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 nonlife 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

Pet insurance
Basic strategy under previous medium-term plans
Anicom has built a position for itself as a market leader in the domestic pet insurance market, maintaining higher than a 50%
share of a market which continues to grow at a double-digit pace. The sales channels that it uses for pet insurance split the market
roughly into two, the market reached by “newborn” sales channel and market reached by the “family” channel. The new born
sales channel consists largely of pet shops that serve as sales agencies for Anicom insurance, and their target market is would-be
pet owners looking to buy a new pet. In contrast, the family channel consists of general insurance agencies and direct sales
channels (referred to below as “general channels”) and targets people who already own pets. (For further details, please see
discussion under the Business Description section of this report.)
The newborn channel has been the most important sales channel for Anicom since its inception, handling sales of some 600,000
to 700,000 newborn companion animals a year. Following its move to increase its ability to handle new insurance policy sales
online in FY03/14, Anicom has directed its efforts to sell new pet insurance policies primarily through the newborn sales channel
and with this has also been able to increase the proportion of sales of newborn pets by pet shops that are sold along with Anicom
insurance coverage.
General channels that are aimed at reaching people who already own pets include 1) direct sales routes, namely direct online
applications and through call centers; and 2) general agency routes including other pet-related companies, financial institutions,
co-ops, specialist insurance agencies, online agencies, and veterinary hospitals and clinics that offer Anicom insurance.
Working under the previous medium-term business plan, the company started building up new sales channels outside of pet
shops in FY03/18. In the newborn channel outside of pet shops, the company started developing sales through breeders and also
through the adoption market (which together account for some 100,000 to 200,000 pets a year). Meanwhile, in the general sales
channel, the company made a major strategic shift with its move to increase direct sales online. With this, the company not only

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went after a larger share of newborn pet market that can be counted on to generate a steady flow of business year after year, italso went after a larger share of the existing market represented by people who already own pets.

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
Increase investment revenue: Invest in pet-related properties and undertake various other measures aimed at increasing returns
on its securities portfolio▷

Bring down claim payments: Work to bring down claims payments by with the help of Big Data analysis, especially analysis of▷

Increase customer satisfaction: Expand services that will further build relationships with customers (improve call center▷

data from gut microbiota medical checkups, using this to prevent illnesses and find the most appropriate medical treatments

operations, make business operations more customer-focused)
Upgrade IT systems: build solid foundation for system that can maintain Big Data database, rebuild core system.

FY03/22 performance targets at Anicom’s pet insurance business include 1) CAGR of roughly 10% for insurance underwriting
revenues and investment revenue combined; 2) loss ratio of 57%-59% versus 57.8% in FY03/20; 3) expense ratio of 34%-37%
versus 37.1% in FY03/20; and 4) solvency margin of roughly 380% rising to 400% over the long term.

Newborn channel (one-time revenue)
Continue to seek scale expansion: Agency commissions and collection expenses trend up amid increased competition, but absorbed by
growth of new policies
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.
Major expense categories as % of recurring revenues (left) and in comparison with number of new policies (right)

80%

Net claims paid

Loss adjustment expenses (right axis)

Commissions and collection fees (right axis)
10%

9%

70%

8%
7%

60%

6%
50%

5%
4%

40%
30%

3%
Q1
FY03/12Q1
FY03/13Q1
FY03/14Q1
FY03/15Q1
FY03/16Q1
FY03/17Q1
FY03/18Q1
FY03/19Q1
FY03/20Q1
FY03/212%

Source: Shared Research based on company data

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Development of next-generation insurance products: Differentiate from competitors’ offerings by prevention approach
In the pet shop industry, pressure on earnings from the rising wholesale price of live animals has necessitated finding new sourcesof earnings; as this has made push-backs against commission rate cuts likely to continue, Anicom has been forced to better
differentiate its pet insurance products and better explain the advantage of having pet shops handle its insurance to pet shops
and new pet buyers alike. With Anicom now seeing its costs rising steadily as it works to sell new policies, going forward it islooking to make its new “preventative” approach the focus of its sales efforts as it works to promote new businesses.

Sales channel expansion: Developing channels outside of pet shops
Under its previous medium-term plan, the company aimed to expand the breadth of the newborn channel, which was focusedon pet shops, and also expand into the overall diverse domestic distribution market for newborns. And through that planned todevelop a customer base that its previous approach could not while also curtailing the rise in the commissions and collection fees
(as a proportion of total revenues).
Although smaller in scale than that for pet shops (600,000–700,000 pets per year), the company views the market size of
newborns outside of pet shops as being about 100,000–200,000 pets per year. The company is specifically considering thebreeder market (50,000–100,000 pets per year), the adoption market (several tens of thousands of pets per year), and otheranimal facilities (veterinary hospitals, trimming salons, etc.) These markets are for newborn animals, just like the pet shop market,
and will contribute to the making a sound portfolio at a time when the rest of pets under coverage are aging. However, unlike
pet shops, these markets are unorganized and will require time and capital. The company also plans to provide a variety of
support services to breeders such as genetic testing. In addition to spending on general sales channels, such as online contracts(to be discussed later), the company also plans to spend a certain amount on the market for newborns outside of pet shops.

General sales channels: Insurance for animals under 8 years old (digging deeper into recurring revenue
market)Further cultivating online channels
Starting in FY03/18, Anicom began a new effort aimed at developing the market of an estimated 18–19mn pets, out of a total
domestic market of roughly 20mn, which are not covered by insurance. The company has traditionally possessed sales channels
such as financial institution agencies and online contracts (direct sales by the company, online agencies), but had taken a neutral
stance without actively winning online contracts. However, in recent years it has become difficult to accelerate the rate of growth
via pet shop channels alone due to increases in the percentage of pet owners buying insurance, and changes have also been seenin the competitive environment, such as pet shop chains entering the insurance market (P’s-first Small-Amount Short-Term
Insurance official website launched in March 2017). In response, Anicom decided that it would restart its efforts to develop thegeneral channel as a means of growing its market share.
More specifically, under its new medium-term business plan the company aims to increase sales through the general sales
channel so as to make it at least as important as newborn sales channel. Towards this end, the company plans a number of
additional growth initiatives, including increase spending on marketing, PR, website enhancements, and the use of veterinary
hospitals/clinics.

General sales channels: Sales channels for online (directly by the company, online agencies) and over the counter sales targeting dogs and cats under
the age of eight years old. Anicom significantly increased the number of policies, mainly via online sales, in FY03/12, but, coupled with the special
features of 90% coverage plans at the time, the loss ratio increased. The company has carried out various measures such as stopping the underwritingof 90% coverage in August 2012, extending the period between the application for online contracts and the start of payout in October 2013 (curtailed
applications which require immediate payout), and suspending sales of 70% coverage for online contracts in January 2014. The number of general sales
channel new policies continued to decrease YoY until Q3 FY03/16, when the effects of the measures have run their course. Since Q4 FY03/16, there has
been no major movement. Examples of general agencies include Sony Assurance, Asahi Mutual Life Insurance, financial institutions such as regionalbanks and credit associations, Benesse, Yanase & Co., and regional co-ops.
Business alliance with Benesse Corporation: Benesse to become one of Anicom’s agencies. Plan to utilize points of contact such as magazines “Inu no
Kimochi” (Dog’s Feelings) and “Neko no Kimochi” (Cat’s Feelings) with roughly 160,000 monthly subscriptions, smartphone apps (about 1mn
downloads), and Facebook. Anicom to offer information regarding pet injury and sickness prevention to this, the largest network in Japan for pet
owners, and also services, such as one in which newborn insurance policy holders can subscribe to online versions of the magazines.

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New businesses
Growth initiatives under new medium-term business plan
Anicom’s new medium-term business plan is counting on a number of new businesses in different areas, including upstream aswell as downstream businesses. In this report we will provide an overview of its genetic screening business and breeder support
business (upstream/midstream), its veterinary medical treatment-related business (midstream/downstream), and special services
for elderly people and their aging pets (downstream).

Upstream/midstream: Genetic testing services and breeder support services (such as inbreeding management services)
Genetic screening services are an important part of the company’s strategy to development upstream businesses. Hereditarydiseases 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 health checkups at
appropriate times for animals with an awareness of high-risk diseases for each breed. For its part, Anicom stands to benefit from alower loss ratio while pet owners can enjoy healthy pets and lower insurance premiums, and breeders enjoy a strong reputation(i.e., for breeding healthy animals), which will lead to more revenue opportunities.
The new medium-term business plan has provided some specifics for plans thus far, saying that it would be doing the genetic
screenings in the company’s own laboratory and that the genetic screening business was expected to add to revenues and help
reduce insurance claim payouts. Major initiatives in this area include 1) convincing major pet shops to run genetic screenings on
all the live animals they sell, 2) genetic screening of dogs used in breeding, and 3) research into new causative genes that canthen be screened for. To help solve the other problems breeders run into, Anicom also plans to use the data it has accumulated
to provide breeding management services to help breeds avoid the incidences of hereditary diseases and resulting deformities.

Midstream/downstream: Veterinary medical care-related businesses
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. By the end of FY03/20 the company had more than 57 such veterinary clinics in operation, doing everythingfrom preventative care to general medical treatment. Under its new medium-term business plan, 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, the company also noted that it established a capital alliance with E Pet Life to help itwith 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.

Under its new medium-term business plan, the company is looking to promote healthy lifestyles for pets. This is in part motivatedby its desire to use analysis of large amounts of customer data to shows that promoting healthier lifestyles for pets leads to lower
insurance claim payouts. Another aim of this push is to use its customer data to develop better pet food (from the perspective ofpreventative medicine) and establish joint ventures with other companies.

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Downstream: 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.

Earnings contribution: Synergies between pet insurance and new businesses
Earnings from new businesses were not, for the most part, incorporated in earnings forecasts of the medium-term planannounced in May 2017. The medium-term plan announced in May 2018 forecasts sales growth mainly in the animal hospitalbusiness but, on the whole, only outlined the new businesses planned without detailed expected contributions to revenues andearnings.
Under the medium-term plan announced in May 2019, the company broke down the revenue opportunities represented by new
businesses into upstream, midstream, and downstream businesses, and in doing this demonstrated that it understood exactly
how these businesses would contribute to its mainstay pet insurance businesses. As for the impact of these new businesses on its
top- and bottom-lines, the company said it is looking to get combined revenue from new businesses (listed under “other revenue”
on its income statement) up to around 10% of consolidated revenue by FY03/22, which means we will keep a close watch thecontributions to revenues and earnings from new businesses going forward.
Other operating revenue (includes new businesses)
Other recurring revenue (right axis)

140%(JPYmn)

YoY

2,000
1,800

120%

1,600

100%

1,400

80%

1,200

60%

1,000

40%

800
600

20%

400

0%
-20%

200
FY03/10

FY03/12

FY03/14

FY03/16

FY03/18

FY03/200

Source: Shared Research, based on company data

Synergies expected from acquisition of SIMNET
Anicom acquired SIMNET Co., Ltd. in December 2019, making it a wholly owned consolidated subsidiary. Established in March
2001, SIMNET designs, develops, and operates online pet-related services. Through its wholly owned subsidiary Minna No Pet
Online, SIMNET also operates the breeder matching sites Minna no Breeder and Minna no Koneko Breeder. SIMNET is the largest
pet breeder matching website operator in Japan, and previously served as a sales agent for Anicom Insurance, Inc., a subsidiary ofAnicom Holdings.
By making SIMNET a wholly owned consolidated subsidiary, Anicom will be able to take full advantage of SIMNET’s breeder
matching sites, using them to advertise its breeder support services more directly and further expand its breeder support
business. In its capacity as a sales agency for Anicom Insurance, SIMNET will be able to work even more closely with Anicom,
which should in turn help the two put together more efficient and effective measures to increase sales of Anicom pet insurance.

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Business
Business description
96% of recurring revenue comes from Anicom Insurance, Inc.
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 nonlife insurance license in 2007 and began operations in January 2008.
Anicom Holdings has under its umbrella the following wholly owned subsidiaries: Anicom Insurance, Inc. (non-life insurance: petinsurance), Anicom Pafe, Inc. (animal hospital support), Anicom Frontier, Inc. (insurance agent), Japan Animal Specialty Medical
Institute Inc. (animal healthcare clinical research), and Anicom Capital, Inc. (venture capital investment business), and SIMNET
Co., Ltd. (breeder matching site operator). In FY03/20, Anicom Insurance accounted for 95.6% of consolidated recurring revenue.
Other consolidated subsidiaries account for only a small share of overall revenues, but give Anicom a position in upstream,
midstream, and downstream businesses.
Performance
Underwriting revenue(JPYmn)Investment revenue

Other recurring revenue

50,00041,46540,00030,00022,63820,00010,0000(JPYmn)Recurring profit (right axis)

7,267

10,800
4,317

7,228

6,442

FY03/08

FY03/09

9,216

11,107
154
94

141
71

9,003

FY03/10

13,845144
108

10,85813,592

FY03/11

FY03/1226,506446
690

28,978405
504

32,339628
420

35,829

1,863

910

496

383

18,366

15,781

18,087

21,73325,37028,06831,29034,535

39,105

FY03/13

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

FY03/20

143
260

171
108

4,000
3,000

382
522

16,186

5,000

2,000
1,000
0

Source: Shared Research based on company data

Anicom’s pet insurance business generates a steady flow of recurring revenues from insurance policy holders paying theirmonthly premiums. And because the monthly premiums it receives depends on the number of insurance policies in force, thecompany 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 shops and general channels that it had
traditionally used. Growth at the company’s pet insurance quickly accelerated following this change in its sales approach, leaving
the company with a CAGR in the number of insurance policies in force of more than 10% over the last five years.

As pioneer in pet insurance, Anicom’s growth has driven growth in overall market
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 theend of FY03/20 was 816,254, representing an average annual growth rate of 8.4% over the last five years. This compares with anaverage annual growth rate of 17.5% for the pet insurance market during the five-period from 2013 through 2018, during whichtime the pet insurance market grew from JPY29.8bn to JPY66.7bn. The pet insurance market in Japan is projected to grow to
JPY76.8bn in 2019 to JPY87.4bn in 2020, according to recent estimates published in the “Pet-related Marketing Handbook” 2019
by Fuji Keizai. Based on the market figures from Fuji Keizai, Anicom’s JPY34.5bn in underwriting revenues in FY03/19 gave it amarket share of 52% in 2019. Although competition within the pet insurance industry is increasing, Anicom is still the clear
market leader with a market share of more than 50%.

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Domestic pet insurance market worth JPY87.4bn in 2020, with about 10% of pets covered by insurance
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 that are covered by pet insurance at this time. According to figures from a 2019 survey of dog and catownership sponsored by the Japan Pet Food Association, there are roughly 18.6mn dogs and cats kept by Japanese households aspets and only about 10% of these are covered by insurance. The UK has 16.5mn dogs and cats (8.5mn dogs, 8mn cats; about
25% of the population; 2017), which is the same size as Japan; however, pet insurance covers over 25% of UK pets, more thandouble the proportion in Japan. This means there is plenty of room for growth in Japan. According to Fuji Keizai’s “Pet-relatedMarketing Handbook 2019,” the pet insurance market in Japan in 2020 is expected to be worth JPY87.4bn.

