Helia Group Limited (HLI) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Helia Group Limited 2024 Full Year Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Paul O'Sullivan, Head of Investor Relations. Please go ahead.

Hello, and welcome to the 2024 Full Year Financial Results briefing for Helia Group. I am Paul O'Sullivan, Head of Investor Relations. This morning, we will start with a presentation from our CEO, Pauline Blight-Johnston, who will provide an overview of the results. Our CFO, Michael Cant, will then go into more detail on the financial results, and Pauline will then wrap up with closing comments. At the end of the presentation, we'll pass back to the moderator and take questions from investors and analysts. I'll now hand over to Pauline.

Thank you, Paul. Good morning, everyone, and thank you for joining us. Before I start, I'd like to acknowledge the Cammeraygal people of the Eora Nation on whose land I'm hosting our call today. I pay my respects to all elders past and present and to all Aboriginal and Torres Strait Islander people here today. Helia is Australia's leading lenders mortgage insurance provider. We harness the power of almost 60 years' experience to help homebuyers achieve homeownership. We're a specialist LMI provider with a differentiated customer-focused strategy. We partner with our customers to help aspiring homebuyers realize their property dreams and get into homes an average of over 5.5 years earlier than they would without our support. In a year when the challenge of housing affordability continued to increase, we are proud to have worked closely with our customers to help over 31,000 Australians into homeownership, ending the year with over 810,000 policies in force and insurance in force of $235 billion. We are pleased to present today our 2024 financial results, demonstrating strong financial and operational performance for our customers, shareholders, continued market leadership and a robust capital position that provides scope for both investment in the business and shareholder returns. I'll now turn to Slide 5 to walk through the full year 2024 highlights. In 2024, Helia delivered an underlying net profit after tax of $221 million, benefiting from a continuation of unusually light claims experience. Statutory net profit after tax of $232 million was above underlying NPAT, mainly as a result of pretax mark-to-market unrealized gains on infrastructure and equities. Insurance revenue was $389 million, reflecting the lower levels of premium in recent years. I'll discuss new business volumes in greater detail in a few minutes. Total claims incurred were a negative $37 million as releases of reserves for previously reported claims exceeded new claims recognized due to continuing unusually good experience. During 2024, we continue to deliver on our customer-focused strategy, investing in better understanding the needs of our customers, brokers and homebuyers. Helia retained 100% of our 2024 customer contract renewals, reflecting the strength of our relationships and the quality of the service delivery that we provide our customers. The trust and satisfaction of our customers was again demonstrated by our strong Net Promoter Score of plus 83, up a further 4 points on 2023. As we disclosed in our ASX announcement this morning, we currently have no update to provide in relation to the Commonwealth Bank contract or RFP advised in our June ASX announcement. During the year, we also delivered 6 new customer integrations to our modern APIs and delivered our new digital onboarding system, which is expected to reduce the transition time for new customers from months to weeks. The prudential capital amount ratio of 2.1x as at 31 December 2024 and strong 2024 profitability have enabled the Board to declare today a fully franked final ordinary dividend of $0.16 per share and a fully franked special dividend of $0.53 per share. Our financial strength also enabled Helia to return $113 million to shareholders through on-market buybacks during 2024, reducing the share count by 9%. The key performance measures on Slide 6 depict Helia's results in graphical format. A key driver of the strong result has been the continuing low level of claims with a total incurred claims ratio a negative of 9.5% for the year. The net tangible assets and contractual service margin together rose 5% in the year to $5.58 per share, illustrating the value being created for shareholders. Despite an active capital management program during the year, Helia's PCA coverage ratio remains above the Board target range, and I'll discuss our capital management principles and initiatives shortly. Turning to economic conditions on Slide 7. The resilience in the Australian labor market continued to be a key positive for Helia. The unemployment rate ended 2024 unchanged from its starting level of 4.0%. Whilst there was a small increase in the unemployment rate in January, the participation rate remains around all-time highs. Hours worked remain robust and wage growth is assisting loan serviceability. CoreLogic's Home Value Index reported an increase in national dwelling values of 4.9% over the year, with growth stabilizing in the fourth quarter. Strong annual dwelling value increases in Western Australia and Queensland were particularly positive for the in-force portfolio and contributed to a fall in negative equity. The Reserve Bank of Australia's cash rate target was stable during the year at 4.35%, but the steep rise in mortgage interest rates in 2023 and cost of living pressures contributed to a modest increase in delinquencies. The 25 basis point cash rate cut at the February meeting may begin to take some of the pressure off household budgets. Slide 8 provides a closer look at the residential mortgage market and industry gross written premium. High loan-to-value ratio lending grew 14% on the prior comparative period, but remains below historical averages as buyers remain sensitive to movements in house prices, the high level of interest rates and serviceability buffers. LMI industry growth has lagged high LVR lending growth due to the impact of the Federal Government's Home Guarantee Scheme and increased lender self-insurance. Pleasingly, for Helia, our second half 2024 gross written premium was the highest since the second half of 2022 as a result of both increases in the high LVR lending market and an increase of Helia's LMI market share. Slide 9 looks at the impact of the Federal Government Home Guarantee Scheme on the LMI industry. Whilst the Scheme has remained at a maximum of 50,000 places per annum in recent times, the number of issued places are continuing to increase. This is having an impact on the LMI industry with the Scheme now representing 38% of total lending that is either insured or government guaranteed. Helia continues to work closely with