Japan

Anicom (8715 JP)

Japanese pet insurance company with secular growth at 13x P/E

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Anicom (2353 JP — US$295 million) is a Japanese pet insurance company. I first heard about the business from fellow blogger Global Stock Picking, who wrote an excellent introduction to the company here.

I also noted that private investor Alexander Eliasson took a position in Anicom earlier in April. He’s a savvy investor, so it's worth paying attention to him. As is Hikari Tsushin (9435 JP - US$12 billion), which has also recently increased its position in Anicom.

The business is simple. Anicom provides insurance for household pets. Policyholders pay premiums of, say, JPY 3,000/month (US$21/month). In return, future unexpected medical expenses will then be partly covered by Anicom. Such medical expenses can include outpatient visits, hospitalizations and surgery due to either injury or disease. Typically, Anicom pays 30% or 50% of any bill, and the pet owner pays the rest.

Since there is a winner and a loser for each policy, you might ask yourself why insurance is needed in the first place.

The best explanation I’ve found is that pet insurance helps you budget and hedge against catastrophic risks. In this video, Trupanion founder Darryl Rawlings tells the story of how his 2-year-old dog died when his parents couldn’t pay a hospital bill. Many pet owners would rather pay $30 a month to hedge against this scenario ever playing out.

In Japan, pet insurance policies are mostly sold via pet shops. And this is where Anicom dominates. It has partnerships with around 2,000 pet shops nationwide, which is roughly 40% of the total. These will then sell 600-700,000 puppies per year to prospective owners. Most of Anicom’s policies are for dogs, but they also cover cats and other pets, such as rabbits.

Other than pet shops, Anicom also targets the general population of pets through its website, call centers, affiliated insurance companies and relationships with dog and cat breeders.

Anicom has an advantage when it comes to the breeder market because it owns the two most popular websites for matching dogs and cats with potential owners: Minna no Breeders (for dogs) and Minna no Koneko Breeder (for cats). Since the purchase of pets often warrants new pet insurance policies, there are synergies between the breeder matching websites and Anicom’s mainstay insurance business.

Property & casualty insurance is indeed a commodity industry. But I think Anicom has a strong reputation when it comes to pet insurance. It’s spent decades building up relationships with pet shops and veterinarians. It has a decent policy renewal rate of 88% after each year. It’s also ranked as the #1 pet insurance company in the Oricon Customer Satisfaction survey.

One underappreciated benefit is that Anicom offers over-the-counter bill settlement at almost 7,000 affiliated veterinary clinics or hospitals. With typical insurance contracts, policyholders need to pay the bill first, fill out a form, and later hope to get reimbursed. It’s a huge hassle.

But with Anicom’s insurance card, policyholders just need to present it at the counter, and they’ll only need to deal with the 30-50% co-pay component of the bill. The rest will be taken care of behind the counter, through a software system called Anicom Receptor. The clinic submits a payment request to Anicom, which then quickly reimburses the clinic.

There are currently only three companies offering over-the-counter settlements: Anicom, Pet & Family, and ipet. The latter has just been taken over by a much larger insurance company, Dai-Ichi Life. Now, ipet has been growing fast, but more so through the online channel, and it’s not clear how profitable policyholder acquisition through this channel really is.

The company has grown nicely over time. It has compounded its book value per share at an annual rate of +11 % since its IPO in 2010. Part of its success is profitable underwriting with a current combined ratio of 93%. While its return on equity has been average in the past at 10%, it is now targeting 12-15% by 2031.

There’s every reason to think that growth will continue. Founder Nobuaki Komori continues to be involved in the business, serving as CEO, and his vision is for Anicom to move into preventive services, lowering claims by improving pet health. Japan’s pet-to-population ratio is only 13% compared to 24% in Scandinavia. Meanwhile, the pet insurance penetration rate is only 17% compared to 65% in Sweden. This is a company with secular growth ahead.

The near-term picture seems excellent, too. COVID-19 led to an acceleration in growth, as pet owners feared their dogs and cats would fall sick. Growth then decelerated to mid-single-digit levels. However, over the past few months, growth in written premiums has increased to around 10% year-over-year. And in March 2025, Anicom cancelled 7.8% of its shares outstanding, leading to materially higher earnings per share.

The stock now trades at 13 times its current-year earnings. With about 10% expected earnings growth, I see the stock reaching 12x P/E by next year. That compares to about 30x P/E historically, back when Anicom used to be seen as a growth stock.

Seen from another perspective, Anicom trades at 1.5x book compared to a targeted 12-15% return on equity. It’s also worth mentioning that competitor ipet was acquired at 7.6x book — a massive premium to Anicom’s current multiple.

There are a few question marks, including the threat of online competition. A new animal welfare law is set to take effect in 2027, and we don’t know what new policies may be introduced. Finally, while Anicom has historically performed well, the insurance industry requires solid execution. With an aging pet population, its policies may be mis-priced from one year to another. But so far, Anicom has executed well and will most likely continue to execute well.

Thank you for reading, and if you have any questions, feel free to ask them in the comment section below.

Regards,
Michael