Newborn market (600,000–700,000 pets) and general market (20mn pets)
The pet insurance market is classified into the “newborn market” and the “general market,” which, according to Anicom
estimates, have 600,000–700,000 pets and 20mn pets, respectively. The newborn market refers to newly born pets, while thegeneral market refers to animals that are already part of the owner’s family. Sales channels used to reach the general market
include 1) direct sales made online or through call centers, and 2) general agency routes including other pet-related companies,
financial institutions, co-ops and other companies, specialized insurance agencies, online agencies, and veterinary hospitals andclinics.
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

A few tens of thousands

Breeders market

Adoption market

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

Non agencies(1/3 of policies)

50% of pets
insuredNon agencies(1/3 of policies)

Other

Direct customers, other

Remaining 50%
uninsured

Potential customers for Anicom

Potential customers for Anicom

Source: Shared Research based on company data

Q1
FY03/11

46,13540,65040,32940,20437,872

38,12636,90137,72636,54031,692

31,44730,52930,181

28,887

80%
75%

65%

10,000
0

85%

70%

5,518

5,761

6,037

5,489

27,472
5,998

5,446

27,055

26,679

5,054

5,972

25,140

6,469

5,722

25,24924,841

7,382

26,706

26,398
7,716

26,024

7,776

8,481

28,59927,841
9,408

25,89824,52324,306

9,503

9,010

9,568

9,627

24,997

24,777

9,867

9,927

24,7689,617

26,606

24,643

9,491

23,924

9,496

8,924

9,290

22,728
6,983

20,000

6,904

30,00021,25240,00023,88950,00036,411

Ratio of new policies for newborns

35,747

No. of new policies (general)

34,667

No. of new policies (newborns)

60,00053,456Composition of new policies

60%
Q1
FY03/12Q1
FY03/13Q1
FY03/14Q1
FY03/15Q1
FY03/16Q1
FY03/17Q1
FY03/18Q1
FY03/19Q1
FY03/2055%Q1
FY03/21

Source: Shared Research based on company data

With more than 90% of vets accepting Anicom insurance, it has become the industry standard
There were 9,165 veterinary hospitals and clinics in Japan as of the end of December 2019, according to new businessnotifications submitted to the Ministry of Agriculture, Forestry and Fisheries. Of those, 6,905 cater to small animals (i.e., pets).
Anicom’s pet insurance pays for treatment provided by any animal hospital in Japan. Furthermore, 6,466 institutions, or 94% of allveterinary hospitals and clinics, accept health insurance cards issued by Anicom (as of the end of March 2019).

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Three pet insurance companies in Japan offer over-the-counter settlement. The three companies are Anicom (accepted at 6,466
veterinary hospitals/clinics as of end-March 2020), ipet Insurance, ranking the second in the industry (5,054, as of end-March
2020), and Pet & Family Insurance (formerly Pet & Family Small-amount Short-term Insurance; moved into the non-life insurance
business in April 2019). This method of settlement is an important tool for veterinary hospitals and clinics to attract customers,
and is becoming the de facto industry standard.
This is how the system works: Anicom issues animal health insurance cards to policyholders, who show their card at 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

About 80% of new policies still come through pet shops, but company now putting more effort to develop
general sales channels
Shifting strategy
Of the company’s sales channels for new policies, pet shops comprise a little more than 80%, and general agencies and direct
sales (general channel) a little less than 20%. (These figures are as of FY03/17, since the company had not disclosed thisbreakdown since FY03/18). While, traditionally, direct sales do not require the company to pay agency commissions, thecompany had believed the loss ratio also tends to be higher. However, after confirming that the loss ratio at general sales
channels is about the same level as that at pet shop agencies, the company shifted its strategy in FY03/18 and began building up
general sales channels in order to further accelerate growth in the pet insurance business. And now under its new medium-termbusiness plan the company is working to establish these general sales channels as a major source of sales of new policies andfuture revenue.

About 40% of pet shops in Japan serve as Anicom sales agents (company estimates)
According to the March 29, 2019 Economic Census for Business Activity (complied by the Ministry of Finance and the Ministry of
the Economy, Trade, and Industry), there are 5,041 shops that sell pets and related goods in Japan. Anicom had agency contracts
with 1,295 pet shops at the end of 2012, 1,490(about a third of all pet shops) at the end of March 2015, and 1,997 (about 40%
of all pet shops) at the end of 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 weresold via the company’s pet shop sales agents. Assuming about half of the 600,000–700,000 newborns sold each year are via pet
shop means: about 200,000 divided by 300,000 to 350,000 equals about 60%.)

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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

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

Online sales

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

Rising average age of pets and policy renewal
Increase in the average age of pets raises average premium written and claims paid
Of insurance policies sold by Anicom, 80% were for dogs, 14.3% for cats, and 1.0% for other animals in FY03/18. The averageage of dogs covered by Anicom has been rising in recent years, reaching 4.7 in FY03/17, according to Shared Research estimates,
based on contracts for animals up to age 12. Under the company’s pricing structure, the insurance premium rises with the pet’sage. Hence, a rise in average pet age would lead to higher premium revenue.
Average age of animals insured by Anicom
Dogs

Average age of animals

Old standard (age 0 to 12)
YoY
New standard (total policies)Cats
Old standard (age 0 to 12)
New standard (total policies)
Birds
Old standard (age 0 to 6)
New standard (total policies)
Rabbits Old standard (age 0 to 6)
New standard (total policies)
Ferrets Old standard (age 0 to 6)
New standard (total policies)
Avg. annual insurance premium (JPY)YoY

FY03/05

FY03/06

FY03/07

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

2.5

2.6

2.7

3.0

3.6

3.7

3.7

3.7

3.7

2.0

2.1

2.3

2.4

2.5

2.4

2.5

2.6

2.7

1.7

2.2

2.4

2.5

2.7

2.8

3.0

2.9

2.9

1.7

2.2

2.7

2.9

3.0

3.0

2.9

2.9

3.0

-

27,49225,433-7.5%

25,636+0.8%

29,258+14.1%

33,764+15.4%

34,394+1.9%

36,892+7.3%

37,456
+1.5%

1.6

1.8
+14.3%

2.0
+9.6%

2.3
+16.0%

2.9+25.0%

3.1
+5.8%

3.4
+9.8%

3.6
+8.7%

4.0
+8.9%

FY03/14

4.2
+5.9%
4.4
3.7
4.2
2.6
4.9
2.9
4.8
3.1
3.4
38,023+1.5%

FY03/15

FY03/16

FY03/17

FY03/18

3.7

3.7

3.6

3.6

2.6

2.2

1.1

0.9

2.7

2.5

1.5

1.2

3.0

2.3

1.4

1.3

41,405+8.9%

44,872+8.4%

45,952+2.4%

46,903
+2.1%

4.5
+5.9%

4.6
+3.6%

4.7
+1.4%

4.7
-0.3%

Source: Shared Research estimates, based on company’s 2019 Family Animal White Paper (detailing age, contract expirations after one year, and cancellation due todeath)

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 tried to make its portfolio
sound by increasing the number of policies for animals that are less than one-year old. However, as the loss ratio rose more thanthe company anticipated, it introduced various measures (products with limits on the number and length of hospital visits,
healthy pet discounts), and in FY03/18 it decided to raise insurance premiums for nearly all policies for pets over eight years old(from July 2017). In addition, the company is trying to maintain a sound portfolio by cultivating the newborn market outside ofpet 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.

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Annual premium for toy poodle (5% discount policy renewal for dogs aged over one year); avg. annual medical costs per dog (FY03/12)(JPY)

Annual medical costs per dog by age (right axis)
From June 2014 (70%)
From July 2017 (70% Wide; renewed contract)

100,000(JPY)

Up to May 2014 (70%)
From November 2014 (70% Wide; renewed contract)200,000

80,000160,000

60,000120,000

40,00080,00020,00040,000

0

0yrs

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

0

20

Number of insured dogs by age
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 yrs

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

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

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

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

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

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

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

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

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

FY03/1466,80549,22147,91044,08942,27029,24933,59030,802
27,70624,03817,515
10,162
5,978

FY03/15
63,76253,282
46,24845,93042,436
40,832
28,83733,282
28,86525,97322,40915,9589,008

FY03/16
69,20049,91649,362
43,83544,05940,86039,44328,711
31,056
26,96524,087
20,49914,194

FY03/17
74,23954,154
46,67647,20042,12542,53739,64638,65427,032
29,32025,191
22,202
18,399FY03/18
79,76058,68250,92745,00845,732
41,114
41,531
39,15536,381
25,49927,324
23,211
19,903% of total
14.6%
10.7%
9.2%
9.3%
8.3%
8.4%
7.8%
7.6%
5.3%
5.8%
5.0%
4.4%
3.6%

Source: Shared Research based on company’s 2019 Family Animal White Paper (detailing contract expirations after one year and cancellation due to death by age andpet category)

Policy renewal rate holding around 87%
A rising rate of policy renewal 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 87.2% in FY03/20).
Although a portion of policies are canceled due to death, considering that the average age of pets is about 13 years and that
Anicom’s composition ratio of pets aged 12 years or older is about 3.6% (FY03/18), the number of cancellations due to death islikely to be small. Potentially, the company could maintain the current level by raising the renewal rate in the initial year of thepolicy and through measures to improve its preventive services.
Renewal rate

Renewal rate

FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
84.1%
86.6%
87.6%
88.1%
89.3%
88.7%
88.2%
88.2%
88.2%
87.7%
87.2%

Source: Shared Research based on company data

Different attitudes toward pet insurance: animals or family
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 are
no incentives 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 taken by Anicom shows that its respondents spent on average JPY480,000 on dogs and JPY231,000 on cats in 2018,
representing an increase of roughly JPY30,700 in spending on dogs and JPY15,900 in spending on cats versus its 2019 survey.
These figures suggest that people who acquire pet insurance are also generous in the purchase of other pet-related goods andservices.

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Survey on annual spending on pet(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
2018
44,86952,4978,737
7,273
42,32350,15527,653
8,339
20,601
13,156
4,157
5,387
1,082
5,457
15,113306,801

YoY-20.9%-8.0%-22.8%
12.8%
-4.9%
4.2%
-8.6%
7.7%
54.4%
18.5%
9.5%
5.4%
79.7%
-65.9%-21.1%-7.5%

2018
29,631
42,925
4,694
22
3,002
30,653
12,424
3,563
13,113
408
1,929
633
2,057
15,920160,975Cats
2018
23,91949,713
2,783
2
2,623
30,155
12,814
3,469
12,118
753
6
2,354
1,431
1,357
15,183
158,680

YoY-19.3%
15.8%-40.7%-90.9%-12.6%
-1.6%
3.1%
-2.6%
-7.6%
84.6%
22.0%
126.1%-34.0%-4.6%-1.4%

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

New businesses
Basic strategy: steps taken thus far to become preventative 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 plan announced in May 2017, in addition to the medium-term VISION of
offering, as an infrastructure player in the animal industry, a world free of concern for hereditary disorders, and the new value ofthe lengthening of a healthy lifespan, more specific details were indicated regarding in what way the company will be a partner
engaged in animals’ lives from upstream (before becoming ill, before being born) to midstream (lengthening of a healthy
lifespan) to downstream (after becoming ill). At the same time, it was clear the various initiatives to date fit in nicely as parts ofthe strategy.
・The company’s current move towards preventive services reflects the desire of the company’s founder since Anicom’s inception. This means abusiness model revolution in the insurance industry: when pet illness does occur, this new business structure aims to allow the pet to quickly get backto health. The driving force behind Anicom’s move to become a preventative insurance is new businesses, which already include breeder support
services via its genetic screening business (upstream business), veterinary clinic/hospital operations (midstream/downstream business), and a portal
website to facilitate online searches for veterinary hospitals (downstream 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 preventative diagnostic services thecompany 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 withthe 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 revenues as an increase in insurance premiums would, Shared Researchsees them as a means of strengthening the foundation of the company’s insurance business and potentially differentiating itself from competitors. With
the rollout of anirece cloud, the company is looking to go beyond simply treating pets and use it to create the backbone a system that draws on open
medical records and the medical history of breeding animals and their offspring.

FY03/18
The new business strategy announced in May 2017 set out specific initiatives for each stage: upstream (eliminating hereditarydiseases in pets), midstream (symbiotic bacteria-related business), and downstream (pioneering fields of veterinary medicine).
In FY03/18 (the period in which Anicom takes its first steps as an infrastructure partner company), Anicom targeted the following:
In the upstream of the cycle, the company began breeding consulting services for domestic breeders based on genetic analysis. It
aims to commercialize the prevention of hereditary disorders, and discover previously unknown genetic predispositions to illness.
Midstream, the company began efforts to make gut microbiota-based medical checkups (bowel activity) more widespread, andlaunch food, lifestyle consulting, and other businesses revolving around symbiotic bacteria. Downstream, it put advanced

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medical treatment (cell therapy, regenerative treatment) to practical use and expanded its application. It also targeted
development of animal hospital operations overseas.
Furthermore, the company made progress with comprehensive analysis of what links the cycle from downstream to
upstream—big data such as insurance claim data spanning over 15 million cases (as of FY03/17), treatment data (Anicom
Receptor) and genetic information—to utilize these toward the development of next-generation preventive care technologies.
As an infrastructure partner company engaged in the lives of pets

Source: Company data

The company’s progress at end-FY03/18 is as follows: 1) Genetics (upstream): Genetic screening business started (1H),
partnership with venture company underway (February 2018); 2) Breeding/birth (upstream): Medical support for breeders (1H);
3) Health checkups (midstream): Screening and checkups for gut microbiota launched as insurance accessories (1H); 4) General
medical care (downstream): Operation of hospitals focusing on preventive services (1H), and collaboration with pet-related
portal website (May 2018); 5) Advanced medicine (downstream): Clinical research ongoing (continuing from previous years),
starting treatment for keratoconjunctivitis sicca “dry eye” in Q4.

FY03/19
Building on FY03/18 results, the current medium-term plan aims to focus on: 1) making a viable business of eliminating hereditarydiseases; 2) symbiotic bacteria and pet lifestyle management; and 3) contributing to advances in veterinary medicine. The
current medium-term plan takes a step further toward the commercialization of new businesses.
Upstream, 1a) the company seeks to eliminate hereditary diseases by adding medical support to gene analysis data to develop a
profitable breeding support service and 1b) make a business out of preventing the onset of hereditary diseases and identifying
unknown disease-related genes. Midstream, 2) the company seeks to popularize health checkups based on gut microbiota-based
medical checkups and develop food and lifestyle management consulting services based on symbiotic bacteria (which inhabit
the intestines of animals). Downstream, 3a) the company seeks practical application and scale expansion of advanced medical
technologies such as cell therapy and regenerative medicine, and 3b) combined with expansion of its medical records
management system business (extended features of reservation system), utilize data further to develop prevention methods, andexpand pet-related businesses overseas.

