Time to reveal my first investment in a truly Japanese company (that is bought with Yen and only listed in Japan). What really triggered me to pull the gun was the significant JPY weakening we have seen lately, with only domestic sales I’m fully exposed to the Yen in this holding, let’s dig into Anicom Holdings!
- Dominant insurance company in it’s niche of pet insurance in Japan (estimated 44% market share).
- Strong growth: 10 year Revenue CAGR of 14% and 5 year of 6%.
- Founder led with CEO who still holds about 8% of outstanding shares.
- Core of the thesis is really about Japanese mindset change of the role the pet has in the family. This will over time increase insurance penetration.
- Moat built from highest coverage of direct settlement of bill at veterinary as well as regulatory barriers for insurance companies.
Pet industry in Japan
Anicom has been responsible for much of the growth in the Japanese pet insurance market over the years, however there are still relatively few pets covered by insurance at this time. According to figures from a 2020 Japan Pet Food Association survey of dog and cat ownership, there are roughly 18.1mn dogs and cats kept by Japanese households as pets, and only about 12% of these are covered by insurance. The UK has 16.5mn dogs and cats (8.5mn dogs, 8mn cats; about 25% of the human population in 2017) but pet insurance covers more than 25% of UK pets. So adjusted for population, UK has about twice as many pets and twice as high rates of insured pets. If Japan overtime would reach UKs level of number of pets as well as insurance penetration that is a four fold increase of the market.
As you will see below, the number of pets owned in Japan is in a rather steady state (dogs decreasing, cats increasing). Considering that the population has decreased with a few percent in this timeframe and will continue to do so, is a natural headwind. As a tailwind is that interest in pet ownership is up, but somewhat held back by the supply of especially dogs. There is a more interesting story than the steady state of pet ownership and that is around the mindset of the owners. As you also can see below the industry keeps growing in size although number of pets is not growing. We can only attribute this to the changing mindset around pet ownership. More and more pet owners puts the pet in a family position, where no costs are spared for the pet to have a good life. As a US pet insurance CEO put it: In the past 20 years pets have moved from the backyard to inside the house, and now they are moving from the house into the bedroom and even on to the bed. Press to read more..