Key Positives From The Results
Cost structure improvement in the P&C insurance business and expanded investment gains drove earnings growth. Recurring profit of JPY 3.53B (+267.5% YoY) marked a record high for any 1Q, representing 70.6% progress against the full-year target of JPY 5.0B—an exceptionally high level. This quarter can be characterized as the period in which the roll-off of AXA Direct policy migration costs made a full contribution to expense ratio improvement.
- Combined ratio improved to 95.5% (▲2.4pt YoY), primarily driven by an earned premium basis expense ratio of 31.0% (▲4.5pt YoY)
- Investment income of JPY 2.252B (+521.8% YoY); realized gains on equity sales of JPY 1.996B were booked, combined with JPY 255M in income-based returns, tracking in line with plan
- Policies in force reached 1.412M (+7.1% YoY) with a retention rate of 88.3%, remaining stable; OEM partnerships expanded to 8 companies, advancing distribution channel diversification
- Operating expenses and G&A of JPY 5.146B (▲1.5% YoY), achieving cost containment despite top-line growth; consolidated SG&A ratio of 24.0% at its lowest level in 5 years
- Catastrophe reserve reversal of JPY 968M booked; triggered by net loss ratio exceeding 50%, serving as an earnings tailwind
Key Concerns From The Results
The E/I loss ratio of 64.5% (+2.1pt YoY) continues its upward trajectory, with rising veterinary costs and pet aging driving structurally higher claims payments. The new business segments are seeing widening losses, warranting attention to the investment recovery outlook.
- E/I loss ratio at 64.5% (+2.1pt YoY); net claims paid of JPY 9.954B (+13.6% YoY) outpaced premium growth of +5.9%, making near-term loss ratio improvement difficult to envision
- Veterinary hospital operations swung to a segment loss of ▲JPY 191M (vs. profit of JPY 60M in the prior year); while JARVIS Tokyo drove revenue expansion, closures and downsizing of existing hospitals weighed on profitability
- Net investment-related contribution (net realized gains of ~JPY 1.942B) accounted for ~55% of recurring profit, highlighting declining reliance on core underwriting profit as a concern
- Unrealized losses on securities of JPY 3.941B (held-to-maturity ▲JPY 320M, available-for-sale ▲JPY 3.621B); risk of bond portfolio impairment in a rising rate environment
- New policy count of 60,125 (▲13.9% YoY); even adjusting for the roll-off of AXA migrated policies, deceleration in organic growth is a concern
Focus Areas / Items To Monitor Going Forward
- Whether the upward trend in E/I loss ratio persists; at 64.5% in 1Q versus the full-year forecast of 63.4%, monitoring the impact of product revisions and premium rate adjustments from 2Q onward is key
- JARVIS Tokyo monthly revenue is tracking behind plan; July estimate of JPY 80M (vs. plan of JPY 98M), making it critical to assess the breakeven timeline and threshold
- Progress Rate on investment portfolio repositioning; JGB holdings nearly doubled from JPY 6.877B to JPY 13.273B, warranting monitoring of the medium- to long-term impact of replacing low-yielding assets on portfolio returns
- Countermeasures for rising E/I loss ratio (timing and magnitude of premium revisions, review of deductible terms, etc.)
- Concrete timeline for JARVIS Tokyo breakeven and the breakeven revenue threshold
- Sustainability of capital gains in investment operations and future investment policy
- Strategies to return the pet internet services business to growth amid declining advertising revenue
- Revenue monetization roadmap for the health innovation business and approach to narrowing the core product lineup
- Contribution of the 8 OEM partners to policy count and scope for further partnership expansion
- Management's views and engagement with Dalton Investments following its stake increase to 14.83%
- Background behind Hikari Tsushin's stake reaching 18.78% and implications for capital policy
- Status of consideration for additional shareholder returns following the completion of the JPY 1B share buyback
- Specific insurance product development plans leveraging data from "Doubutsu Kenkatsu" following its milestone of 1M cumulative tests
Key Financial Highlights
| Item | Value | YoY |
|---|---|---|
| Recurring Revenue | JPY 21.905B | +20.1% |
| └ Underwriting Income | JPY 17.216B | +9.1% |
| └ Investment Income | JPY 2.252B | +521.8% |
| └ Other Recurring Revenue | JPY 2.436B | +16.3% |
| Recurring Expenses | JPY 18.375B | +6.4% |
| └ Underwriting Expenses | JPY 12.063B | +6.8% |
| └ Operating Expenses and G&A | JPY 5.146B | ▲1.5% |
| Recurring Profit | JPY 3.53B | +267.5% |
| Recurring Profit Before Goodwill Amortization | JPY 3.594B | +250.5% |
| Net Income Attributable to Owners of Parent Company | JPY 2.433B | +274.0% |
| EPS | JPY 33.09 | +281.0% |
| Comprehensive Income | JPY 1.468B | +110.6% |
| Net Premiums Written | JPY 16.714B | +5.9% |
| Net Claims Paid | JPY 9.954B | +13.6% |
| Policies in Force | 1,411,711 | +7.1% |
| E/I Loss Ratio | 64.5% | +2.1pt |
| Combined Ratio (Earned Premium Basis) | 95.5% | ▲2.4pt |
Recurring revenue is reported as JPY 21.905B in the earnings summary, but the supplementary materials present JPY 21.403B after netting the JPY 502M policy reserve reversal against underwriting expenses. No impact on recurring profit. The two primary drivers of earnings growth were the surge in investment income (securities gains of JPY 1.996B) and expense ratio improvement.