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FY03/20
Upstream/midstream
Genetic testing business:
By using genetic testing, breeders can avoid breeding animals with hereditary diseases. Because the genetic tests are performedin labs operated by Anicom group companies, they will 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.
Breeder support business:
On the breeder support front, Anicom provided on-site support services to help breeders resolve various problems, thereby
helping breeders improve their own profit opportunities, and also took additional steps to help breeders avoid new hereditarydiseases in their animals and otherwise promote animal health. In addition to traditional testing for hereditary disorders using
next-generation sequencing (NGS), Anicom has succeeded in developing a custom panel that makes it possible to get a read on
the resemblance of the child to the parents on a range of other attributes as well, including behavior, breed, fur color, and body
type. For the breeder, this ability to do paternity testing and check the genes for color and other attributes will allow them to findthe ideal breeding matches and increase the number of offspring produced. At the same time, Anicom is also looking to develop
and offer new services that use genetic tests to determine breed, behavioral characteristics, and physical disposition on behalf ofpet shops and other organizations involved in the transfer of pets from the breeder to the final owner.

Midstream/downstream
Promoting 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 96,000 in FY03/20. With the rollout of Dobutsu Kenkatsu, the company has also seen increases in both the number of 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.
Veterinary hospital succession (taking over existing veterinary practices from retiring doctors):
As of the end of FY03/20, the Anicom group was operating a total of 57 veterinary hospitals that do everything from preventativeand general veterinary medicine. By collecting and examining detailed data from these veterinary hospitals, the company aims toestablish next-generation protocols for preventative veterinary medicine.

Downstream
Established 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, andputting 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.
Pursue various business alliances:
With both 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. Towards 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.

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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 100 small-amount, short-term insurancecompanies registered with the finance bureau as of May 2019, only 10 are currently offering pet insurance. 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 thatcome 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.
Competitive landscape in pet insurance business in Japan
Insurance company
Non-life insurance
Anicom Insurance
ipet Insurance
Pet & Family Small-amount ShortAXA General Insurance
au insurance
Small-amount short-term insurance
Aeon S.S. Insurance
e-Pet S.S. Insurance
SBI Insurance Group (SBI Ikiiki SSIFPCJapan Animal Club (a subsidiary
Nihon Pet SSI (renamed in Jan.
Pets First SSI
Pets Best JapanPet Medical Support
Rakuten SS Insurance

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 toOnline application; free 24-H consultation by veterinarian
Online application; free 24-H consultation by veterinarian
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 plans
Online application; premiums increase happens only twice in lifetime (three times
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
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 FY03/20 Anicom was the No. 1 player in the industry with 816,254, iPet Insurance
was No. 2 with 508,225, 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 Ikiki SSI and Japan Animal Cub) eachhave more than 100,000 policies in force.

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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.

Recurring profit
Anicom and iPet Insurance have been consistently operating in the black at the recurring profit level.

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 strategy 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. Thissituation is similar to the average insurance premium formula mentioned above.
Status of competition
FY03/16
585,962
249,330

FY03/17635,670
300,20376,43045,850864,059

FY03/18 FY03/19 FY03/20
698,566
753,332
816,254355,513423,352
508,225
1,338
8,950
100,896
96,434
115,827
131,000
146,183
161,058
52,53472,963
71,955103,277
140,136984,260 1,124,663 1,258,372 1,435,094 1,726,569

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
33,590FY03/16
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
18,1155,207
2,218
49,366

5,798
3,664
66,682

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

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

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

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

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%

10.5%
4.5%

8.7%
5.5%

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

FY03/12
13,845
3,283
934
871
905
19,838

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
79,082Anicom 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

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

Recurring profit margin

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%

Net loss ratio

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
61.4%
44.5%
59.9%
55.3%

No. of policies in force

Underwriting revenue(JPYmn)Premium per policy(JPYmn)Underwriting revenue
share among
the five companies(JPYmn)Recurring revenue(JPYmn)Recurring profit

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

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

60,841
40,627
764,583

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
23,562Anicom Insurance
ipet Insurance
SBI (Japan Animal Club, Ikiiki SSI)
Pet & Family SSI
Rakuten SS Insurance

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

FY03/1236,89235,01027,25528,904Anicom 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%

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

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

Source: Shared Research based on company data

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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

FY03/109,216-14.7%
9,003
71
141
8,924
-17.9%
5,541
3,072
292
3.2%

FY03/11
11,10720.5%
10,85894
154
10,764
20.6%
7,146
8
3,312
342
17.3%
3.1%

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
16,186
16.9%
15,781260
143
15,34813.6%
11,4503,632
837
148.4%
5.2%

FY03/1418,36613.5%
18,087108
171
17,63314.9%
13,44818
3,982
733-12.4%
4.0%

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%

Source: Shared Research, based on company data

In the nonlife 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 nonlife 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 nonlife 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

FY03/109,216-14.7%

FY03/11
11,10720.5%

FY03/12
13,84524.7%

FY03/13
16,18616.9%

FY03/1418,36613.5%

FY03/15
22,63823.3%

FY03/16
26,50617.1%

FY03/17
28,9789.3%

FY03/18
32,33911.6%

FY03/19
35,82910.8%

FY03/20
41,465
15.7%

9,003
8,981
71
71
0
141
141

10,85810,858
94
78
15
154
154

13,592
13,592
108
92
16
144
144

15,781
15,781
260
113
147
143
143

18,08718,087
108
18
89
171
61
110

21,733
21,733
522
289
232
382
382

25,37025,370
690
334
355
446
446

28,06828,068
504
320
184
405
405

31,29031,290
420
255
165
628
628

34,53534,535
383
154
228
910
910

39,105
39,105
496
219
276
1,863
1,863

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

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 (JPY314.5bn in FY03/19). However, high-risk investments
would affect Anicom’s solvency margin. Thus, the company is seeking low-risk investments.
The balance of the company’s securities portfolio at end-FY03/20 was JPY9.2bn, twice the level at end-FY03/19 (JPY4.0bn). The
breakdown was JPY516mn in stocks and JPY8.7bn in other securities. Other securities are investment trust beneficiary certificates.
The yield on the portfolio fell 0.7pp to 2.3% (income yield). Shared Research believes that the market turmoil due to the spreadof the coronavirus at the end of March 2020 has had a major impact on the yield

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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

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%

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 CoGS 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.

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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

E/I loss ratio target of 60%
The company targets an E/I loss ratio of 60%. The target is based on the following formula: about half of insured pets get treatedfor sickness or injury on an annual basis. Five trips to the animal hospital, each costing between JPY6,000 and JPY7,000, would
cost a total of JPY35,000. The company offers two plans: 50% payout and 70% payout, with an average payout of 60%. Thatmeans the company would pay a little over JPY20,000, to which loss adjustment expenses are added. Since the average premium
revenue is JPY38,023,* the loss ratio would be 60%.
* Annual net loss ratio ÷ number of policies in force

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 rate

FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20
48.6%
53.4%
64.3%
67.5%
66.7%
64.4%
60.1%
58.9%
59.2% 59.0% 57.8%
33.2%
29.7%
28.6%
28.3%
31.1%
32.1%
35.2% 34.5% 37.1%
97.5%
97.2%
95.3%
92.7%
91.2%
91.0%
94.4% 93.5% 94.9%
24.4%
45.5%
48.1%
57.3%
63.7%
62.8%
59.3%
56.9%
56.5%
56.2% 56.3% 55.2%
48.0%
40.2%
36.3%
30.9%
28.5%
27.3%
28.4%
32.7%
33.0%
35.6% 35.3% 37.9%
72.4%
85.7%
84.4%
88.2%
92.2%
90.1%
87.7%
89.6%
89.5%
91.8% 91.6% 93.2%- 304.1% 307.2% 281.3% 295.1% 288.7% 282.6% 295.6% 305.6% 379.8% 357.0%
84.1%
86.6%
87.6%
88.1%
89.3%
88.7%
88.2%
88.2%
88.2% 87.7% 87.2%a)b)a) + b)c)d)c) + d)E/I loss ratio

Earned-Incurred ratio, or (Net claims paid + Increase in reserve for outstanding losses and claims + Lossadjustment expenses) ÷ Earned premiums

Expense ratio (earned premiums basis)
Combined ratio (earned premiums basis)
Net loss ratio
Net expense ratio
Combined ratio
Solvency margin ratio
Renewal rate

Written-Paid (W/P) ratio, or (Net claims paid + Loss adjustment expenses) ÷ Net premiums written(Commissions and collection fees + Undertaking expenses) ÷ Net premiums written
Net loss ratio + Net expense ratio

E/I loss ratio and expense ratio (based on earned premiums)
80%

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

70%
60%

56.5%55.3%
53.0%

50%

48.2%

40%

44.8%
41.1%
39.7%

30%
20%

E/I loss ratio

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%

58.7%

60.6%

60.3%

60.1%
60.8%
59.4%
57.6%

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%

55.6%

59.3%
58.7%
57.6%
55.6%

introduced a new ancillary service,
Dobutsu Kenkatsu; revised premiums

38.5%
36.7%
36.5%
36.1%37.0%
35.4%35.5%35.3%34.5%34.1%
36.5% 36.3%
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%
29.5%
29.2%28.4%
28.3%27.7%27.9%28.7%28.3%
26.8%

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

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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.

Amortization of deferred assets per Article 113 of the Insurance Business Act
On April 14, 2015, the company announced the bullet amortization of deferred assets per Article 113 of the Insurance BusinessAct at core subsidiary Anicom Insurance, Inc. The bullet amortization is one of the factors that helped raise recurring profit for
FY03/16 and FY03/17 up by JPY161mn in the company’s medium-term plan (released in FY05/15), versus FY03/16 and FY03/17
recurring revenue plans.

Details of the amortization
At Anicom Insurance, some operating costs from FY03/08 (when it began operations) and FY03/09 were booked as deferredassets in accordance with Article 113 of the Insurance Business Act. The company has been applying the straight-line method
over ten years until FY03/17 (meaning deferred assets for the end of FY03/14 totaled JPY484mn).

Reasons for the bullet amortization
The company decided to use bullet amortization in FY03/15 because robust earnings at Anicom Insurance means the company
expects to book a profit surplus, even after amortization of deferred expenses per Article 113. Also, rather than weigh down thebalance sheet in the future with deferred expenses, it will use write-offs for healthier finances.

Effects on FY03/15 earnings
In the company’s FY03/15 plan, JPY161mn in recurring costs was accounted for under the straight-line method, but the company
booked an additional JPY323mn in new recurring costs under the bullet method, and JPY93mn in deferred income taxes from thereversal of deferred tax liabilities.

Compared to other industries, insurance companies have significant initial costs. Under Article 113 Act 1 of the Insurance Business Act, business expenses
for the first 5 years after beginning operations may be recognized as assets, amortized over a ten-year period using the straight-line method.

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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 6,466 veterinary hospitals and clinics asof the end of March 2020. Excluding veterinary hospitals for farm animals, Anicom pet insurance is accepted at more than 90% ofveterinary hospitals in Japan. Similar services are offered also by ipet and Pet & Family, but Anicom has far wider acceptance;
5,054 veterinary hospitals and clinics accepted insurance cards issued by ipet as of the end of March 2020.

Name recognition, industry data, customer base, and strong earnings structure provide resources to expand into new business areas
The company holds more than 50% share of Japan’s pet insurance market. This formidable share is a major advantage sincecustomer trust is vital in the insurance business. The company’s strong finances and cash flow will help the company survive thecompetition and provide it with resources to expand into new business areas.

Stable source of recurring revenue
The company’s pet insurance policies have an average renewal rate of 87.2% (in FY03/20). 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 nonlife 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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Past results and Financial statements
Full-year consolidated results for FY03/20 (out May 12, 2020)▷

Recurring revenue:

JPY41.5bn (+15.7% YoY)▷

Recurring expenses:

JPY39.3bn (+17.1% YoY)

Recurring profit:

JPY2.2bn (-3.9% YoY)

Net income*:

JPY1.5bn (-5.3% YoY)▷▷*Net income attributable to owners of the parent
Uncertainty about when the coronavirus pandemic might end notwithstanding, demand for pets remained strong during theyear and Anicom saw sales of pet insurance continue apace. The problem was on the investment side, where the market crash
precipitated by the pandemic led to increases in investment expenses. If not for these added investment expenses, earnings
would have finished the year in line with the company’s forecast.
Despite the drag on sales from the consumption tax hike and coronavirus pandemic, the company saw steady growth in thenumber of pet insurance policies in force and also built up new businesses, thus laying the groundwork for continued growth in
the second year of its medium-term business plan, under which it is targeting average annual growth of 10% or more forrecurring revenue and 20% or more for recurring profit over the three-period running from FY03/20 through FY03/22.

Results overview
Recurring revenue
Full-year recurring revenue of JPY41.5bn was up 15.7% YoY, with underwriting revenue of JPY39.1bn up 13.2% YoY. Growth inunderwriting revenue was underpinned by a combination of an 8.4% increase in the number of policies in force (816,254 at fiscal
year-end; up 62,922 policies YoY and achieved target) and a 11.1% increase in the number of new polices. Growth was also
underpinned by higher average premiums per policies, 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 its
genetic testing services and veterinary hospital operations, generated recurring revenues of JPY1.9bn (+104.7% versus FY03/19;
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 4.5% of total revenue in FY03/20, up from 2.5% in FY03/19. Under the supplementary information sectionof its financial statement, the company break downs down FY03/20 recurring revenue from non-insurance businesses as follows:(1) veterinary hospital support services JPY223mn (+9.8% YoY), (2) insurance agency business JPY15mn (+10.5% YoY), (3)advanced veterinary medicine clinical research services JPY882mn (+100.6% or +JPY443mn YoY), and (4) other businesses
JPY721mn (+245.3% or +JPY512mn). Revenues from veterinary clinic/hospital operations appear to be included under advanced
veterinary medicine clinical research services, while revenues from genetic testing appear to be included under other businesses.
The monthly figures reported by Anicom show solid growth in genetic testing, with the number of tests performed during
FY03/20 coming to 148,535, or nearly a 14-fold increase over 10,659 in FY03/19.

Recurring expenses
Total recurring expenses of JPY39.3bn were up 17.1% YoY, ahead of the 15.7% rise in recurring revenue. Total underwriting
expenses of JPY27.2bn were up 13.0% YoY; this included net claims paid of JPY20.5bn, up 11.0% YoY on increases in the numberof policies in force, commissions and collection fees paid to agents of JPY3.7bn (+19.4% YoY), additions to provision foroutstanding losses and claims of JPY179mn (-8.7% YoY), and additions to provision for underwriting reserves of JPY1.8bn(+31.4% YoY). SG&A expenses of JPY11.2bn were up 22.4% YoY. Investment expenses of JPY109mn were unexpectedly high,being the result of the sharp downturn in the market in response to the coronavirus pandemic.

