Insurance Australia Group Limited (IAG) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining the 2023 IAG Investor Day. My name is Mark Ley, Head of Investor Relations. And before I hand over to Nick Hawkins, our CEO for the formal welcome, just a couple of housekeeping matters. For those watching on the webcast, we'll be pausing about quarter past 3, well, the rows in the room will head downstairs for a couple of showcases and deep dives. We expect to recommence the webcast about quarter past 4. For those in the room, I could ask that you take your seats. Please make sure your phones are on silent. And on that note, I'll hand over to Nick. Thanks.

Thanks, Mark, and good afternoon to everyone, and thanks very much for coming along. To begin with, I'd just like to acknowledge that we're holding this meeting today on the land of the Gadigal people. And so I pay my respects to Elders past present and emerging. Before we go into all the detail of our presentation slide, I sort of just wanted to set the scene a little bit about what's been happening here. So 2.5 years ago we sort of put together a plan and a team. And really what we were doing was sort of aiming to sort of focus on our core insurance business to simplify what we do within the business, and of course, resolving some of the legacy issues that we have and had. And of course, since then, us and the industry have faced what many sort of talk about a sort of unprecedented sequence of events that have impacted us. And so in a way, we've had to slightly course correct. What we've had to do is we had to materially reprice our business, reflecting the changes that we've seen around inflation. We've had to adapt to the changing environment around our reinsurance costs and our peril costs. As an example, in this half, so second half '23, what you'll see is double-digit rate increases flowing through essentially our entire portfolio. As a team, we're super focused on sort of improvement in our overall margin in the near term. And that is going to have some impact on our overall growth aspirations, particularly around the timing. And realistically, we have to be very considerate around affordability issues around what our customers are experiencing. I mean when the story here is we've had a real bias to action as a team. And we've really made what we believe is some material changes to how we run our business. We've simplified our brand structure, taking the NRMA Insurance brand nationally and simplifying the number of brands we have in that retail business. And as we know, the NRMA Insurance brand is sort of the most trusted brand in financial services and it's really helping us grow our business across our retail. We've put in place, so we've delivered an enterprise-wide claims system, so that's in. And what that does, and you'll hear a bit about that later, allows us to really capitalize on some of the scale of our business. You'll hear more from Neil about the fact that we are in the process now of rolling out a common policy, pricing and administration system across -- right across all of our personal lines products across Australia and New Zealand. And what we're really doing there is addressing 25 years of complexity that we have in our back office of IAG, really driven by the acquisitions that we've made. So essentially, we're going to have one technology platform sitting right across our personal lines business Australia and New Zealand, which is roughly 2/3 of the enterprise. As you know, we've reestablished or established sort of our intermediated insurance division here in Australia. And what we've done starting with that is we boarded on Jarrod, an experienced commercial insurance executive to really build on the strength of the CGU and the WFI brands, and really making sure that business, which is a large scale business deliver the type of returns that we should expect from that. And we've also been implementing company-wide risk management systems and processes and really, really significantly strengthen the way we run our business. So we've really had a bias to action. Though frustratingly, we also know when we -- as we're progressing the sort of strategic initiatives, we've also been -- some of the outcomes have been masked by the challenges of the environment we've been running our business in. We've obviously experienced a sudden increase in inflation, which had an immediate impact on our claims costs. We've had 3 years of La Nina with a system that's pretty much running up and down the East Coast in New Zealand that's impacted our perils and obviously amplified by climate change, the impact. And then we've had some real challenges with global reinsurance markets with a significant repricing on what it costs for us to place those programs. But what we'll do today, even despite that environment, is we're going to demonstrate our confidence in delivering the outcomes that this business can achieve, and we're going to step you through that. And so the takeaways that I want people to be thinking about when I leave this building today or off the video is that we acknowledge it's been a tough couple of years that we can though, and we're going to point them to you today, see the positive financial signals that are coming from our business now, and we'll step you through those in a number of the different presentations. At the same time, over the last couple of years, we have been investing in our business. We've been investing in our technology platform. We've been investing in our businesses and building our Repairhub and Motorserve. And of course, importantly, we've been investing in our people. So we've been doing that at the same time. And finally, you see that we're connected in a Line team, which is important for the delivery of the strategy. And you're going to hear from a number of the executives today on what they're up to. And of course, the sum of their stories is really the delivery of our strategy. And so you'll hear about that. So just on our strategy. This is the same page that we've seen before around what is the areas of focus within our business. And of course, this strategy is really guided by our purpose around building out a safer place -- building -- we're making world a safer place. And of course, most importantly, what we're trying to do here is build out a stronger and a more resilient business, and we're very focused on delivery there. But of course, considering the operating environment we've been in over the last couple of years and some of the macro industry trends that we've