Performance By Business Segment
The P&C insurance business accounts for 89% of total recurring revenue and is the earnings pillar. Boosted by investment gains, segment profit surged +274.1% YoY. Meanwhile, synergy-creation businesses (matching, veterinary hospitals, health innovation) are growing revenue but remain predominantly loss-making.
Segment Performance Table
| Segment | Revenue | YoY | Recurring Profit | YoY | Margin |
|---|---|---|---|---|---|
| P&C Insurance | JPY 19.509B | +20.9% | JPY 3.73B | +274.1% | 19.1% |
| Pet Internet Services | JPY 580M | ▲2.5% | JPY 46M | ▲45.2% | 7.9% |
| Veterinary Hospital Operations | JPY 820M | +20.2% | ▲JPY 191M | Swung to loss | - |
| Health Innovation | JPY 171M | +37.4% | ▲JPY 74M | Loss widened | - |
| Other Businesses | JPY 823M | +18.9% | JPY 24M | Swung to profit | 2.9% |
- P&C Insurance: Recurring revenue +20.9%; expense ratio improved ▲4.5pt due to AXA migration cost roll-off, and investment gains of +JPY 1.89B boosted earnings, lifting segment margin to 19.1%
- Veterinary Hospital Operations (Revenue): +20.2%; JARVIS Tokyo (estimated 1Q revenue of ~JPY 187M) was the growth driver, with full-year revenue expected at JPY 3.7B–3.9B
- Health Innovation (Revenue): +37.4%; subscriber acquisition via e-commerce channels contributed, with expanding sales of oral and gut care products
- Other Businesses: +18.9%; veterinary hospital support services (+40.8%) led the segment to swing to profitability
- Pet Internet Services: Revenue declined ▲2.5%, profit down ▲45.2%; primarily due to lower advertising revenue; per-transaction unit pricing rose but transaction volume was flat
- Veterinary Hospital Operations (Profitability): Closure and downsizing costs at existing hospitals are front-loaded; JARVIS Tokyo itself is also tracking behind its revenue plan
Progress Versus Full-Year Guidance
The 1Q progress rate for recurring revenue at 27.0% is largely in line with the full-year plan, but the 70.6% progress rate for recurring profit is exceptionally high. This is primarily attributable to the concentration of investment gains (capital gains) in the quarter; from 2Q onward, the focus will shift to the contribution from core underwriting profit. Progress against the 1H cumulative plan stands at 88.3% for recurring profit (vs. JPY 4.0B target), a high level that raises awareness of potential upward revision.
| Account | Value (1Q) | Full-Year Forecast | Progress |
|---|---|---|---|
| Recurring Revenue | JPY 21.905B | JPY 81.0B | 27.0% |
| Recurring Profit | JPY 3.53B | JPY 5.0B | 70.6% |
| Net Income Attributable to Owners of Parent Company | JPY 2.433B | JPY 3.25B | 74.9% |
| Account | Value (1Q) | 1H Cumulative Plan | Progress |
|---|---|---|---|
| Recurring Revenue | JPY 21.905B | JPY 41.0B | 53.4% |
| Recurring Profit | JPY 3.53B | JPY 4.0B | 88.3% |
| Net Income Attributable to Owners of Parent Company | JPY 2.433B | JPY 2.6B | 93.6% |
- Pet insurance new policy originations tend to concentrate in spring (April–June), making 1Q new policy count a bellwether for the full-year trajectory
- Loss ratios tend to rise in summer (July–September) due to seasonal factors such as heatstroke
Changes To Guidance
No revision to guidance. The full-year plan announced on May 12, 2026 (recurring revenue JPY 81.0B, recurring profit JPY 5.0B, net income JPY 3.25B) was maintained. While the 1Q profit progress rate of 70.6% is high, the company is maintaining a cautious stance given the significant timing factor from investment gains.