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The outsized increase in additions to provision for underwriting reserves, which at JPY1.8bn was up 31.4% YoY, reflected an
additional JPY1.4bn (+14.1% YoY) added to unearned premium reserves and an additional JPY351bn added catastrophe reserves*
versus the previous year. The jump in additions to unearned premium reserves reflected the hike in premiums following thechanges in insurance policy terms and rates made in December 2018, which caused more premium revenue to be deferred into
future years. The larger addition to catastrophe reserves reflect a decline in Anicom’s net loss ratio** as the hike in premiums
pushed growth in underwriting revenue ahead of growth in net claims paid.
*Catastrophe reserves are regulatory reserves in which 3.2% of premium revenue must be booked each fiscal year. Funds are withdrawn fromcatastrophe reserves until the net loss ratio reaches 50%, with the opening balance as a limit. Remaining funds are booked as provisions to be carriedforward.
**Net loss ratio = (net claims paid + loss adjustment expenses) ÷ net premium revenue

Recurring profit
Full-year recurring profit of JPY2.2bn was down 3.9% YoY and short of the company’s forecast of JPY2.3bn despite steady growthin the number of policies in force and underwriting revenues, as the JPY4.4bn rise in earned premium income was outpaced by arising costs. Underwriting-related costs rose by nearly JPY3.0bn over FY03/19, reflecting a JPY2.1bn increase in claims paid,
JPY597mn increase in agency commissions/fees, and a JPY247mn increase in additions to catastrophe reserves. On top ofunderwriting-related costs came a JPY2.0bn increase in SG&A expenses and, lastly, an increase in investment expenses as thefinancial markets plummeted due to the coronavirus pandemic. Shared research understands that, if not for the increase ininvestment expenses, recurring profit would have finished the year in line with the company’s forecast.
Reflecting normal seasonal trends, the recurring profit margin fluctuated throughout the year but, as expected, was much higher
in the second half of the year, rising from 1.8% in Q1 and 3.2% in Q2 to 8.3% in Q3 and 7.5% in Q4.

Adjusted profit
Adjusted profit is 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 JPY2.0bn in FY03/20. Down 9.1% from FY03/19, this reflected an increase in the company’s expense ratio,
which was pushed up by increases in outlays on gut microbiota exams and other animal health promotion measures under its
Dobutsu Kenkatsu service, which is expected to bring down the company’s loss ratio over the medium to long term.

Trends in key metrics▷

New policies written: During the year the number of new pet insurance policies written through both its newborn channels
and general channels came to 167,318 (+11.1% YoY), of which Q4 (January-March 2020) accounted for 46,135 (+21.8% YoY).
With the renewal rate for existing policies holding steady around 87%, and the number of policies in force came to 816,254 at▷

the end of FY03/20, up 8.4% versus the end of FY3/19.
E/I loss ratio: The E/I loss ratio (a measure of recurring expenses) declined 1.2pp YoY to 57.8%, reflecting a product portfolio
improvement driven by increased sales of new policies. The company noted that its E/I loss ratio tend to go up in Q1 and Q2
then come down in Q3 and Q4.

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 revenues. 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 of 37.1% was up 2.6pp versus FY03/19, reflecting aggressive investment spending aimed at
growing the business. The increase in expenses reflects higher costs at Dobutsu Kenkatsu (non-consolidated); SG&A expenses
on a consolidated basis were said to be in line with the plan.

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Combined ratio: The combined ratio of 94.9% was up 1.4pp versus FY03/19.
Veterinary hospitals accepting Anicom insurance: At 6,466 at the end of FY03/20, the number of veterinary hospitals accepting
Anicom pet insurance was up 49 versus the end of FY03/19.

Progress on key initiatives during FY03/20
Insurance business
Key initiatives undertaken during FY03/20 include starting sales of Dobutsu Kenpo Senior insurance as part of an overall effort toincrease more older pets covered by insurance. The company also launched a strategic sales initiative aimed at opening up more
new born and general sales channels, where new value added services such as Dobutsu Kenkatsu and the genetic testing services
offered by its group companies would further differentiate Anicom from competitors.
In December 2019, Anicom acquired SIMNET Co., Ltd., operator of Japan’s largest direct sales website for pet breeders. WithSIMNET now a wholly owned subsidiary, Anicom is looking to use its direct sales website for breeders to (1) increase theproportion of pets covered by pet health insurance, (2) reduce agencies fees on insurance sales, and (3) develop more efficientchannels for selling pet insurance, and (4) help expand its breeder support business.

Asset management
During the year the company expanded the size of its portfolio of marketable securities and, in the area of real estate investing,formed a business alliance with Advance Net, a company that facilitates and promotes the spread of pet-friendly housing

Upstream/midstream: Genetic testing business and breeder support business
Genetic testing business
By using genetic testing, breeders can avoid breeding animals with hereditary diseases. Because the genetic tests are performedin labs operated by Anicom group companies, they will 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.

Breeder support businessOn the breeder support front, Anicom provided on-site support services to help breeders resolve various problems, thereby
helping breeders improve their own profit opportunities, and also took additional steps to help breeders avoid new hereditarydiseases in their animals and otherwise promote animal health. In addition to traditional testing for hereditary disorders using
next-generation sequencing (NGS), Anicom has succeeded in developing a custom panel that makes it possible to get a read on
the resemblance of the child to the parents on a range of other attributes as well, including behavior, breed, fur color, and body
type. For the breeder, this ability to do paternity testing and check the genes for color and other attributes will allow them to findthe ideal breeding matches and increase the number of offspring produced. At the same time, Anicom is also looking to develop
and offer new services that use genetic tests to determine breed, behavioral characteristics, and physical disposition on behalf ofpet shops and other organizations involved in the transfer of pets from the breeder to the final owner.

Midstream/downstream: Promotion of healthy pet lifestyles, regular animal checkup-related businesses (preventative
medicine/general practice)
Promoting 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 96,000 in FY03/20. With the rollout of Dobutsu Kenkatsu, the company has also seen increases in both the number of 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.

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Coverage

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Veterinary hospital succession (taking over existing veterinary practices from retiring doctors)
As of the end of FY03/20, the Anicom group was operating a total of 57 veterinary hospitals that do everything from preventativeand general veterinary medicine. By collecting and examining detailed data from these veterinary hospitals, the company aims toestablish next-generation protocols for preventative veterinary medicine.

Downstream: Advanced medical treatment and businesses to provide care for aging pets
Established 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, andputting 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.

Pursue various business alliances
With both 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. Towards 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.
Quarterly performance
No. of policies in force ('000)(JPYmn)

1,000
800

400

312
105

0

186
47

8

4

Q1
Q3
FY03/11

18

321
113

187

379

293

491

404

567 572 589
437

395 407 358

90%

493

277

174

112

751

627 673

80%

445

322

70%

175

60%
50%

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

E/I loss ratio

Q1
Q3
FY03/16

Q1
Q3
FY03/17Q1Q3
FY03/18

Q1Q3
FY03/1940%Q1Q3
FY03/20

Expense ratio (earned premiums basis)

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

70%

69.0% 69.5%
68.9%
68.1%
66.7%
66.3%
64.2%
63.1%
62.1%

56.5%55.3%
53.0%

50%

48.2%

40%

44.8%
41.1%
39.7%

20%

321

231 26798

Q1
Q3
FY03/1280%

30%

Combined ratio (right axis)

-81

-200

60%

714

90.1%

600

200

Recurring profit (JPYmn)

102.6%
875
100.2%
99.5%
99.4%
98.8%
97.9%
97.8%
97.2%
97.2%
97.1%
96.7%
817 100%
96.2%
95.8%
95.7%
95.4%
95.1%
94.4%
94.2%
94.1%
93.9%
93.4%
93.2%
93.0%
92.9%
94.1%
92.6%
92.4%
92.2%
92.0%
91.0%
90.8%
90.5% 836
90.1%
89.9%
89.7%
91.1%
91.0%
88.2%
87.9%

62.1%

58.7%

60.6%

60.3%

60.1%
60.8%
59.4%
57.6%

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

55.6%

Reviseed premium for pets
aged eight or older

59.3%
57.6%
55.6%

introduced a new ancillary service,
Dobutsu Kenkatsu; revised premiums

38.5%
36.5%
36.3%
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%
29.5%
29.2%
28.7%
28.4%
28.3%
28.3%27.7%27.9%
26.8%

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

Source: Shared Research based on company data

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Coverage

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

12,00010,000Investment expenses

Underwriting expenses

27%

8,000

24%

24%

6,000

3,281 3,312 3,442 3,473
22%

4,000

23%

3,614 3,826 3,83122%Q1
FY03/12Q3Q1
FY03/13

4,077 4,280 4,269
23%
21%

2,000
0

27%

27%

26%

Q3

22%

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

22%
21%

Q3

5,205 5,419

5,979 5,913

75%

26%
6,662 6,684

6,284
25%

6,657
25%

6,981

7,474 7,375

7,683 7,954

8,122 7,823

27% 27% 26%
25% 25%

24%

8,483

9,122

9,814 9,733 9,66510,063

26% 26% 26%

24%

25%

22%
20%

20%

Q1
FY03/15

Q3

30%
26%

27%

26%

32%
28%

29%

22%

18%
Q1
FY03/16

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

80%

6,222

25%
23%

22%

5,580

Operating and general admin. expense ratio (right axis)

Q3

Q1
FY03/17Q3Q1
FY03/18Q3Q1
FY03/20

16%

Q3

1.4
1.2

800

8%

65%

Q1
FY03/19

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

10% 1,000
900
9%

70%

Q3

700

1.0

600

0.8

60%

7%

55%

6%

50%

500

5%

400

0.6

300

0.4

45%

4%

40%

200

3%

35%
30%

Q1
FY03/12Q1
FY03/14Q1
FY03/16Q1
FY03/18

2%

Q1
FY03/20

0.2

100
0

Q1
FY03/12Q1
FY03/14Q1
FY03/16Q1
FY03/18

0.0

Q1
FY03/20

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%
20%
10% 17% 16%
0%

15% 15%
4% 5%

-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%

10%

-30%
-40%

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

Q1
FY03/15

Q3

No. of new policies (newborns)

48,000Q1
FY03/16Q3

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

Q1
FY03/20

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

10%

44,0009%40,00036,0008%

32,0007%

28,00024,000

6%

20,0005%

16,00012,000Q3

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

Q1
FY03/15Q3Q1
FY03/16Q3

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

Q1
FY03/20Q3

4%Source: Shared Research based on company data

Q3 FY03/20 results (out February 7, 2020)▷

Recurring revenue:

JPY30.6bn (+16.5% YoY)▷

Recurring expenses:

JPY29.2bn (+19.6% YoY)

Recurring profit:

JPY1.4bn (-25.2% YoY)

Net income*:

JPY976mn (-24.4% YoY)▷▷*Net income attributable to owners of the parent

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Earnings summary
Recurring revenue
In cumulative Q3 FY03/20, underwriting revenue was JPY28.9bn (+14.1% YoY), reflecting a 7.4% YoY increase in the number ofpolicies in force and a 7.5% increase in the number of new policies. Growth was also underpinned by product alterations
conducted in December 2018, and higher premiums caused by an increase in the age of pets. Other recurring revenues frombusinesses outside of the insurance field, including genetic screening and operation of animal hospitals, expanded JPY1.3bn(+99.0% YoY), bringing recurring revenue up to JPY30.6bn (16.5% YoY).
Anicom’s other recurring revenue in cumulative Q3 FY03/20 included JPY165mn from animal hospital support (+9.1% YoY),
JPY11mn from its insurance agent (+18.9% YoY), JPY617mn from animal healthcare clinical research (+JPY282mn, or 84.2%, YoY),
and JPY521mn from other businesses (+JPY377mn, or 261.3%, YoY). Revenue from veterinary clinic/hospital management has
been included under recurring revenue from animal healthcare clinical research, and revenue associated with genetic screening
was included under recurring revenue from other businesses. Shared Research has researched the company’s monthly genetic
testing specimen numbers and believes they are growing steadily (average 14,081 cases per month in Q3 [October–December2019] versus 13,784 in Q2).

Recurring expenses
On the expense front, underwriting expenses grew 15.7% YoY to JPY20.3bn. Net claims paid increased 9.9% YoY to JPY15.2bn,
accompanying an increase in the number of policies in force, and agency fees rose 18.5% YoY to JPY2.7bn. In addition, provisionsof reserves for future claims were JPY328mn (+42.0% YoY) and underwriting reserves were JPY1.3bn (+178.0% YoY). Including
operating expenses and SG&A expenses of JPY8.4bn (+26.1% YoY), recurring expenses outpaced recurring revenue, increasing
19.6% YoY to JPY29.2bn.
Underwriting reserves increased by a sharp178.0% YoY to JPY1.3bn. In addition to a 58.9% increase in unearned premiums to
JPY1.0bn, catastrophe reserves were up YoY to JPY242mn. Increases in premiums accompanying product alterations conducted in
December 2018 caused a larger portion of premium revenue to be deferred to the next period. In terms of catastrophe reserves,
growth in underwriting revenue stemming from increases in the price of premiums outstripped growth in net claims paid,
leading to a decline in the net loss ratio.

Catastrophe reserves: An institutionalized reserve in which 3.2% of premium revenue is booked each fiscal year. Funds are withdrawn from thereserves until the net loss ratio reaches 50%, with the opening balance as a limit. Remaining funds are booked as provisions to be carried forward.
*Net loss ratio = (net claims paid + loss adjustment expenses) ÷ net premium revenue

Recurring profit: comparison to company forecasts
Recurring profit was JPY1.4bn (-25.2% YoY). The number of policies in force and underwriting revenue increased steadily, andearned premiums increased JPY3.2bn YoY. However, expenses including claims paid, agency fees, and catastrophe reserves(JPY2.4bn increase) grew. The decline in recurring profit also reflected the impact of product alterations and higher costs
associated with the business growth. The company’s initial forecast for Q3 FY03/20 called for recurring profit of JPY1.0bn, but
actual results were higher.
The company forecast JPY1.0bn recurring profit for cumulative Q3 FY03/20 (April–December 2019). Since the increase in theprice of insurance premiums would cause higher underwriting reserves (unearned premiums are transferred to ordinary
underwriting reserves), the company expected these higher reserves to squeeze profits.
Recurring profit was JPY372mn higher than forecast at JPY1.4bn (JPY1.37bn minus JPY1.0bn). About JPY260mn of this difference
can be explained by the absence of reversal of catastrophe reserves and a reduction in claims paid and agency fees. The written
basis loss ratio (claims paid ÷ underwriting revenue) for cumulative Q3 FY03/20 was 52.5%, roughly 2.0% higher than theforecast of over 50.0%. This 2% difference was a primary factor driving up profit. The remaining JPY110mn difference (JPY372mn
minus 260mn) reflects investment revenue exceeding the company plan.

