Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Anicom at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.
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.
Listen to this episode with a 7-day free trial
Subscribe to Asian Century Stocks to listen to this post and get 7 days of free access to the full post archives.