policymakers to encourage them to better focus government support packages for homeownership to those in real need of assistance, including those that are unable to obtain the support they need through existing private sector solutions. Slide 10 provides more detail on industry arrears and the strength of Helia's portfolio. Industry mortgage arrears rose in the first half of 2024, but have shown some signs of flattening in the second half. Favorable economic conditions and increased sophistication in the application of lender hardship solutions continues to result in delinquencies remaining both lower than expected and lower than long-term average levels. Helia's new delinquency trends have been consistent with industry arrears. Closing delinquencies, though slightly increased compared to the prior year, continue to benefit from cures and sales with no claim, reflecting strong employment and dwelling value conditions. Slide 11 walks through our disciplined capital management initiatives. Our principles on capital management remain unchanged. We seek to deploy capital at attractive returns to shareholders and over time to return to and operate within the Board's target range of 1.4 to 1.6x PCA. If we can't deploy the capital to drive shareholder value, we will look to return capital to a stable fully franked ordinary dividend and to explore options to return excess capital through special dividends or share buybacks. Capital generation was strong in 2024, reflecting strong profitability and low new business strain due to subdued premium volumes despite some increase in the second half. In addition to the $0.84 per share from ordinary and special dividend declarations in respect to the 2024 financial year, the Board has today announced a further $100 million on-market share buyback. This is in addition to the existing $21 million remaining to be completed and results in a total announced buyback of $121 million. Fully completed, these dividend and buyback activities would have the impact of reducing the PCA multiple to 1.73x on a pro forma basis. On Slide 12, we outline Helia's approach to sustainability. Demonstrating good corporate citizenship is a core part of who we are, and there are 2 foundational sustainability pillars where we believe we can have the greatest impact. Firstly, driving social well-being reflects our role in the communities in which we live and work, aligned to our purpose of accelerating well-being through homeownership. Through our community partnerships, we support programs that help people experiencing homelessness, provide emergency shelter and help remove barriers to future homeownership. During 2024, Helia worked with lenders to help over 11,000 Australian families experiencing hardships stay in their homes by supporting loan deferrals and restructures. Our commitment to diversity, equity and inclusion remains a cornerstone of our culture, and we're especially proud of achieving and maintaining gender pay equity, as well as being recognized as a WGEA Employer of Choice for Gender Equality for the 10th consecutive year. Our second pillar, enhancing climate resilience is a core to our business and the community. We continue to work with lenders using our location risk model to provide a granular identification of high-risk properties and an assessment of the potential financial impact of climate change. Our Scope 1 and 2 emissions have been maintained at net zero through the purchase of renewable sources of energy. We have also commenced emissions measurement on our investment portfolio, acknowledging that Helia has a role to play in ensuring that companies we invest in also play their role in being climate awareness. Moving to Slide 13. Helia is proud of the pivotal role we and the LMI industry have played in the Australian property market since 1965. Our strategy has 4 key objectives. Firstly, to grow the market for LMI and help more Australians realize the benefit of homeownership sooner. We have commenced a new program incorporating the theme "LMI Lets Me In", repositioning LMI for homebuyers, mortgage brokers and members to improve awareness and increased understanding of the benefits of LMI. In recognition of the important role mortgage brokers play in home lending, in 2024, we launched our inaugural Mortgage Broker LMI Sentiment Index to better understand the perceptions and insights of mortgage brokers regarding LMI. Using the findings from this survey, we are partnering with mortgage brokers to better integrate and position LMI as they assist homebuyers to understand their options. This survey complements Helia's annual Home Buyer Sentiment Report, which provides valuable insights into homeownership, the buying journey and awareness and sentiment towards LMI amongst aspiring homebuyers. The 2024 survey indicated that 77% of first homebuyers are likely to use LMI, a significant increase on the 59% result from the previous year. Secondly, our differentiated LMI proposition is resonating with customers and helping us grow and defend our LMI market share. We continued our 100% success rate with 2024 contract renewals and are working with a range of customer and noncustomer lenders to build our relationships and expand our services, harnessing the momentum we have built over recent years. Thirdly, we are committed to maintaining our superior customer experience by strategically investing in technology to optimize our operations and leverage automation to elevate our service delivery. This year, we successfully delivered 6 new customer software integrations to our modern APIs. We also completed 5 new reusable APIs with industry technology platforms such as Simpology. These platforms are used by lenders and enable an out-of-the-box integration offer for our existing and prospective customers. Importantly, we also delivered during the year an industry-first new digital onboarding system that can reduce the transition time for new customers from months to only weeks, positioning us well as we engage with prospective customers to grow our footprint over the coming years. Finally, Helia's strong financial performance and operational performance in the past year is a testament to the skills, experience and dedication of our people to delivering exceptional outcomes in all areas of our business. It's a strategic imperative for us to maintain this and support our people in their own development, as well as to operate increasingly efficiently as a team. This investment in our people is paying dividends with Helia staff engagement score of 78%, placing us again in the top quartile of financial services companies in Australia compared to the Culture Amp Finance Australia benchmark, leaving us well placed for future success. I'll now hand over to Helia's Chief Financial Officer, Michael Cant, who will provide more detail on our financial results.