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Coverage▷

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Number of new contracts acquired: The total number of new contracts acquired in the newborn channel and in generalchannels for cumulative Q3 FY03/20 was 121,183 (+7.5% YoY) and 40,650 (+10.2% YoY) in Q3 (October–December 2019).
The renewal rate of existing policies remained stable at around 87%, and the number of contracts held was 796,167 at the end▷of Q3 (+7.4% from the end of FY03/19). The company made steady progress towards its full-year target of 813,000.
E/I loss ratio: The loss ratio, a recurring expense parameter, fell 1.4pp YoY to 58.5%. This reflected product portfolio
improvement caused by an increase in new policies and the appearance of impact from revised premium rates that
accompanied product alterations conducted in December 2018, with the impact of transition from “wide” plans to standard
plans showing through. 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 revenues. 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 up 3.3pp YoY to 37.3% because of aggressive investment to grow the business.
According to the company, the increase in expense ratio mainly reflects higher costs at Dobutsu Kenkatsu (non-consolidated),but SG&A expenses on a consolidated basis are in line with the plan.
Combined ratio: The combined ratio (E/I loss ratio and expense ratio combined) was 95.8%, up 1.9pp YoY. This is behind thefull-year company plan (combined ratio: 92.3%), but Anicom expects an improvement in 2H. The earned premium expense
ratio may appear slightly larger because internal transactions of consolidated subsidiaries are also included.
The number of animal hospitals accepting Anicom pet insurance increased by 65 from end-FY03/19 to 6,482.

Progress of priority measures and current topics▷▷▷

Progress with priority measures (1): Sales enhancement in the newborn channel supported by a strategy centered on genetic
testing: Acquiring new pet shop agencies on the strength of pet health checks and genetic testing services. In terms ofprogress with use of IT in marketing, putting SEM/SEO marketing measures into action to strengthen web channels
Progress with priority measures (2): As for genetic testing business, test orders from pet shops and breeders are growing.
Between April and December 2019, more than 115,000 tests were carried out. Regarding promotion of healthy lifestyles for
pets, applications for Dobutsu Kenkatsu increased from a monthly average of 7,246 in Q2 to 8,782 in Q3.
Launch of new “Dobutsu Kenpo Senior” plan: On September 17, 2019, the company launched its “Dobutsu Kenpo Senior”
plan, which covers pets aged eight years or older. This is the first pet insurance plan in Japan to allow new enrollment of elderly
dogs and cats. Characteristic features include compensation for medical expenses for hospitalization and surgery; inexpensive
monthly premiums of JPY1,010; the ability to settle insurance claims at animal hospital service counters; and additional services▷

such as gut microbiota checkups.
Current topic: Acquisition of shares in SIMNET Co., Ltd.
The company acquired all shares of SIMNET Co., Ltd., which operates the breeder matching site “Minna no Breeder”, making it
a wholly owned subsidiary. It consolidated SIMNET on February 1, 2020. SIMNET holds the top share in breeder matching
services and also functions as a sales agent for pet insurance offered by Anicom Insurance, Inc., a subsidiary of Anicom Holdings.
By making SIMNET a subsidiary, the company will be able to advertise its breeder support services more directly and will also
be well-placed to further grow these services.

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R Anicom Holdings / 8715
Coverage

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Quarterly performance
No. of policies in force ('000)(JPYmn)102.6%

100.2%
99.4%
98.8%

1,000

96.2%
93.0%94.1%
89.9%

800

Recurring profit (JPYmn)

97.1%

92.0%

714

90.1%

600
400

312

200

105

186
47

0

321

231 267

98

8

4

Combined ratio (right axis)

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

321
113

18

187

379

293

491

404

627 673567 572 589

493

437

395 407 358

322

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

80%

60%
50%

Q1
Q3
FY03/14Q1Q3
FY03/16

Q1
Q3
FY03/17Q1Q3
FY03/18

56.5%55.3%
53.0%

40%

Q1
Q3
FY03/20

40%

Expense ratio (earned premiums basis)

48.2%

50%

Q1
Q3
FY03/19

69.0% 69.5%
68.9%
68.1%
66.7%
66.3%
62.1%
64.2%
63.1%
60.3%
60.1%
59.7%60.9%
62.1%
59.3%
60.6%
60.3%61.2%59.1%
60.8%
59.4%
59.1%
58.8%
58.7%
57.6%
57.6%
56.5%
56.3%
55.6%

66.0%67.3%
65.5%
62.3%
61.5%

60%

Q1
Q3
FY03/15

E/I loss ratio

73.4%

70%

90%

70%

175

-81

-200

100%

80%

445

277

174

112

751

Reviseed premium for pets
aged eight or older

44.8%
41.1%39.7%

introduced a new ancillary service,
Dobutsu Kenkatsu; revised premiums

38.5%
36.5%
36.5%
36.1%37.0%
35.4%35.5%35.3%34.5%34.1%
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%
28.3%27.7%27.9%28.7%28.3%26.8%29.2%28.4%29.5%

30%
20%

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

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)

27%

8,000

26%
24%

24%

6,000

3,281 3,312 3,442 3,473
22%

4,000

23%
3,614 3,826 3,831
22%

2,000
0

Investment expenses

Q1
FY03/12Q3Q1
FY03/134,502 4,582 4,784

5,205 5,419

4,077 4,280 4,269
23%
22%
22%
22%
21%
21%
21%

Q3

Q1
FY03/14Q3

Q1
FY03/15

5,979 5,913

23%

Q3

7%
6%

50%

5%
4%

40%

3%
Q1
FY03/16Q1
FY03/18

24%

26% 26% 26%

30%

29%

28%
26%

27%

26%

24%
22%
20%

Q1
FY03/16

9%

60%

Q1
FY03/1425% 25%

9,122

18%

8%

Q1
FY03/1227% 27% 26%

8,483

22%

Q3

Q1
FY03/17Q3Q1
FY03/20Q1
FY03/18Q3Q1
FY03/19Q3

Q1
FY03/20

16%Q3

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

10% 1,000

70%

30%

6,981

8,122 7,823

20%

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

80%

27% 6,662 6,684
27% 6,284 6,657
6,222
26%
5,580
25%
25%
25%

7,954
7,474 7,375 7,683

32%

9,814 9,733 9,665

1.4
1.2

800

1.0

600

0.8

400

0.6
0.4

200

2%

0.2

0

Q1
FY03/12Q1
FY03/14Q1
FY03/16Q1
FY03/18Q1
FY03/20

0.0

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%
20%
10%

17% 16%0%

15% 15%
4% 5%

-10%

-7%

-20%

-1% -1%4%6%

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

2%

6%

11%

15%

12%

14% 14%10%

15% 17% 16% 15%

9% 7%

1%

4%

7% 6%

10%

-30%
-40%

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

Q1
FY03/15Q3Q1
FY03/16Q3

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

Q1
FY03/20Q3

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No. of new policies (newborns)

44,000Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

10%

40,0009%36,0008%

32,00028,0007%

24,000

6%

20,0005%

16,00012,000Q1
FY03/12Q3Q1
FY03/13Q3Q1
FY03/14Q3

Q1
FY03/15Q3Q1
FY03/16Q3

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

Q1
FY03/20

4%Q3Source: Shared Research based on company data

1H FY03/20 results (out November 8, 2019)▷

Recurring revenue:

JPY20.0bn (+16.0% YoY)▷

Recurring expenses:

JPY19.5bn (+22.6% YoY)

Recurring profit:

JPY497mn (-62.9% YoY)

Net income*:

JPY344 (-63.9% YoY)▷▷*Net income attributable to owners of the parent

Earnings summary
Recurring revenue
In 1H FY03/20, the number of new policies were in line with the revised company forecast and the number of policies in force
totaled 781,368 (+28,036 from end-FY03/19), underwriting revenue grew 14.1% to JPY19.0bn due to an uptick in the number ofpolicy renewals, product alterations conducted in December 2018, and higher premiums caused by an increase in the age ofpets. Other recurring revenues from new businesses, including genetic screening and operation of animal hospitals, expanded
JPY809mn (+83.0%), bringing recurring revenue up to JPY20.0bn (+16.0% YoY).
Other recurring revenue in 1H FY03/20 included JPY109mn from animal hospital support (+7.4% YoY), JPY7mn from its insurance
agent (+6.5% YoY), JPY340mn from advanced small animal clinics (+JPY101mn, or 42.1%, YoY), and JPY343mn from otherbusinesses (+JPY264mn, or 334.9%, YoY). Revenue from veterinary clinic/hospital management has been included underrecurring revenue from advanced small animal clinics, and revenue associated with genetic screening was included underrecurring revenue from other businesses. Shared Research has researched the company’s monthly genetic testing specimen
numbers (13,399 [+521 YoY] in October 2019) and has concluded they are growing steadily.

Recurring expenses
On the expense front, underwriting expenses grew 19.4% YoY to JPY13.6bn. Net claims paid increased 8.7% YoY to JPY9.9bn,
accompanying an increase in the number of policies in force, and agency fees increased 17.2% YoY to JPY1.7bn. In addition,
provisions of reserves for future claims were JPY385mn (+246.8% YoY) and underwriting reserves were JPY1.1bn (+332.8% YoY).
Including operating expenses and SG&A expenses of JPY5.6bn (+27.4% YoY), recurring expenses outpaced recurring revenue,
increasing 22.6% YoY to JPY19.5bn.
Underwriting reserves increased by a dramatic 332.8% YoY. In addition to a 97.3% increase in unearned premiums to JPY817mn,
catastrophe reserves rose to JPY316mn. Increases in premiums accompanying product alterations conducted in December 2018
caused a larger portion of premium revenue to be deferred to the next period. In terms of catastrophe reserves, growth inunderwriting revenue stemming from increases in the price of premiums outstripped growth in net claims paid, leading to a
decline in the net loss ratio. As a result, no catastrophic reserves were withdrawn in Q2, contributing to the large YoY increase.

Catastrophe reserves: An institutionalized reserve in which 3.2% of premium revenue is booked each fiscal year. Funds are withdrawn from thereserves until the net loss ratio reaches 50%, with the opening balance as a limit. Remaining funds are booked as provisions to be carried forward.

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Coverage

LAST UPDATE: 2020.09.07

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp*Net loss ratio = (net claims paid + loss adjustment expenses) ÷ net premium revenue

Recurring profit: comparison to company forecasts
Recurring profit was JPY497mn (-62.9% YoY). The number of policies in force and underwriting revenue increased steadily.
Earned premiums increased JPY1.9bn YoY. This was almost totally offset by higher expenses including claims paid, agency fees,
and catastrophe reserves (JPY1.8bn increase). In addition, SG&A expenses increased JPY1.2bn as a result of growth in new
business.
The company’s initial forecast for 1H FY03/20 called for recurring profit of JPY150mn, but actual results were higher as
underwriting revenue decreased in Q1 and genetic screening research expenses were pushed back to 2H.
The company forecast JPY150mn recurring profit in 1H FY03/20 (April–September 2019). Since the increase in the price of
insurance premiums would cause higher underwriting reserves (unearned premiums are transferred to ordinary underwriting
reserves), the company expected these higher reserves to squeeze profits.
Recurring profit was JPY347mn higher than forecast at JPY497mn (JPY497mn - JPY150mn). About JPY200mn of this difference canbe explained by the absence of reversal of catastrophe reserves. In short, the written basis loss ratio (claims paid ÷ underwriting
revenue) in 1H was 51.7%, which was 1.7% higher than the forecast of 50.0%. This difference equated to JPY200mn and was a
primary factor driving up profit. The remaining JPY147mn of the difference can mostly be explained by approximately JPY100mn
in genetic screening research expenses that were pushed back to 2H from Q1.

▷

Number of new contracts acquired: The total number of new contracts acquired in the newborn channel and in generalchannels was 80,533 (+6.2% YoY) in 1H and 40,329 (+5.8%YoY) in Q2 (July–September 2019). The renewal rate of existing
policies remained stable at around 87%, and the number of contracts held was 781,368 at the end of Q2 (+3.7% from the end

▷

▷

▷
▷

of the previous year). The company appears to be making steady progress towards its full year target of 813,000.
E/I loss ratio: The loss ratio, a recurring expense parameter, fell 0.3pp YoY to 59.1%. This was due to product portfolio
improvement caused by an increase in new policies and the appearance of impact from revised premium rates that
accompanied product alterations conducted in December 2018. The E/I loss ratio tends to improve in 1H and drop in 2H.
Expense ratio: The expense ratio was up 3.9pp to 37.8% because of aggressive investment to grow the business. According to
the company, this increase reflects higher costs at Dobutsu Kenkatsu (non-consolidated). SG&A expenses on a consolidated
basis are in line with the plan.
Combined ratio: The combined ratio (E/I loss ratio and expense ratio combined) was 96.9%, up 3.6pp YoY. The company
thinks it will improve in 2H.
The number of animal hospitals accepting Anicom pet insurance increased by 46 from end-FY03/19 to 6,463.

Progress of priority measures▷▷▷

Progress with priority measures (1): Sales enhancement in the newborn channel supported by a strategy centered on genetic
testing: Acquiring new pet shop agencies on the strength of pet health checks and genetic testing services. In terms ofprogress with use of IT in marketing, putting SEM/SEO marketing measures into action to strengthen web channels
Progress with priority measures (2): As for genetic testing business, test orders from pet shops and breeders are growing.
Between April and September, more than 72,000 tests were carried out. Regarding promotion of healthy lifestyles for pets,
applications for Dobutsu Kenkatsu look to be increasing to more than 7,000 per month in line with the company’s forecast.
Launch of new “Dobutsu Kenpo Senior” plan: On September 17, 2019, the company launched its “Dobutsu Kenpo Senior”
plan, which covers pets aged eight years or older. This is the first pet insurance plan in Japan to allow new enrollment of elderly

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Coverage

LAST UPDATE: 2020.09.07

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

dogs and cats. Characteristic features include compensation for medical expenses for hospitalization and surgery; inexpensive
monthly premiums of JPY1,010; the ability to settle insurance claims at animal hospital service counters; and additional services
such as gut microbiota checkups.

▷

Promotion of customer transition to plans with limited hospital visits and stays: Alongside product alterations, the company
encouraged customers to transition from its original “wide” plan, which does not limit the number of hospital 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
revenues. 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 in higher profits.

