Summary
Recurring profit reached 88.3% of the ¥4,000M 1H plan in 1Q, driven by two factors. First, the expense ratio improved as costs tied to the transfer of another insurer's policies fell away. Second, the company booked gains on sales of securities. If results land on plan, standalone 2Q recurring profit would be only ¥470M (our estimate), below the ¥1,138M posted in 2Q last year. The key questions for 2Q are therefore how far results beat plan and whether guidance is revised. Two factors will determine whether the upside is sustainable. The first is whether expense ratio improvement continues to offset a rising E/I loss ratio through July–September. The second is the level of underwriting profit excluding securities gains. Net growth in policies in force after the transfer and profitability in the veterinary hospital business will also be key gauges of earnings quality from 2H onward.
Key Points for Next Quarter
| Key Points & Focus | Implications |
|---|---|
Earnings Progress1H cumulative recurring profit vs. 1H plan; any guidance revision | The plan implies standalone 2Q recurring profit of ¥470M (our estimate), below last year's standalone 2Q figure of ¥1,138M. This gap indicates how conservative the plan is and how much room exists for an upward revision. |
Underwriting ProfitabilityYoY change in E/I loss ratio, expense ratio (earned premium basis), and combined ratio | In 1Q, a 4.5pt improvement in the expense ratio absorbed a 2.1pt rise in the E/I loss ratio, bringing the combined ratio to 95.5%. Whether 1H sustains this margin of improvement will determine the durability of non-life insurance segment earnings. |
Asset ManagementTrends in gains/losses on securities sales and valuation difference on available-for-sale securities | Excluding gains/losses on securities sales, 1Q recurring profit was ¥1,844M (our estimate). The valuation difference widened to -¥3,621M; we will monitor both the sustainability of realized gains and the trajectory of unrealized losses. |
Policy GrowthNet increase in policies in force; YoY growth in net premiums written | Net premiums written rose 5.9% in 1Q, decelerating from +9.9% a year earlier. Continued growth in policies in force after the transfer completes will underpin premium growth from next fiscal year. |
New BusinessesSegment profit/loss in the veterinary hospital and health innovation businesses | The veterinary hospital business grew revenue 20.2%, but swung from a ¥60M profit a year earlier to a ¥191M loss. We will look for a clear path to converting revenue growth into profit. |
Key Issues from Previous Results (FY3/27 1Q Results)
1Q ordinary revenues were ¥21,905M (+20.1%), recurring profit was ¥3,530M (+267.5%), and quarterly net income attributable to owners of the parent was ¥2,433M (+274.0%), all reflecting strong top- and bottom-line growth. The company aims to become a preventive insurance group under the concept of "get insured, get healthier," as part of its "second founding" initiatives. This quarter showed improved pet insurance profitability coming through in the numbers. The central issue for 2Q is to separate the underwriting and investment contributions to this profit level and assess their sustainability.
1. Upside Potential vs. 1H Plan
- Previous Quarter: 1Q recurring profit of ¥3,530M represented 88.3% of the ¥4,000M 1H plan (our estimate).
- This Quarter's Check: The plan implies a conservative standalone 2Q recurring profit of ¥470M (our estimate). We want to confirm the company's loss ratio and expense assumptions for 2Q and whether guidance will be revised.
- Key Metrics: 1H cumulative recurring profit vs. 1H plan; progress against the ¥5,000M full-year plan.
2. Balance Between Rising E/I Loss Ratio and Improving Expense Ratio
- Previous Quarter: The E/I loss ratio rose 2.1pt YoY to 64.5%, while the expense ratio (earned premium basis) fell 4.5pt to 31.0%. The combined ratio improved 2.4pt to 95.5%.
- This Quarter's Check: The company attributes the higher loss ratio to longer pet life expectancy, more advanced veterinary care, and persistently high treatment costs. We will check whether net claims paid (+13.6%) continue to outpace net premiums written (+5.9%) in 2Q.
- Additional Note: 1Q included a ¥502M reversal of underwriting reserves, versus a ¥439M provision a year earlier. How this swing plays out over 1H will also affect reported profit.
- Key Metrics: YoY changes in 1H cumulative E/I loss ratio, expense ratio, and combined ratio; non-life insurance segment profit (1Q: ¥3,730M).