Thank you, Pauline. I'm pleased today to present a strong financial result for 2024, underpinned by another very low year for claims incurred. I'd like to start my presentation on Slide 15 with the income statement. Statutory net profit after tax was $232 million. Underlying NPAT, which removes unrealized gains and losses on the shareholders' fund was $221 million. And while NPAT was down on prior year, it was nevertheless a strong result with a 19.9% underlying return on equity. Key elements of the result were a 9% decline in insurance revenue, while claims experience was again extremely favorable. Total claims incurred were negative $37 million as releases from the opening reserves exceeded claims paid and reserves for new delinquencies. Net expense from reinsurance contracts of $24 million was well down on the prior year due to lower levels of reinsurance coverage in response to reduced volumes and strong capital position. The overall insurance service result was $292 million. Net investment revenue for the year was $141 million, representing a return of 4.9%. Slide 16 has a breakdown of the insurance revenue into its major component parts. The 9% fall in insurance revenue is primarily due to the smaller volume of in-force business following subdued gross written premium volumes in recent years. Volatility in the level of experience variations arising from premium credits and top-ups was also a small drag on revenue for 2024. Slide 17 shows the trend in new business. Gross written premium was up 6% on the prior year with a noticeable lift in the second half, reflecting a cyclical pickup in high LVR lending. Nevertheless, the overall level of gross written premium remains soft as the LMI industry as a whole continues to be negatively impacted by the Federal Government's Home Guarantee Scheme. We've also seen an increase in the level of waivers and self-insurance from some lenders in response to the benign claims environment. Within a challenging market, Helia has increased its market share from 33% to 35% on a rolling 12-month basis. Slide 18 has a breakdown of the insurance service expense. The key item of total incurred claims was negative $37 million, and this reflected good experience in a benign environment, as well as some changes to the reserving basis. The key drivers of the good experience were house price appreciation, as well as ongoing cancellations from refinancing and property sales with no claim. Further analysis and commentary on claims incurred is contained on later slides. Total expenses, including other operating expenses and the amortization of acquisition expenses were up 4% year-on-year. Slide 19 contains more detail on claims. Paid claims remain unusually low as does the stock of mortgages in position. The level of negative equity is also extremely low at only 0.5% of the total portfolio. And this is a function of both the strong property market together with the seasoned nature of our book. The low mortgages in possession and minimal levels of negative equity underpin our expectation that 2025 claims will again be lighter than long-run averages. Slide 20 contains an overview of delinquency performance. New delinquencies were up 17% on the prior period due to higher interest rates and cost of living pressures. A sizable proportion of the new delinquencies have been previously delinquent for which we already recognize a liability by the redelinquency reserve. Total number of closing delinquencies was up 12% over the year with stable experiences on cures and aging, partly mitigating the rise in new delinquencies. The increase in delinquencies was most noticeable in the first half of the year, and we saw some flattening off of delinquency numbers in the fourth quarter. At a state level, Victoria had the most significant increase in delinquencies. Western Australia and Queensland, which historically have had higher levels of arrears and claims are now performing much better in a relative sense. Please turn to Slide 21 for further analysis on claims incurred. New claims incurred for the period of $53 million was slightly down on the prior year, largely due to a reduced estimate for IBNR delinquencies. This new claims incurred was more than offset by a sizable $90 million positive impact from a reduction in the liabilities for prior year's incurred claims. Experience on claims incurred from prior periods continues to be very positive and much more favorable than assumed in the reserving basis. We've seen house price appreciation in most states and a continuation of strong and stable cure rates. Cancellations through a combination of property sales and refinancing have also continued to have a positive impact by releasing reserves on policies where Helia has gone off risk. Together, these factors contributed a $57 million experience benefit for the period. In addition to the good experience, there was a $33 million benefit from changes in the reserving basis, which I will expand upon later. Please now turn to Slide 22, which outlines a different presentation of the insurance services result. The expected insurance service result represents what we would expect to report if experience was exactly in line with the actuarial assumptions. For 2024, this was $165 million, up 13% on the prior comparative period, mainly due to a significant reduction in the level of reinsurance premiums. Experience variations represent the difference between the actual and expected experience and the largest of these would typically be claims. 2024 again saw another very significant positive experience variation of $127 million, largely arising from positive claims experience. Slide 23 summarizes the breakdown of investment revenue. Net investment revenue of $141 million represented a return of 4.9%. The bulk of this return was through interest, dividend and distribution income. Capital gains, both realized and unrealized, contributed $27 million, but was not as strong as the prior year. The net running yield on the portfolio at the end of the year was 4.3%. Slide 24 contains the net insurance finance expense. And this item measures the impact of interest rates on the insurance contract liabilities. Our insurance liabilities are valued on a discounted basis. And accordingly, there is an embedded interest accretion each year by the unwind of the discount rate. The second component of the interest finance expense reflects changes in discount rates, which move in line with market interest rates. For 2024, there was only a small