Quarterly performance
No. of policies in force ('000)(JPYmn)

1,000
800

400

312
105

186
47

0
-200

80%

8

4

50%
40%
30%
20%

Combined ratio (right axis)

321

231 267

98

321
113

18

187

379

293

491

404

627 673567 572 589
437

395 407 358

493

Q1
FY03/11Q3

Q1
FY03/12Q3Q1
FY03/13

Q3

80%

445
175

60%

Aug 2012: halts sales of 90%
coverage product(Jul 2013: terminates 90%
coverage product)

44.8%
41.1%39.7%

Q3Q1
FY03/15Q3Q1
FY03/16Q3

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

Q1
FY03/20

40%

Expense ratio (earned premiums basis)

68.1%

56.5%55.3%
53.0%
48.2%

Q1
FY03/14Jan- Sep 2014: suspends online sales of 70% coverage plan
69.0% 69.5%
68.9%
66.7%
66.3%
64.2%
63.1%
60.8%
62.1%
62.1%60.6%
60.9%
60.3%61.2%59.1%
59.4%60.1%
60.3%
59.1%59.7%
58.8%59.3%
58.7%
57.6%
56.5%
56.3%
55.6%

73.4%

66.0%67.3%
65.5%
62.3%
61.5%

90%

50%

E/I loss ratio

Oct 2010: begins sales of
90% coverage product100%

322 70%

277

174

112

751

-81

70%
60%

714

90.1%

600

200

Recurring profit (JPYmn)

102.6%
100.2%
99.5%97.9%
99.4%
98.8%
97.8%
97.2%
97.2%
97.1%
96.2%
95.8%
95.7%96.7%94.4%
95.4%
95.1%
94.2%
93.9%
93.2%93.4%
93.0%94.1%
92.9%
92.6%
92.4%
92.2%
92.0%
91.0%
90.8%
90.5% 836
90.1%
89.9%
91.1%
89.7%
88.2%
87.9%

Aug 2013: limited
shifts in coverage from
50% to 70%

Jun 2014: revision topremiums
Oct 2013: extends period from online
application to coverage start

38.5%
36.5%
36.1%37.0%
35.4%35.5%35.3%34.5%34.1%
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%
29.5%
29.2%
28.4%
28.3%27.7%27.9%28.7%28.3%26.8%

Q1
FY03/11Q3

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

Q1
FY03/15Q3Q1
FY03/16Q3

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

Q1
FY03/20

Source: Shared Research based on company data

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R Anicom Holdings / 8715
Coverage

LAST UPDATE: 2020.09.07

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

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)

27%

8,000

26%
24%

24%

6,000

3,281 3,312 3,442 3,473
22%

4,000

23%
3,614 3,826 3,831

4,077

22%

Q1
FY03/12Q3Q1
FY03/13

27% 6,662 6,684
27% 6,284 6,657
6,222
5,979 5,913
26%
5,580
5,205 5,419
25%
25%
4,784
4,582
25%
4,502
4,280 4,269
23%

22%

21%

2,000
0

Investment expenses

Q3

Q1
FY03/14

21%

22%
21%

Q3

23%

22%

27% 27% 26%
25% 25%

24%

8,483

26% 26% 26%

32%

9,814 9,733

30%

29%

28%
26%

26%

24%
22%

22%

20%

20%

Q1
FY03/15

Q3

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

80%

6,981

7,954 8,122 7,823

7,474 7,375 7,683

9,122

18%
Q1
FY03/16Q3

Q1
FY03/17

Q3

70%

8%
7%

60%

6%
50%

5%
4%

40%

3%

30%

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

Q3

Q1
FY03/19

Q3

16%

Q1
FY03/20

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

10% 900
9%Q1
FY03/18

800

1.2
1.0

700
600

0.8

500

0.6

400
300

0.4

200

0.2

100

2%

0

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

0.0

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%
20%
10%

17% 16%0%

15% 15%
4% 5%

-10%

-7%

-20%

-1% -1%4%6%

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

2%

6%

11%

15%

12%

14% 14%10%

15% 17% 16% 15%

9% 7%

1%

4%

7% 6%

-30%
-40%

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

Q1
FY03/15

No. of new policies (newborns)

44,000Q3

Q1
FY03/16Q3

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

Q1
FY03/20

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

9%40,0008%

36,00032,0007%

28,0006%

24,00020,0005%

16,00012,000Q1
FY03/12Q3Q1
FY03/13Q3Q1
FY03/14Q3

Q1
FY03/15Q3Q1
FY03/16Q3

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

Q1
FY03/20

4%

Source: Shared Research based on company data

Q1 FY03/20 results (out August 7, 2019)▷

Recurring revenue:

JPY10.0bn (+14.7% YoY)▷

Recurring expenses:

JPY9.8bn (+20.8% YoY)

Recurring profit:

JPY175mn (-70.3% YoY)

Net income:

JPY104mn (-75.7% YoY)

▷
▷

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Coverage

LAST UPDATE: 2020.09.07

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

Earnings summary
Recurring revenue
In Q1 FY03/20, due to marketing activities aimed at improving profitability of the company’s pet insurance business (one ofmanagement’s highest priorities), the number of new policies sold rose 6.6% YoY to 40,204, and the number of policies in force
rose 7.4% YoY to total 766,774. Underwriting revenue grew 13.6% to JPY9.5bn due to an uptick in the number of policy
renewals, product alterations conducted in December 2018, and higher premiums caused by an increase in the age of pets.
Other recurring revenues from new businesses, including genetic screening and operation of animal hospitals, expanded
JPY397mn (+56.3%), bringing recurring revenue up to JPY10.0bn (+14.7% YoY).

Recurring expenses
On the expense front, underwriting expenses grew 18.5% YoY to JPY7.0bn. Net claims paid increased 7.7% YoY to JPY4.7bn,
accompanying an increase in the number of policies in force, and agency fees increased 17.3% YoY to JPY869mn. In addition,
provisions of reserves for future claims were JPY259mn (+168.5% YoY) and underwriting reserves were JPY876mn (+108.7% YoY).
Including operating expenses and SG&A expenses of JPY2.6bn (+22.9% YoY), recurring expenses outpaced recurring revenue,
increasing 20.8% YoY to JPY9.8bn.
Underwriting reserves increased by a dramatic 108.7% YoY. In addition to a 70.1% increase in unearned premiums to JPY570mn,
catastrophe reserves jumped by 264.3% YoY to JPY306mn. Increases in premiums accompanying product alterations conductedin December 2018 caused a larger portion of premium revenue to be deferred to the next period. In terms of catastrophe
reserves, growth in underwriting revenue stemming from increases in the price of premiums outstripped growth in net claims
paid, leading to a decline in the net loss ratio. As a result, no catastrophic reserves were withdrawn in Q1, contributing to thelarge YoY increase.

Catastrophe reserves: An institutionalized reserve in which 3.2% of premium revenue is booked each fiscal year. Funds are withdrawn from thereserves until the net loss ratio reaches 50%, with the opening balance as a limit. Remaining funds are booked as provisions to be carried forward.
*Net loss ratio = (net claims paid + loss adjustment expenses) ÷ net premium revenue

Recurring profit: comparison to company forecasts
The company forecast a JPY80mn recurring loss in Q1 FY03/20 (April–June 2019), but in fact achieved a recurring profit of
JPY175mn (-70.3% YoY). Since the increase in the price of insurance premiums would cause higher underwriting reserves(unearned premiums are transferred to ordinary underwriting reserves), the company expected these higher reserves to squeeze
profits. The company has not abandoned this view and attributes better than expected profits to several other unanticipatedfactors.

▷

The company offers genetic screening for parent dogs to breeders free of charge and the costs are booked under R&D
expenses. Since genetic screening for the offspring puppies is not free, this practice results in actual sales and profits. In Q1,
demand was strong for puppy screening and the company prioritized this type of screening. For that reason, JPY100mn in
R&D expenses earmarked for parent dog screening was postponed, which was a factor contributing to higher profits thanthe company had forecast. Puppy screenings were also prioritized due to a problem with capacity at the research facility in▷

Yokohama where genetic screenings are conducted.
Alongside product alterations, the company encouraged customers to transition from its original “wide” plan, which does
not limit the number of hospital visits and stays, to a standard plan that has such limits (the gut microbiota checkup service
is only attached to the standard plan). Since the standard plan is less expensive than the “wide” version, a transition toward
the standard plan means downward pressure on revenues. On the other hand, the company expects having morecustomers in the standard plan will suppress future claims paid and pull the loss ratio down, resulting in higher profits. The▷

company thinks this may be a factor in the upturn in profit versus company forecasts in Q1.
Growth in agency fees was dulled by weaker than expected growth in the number of new contracts.

Although Anicom’s forecasts were somewhat off mark, it maintains that business conditions are good overall. The company will
be paying especially close attention to recurring expenses in 2H, along with trying to determine the effects of lower prices
accompanying the transition from the “wide” plan to the standard plan on recurring revenue.

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Coverage

LAST UPDATE: 2020.09.07

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

Other: consumption tax hike
The company expects JPY250mn in increased expenses over six months in FY03/20 as a result of the consumption tax hikeplanned for October 2019 (from 8% to 10%). The breakdown is unclear, but SG&A expenses, expenses from other operations,
agency fees, and claims paid should all be affected.

Key performance indicators▷

Increase in new policies: New policies were up in both the newborn and general categories, finishing at 40,204 (+6.6% YoY).

▷

Renewal rate of existing policies was stable at around 87%, leading to a steady rise in the number of policies in force.

▷

Number of policies in force: 766,774 (+7.4 YoY)▷

Number of claims paid: 795 (+22 YoY)▷

Number of veterinary hospitals: 6,448 (+31 YoY); With over 80% coverage, the company prioritizes quality over quantity,
except when considering new hospitals.

▷

E/I loss ratio: The loss ratio, a recurring expense parameter, rose 0.3pp YoY to 58.8%. This was due to product portfolio
improvement caused by an increase in new policies and the appearance of impact from revised premium rates that
accompanied product alterations conducted in December 2018. The E/I loss ratio tends to improve in 1H and drop in 2H.

▷

Expense ratio: The expense ratio was up 2.9pp to 37.0% because of aggressive investment to grow the business.

▷

Combined ratio: The combined ratio rose 2.6pp YoY to 95.8%, but the company expects it to improve in 2H.

▷

Parent solvency margin: 375.6% (+66.2pp YoY); Forecasted at 380.0% for FY03/20.

Progress of priority measures
Strategy centered on genetic screening and optimization of insurance claims◤ Sales enhancement in the newborn channel: Acquired new pet shop agencies on the strength of pet health checks andgenetic testing services◤ Progress with use of IT in marketing: Put SEM/SEO marketing into action to strengthen web channels◤ Promoting customer transition to plan with limited hospital visits and stays in order to reduce claims paid

Grow new businesses and accelerate shift to profitability◤ Genetic testing business: Increased testing of animals in pet shops at the time of sale, with over 30,000 tests performed in

April–June 2019

◤ Promoting healthy lifestyles for pets: Applications for pet health checks increased to more than 6,000 per month in line withthe company’s forecast.

Quarterly performance
No. of policies in force ('000)(JPYmn)

1,000
800

400

0

714

90.1%

600

200

Recurring profit (JPYmn)

Combined ratio (right axis)

102.6%
100.2%
99.5%97.9%
99.4%
98.8%
97.2%
97.2%
97.1%
96.2%
95.8%
95.7%96.7%94.4%
95.4%
95.1%
94.2%
93.9%
93.2%93.4%
93.0%94.1%
92.9%
92.6%
92.4%
92.2%
92.0%
91.0%
90.8%
90.5% 836
90.1%
89.9%
91.1%
89.7%
88.2%
87.9%

312
105

186
47

4

8
-81

98

321

231 267
18

321
113

187

112

379

293

491

404
174

395 407 358

751

627 673567 572 589
437
277

493

100%
90%
80%

445

70%
175

60%
50%

-200

40%
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
FY03/2051/65

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Coverage

LAST UPDATE: 2020.09.07

73.4%

60%

69.0% 69.5%

68.1%

66.0%67.3%
65.5%
62.3%
61.5%

70%

63.1%

56.5%55.3%
53.0%

50%

48.2%

40%

44.8%
41.1%39.7%

Aug 2012: halts sales of 90%
coverage product(Jul 2013: terminates 90%
coverage product)

Expense ratio (earned premiums basis)

Jan- Sep 2014: suspends online sales of 70% coverage plan

68.9%
66.7%
66.3%
64.2%
60.8%
62.1%
62.1%60.6%
60.9%
59.4%60.1%
60.3%61.2%59.1%
60.3%
59.1%59.8%
58.8%
58.7%
57.6%
56.5%
56.3%
55.6%
Jun 2014: revision topremiums

Aug 2013: limited
shifts in coverage from
50% to 70%

November 2014: introduces products with limits innumber of hospital visits and length of stay, as well as
system for discount depending on health conditions

Oct 2013: extends period from online
application to coverage start

36.5%
36.1%37.0%
35.4%35.5%35.3%34.5%34.1%
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%
28.3%27.7%27.9%28.7%28.3%26.8%29.2%28.4%29.5%

30%
20%

E/I loss ratio

Oct 2010: begins sales of
90% coverage product80%

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

Q1
FY03/11Q3

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

Q1
FY03/15Q3Q1
FY03/16Q3

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

Q1
FY03/20

Source: Shared Research based on company data

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

12,00010,000

26%
24%

24%

6,000

3,281 3,312 3,442 3,473
22%

23%
3,614 3,826 3,831
22%

2,000
0

Underwriting expenses

Operating and general admin. expense ratio (right axis)

27%

8,000

4,000

Investment expenses

Q1
FY03/12Q3Q1
FY03/134,502 4,582 4,784

5,205 5,419

4,077 4,280 4,269
23%
22%
22%
22%
21%
21%
21%

Q3

Q1
FY03/14Q3

Q1
FY03/15

5,979 5,913

23%

6,981

8,122 7,823

27% 27% 26%

9,122

26% 26% 26%

25% 25%

24%

8,483

30%
28%
26%

26%

24%
22%

22%

20%

20%

18%

Q3

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

80%

27% 6,662 6,684
27% 6,284 6,657
6,222
26%
5,580
25%
25%
25%

7,954
7,474 7,375 7,683

32%

9,814

Q1
FY03/16Q3

Q1
FY03/17

Q3

70%

800

Q1
FY03/20

1.0
0.8
0.6

400

5%

300

4%

0.4

200

3%

0.2

100

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

30%

16%

1.2

500

6%

40%

Q3

600

7%

50%

Q1
FY03/19

700

8%

60%

Q3

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

10% 900
9%Q1
FY03/18

0

0.0
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

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%
20%
10%

17% 16%

15% 15%

0%

4% 5%

-10%

-7%

-20%

6%

4%

-1% -1%

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

2%

6%

11%

15%

12%

14% 14%10%

15% 17% 16% 15%

9% 7%

1%

4%

7%

29

32

35

36

37

36

38

38

37

38

Q3

Q1
FY03/20

89.0%

89.3%

31

89.1%

31

89.1%

30

89.7%

27

89.6%

27

Q1
FY03/19

89.5%

27

Q3

89.4%

25

Q1
FY03/18
89.9%

25

Q3

89.7%

25

88.6%

26

87.6%

27

88.4%

26

Q1
FY03/1788.5%

28

Renewal rate (right axis)

Q3

88.5%

29

Q1
FY03/15

88.1%

26

87.8%

87.6%

25

88.7%

24

Q1
FY03/16

88.3%

25

Q3

88.2%

25

88.0%

88.0%

25

87.6%

25

87.9%

27

87.4%

Number of new policies

Q3

88.0%

Q1
FY03/14

88.1%

Q3

87.9%

Q1
FY03/13

87.5%

Q3

87.3%

50
45
40
35
30
25
20
15
10
5
0

Q1
FY03/12

87.2%

-40%

89.7%

-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
FY03/12

FY03/13

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/19

91%
90%
90%
89%
89%
88%
88%
87%
87%
86%
86%

FY03/2052/65

R Anicom Holdings / 8715
Coverage

LAST UPDATE: 2020.09.07

No. of new policies (newborns)