3. Quality of Investment Income and Unrealized Losses
- Previous Quarter: Investment income was ¥2,252M, including ¥1,996M in gains on securities sales. Excluding these gains and ¥310M in losses on sales, recurring profit was ¥1,844M (our estimate), above ¥812M on the same basis a year earlier.
- This Quarter's Check: By end-1Q, the acquisition cost of "other" available-for-sale securities fell to ¥19,598M, while JGB holdings rose to ¥13,273M. The realized gains may reflect portfolio rebalancing; we want to see whether they continue from 2Q onward.
- Key Metrics: 1H cumulative gains/losses on securities sales; YoY change in interest and dividend income; change in valuation difference on available-for-sale securities vs. prior fiscal year-end.
4. Building Policies in Force After Transfer Completion
- Previous Quarter: New policies totaled 60,125 (-13.9% YoY). Policies in force reached 1,411,711, up 18,939 from the prior fiscal year-end.
- This Quarter's Check: The company attributes the decline in new policies to completion of the policy transfer from another insurer. We will assess whether stronger sales channel efforts can sustain net growth.
- Key Metrics: Policies in force at end-2Q vs. prior fiscal year-end; YoY changes in 1H cumulative new policies and net premiums written.
5. Profitability of New Business Segments
- Previous Quarter: The veterinary hospital business posted a segment loss of ¥191M, swinging from a ¥60M profit a year earlier. The health innovation business grew revenue 37.4%, with a segment loss of ¥74M (vs. a ¥61M loss a year earlier).
- This Quarter's Check: The company is expanding advanced veterinary care (surgical robots, cell therapy), and property, plant and equipment increased by ¥541M in 1Q. Upfront investment costs may be weighing on earnings; we want to gauge when profitability will improve.
- Key Metrics: Segment profit/loss in the veterinary hospital and health innovation businesses; YoY change in depreciation.
Key Timely Disclosures During the Quarter
- 2026/09/18August 2026 Monthly Business Parameters - Monthly business parameters for the 2Q period were disclosed. Trends in policies in force and other metrics offer an early read on 2Q results.
- 2026/09/15Rating Change (Upgrade) - Japan Credit Rating Agency (JCR) upgraded the company's long-term issuer rating and the rating on its 2nd series unsecured bonds from A to A+. The stronger external assessment of financial soundness and creditworthiness is a positive for funding.
- 2026/08/21July 2026 Monthly Business Parameters - Monthly business parameters for the first month of 2Q were disclosed. Together with the August data, they provide visibility into post-transfer policy trends ahead of 2Q results.
Previous Quarter Results (FY3/27 1Q Actual)
The group's core business is pet insurance provided by Anicom Insurance. It also operates pet-related internet services, veterinary hospitals, and health innovation businesses across the full life stage of animals. A central pillar of its "second founding" is the shift to a "preventive insurance group" that uses claims data to help prevent illness and injury. In 1Q, expense ratio improvement and investment gains lifted recurring profit to 88.3% of the 1H plan. The company left FY3/27 guidance unchanged and maintained its year-end dividend forecast of ¥13.50 (vs. ¥9.00 in the prior year).
| Item | Amount | YoY | vs. Company Plan | Notes |
|---|---|---|---|---|
| Ordinary Revenues | ¥21,905M | +20.1% | - | Underwriting income +9.1%, investment income +521.8%; 53.4% progress vs. 1H plan |
| Operating Income | - | - | - | Not disclosed as an insurer; assessed on a recurring profit basis |
| Recurring Profit | ¥3,530M | +267.5% | - | Driven by expense ratio improvement and ¥1,996M in gains on securities sales; 88.3% progress vs. 1H plan |
| Quarterly Net Income Attributable to Owners of Parent Company | ¥2,433M | +274.0% | - | Extraordinary losses of ¥7M; negligible impact |
| EPS | ¥33.09 | +280.8% | - | Average shares outstanding declined due to share buybacks |
Guidance Achievement Rate vs. Full-Year Plan (Recurring Profit Basis): 70.6% (prior-year period: 27.1%)
- The prior-year figure is our estimate, using the prior fiscal year's full-year actual of ¥3,543M as the denominator.
- Progress against the ¥4,000M 1H plan was 88.3% (our estimate).
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