impact from change in discount rates. The interest rate sensitivity table on the slide shows the impact of changes on interest rates on both assets and liabilities. We duration match the investment portfolio backing the insurance liabilities, which reduces the financial impact from changes in interest rates. Our balance sheet is shown on Slide 25. The balance sheet is a fairly simple one with 97% of the assets in cash and investment assets and the liabilities comprised mainly by the insurance contract liabilities. There is also $190 million of debt on the balance sheet in the form of Tier 2 notes, which qualify for APRA capital. These notes have an initial call date of the 3rd of July 2025. The major change in the balance sheet over the year was in the tax balances. As we outlined at the half year, there has been a change in tax legislation that has aligned tax and accounting for insurance companies. Accordingly, we've seen a significant drop in our deferred tax asset, along with the corresponding and offsetting changes in the current tax liabilities and assets. In aggregate, net assets over the year were down $61 million, reflecting the ongoing share buyback and capital management. However, the reduced share count has led to an increase in the net tangible assets per share from $3.76 to $3.93 per share. Our investment portfolio is summarized on Slide 26. The asset allocation has been fairly stable and consistent over the year with a largely defensive portfolio. As I outlined earlier, the technical funds largely match the profile of our liabilities. Slide 27 shows a fuller breakdown of the insurance contract liabilities. The liability for incurred claims represents liability arising from past periods, while the liability for remaining coverage, or LRC, represents the liability for future periods. Total insurance contract liabilities are down 10% on the prior year. The liability for incurred claims fell primarily due to good claims experience, while the LRC was down primarily due to lower business volumes. Insurance contract liabilities are set on a best estimate basis plus a risk margin. The LRC also contains a sizable component for expected future profits referred to as the contractual service margin or CSM. At 31 December 2024, the CSM represented approximately 50% of the total liability for remaining coverage with the risk adjustment an additional 10%. I'd now like to provide some commentary on the liability for incurred claims, which is shown on Slide 28. The liability for incurred claims is calculated using statistical models that reflect the likelihood of delinquent policies developing into a claim. And the liability takes into account the key attributes of policies in arrears, such as the loan-to-valuation ratio, the duration of the arrears and the location of the property. Reserves also factor in the expected economic environment and outlook. Given the unusual conditions that prevailed from 2020 to 2022, the reserving basis at that time made allowance for potential increase in delinquencies in response to the COVID repayment deferrals and the mid moratorium and the subsequent rapid rise in interest rates. As these factors have dissipated in recent years, the reserving basis has progressively released much of these allowances. In 2024, these basis changes resulted in reserve releases of $33 million. The overall liability for incurred claims is comprised of 3 core elements, as you can see on the chart. The reserve for reported delinquencies was $102 million, which was fairly steady year-on-year. While the number of closing delinquencies was up 12%, this was offset by a reduction in the average reserve per delinquency. The reduction in the average reserve was a function of both rising house prices, as well as shifts in the state mix of delinquencies. Changes in the reserving basis also contributed. As I noted earlier, we continue to hold a sizable liability of $128 million for loans that have previously been delinquent but are currently fully up-to-date. This redelinquency reserve fell by $30 million over the year, largely due to cancellations. Finally, we hold a reserve for incurred but not reported delinquencies, which totaled $36 million and was down by $10 million on the prior year. Please now turn to Slide 29, which shows information on the contractual service margin balance. And as I noted, this represents expected future profits on the existing in-force business. The total stock of CSM was $643 million, which is down 4% on the prior year. New business for the year contributed $45 million of CSM. However, this was significantly less than the CSM recognized from the existing book during the year. There was a $64 million increase in the quantum of CSM due to changes in assumptions around the valuation of future liabilities. These assumption changes mainly related to an improved claims expectation for the 2020 and '21 cohorts as these policies season with good levels of positive equity. Slide 30 outlines the regulatory capital position, which remains very strong with a PCA ratio of 2.1x. The regulatory capital base fell slightly over the year, reflecting a fall in net assets due to the ongoing capital management activity. However, regulatory capital requirements fell by a greater amount as a result of lower new business, high cancellations and portfolio seasoning. Reinsurance capital credit was $275 million and is well below historic levels. In recent years, we have deliberately taken out less reinsurance in response to lower new business volumes and a very strong capital position. And this provides significant capital headroom for the future. Finally, on Slide 31, you can see our capital walk. As Pauline noted earlier, we have returned significant capital during the year through a combination of both dividends and buybacks. However, the business is continuing to generate large amounts of organic capital, and the PCA ratio increased due to a combination of strong net profit after tax and a sizable capital release from the runoff and seasoning of the in-force book. Before closing, I'd like to recap on the highlights of the result. 2024 was another strong profit result off the back of another year of very low claims. New business remains subdued, but we have seen some signs of a cyclical recovery. And finally, the capital position remains very strong, highlighting scope to both invest in the business and continue our program of ongoing capital management. Thank you, and I'd now like to hand back to Pauline.