44,000Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

9%40,0008%

36,00032,0007%

28,0006%

24,00020,0005%

16,00012,000Q1
FY03/12Q3Q1
FY03/13Q3Q1
FY03/14Q3

Q1
FY03/15Q3Q1
FY03/16Q3

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

Q1
FY03/20

4%

Source: Shared Research based on company data

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Income statement
Income statement(JPYmn)Recurring revenue
YoY
Underwriting revenue

FY03/11Cons.
11,10720.5%
10,858

FY03/12Cons.
13,845
24.7%
13,592

FY03/13Cons.
16,186
16.9%
15,781

FY03/14Cons.
18,36613.5%
18,087

FY03/15Cons.
22,63823.3%
21,733

FY03/16Cons.
26,50617.1%
25,370FY03/17
Cons.
28,9789.3%
28,068

FY03/18
Cons.
32,33911.6%
31,290FY03/19
Cons.
35,82910.8%
34,535

FY03/20Cons.
41,465
15.7%
39,105

10,858
94
78
15
154

13,592
108
92
16
144

15,781
260
113
147
143

18,087
108
18
89
171

21,733
522
289
232
382

25,370
690
334
355
446

28,068
504
320
184
405

31,290
420
255
165
628

34,535
383
154
228
910

39,105
496
219
276
1,863

154

144

143

61
110

382

446

405

628

910

1,863

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
Loss on redemption 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
Deferred expenses under Article 113

10,764
20.6%
7,146
4,829
392
629
152
1,141
8
2
6
3,312
296
102
161
32
-

13,508
25.5%
9,797
7,304
480
780
348
883
31
30
3,392
287
5
102
161
18
-

15,34813.6%
11,450
9,465
581
853
140
409
3,632
264
2
76
161
23
-

17,63314.9%
13,448
10,693
660
1,029
149
916
18
18
3,982
183
6
161
15
-

21,38721.3%
15,92012,149
741
1,269
144
1,616
21
21
4,905
540
6
484
48
-

24,37714.0%
17,393
13,547
895
1,590
122
1,237
182
101
80
6,699
100
4
96
-

26,606
9.1%
18,967
14,901
965
1,995
181
923
0
0
7,273
364
124
122
-

30,486
14.6%
21,771
16,591
1,004
2,660
212
1,302
8
8
0
8,479
227
110
-

33,55010.1%
24,071
18,456
1,003
3,077
196
1,336
10
6
3
9,112
356
108
247
-

39,27517.1%
27,212
20,492
1,109
3,674
179
1,756
109
28
80
11,153
800
10
790
-

Recurring profit
YoY
RPM
Extraordinary gains
Extraordinary losses
Total income taxes

342
17.3%
3.1%
14
-93

337
-1.5%
2.4%
1
7
-133

837
148.4%
5.2%
2
194

733
-12.4%
4.0%
8
276

1,250
70.5%
5.5%
18
403

2,129
70.3%
8.0%
27
83
674

2,372
11.4%
8.2%
203
610

1,853
-21.9%
5.7%
13
519

2,278
22.9%
6.4%
16
19
665

2,189
-3.9%
5.3%
14
42
637

Net income
YoY
Net margin

421
21.7%
3.8%

465
10.5%
3.4%

640
37.6%
4.0%

447
-30.2%
2.4%

829
85.5%
3.7%

1,399
68.8%
5.3%

1,568
12.1%
5.4%

1,320
-15.8%
4.1%

1,610
22.0%
4.5%

1,525
-5.3%
3.7%

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
anicom mutual aid association revenue
Reversal of unearned Anicom revenue
Reversal of unpaid Anicom benefits
Other

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
Monetary claims bought
Loans receivable
Tangible fixed assets
Land
Buildings
Lease assets
Other tangible fixed assets
Intangible assets
Software
Software in progress
Lease assets
Other
Other assets
Deferred assets under Article 113
Accounts receivable
Accrued premiums
Suspense payments
Deferred organization expenses
Business commencement expenses
Other
Deferred tax assets
Allowance for doubtful accounts
Total assets
Reserve for insurance contract

Reserves for outstanding losses and claims

Underwriting reserves
Other liabilities
Unearned revenue
Income taxes payable
Accounts payable–otherSuspense receipts
Other
Provision for bonuses
Reserves under special laws
Reserves for price fluctuations
Deferred tax liabilities
Total Liabilities
Net
Shareholders' equity
assetsCapital stock
Capital surplus
Retained earnings
Treasury stock
Valuation and translation adjustments
Valuation difference on securities
Minority interests
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
3,682
5,098
4,986
4,457
4,217
7,566
15,242
19,07829,64324,427
7,065
7,444
9,272
11,367
15,108
10,739
5,914
4,625
4,660
9,999
294
196
225
127
96
93
86
118
250
1,527
1,432
1,359
1,367
1,858
518
508
508
508
806
34
31
27
33
89
462
433
412
440
447
7
5
3
1
4
6
17
27
34
54
56
55
83
160
542
484
420
391
548
374
387
373
477
566
653
904
1,462
1,506
3,956
125
178
159
263
305
532
642
845
811
1,165
246
208
213
214
261
33
195
473
592
271
2
86
66
143
102
2,518
1,975
1,981
1,940
2,112
1,945
4,297
3,876
3,908
4,344
4,263
969
808
646
484
575
839
935
1,121
1,118
2,041
1,388
1,689
1,895
1,923
63
83
112
143
191
232
260
365
445
508
1,490
1,771
1,351
1,396
906
179
76
4
5
186
172
245
357
629
533
455
501
606
926
187
353
219
116
263
433
597
623
718
1,041
-5
-7
-13
-13
-16
-140
-88
-76
-75
13,382
15,355
16,872
18,634
22,33725,192
28,12331,16442,39045,598
5,920
7,152
7,702
8,768
10,528
11,88812,993
14,50816,041
17,977
653
1,001
1,142
1,291
1,435
1,558
1,739
1,952
2,148
2,328
5,267
6,151
6,560
7,476
9,093
10,330
11,253
12,556
13,893
15,649
824
1,073
1,292
1,520
2,411
2,414
2,635
2,845
3,867
4,018
329
463
273
610
600
234
341
398
447
777
855
856
1,093
1,543
1,550
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
46
55
69
86
103
157
172
173
191
209
2
2
10
22
32
41
48
54
68
2
2
10
22
32
41
48
54
68
6,793
8,283
9,067
10,385
13,066
14,492
15,842
17,576
20,15622,273
6,569
7,067
7,795
8,306
9,272
10,762
12,233
13,54622,23323,719
4,178
4,194
4,238
4,282
4,350
4,396
4,402
4,443
7,950
7,981
4,068
4,084
4,128
4,172
4,240
1,286
4,292
4,333
7,840
7,871
-1,677-1,211
-571
-147
681
2,080
3,539
4,770
6,443
7,868
-0
-0
-0
-0
-0
-0
18
3
9
-57
-1
-123
-100
-128
-150
-530
18
3
9
-57
-1
-123
-100
-128
-150
-530
6,588
7,071
7,805
8,248
9,270
10,69912,281
13,587
22,23423,325
13,382
15,355
16,872
18,634
22,33725,192
28,12331,16442,39045,598Source: Shared research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

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
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
1,792
1,879
1,507
2,009
3,094
1,960
3,231
3,393
-1,936-1,044-1,852-2,052-2,963
2,489
4,233
253
-144
835
-345
-43
131
4,449
7,464
3,646
38
28
85
60
135
89
-79
-10
73
82
92
99
166
367
479
533
-226
-95
-71
-87
-188
-1,578
-840
-871
268
452
661
459
807
235
1,447
1,834

FY03/19
Cons.
4,359
-487
3,872
6,693
552
-567

FY03/20Cons.
4,246-10,263-6,017-99765-1,181807

93

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.

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

Total JPY2.2bn

Source: Shared research based on company data

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ROE, ROA, ROIC
FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
6.6%
6.8%
8.6%
5.6%
9.5%
14.1%
13.8%
10.3%
9.1%
6.7%
3.8%
3.4%
4.0%
2.4%
3.7%
5.3%
5.4%
4.1%
4.5%
3.7%
0.89
0.96
1.00
1.03
1.11
1.12
1.09
1.09
0.97
0.94
1.96
2.10
2.17
2.21
2.34
2.39
2.34
2.32
2.07
1.94
2.7%
2.3%
5.2%
4.1%
6.1%
9.0%
8.9%
6.3%
6.2%
5.0%
3.2%
2.9%
7.0%
5.7%
9.2%
14.3%
14.3%
9.9%
8.8%
6.6%
203
200
519
454
805
1,425
1,640
1,281
1,575
1,519
6,359
6,830
7,438
8,027
8,759
9,985
11,49012,934
17,911
22,977
5.4%
4.9%
11.3%
9.1%
14.3%
21.3%
20.6%
14.3%
12.7%
9.5%
3.1%
2.4%
5.2%
4.0%
5.5%
8.0%
8.2%
5.7%
6.4%
5.3%
1.75
2.03
2.18
2.29
2.58
2.65
2.52
2.50
2.00
1.80

(JPYmn)ROE
Net margin
Total asset turnover
Financial leverage (equity multiplier)
ROA (RP-based)
ROIC
NOPAT
Net assets + Interest-bearing debt
ROIC (before tax)
OPM
Recurring revenue / Invested capital

16%

ROE

14%
12%
10%
8%

6.8%

6%
4%

3.2%

2.9%

2%

2.7%

2.3%

FY03/11

FY03/12

0%

ROIC 13.8%

14.3%

14.3%

9.0%

8.9%

10.3%

9.5%

8.6%
6.6%

ROA (RP-based)
14.1%

9.2%

5.6%

7.0%

5.7%

5.2%

9.1%

9.9%
6.3%

6.2%

FY03/18

FY03/19

6.1%

6.7%

8.8%

6.6%
5.0%

4.1%

-2%
-4%

FY03/13

FY03/14

FY03/15

FY03/16

FY03/17

FY03/20

ROE
16%

ROE

Net margin

Total asset turnover (right axis)

Financial leverage (equity multiplier; right axis)

14%
12%
10%
8%

2.0
6.6%

2.1

2.2

2.2
8.6%

6.8%

2%

3.8%

3.4%

2.3

2.4%

0%

2.6

2.3

9.5%

2.4
9.1%

10.3%

2.2

1.9

2.1

2.0
1.8

6.7%
5.4%

5.3%

4.0%

2.8

13.8%

2.4

5.6%

6%
4%

2.3

14.1%

1.6

4.5%

4.1%

3.7%

3.7%

1.4
1.2

-2%
-4%

1.0

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16

FY03/17

FY03/18

FY03/190.8

FY03/20

ROIC
25%

ROIC (before tax)

RPM

3.5

Recurring revenue / Invested capital (right axis)
21.3%

20.6%

20%

11.3%

10%
5%
0%

2.7

14.3%
2.6

15%

1.7
3.1%

FY03/11

8.0%
5.2%

4.0%

2.4%

FY03/13(JPYbn)FY03/14
Net assets

25

12.7%
9.5%

2.0
4.9%

FY03/12

14.3%
2.5

2.3
9.1%

2.2
5.4%

2.5

8.2%
5.7%

5.5%

FY03/15

FY03/16

Interest-bearing debt

FY03/17

FY03/18

FY03/191.8
5.3%

FY03/20

3.0
2.3

2.1

2.2

1.9
1.3

5
0

0.8

22.2

0.7

0.3
6.6

0.3
7.1

7.8

8.2

9.3

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15

10.7

FY03/16

12.3

13.6

FY03/17

FY03/18

2.5
2.0

15
10

1.5
(JPYbn)Recurring profit (right axis)
2.4

20

2.0
6.4%

2.5

23.7

1.5
1.0
0.5

FY03/19

FY03/20

0.0

Source: Shared research based on company data

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Other information
Overview of pet insurance products
Anicom sells the following products (covering dogs, cats, birds, rabbits, and ferrets).
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.

Dobutsu Kempo Smile Family

Pet shops

Dobutsu Kempo Smile Baby expires after one month; before expiration,
policyholders make an application for additional one-year coverage 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 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.

Pet insurance premiums
Premiums for pet insurance differ depending on the age and the breed of the animal. The company classifies dogs into five types
based on their size, with “A” being the smallest and “E” the largest. The price rises in proportion to the size of the pet.
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.

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

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 (as of November 2014)
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
Note: Revised in November 2014; standard product (no limit to the number of hospital visits or stays)
Note: Revised in December 2018

Details of plan changes in 2014
Premium revised on June 1, 2014
Anicom announced in March 2014 that it would revise its insurance premiums from June 1, 2014. The company also said that it
would adopt a new discount system for policies that begin coverage on June 1, 2015 or thereafter. Under the new system, thecompany will offer discounts for healthier animals at the time of contract renewal. The existing system, which provides automatic
discounts when contracts are renewed, will be abolished. The company revised its premiums on June 1, 2014 as planned.