Commentary On Shareholder Returns
Annual dividend forecast of JPY 13.50 (vs. JPY 9.00 in the prior year, +50.0%) maintained. Targeting a payout ratio of ~30%. A share buyback of up to JPY 1B was executed from June 1 to July 31, 2026, with ~JPY 480M acquired as of end-June and the full JPY ~1B buyback completed on July 27. The mid-term plan (FY2024–FY2027) targets a cash allocation of ~JPY 6B for shareholder returns.
Financial Position
The company holds JPY 5.0B in corporate bonds and JPY 5.103B in borrowings as interest-bearing debt, but the liability structure is primarily composed of JPY 28.808B in policy reserves, maintaining a stable equity ratio of 38.8% (vs. 37.9% at prior fiscal year-end) for an insurance company.
- Key Figures
- Leverage Metrics
| Account | Value | Additional Information |
|---|---|---|
| Total Assets | JPY 75.738B | ▲1.2% vs. prior FY-end |
| Cash and Deposits | JPY 10.588B | ▲20.9% vs. prior FY-end |
| Securities | JPY 43.321B | +1.6% vs. prior FY-end |
| └ Held-to-Maturity Bonds | JPY 5.1B | Unrealized loss ▲JPY 320M |
| └ Available-for-Sale Securities | JPY 36.631B | Unrealized loss ▲JPY 3.621B |
| Policy Reserves | JPY 28.808B | ▲0.9% vs. prior FY-end |
| Total Interest-Bearing Debt | JPY 10.103B | Bonds JPY 5.0B + Borrowings JPY 5.103B |
| Shareholders' Equity | JPY 29.41B | +1.1% vs. prior FY-end |
| Treasury Shares | ▲JPY 1.489B | ▲JPY 487M vs. prior FY-end |
| EBITDA | JPY 3.858B | Recurring profit JPY 3.53B + D&A JPY 264M + Goodwill amortization JPY 64M |
News Released Alongside The Earnings Announcement
- 2026/08/06Launched a pet relief donation drive to support animals affected by the 2026 Kumamoto Earthquake (August 6–31) Notice of Pet Relief Donation Drive for the 2026 Kumamoto Earthquake
- 2026/08/07Announced the upcoming launch of "7Days Food Puree," a dog treat co-developed with Ariake Japan; deploying a new product series at the intersection of food and health Dog Treat "7Days Food Puree" Launch Announcement
Major Announcements During The Quarter
- 2026/05/13Disclosed initiatives on the co-evolution of "insurance" and "medicine," explaining the preventive application of gut microbiome data and progress at JARVIS Tokyo in advanced veterinary medicine Initiatives on the Co-evolution of "Insurance" and "Medicine"
- 2026/07/09Policies in force for the flagship pet insurance "Doubutsu Kenpo" surpassed 1.4M as of end-May 2026 Pet Insurance "Doubutsu Kenpo" Surpasses 1.4M Policies in Force
- 2026/07/24Cumulative test count for gut flora testing "Doubutsu Kenkatsu" surpassed 1M; communicated the evolution of preventive insurance leveraging accumulated data Gut Flora Testing "Doubutsu Kenkatsu" Surpasses 1M Cumulative Tests
Large-Shareholding Filings / Material Proposals Over The Past Year
- Hikari Tsushin: 10.48% → 18.78% (August 26, 2025 – May 14, 2026; multiple amendment filings) — Pure investment purpose
- Dalton Investments: 6.31% → 14.83% (November 14, 2025 – February 16, 2026; multiple amendment filings) — Long-term investment purpose; filing notes the possibility of material proposals regarding governance and capital policy
- Resona Asset Management: 5.95% → 5.98% (March 19, 2026) — Investment trust / discretionary investment management purpose
- Asset Management One: 6.25% → 4.16% (January 22, 2026) — Investment trust / discretionary investment management purpose; fell below 5% threshold
- Sumitomo Mitsui Trust Asset Management: 5.73% → 4.00% (October 6, 2025) — Investment trust / discretionary investment management purpose; fell below 5% threshold
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