Thank you, Michael. I'll now turn to Slide 33 and the outlook and full year 2025 guidance for Helia based on current economic expectations. Helia is well positioned to continue to deliver its purpose of accelerating financial well-being through homeownership and to continue to deliver value to our shareholders. As we look ahead, 2025 insurance revenue is expected to be in the range of $310 million to $390 million. The key driver of profitability will be the timing and magnitude of future claims, which are driven by the economic environment and by nature, are very difficult to predict. In 2025, the total incurred claims ratio is expected to remain well below Helia's expectations of a through-the-cycle total incurred claims ratio of approximately 30%. As we have noted a number of times in recent periods, our claims experience has been unusually low and is not expected to continue at these levels in the medium term. Wrapping up on Slide 34. Helia is Australia's leading LMI provider and the delivery of our strategic focus to improve the LMI experience of our customers and their borrowers is solidifying this position. We are seeing some early signs of a cyclical recovery in by high LVR lending and are continuing to pursue new customer opportunities in LMI to increase our market share. Our deep expertise and responsible financial management have positioned the company well for profitable growth with sustainable returns in excess of our cost of capital, creating value for our shareholders. Our solid profitability, combined with capital releases from the back book allows the business to invest in our strategic agenda and deliver value for shareholders. Helia has delivered superior total shareholder returns over a sustained period, having outperformed the ASX 200 over 1 year, 3 years and since listing in 2014. We look forward to continuing to deliver on our purpose for the benefit of future generations of Australian homeowners and for our shareholders. On behalf of the Board and senior leadership team, I would like to again thank all of our people at Helia. Our dedicated team's passion and commitment collectively delivers the customer outcomes and strong results we've announced today. Thank you to our customers for your continued support and collaboration to make homeownership more accessible for Australians. And finally, to thank you to all of our shareholders for your ongoing support of Helia. And with that, I'll now hand back to the moderator for questions.