Product change on November 1, 2014
On May 30, 2014, the company received approval from the Financial Services Agency to offer pet insurance that limits thenumber of hospital visits and stays. Consequently, the company announced on August 6, 2014 that it would revise its Dobutsu
Kempo Family product effective November 1, 2014.
Under the revised system, new policyholders can only enroll in a standard plan that limits the number of hospital visits and stays.
Existing policyholders renewing their contracts can choose either the standard plan or a “wide” plan, which does not have such
limitations. At the same time, the new policy no longer covers birds, rabbits, or ferrets. There were also some changes in theclassification of dogs. In addition, premium payments may rise or fall depending on the health of the animal.
Thus, the company changed its insurance premiums twice within a short period of time—in June and November. The company
stated that the only change it had planned to implement was the introduction of a new product upon approval by the Financial
Services Agency. However, the company decided to change the premiums for its existing products in June to mitigate the impactof the April consumption tax hike.
Premiums after November 2014 (5% discount on renewal for pets aged one year or older) and June 2014
Standard plan (70% payout) premiums from November 2014 onward (JPY)
Age
0
1
2
3
4
5
6
7

Dog A
35,63032,24032,73034,80039,03043,91049,06053,950Dog B
39,16035,41035,63037,06040,81046,50052,54057,710Dog C
42,70038,71039,43041,70046,08052,09058,62064,680Dog D
48,87044,30045,12047,76052,95060,17068,11075,520Dog E
55,97050,93052,46056,25062,41069,93077,49084,160Cat36,32032,86033,00033,44034,35035,82037,79040,020Bird
29,21029,21029,21029,21029,21029,21029,210

RabbitFerret34,65035,50037,98043,13041,95056,43046,12071,91050,13085,88053,73098,15056,810 108,060

November 2014 (standard plan, 70% payout) premiums vs. June 2014

Age
0
1
2
3
4
5
6
7

Dog A
-1.8%
0.2%
0.0%
-0.7%
-1.9%
-4.3%
-5.2%
-4.5%

Dog B
-2.9%
-0.8%
-0.9%
-1.3%
-2.3%
-3.4%
-4.3%
-4.9%

Dog C
-3.7%
-1.8%
-2.0%
-2.5%
-3.4%
-4.3%
-5.0%
-5.6%

Dog D
-5.0%
-3.0%
-3.2%
-3.6%
-4.4%
-5.2%
-5.9%
-6.4%

Dog E
-6.0%
-4.1%
-4.3%
-4.8%
-5.4%
-6.0%
-6.5%
-6.9%

Cat
-2.0%
0.0%
-0.0%
-0.2%
-0.5%
-1.0%
-1.6%
-2.1%

Bird
1.6%
1.6%
1.6%
1.6%
1.6%
1.6%
1.6%

Rabbit
-0.6%
-1.6%
-2.5%
-3.4%
-4.0%
-4.5%
-4.9%

Ferret
-0.9%
-2.8%
-4.8%
-6.1%
-6.9%
-6.0%
-4.3%

Wide plan (70% payout) premiums from November 2014 onward (JPY)
Age
0
1
2
3
4
5
6
7

Dog A
35,24035,76037,86040,81045,70052,21058,940Dog B
38,68038,93040,49044,59049,77056,12063,060Dog C
42,29043,08045,56050,34056,90064,04070,670Dog D
48,40049,29052,18057,86065,75074,41082,510Dog E
55,65057,31061,46068,18076,41084,67093,620Cat35,91036,06036,54037,53039,15041,29043,730Bird
31,91031,91031,91031,91031,91031,91031,910

RabbitFerret37,86038,79041,50046,63045,84061,66050,39078,56054,77096,18058,710 112,310
62,070 123,660

November 2014 (wide plan, 70% payout) premiums vs. June 2014

Age
0
1
2
3
4
5
6
7

Dog A
9.5%
9.3%
8.1%
2.6%
-0.4%
0.9%
4.3%

Dog B
8.3%
8.2%
7.8%
6.7%
3.4%
2.2%
3.9%

Dog C
7.3%
7.1%
6.5%
5.6%
4.6%
3.7%
3.1%

Dog D
5.9%
5.8%
5.3%
4.5%
3.6%
2.8%
2.3%

Dog E
4.8%
4.5%
4.0%
3.3%
2.7%
2.1%
3.6%

Cat
9.3%
9.2%
9.0%
8.7%
8.2%
7.6%
6.9%

Bird
11.0%
11.0%
11.0%
11.0%
11.0%
11.0%
11.0%

Rabbit
8.6%
7.5%
6.5%
5.6%
4.9%
4.4%
4.0%

Ferret
8.3%
5.1%
4.0%
2.5%
4.2%
7.6%
9.5%

Source: Shared Research based on company data
Dog A: Japanese Spitz, Chihuahua, etc.; mixed-breed dogs weighing less than 10kg
Dog B: Miniature Dachshund, Shiba, Papillon, Toy Poodle, etc.; mixed-breed dogs weighing between 20kg and 30kg
Dog C: Maltese, Akita, Beagle, Chow Chow, Poodle, Pomeranian, Yorkshire Terrier, etc.; mixed-breed dogs weighing between 20kg and 30kg
Dog D: Shih Tzu, 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 between 30kg and 45kg or more.

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Health discount/extra premium system
Under the new system, the company raises or reduces premium payments when policies are renewed depending on the number
and length of hospital visits and surgeries during the previous contract period. Shared Research believes that the introduction of
the new system may lead to a higher rate of contract renewal. The new system may also discourage policyholders from misusing
insurance and help the company lower the loss ratio.
Under the new “health discount/extra premium” system, the company determines the premium payments for renewed contracts based on thepolicyholders’ insurance use. First-year contracts are assessed based on their record for the initial six-month period. Second-year contracts and thosethat are older are assessed based on their record for the first six months of the current year and the last six months of the previous year. The systemeither offers discounts or charges extra fees based on the health of the animal. Premiums may rise for some contracts that begin coverage on November
1 and thereafter. Discounts for healthier animals will begin beforehand.

No. of hospital visits, stays, and surgery
Discount or extra

0

1-5

10% discount 5% discount

6-19
No discount or increase

20-39

40 and more

20% increase

50% increase

Source: Shared Research based on company data

Details of product revisions in 2018
The company began offering Dobutsu Kenkatsu, a gut microbiota measurement service for checking pets’ health status. Based ontens of thousands of gut microbiota research data accumulated by the company and disease data obtained from insurance claims
statistics, the company created proprietary metrics to determine the risk of animal disease. For pets carrying higher health risks,
the company offers a preventive service where pets can receive a free health checkup at designated animal hospitals. Gut
microbiota measurement is not intended for disease diagnosis. All animals are eligible for measurement, but health checkup
services cover only dogs and cats.

Process for taking out an insurance policy
When Anicom receives applications from sales channels other than pet shops, the company conducts screening based on the
animal’s breed, age, health conditions, and health records submitted by the owner. The pets that pass the screening are required
to go through a waiting period of 1.5–2.0 months before the policy is signed. The waiting period is required to prevent payouts
for any preexisting conditions. The company does not screen store-bought pets that are less than one year old. The company
considers such pets virtually risk-free.

Payout settlement at the hospitals
Anicom’s strengths include 1) the payout settlement system at animal hospitals, 2) the use of information technology to create
hospital expense statements, sell insurance at pet shops (and online), and maintain customer information (web-based service).
There are only three companies in Japan that offer payout settlement systems at hospitals: Anicom, ipet, and Pet & Family. Thesesettlement systems also help the hospitals attract customers.
Anicom provides “Anicom Receptor,” a management system for treatment records, to animal hospitals for free. The system allows
hospitals to offer payout settlement services in a way similar to the public health insurance system for humans. The hospitalprovides fee details for clients and submits payment requests to Anicom, which reviews the requests and sends the money to thehospital. The system improves administrative efficiency and makes it easier for hospitals to handle insurance payments. It is also
designed to prevent fraudulent claims and miscalculations.

Management philosophy

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.

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In interviewing Anicom management, Shared Research was impressed by the company’s commitment to truly seeking to create
happiness for policyholders (in a way that does not necessarily involve monetary rewards). President Nobuaki Komori’s
philosophy seems to represent the company’s mission.

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
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.”

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History
July

Date

DecemberJanuary
February
January
DecemberJanuaryJune
MarchJanuary
June
July
April
March
February

Description
2000 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
2007 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
2004
2005
2005
2006

2008
2008
2010
2014
2014
2015
2016

Anicom Insurance began non-life insurance operations
Anicom International was renamed Anicom Holdings Inc.
Listed shares on the Tokyo Stock Exchange’s Mothers market
Japan Animal Specialty Medical Institute Inc. was established
Listed shares on the First Section of the Tokyo Stock ExchangeAnicom Capital, Inc. was established
Celltrust Animal Therapeutics Co., Ltd. was established as a joint venture(Anicom 49%, FujiFilm 51%) for regenerative medicine for animals
2017 Established Anicom Hong Kong Co., Ltd., a joint venture (49% stake) with theaim of providing animal healthcare services in China
2020 Acquired all shares in Simnet Co., Ltd. and made it a wholly owned subsidiary

Source: Shared Research based on company data

Major shareholders
Top 10 shareholders
Japan Trustee Services Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
KOMORI Asset Management Co., Ltd.
Taiyo Fund, L.P.
CBC Co., Ltd.
The Bank of New York Mellon 140051
BNYM AS AGT/CLTS 10 Percent
TAIYO HANEI FUND, L.P.
Nobuaki Komori
Goldman, Sach & Co. Reg

Shares held Shareholding('000s)
ratio
3,087
15.3%
1,401
6.9%
1,220
6.0%
883
4.4%
756
3.7%
683
3.4%
566
2.8%
555
2.7%
495
2.5%
492
2.4%

Source: Shared Research based on company data
As of end-March 2020

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News and topics
April 2020
On April 17, 2020, the company announced the number of policies in force for FY03/20 and monthly management parametersfor March 2020.
The company had previously disclosed monthly management parameters (for June, September, December, and March) on thesame day as its quarterly results announcement. However, for March 2020, the company decided to disclose the parameters
along with the numbers of policies in force and newly acquired policies due to concerns over the impact of the novel coronavirus
outbreak on its earnings performance. The company commented that the outbreak had so far had no impact on its earnings andthat the number of policies in force steadily increased in Q4 FY03/20.
Cumulative
Number of policies in force
YoY
YoY change

Number of newly acquired policies
YoY
YoY change

Quarterly

Number of policies in force
QoQ increase

Number of newly acquired policies

FY03/19Q1
713,896Q2
729,842Q3
741,641Q4
753,332

FY03/20Q1
766,774Q2
781,368Q3
796,167Q4
816,254

37,72675,852

112,753

150,625

40,20480,533

121,183

167,318

FY03/19Q1
713,896Q2
729,842Q3
741,641Q4
753,332

FY03/20Q1
766,774Q2
781,368Q3
796,167Q4
816,254

37,72638,12636,90137,87240,20440,32940,65046,135

9.7%
63,3468.8%
3,059

15,3309.4%
62,9257.7%
5,438

15,946

8.7%
59,128
5.4%
5,799

11,7997.8%
54,766
5.1%
7,260

11,691

7.4%
52,8786.6%
2,478

13,442

7.1%
51,526
6.2%
4,681

14,594

7.4%
54,5267.5%
8,430

14,7998.4%
62,922
11.1%
16,69320,087

YoY

8.8%

6.7%

1.0%

4.0%

6.6%

5.8%

10.2%

21.8%

QoQ increase

1,315

400

-1,225

971

2,332

125

321

5,485

Source: Shared Research based on company data

December 2019
On December 16, 2019, the company announced its decision to acquire shares in SIMNET Co., Ltd., converting it into a
subsidiary.
In December 2019, the company announced its resolution to acquire all shares in SIMNET Co., Ltd., converting it into a wholly
owned subsidiary.

Reason for acquisition
Established in March 2001, SIMNET (Sendai, Miyagi Prefecture) designs, develops, and operates online pet-related services. It
holds the top share in breeder matching services and also functions as a sales agent for pet insurance offered by Anicom
Insurance, Inc., a subsidiary of Anicom Holdings.
Since its establishment, Anicom Holdings has aimed to become a “preventative insurance company” and has adopted a
corporate vision of “an insurance company that reduces tears and creates smiles.” The company has conducted various initiatives
to address issues facing the entire pet industry, while developing its core pet insurance business.
With this acquisition, Anicom will be able to utilize SIMNET’s breeder matching site platform. The company claims that this move
will enable it to advertise its breeder support services more directly, and that the two companies can collaborate to carry out
effective and efficient measures aimed at increasing the number of pet insurance policies in force.
Date of agreement conclusion: December 16, 2019
Share transfer date: Undetermined (scheduled to be executed with the approval of relevant authorities)

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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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First Brothers Col, Ltd.

Micronics Japan Co., Ltd.

Star Mica Holdings Co., Ltd.

AS ONE CORPORATIONFreeBit Co., Ltd.

MIRAIT Holdings Corporation

Strike Co., Ltd.

Ateam Inc.

Fujita Kanko Inc.

Monex Goup Inc.

SymBio Pharmaceuticals Limited

Aucfan Co., Ltd.

Gamecard-Joyco Holdings, Inc.

MORINAGA MILK INDUSTRY CO., LTD.

Synchro Food Co., Ltd.

AVANT CORPORATION

GameWith, Inc.

Mortgage Service Japan Limited.

TAIYO HOLDINGS CO., LTD.

Axell Corporation

GCA Corporation

NAGASE & CO., LTD

Takashimaya Company, Limited

Azbil Corporation

Good Com Asset Co., Ltd.

NAIGAI TRANS LINE LTD.

Take and Give Needs Co., Ltd.

AZIA CO., LTD.

Grandy House Corporation

NanoCarrier Co., Ltd.

Takihyo Co., Ltd.

AZoom, Co., Ltd.

Hakuto Co., Ltd.

Net Marketing Co., Ltd.

TEAR Corporation

Base Co., Ltd

Hamee Corp.

Net One Systems Co.,Ltd.

Tenpo Innovation Inc.

BEENOS Inc.

Happinet Corporation

Nichi-Iko Pharmaceutical Co., Ltd.

3-D Matrix, Ltd.

Bell-Park Co., Ltd.

Harmonic Drive Systems Inc.

Nihon Denkei Co., Ltd.

TKC Corporation

Benefit One Inc.

HOUSEDO Co., Ltd.

Nippon Koei Co., Ltd.

B-lot Co.,Ltd.

H2O Retailing Corporation

NIPPON PARKING DEVELOPMENT Co., Ltd.

Broadleaf Co., Ltd.

IDOM Inc.

NIPRO CORPORATION

Tsuzuki Denki Co., Ltd.
TOCALO Co., Ltd.

CanBas Co., Ltd.

IGNIS LTD.

Nisshinbo Holdings Inc.

TOKAI Holdings Corporation

Canon Marketing Japan Inc.

i-mobile Co.,Ltd.

NS TOOL CO., LTD.

Tokyu Construction Co., Ltd.

Career Design Center Co., Ltd.

Inabata & Co., Ltd.

OHIZUMI MFG. CO., LTD.

TOYOBO CO., LTD.

Carna Biosciences, Inc.

Infocom Corporation

Oisix ra daichi Inc.

Toyo Ink SC Holdings Co., Ltd

CARTA HOLDINGS, INC

Infomart Corporation

Oki Electric Industry Co., Ltd

Toyo Tanso Co., Ltd.

CERES INC.

Intelligent Wave, Inc.

ONO SOKKI Co., Ltd.

Tri-Stage Inc.

Chiyoda Co., Ltd.

ipet Insurance CO., Ltd.

ONWARD HOLDINGS CO.,LTD.

TSURUHA Holdings

Chori Co., Ltd.

Itochu Enex Co., Ltd.

Pan Pacific International Holdings Corporation

VISION INC.

Chugoku Marine Paints, Ltd.

JAFCO Co.,Ltd.

PARIS MIKI HOLDINGS Inc.

VISIONARY HOLDINGS CO., LTD.

cocokara fine Inc.

JMDC Inc.

PIGEON CORPORATION

WirelessGate, Inc.

COMSYS Holdings Corporation

JSB Co., Ltd.

QB Net Holdings Co., Ltd.

YELLOW HAT LTD.

COTA CO.,LTD.

JTEC Corporation

RACCOON HOLDINGS, Inc.

YOSHINOYA HOLDINGS CO., LTD.

CRE, Inc.

J Trust Co., Ltd

Raysum Co., Ltd.

YUMESHIN HOLDINGS CO., LTD.

CREEK & RIVER Co., Ltd.

Japan Best Rescue System Co., Ltd.

RESORTTRUST, INC.

ZAPPALLAS, INC.

Daiichi Kigenso Kagaku Kogyo Co., Ltd.

JINS HOLDINGS Inc.

ROUND ONE Corporation

Daiseki Co., Ltd.

JP-HOLDINGS, INC.

RYOHIN KEIKAKU CO., LTD.

Demae-Can CO., LTD

KAMEDA SEIKA CO., LTD.

SanBio Company Limited

TKP Corporation

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