ClearView Wealth Limited (CVW) Earnings Call Transcript & Summary

Good day, and welcome to the ClearView Full Year Results Briefing. [Operator Instructions] Finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Nadine Gooderick, Managing Director, to begin the conference. Nadine, over to you.

Thank you for joining ClearView's full year results briefing. I'm here today with Athol Chiert, ClearView's Chief Financial Officer. In a moment, Athol will take you through the results in detail. But first, I will provide an overview and business update. There will be an opportunity to ask questions at the end. ClearView had another strong year with a group underlying net profit after tax of $35.3 million, representing a 25% increase on the previous corresponding period under the new AASB 17 accounting standard. The business continues to drive strong momentum with an environment of favorable market conditions. Our FY '24 highlights include new business market share rising to 11%; gross premiums of $358.1 million, up 10% on the previous corresponding period; and life insurance underlying NPAT margin of 11%. I'm pleased that ClearView introduced an interim dividend this year of $0.015 per share paid in March 2024, in addition to a final dividend of $0.017 per share payable in September 2024. This brings our total FY '24 dividend to $0.032 per share, which is at the top end of our payout range. The DRP has been reinstated and will operate for the FY '24 final dividend to provide shareholders with an opportunity to reinvest in the growth ambitions of the company, noting that it is not the intention to seek support for any shortfall in shareholder participation. This is further evidence that the group is in an underlying capital generation position. Our FY '24 results demonstrate that our strategy is sound and that we are tracking well to our key FY '26 goals, as previously communicated to the market. These goals are outlined on Page 3 of the investor pack and include increasing new business market share to 12% to 14%, in-force market share to circa 4%, gross premiums of $400 million, and an underlying NPAT margin of 11% to 13%. ClearView today is a simplified business focused solely on life insurance. As a dedicated life insurance company, we exist to help our customers protect themselves and their loved ones against the financial risk of a major accident or illness or premature death. We do this by providing high-quality, fit-for-purpose life insurance solutions and excellent customer service in partnership with financial advisers. We have progressed our strategic technology transformation, which will provide significant flexibility, enabling us to customize our flagship ClearChoice product offerings efficiently and at scale in order to meet the evolving needs of our customers and distribution partners. At the same time, we are leveraging the breadth and depth of our increasing distribution footprint and the growing maturity of our data insights capability to help more Australians and their families access life insurance by being easy to do business with and providing a superior customer service. Overall market conditions are improving, and ClearView is winning market share in a growing market as we continue the focused and disciplined execution of our strategy. We're also finalizing our exit from wealth management following the full exit of our advice business with the sale of our interest in Centrepoint Alliance during the first half of the financial year. As previously said, given the increasing size and scale of our in-force portfolio, improved capital position and the industry's improving outlook, ClearView has increased its exposure to underwriting risk for new business from the 1st of October 2023. All of these actions will support margin accretion over time as we target an underlying NPAT margin of 11% to 13%. In summary, the business has demonstrated strong performance this year. It has a solid balance sheet and capital position and is on track to achieve its FY '26 targets. I will now hand over to Athol, who will take you through the results.

Thank you, Nadine. ClearView successfully adopted the new AASB 17 accounting standard for the first time in the half year period and has continued to embed this new standard for the full year FY '24 results. While AASB 17 impacts the timing of when insurance earnings are recognized, it does not impact the economics of our business, ClearView's financial strength, product cash flows, and the ability to pay claims and/or dividends remain unchanged. For the financial year, on a AASB 17 basis, group underlying NPAT from continued operations increased 25% to $35.3 million, with the life insurance underlying NPAT increasing 23% to $39.5 million. The FY '23 prior year numbers have also been restated on a AASB 17 basis. Gross premiums increased by 10% to $358.1 million, driven by market share gains in new business flows and inflation in premiums, with lapses largely in line with expectation. Gross premium income for the year broadly reflects the average in-force premiums that increased 10% to $374 million. New sales increased 34% to $33.7 million, achieving an 11% market share, up from 9% in the prior year. The business has continued to win share in the growing market. The FY '24 life insurance underlying NPAT is up 23% to $39.5 million at an underlying NPAT margin of 11%, up from 9.9% in the prior year. The improved margin between periods reflects the interest rate changes between periods, strong business momentum, and benefits of the transformation program, but noting that it was also adversely impacted by total permanent disability and income protection claims experienced in the year. The long-term material claims assumptions have been updated to reflect the increased claims costs from these products, with a further phase of the gross premium repricing cycle in calendar year 2025 to cover these increased claims and, if applicable, reinsurance costs across these products. These have been incorporated in the FY '26 target margin range of 11% to 13%. The life insurance business performance is expected to continue to support the double-digit NPAT growth as previously communicated to the market. Looking ahead, the improved target margin over time is driven by scale benefits, the increased exposure to underwriting risk for new business and operational efficiency savings expected to be achieved from the information technology investment. Furthermore, the uplift in investment in the claims team and capabilities provide us with the confidence that the margin range is achievable. The FY '24 results also included the sale of ClearView's stake in Centrepoint Alliance. Significant progress has also been made in the exit of the wealth management businesses during the financial year, with the retirement of our trustee and the sale of the investment management business. From a balance sheet perspective, ClearView has net assets of $353.2 million, backed by cash and highly rated securities. The balance sheet provides strong downside protection due to its high level of net tangible assets. Upon the implementation and transition to AASB 17, for the in-force business, as at the transition date on 1 July 2022, the opening balance sheet has an initial net asset reduction of $83.6 million after tax. This is then released back to profit over time, leading to a positive impact on future profit release. Given that it is probable that the group's future taxable profit will be available, against which these tax losses can be utilized, the additional deferred tax asset of $35.9 million has been recognized on balance sheet at transition. The total group deferred tax asset related to group carryforward losses is $43.8 million at 30 June '24. This tax and capital benefit should be realized in future benefits as these losses are utilized. ClearView continues to generate capital from its in-force portfolios prior to the reinvestment in new business, with the business in an underlying capital generation position. I will now hand back to Nadine to wrap up before opening up for questions.

Thank you, Athol. The call out is on Page 21, which reiterates the future focus areas for ClearView in FY '25 and our financial outlook. Business simplification remains a key strategic priority, and we have achieved significant milestones in the last 3 years. We continue to invest in technology and transformation, with planning underway for the migration of the existing in-force onto the new functional platform to drive scale and efficiency benefits from the first half of FY '26. A number of initiatives are also underway to use the capability of our people and the way we do things to drive higher customer engagement, retention and satisfaction. Essentially, our ambition is to be the best at life insurance, leveraging our dynamic challenger ethos together with our simplified technological architecture and smaller, more agile company size to meet the targeted needs of our customers and advisers in faster, better and smarter ways. I'm very proud of what the team has achieved this financial year as we continue to deliver on our strategy. We expect underlying NPAT to continue to grow at double digits with a target FY '26 underlying NPAT margin of 11% to 13%. I will now hand over to the operator to open up for questions. Thank you.

[Operator Instructions] Currently, there are no questions. I'd like to hand back to our speakers.

Okay. Thank you very much. That concludes our FY '24 call. Thank you so much, everyone. Thank you for joining us.

That does conclude our conference for today. Thank you for participating. You may now all disconnect.