[Operator Instructions] Our first question comes from John Li of Goldman Sachs.

Can you hear me?

Yes, we can.

Awesome. Congratulations on the result. Just 3, I guess, from my side. Just firstly, with regards to the CSM balance, it's good to see that it's stabilized. But just to what extent do you think you guys will be able to improve this balance either through improved profitability of the insurance contracts themselves or maybe like further optimization of adjustments and estimates?

Yes, it's Michael here. Ultimately, it's going to be a function of us continuing to write profitable new business. We're obviously happy with the profitability of the business that we're writing at the moment, but we'd like to increase the volume. So the fact that we've got a positive impact from changes in estimates this year is a good thing, reflects the ongoing good experience and the outlook is reasonably positive. But ultimately, for us to stabilize and return to growing that CSM balance, we need to see the volume of new business pick up.

Got it. Got it. And then my second question. So given that this loss environment has continued to remain benign, and it's kind of a similar thematic across credit losses in mortgages as well. Do you think that there's potential for this new low loss benign environment to be structural and we actually don't get back to these long-run historical averages?

I might take this one, and then I'm sure Michael will have something to add. And as always, I preface all of these comments by saying none of us are born with a crystal ball, even those we suspend our lives in insurance. So it is difficult to tell. Throughout my 30 years in insurance, the one thing I will say is, it's very easy to allow residency buyers to come into the way we see things. And I find many stakeholders tend to over-index on the recent years, whether they've been positive or negative. The reality of this business, as you know, is that, in times of low unemployment, it will do very well. We are more, in some ways, I guess, a cat line of business that every now and then when the economy really falters, that's when we come and pay the claims. And so, we try to manage for us through-the-cycle period. Now, this period has been an unusually low good period because good periods are usually not quite as strong. But that was followed by some pretty poor years. So it was following some pretty poor years prior to that. So I would say our job is to try to pick us through the cycle. We would need to see how the business behaves when unemployment does pick up, which it will do at some point in time to form a view that things are structurally different. At the moment, we still are of the view that's being caused by the unemployment rates and the strong reserving that we entered this period with. Michael?

Got it. Got it. That was --. Yes, I've got just one more. And it's okay. This is third question, I understand that you guys don't really talk too much about it, but it's just on the CBA RFP, if there's any update or if you're in any position to talk about that?

It's always worth trying, John. But as you know, as soon as we know anything, we will let you know. At this point in time, we have nothing more that we can say on it.

Our next question comes from Jason Shao from Macquarie.

Two for me, if I may. First, on your GWP growth. What's driven the gains in market shares? Is that mostly a result of recent contracts you've won or just the mix of borrowing going through the lenders you're already partnered with? And if it is the former, are you able to shed any light on any of the contracts you've won recently?

Yes, it's actually a mixture of both. It's the flow-through of the contracts we won towards the end of 2023 being ME Bank and Great Southern Bank. So we have picked up lenders that we didn't previously insure before. And it's also some of our other lenders that we've been supporting have increased their market share, partly as a result of work we've done with them on recalibrating some of the lending settings, for example, increasing the investor lending to a maximum of 95% LVR. That's made quite a difference for some of our lenders.

Okay. Great. No, that makes sense. And second question on claims. Just want to get a better understanding on your releases in reserves for prior incurred claims. Are your house price assumptions marked to market? Or is there a lagged effect on what housing markets do in your models? And maybe another way of asking is, if house prices remain flat from here for 2025, would there still be tailwinds to the reserving basis?

We tend to focus more on the reserving model on where house prices are at the moment. We don't factor in a material change in the future at the exception to that, and we called this out about 2 or 3 years ago when interest rates rose up rapidly at the time, there was an expectation, and it did play out in the short-term that house prices would fall. And we put an allowance in the reserving basis at that time for what we thought was an unusual period on house prices. So we -- if we saw something unusual happening, we might put what I call an overlay on it. But in most circumstances, we try to be fairly neutral in the reserving basis around the short-term outlook for house prices.

So they effectively reflect what's currently happening in the market at the moment as opposed to some sort of like, I don't know, like a moving average or something over the last few years?

Yes. So they will reflect -- I mean, we use valuation information that's current as at 31 December. So we use some statistical market valuation models. And there's a slide in the back of the pack, which summarizes the economic assumptions that we've underpinned the reserves, and Paul is just waiving to me that we've got an assumption in there of 4% house price growth for the next 12 months.

Next, we have Simon Fitzgerald from Jefferies.

I just got one on the basis reserving reported for previous redelinquencies. I was just wondering about the near-term experience about how that has gone in terms of what policyholders you are seeing that have become redelinquent again. I was just interested to know how that's working out in true experience.

Yes. So Simon, not surprisingly, given we've got a fairly large book and we've been writing business for a long time. The policies that are, I'm going to call it, second or third time delinquent in their life is a nontrivial part of our delinquencies. So when you see the interest rates have an impact, not surprisingly, some of the delinquencies are second and third time delinquency. Where we aim to be particularly prudent and we introduced this about 3 or 4 years in our reserving basis, we make an assumption and we set aside redelinquency reserves. So there's an assumption that a certain percentage of those in any particular year are going to go back delinquent now. But the experience on that continues to be more positive than our reserving assumptions. So again, it's...

It sounds like it needs to be looked at potentially.

Can I just jump in? Whilst the experience is more positive in our reserving assumptions and to Michael's point, we'll always refine our assumptions based on those information, and we're always, of course, some level guessing, but in some level be informed by data. It is pretty clear the majority -- redelinquencies have a huge impact on our delinquency book. And we are seeing that with the -- it's becoming an increasing feature as the lenders are being more, what's the word, facilitative to people in hardship. So the fact that lenders are working with people in a more collaborative way, which net-net is good for us and good for them and good for the individuals, it does mean that redelinquencies are becoming quite a significant feature. So we'll continue to refine the assumptions we always do, but I don't think there's an underlying we're glad we've got it.

Yes, yes, sure. Pauline as well, just on that structural question that came up before. If you look back at proper housing downturns and past experience, the banks could have been accused of causing a major property downturn and making their loss rates a lot worse and impairments a lot worse. I'm interested to know what your sort of thoughts are there because it seems to me that we've come out of that cycle and potentially seeing another one at some stage that banks have really learned a lot of lessons through that and potentially through COVID as well. But I'm interested to know your thoughts about whether we could -- whether there is something very structural going on in terms of that facilitation that you're talking about.

Yes. Look, it's a really interesting question. We do believe that it's been net helpful to us and to Australians and to the banks for them to have been more nuanced in the way that they've dealt with these delinquencies and arrears and giving the people for which helps more time. Having said that, we're still early days. So we are noticing a greater redelinquency rate on those individuals that have been provided with more help. So I think we're still yet to see it play out. And the other thing that we've learned is that, every cycle is different, and it's really hard to predict and it depends on some of the underlying causes in the economy. So as a judgment call, we think the banks have played it pretty well and it's been helpful, but it won't always be helpful in every situation. And we're yet to see, I think, some of the longer-term drain that may come through the book as a result of it.

And Simon, I'd just add to that is, one of the features certainly over the last 18 months has been continuing strength in house prices. And it's an easier decision for everyone to take time and work out when you've got that benefit. If prices are falling quickly, it's a much more nuanced decision for the lenders. So I don't -- certainly, there has been more sophistication and analysts and the willingness to working, which net-net this time has been extremely positive, but different cycles may play out differently.

[Operator Instructions] Next question comes from William [indiscernible] Investment.

Congratulations, Pauline. And I see you're a couple of days short of your 5-year tenure. So -- and I think the 5-year TSR shows a pretty good performance and the team you brought together there. I'm just wondering if you can give us some insight as to when you talk to the Board about the gross written premium and your future outlook for it, what are the factors that you see that will be repairing the GWP, which is down quite a bit from when you started at Genworth and now at Helia?

Yes. So there's a number of factors in the change in GWP. The most significant, of course, is the first-time guarantee scheme, which has taken in colloquial terms between about 35% and 40% of what would have otherwise been the LMI market. If the government were an LMI provider, they would be the largest in the country at this point in time. We spend -- that's been, I'd say, a step change in the industry and has taken a share away. We do spend a lot of time with government helping them understand the potential negative consequences of that for homeownership in the country in aggregate. And we are hopeful that, that won't grow any further. And in fact, over time, we may be able to work with the government to better target their programs to people that we can't help because we'll get a better outcome for homeownership across the whole country if we do that. That's the biggest impact. The second one is, we do look at the increased propensity for self-insurance that we reduced propensity, I'd say, to ensure that we're seeing from some of the lenders, which is, again, very standard in all insurance businesses and insurance cycles. So you hear the general insurers talk about it when we haven't had a hurricane for a while, people tend to insure less and insurance prices go down. And then we have a hurricane come through and people insure more and the premiums return. We're definitely suffering from that to some extent in LMI at the moment and people have short memories. And so, it would -- I often talk to the staff about the fact that we are actually here to pay claims, and it would not be bad for our business to be getting some more claims at this point in time and to remind people of the risk that does still exist in the economy and in mortgages. So there are sort of 2, I guess, industry factors that we're working with. What we're doing in response to that -- sorry, and the third one was that the high LVR lending had decreased as interest rates increase. And this is something -- I think of it as a pipe as interest rates increase, the throughput slows. Eventually, as interest rates stabilize, it catches back up again. And if interest rates fall, then it should accelerate a little bit because people's serviceability reacts. So we're starting to see that now. So we always knew that the -- we would expect some return of high LVR lending, which we started to see and if interest rates fall, that will come back. What can we do about it? As I said, we can work with the government to help them see how we can be more constructive together. We can also work with lenders to remind -- to focus where we can help them on areas where there is risk in the portfolio that they may not be identifying, and we've been doing that. And we've increased our risk settings in some areas because we've been comfortable with the quality of the book, and we need to be taking risk. That's what we are here for. But certainly, we can win market share, and we've been successful at that as well winning new lenders. So that's the biggest delta in our GWP going forward would be any change in government policy.

Do you have a metric on how much is being lost to self-insuring lenders?

We do have some data on that, I think, in our presentation, Paul, just helping me here. It's on Page 9 of the presentation. We have a chart that shows the pattern.

Thank you, operator. I guess, just in the interest of time, we might end the Q&A there, but I'll just remind anyone who is on the call, you did have a question, please come through to the Investor Relations team with any questions you have. You can find our details on the ASX and the investor presentation. So maybe now if we can just pass back to Pauline for just some closing comments.

Thank you. Thank you all for being involved and for your excellent questions. I appreciate our business can be a bit of an acquired taste, and I appreciate you taking the time to understand it. We think it's a really critical service that we provide for Australia. We're very proud of what we do, and we think it's a bit of fun too when you get underneath it. So thank you for taking the time. We are obviously very delighted to deliver another strong result. That's really been driven by 2 things. The business is operating very well. We're very proud of the way it's operating. There is also, as we have said a number of times, some short-term benefits from a very unusually low claims environment. And so, we wouldn't expect to be delivering at this level of profitability for all times into the future, but I'm pleased that we're able to and reward our shareholders at this point in time. As we've just been discussing, we spend a lot of our time on new business. That's the thing that we need to focus on most of our business -- in our business, and we are really pleased to see some signs of recovery, both from a market perspective and a market share perspective and proud of what our business has done within its what's controllable for the business to maintain and improve those market share levels. We continue to watch the economic outlook. The claims are mostly driven by unemployment. We've been through a period of difficult household budgets of some difficult GWP and difficult economic factors. However, while unemployment has remained low, it has supported our business, but we are well prepared for that to change if it should and to navigate through that. But in the meantime, we are continuing to focus our efforts on having people understand the benefit of LMI, the fact that an LMI policy taking one out on average, those who choose to take out LMI rather than waiting to save the deposit will end up over $100,000 better off in 5 years' time and we'll get into their house on average over 5 years earlier. And their message is that, we want to get out and so people appreciate the benefits of LMI and look to it as part of their wealth creation solutions. So thank you for your support, and we hope to continue to deliver for you in the coming years.

Thank you, operator.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.