been experiencing. What we've also done around some of our goals and sort of measurable outcomes is probably be a little more realistic around some of those time lines. We've effectively had to adjust to the current environment some of those outcomes and ambitions. So just on that, we are maintaining our long-term growth ambitions of our business. And of course, we're going to take growth opportunities as they arise. But we're going to have -- what you'll see a real focus in all of our messaging today about continuing to strengthen and apply our pricing and risk management skills in the way we're writing our business, making sure that we really are focused on reducing our claims costs in the Now. We're streamlining some of the operational and technology costs that we're incurring and running our enterprise. And you hear a little bit about how we're rolling out digitally based insurance options for our younger people and small businesses. So we're investing in things that can create some growth. And delivering this sort of now does affect some of the timing of some of our growth agendas. And it's probably going to take slightly longer, some of our gross ambitions than we originally set out. And I'll come back to that. So breaking that down sort of further down the list, we are on track as well to deliver at least $250 million of profits out of our intermediated business, and Jarrod will talk to that. In relation to costs across IAG. You'll see we have been disciplined over the last couple of years in relation to our cost structures. But considering and it's been relatively flat, the cost of running our company. But we're being realistic in this current inflationary environment. It's going to be challenging for us to maintain that being flat over the next couple of years. However, what we are saying is that our expense ratio will be down over the next couple of years as we're leveraged into the growth of the company. So expenses will be growing less than our topline essentially is what we're saying. In relation to some of our medium-term financial goals, what we're saying is we're driven by the topline growth, which is ahead of where we probably thought it would have been 18 months ago, together with improved investment returns that we're seeing on our shareholders' funds. That sort of ROE targets that we've had in the past, we're lifting up a little bit. to be a 13% to 14% return. And of course, that's a slight increase from where we were at sort of 12% to 13% topline growth, better investment income on shareholders' funds lifts that return profile to 13% to 14% ROE. We can deliver that 13% to 14% ROE with an insurance margin of around 15% over the next couple of years. And that 15% is really us taking into account the current environment. inflationary pressures that we're seeing, perils, reinsurance and of course, customer affordability. And the package of that, we sort of see 15% sort of insurance margin sort of a realistic outcome, delivering that 13% to 14% ROE, and that's sort of the financial settings of the business. And of course, what those targets will do will deliver improved ROE and EPS for our shareholders. So today, you're going to hear from Julie, Jarrod, Amanda, Neil and Michelle about what we're up to and how we're delivering against that strategy and also in the current economic environment, how we're navigating our way through. And what you are going to see is a real focus by us on execution and delivery. And that's doing that within the context of this current environment. And then we're going to have a break for those in the room, and we're going to showcase in a bit more detail, some of the things we're doing around pricing and perils and some of the things we're doing around the claims management systems in some breakout sessions we're going to have just after 4 o'clock. So that's the plan. I'm going to step through just a little more detail before I hand over to the team around strategy, just some highlights. So around growth. The key here is essentially, we want to retain as many customers as we can and grow in areas that make sense, right? That's not pretty logical. And the themes here are really around 3 elements. And really, our growth is all coming from our retail businesses. So the 3 elements are: One, the focus that we're having on retention right now and new business with our major retail brands. So that's the NRMA, RACV, AMI and state brands, the key retail brands and the focus we've got on retention and new business with them is driving growth, and you're going to hear some stories about that. We see opportunities within direct SME with our major retail brands in Australia and New Zealand. So some growth aspirations we think makes sense around that. We also know that there's more opportunity with those big powerhouse brands in the younger demographics. And that is both with our existing brands being more relevant to that demographic as well as what we've done here in Australia with the Roland brand, which we know is attractive to some of those demographics as well. You'll see some evidence points there. We've got 207,000 more customers today in our direct business here in Australia since June 2021. But that growth, and Julie will step you through this, is really driven by a combination of the very strong retention that we're seeing in the NRMA and RACV brands, together with the way we've successfully launched NRMA Insurance into WA and South Australia. So we've sort of got this -- we've got an Australia-wide brand, ex Victoria now with NRMA, when we're achieving growth with that as that's been deployed. And importantly, and you'll see the link here, the way we're doing that and deployed NRMA into WA and South Australia is on our new platform, which we call the enterprise platform, and that's helping us build out that brand and deliver on that growth strategy. In New Zealand, Amanda will talk about this, we do expect that market to be pretty challenging. Following those extreme weather events that occurred in the beginning of this calendar year in the North Island. So we're a bit more cautious about how our growth is going to play out in New Zealand probably than what we are in Australia. We know though that the growth is still important to us and it's going to be an important part of our strategy. However, given the current environment that we're operating the business in and the prioritization of margin in the Now, essentially, what we are doing is pushing out our delivery timeline on how we see those sort of 1 million extra customers of our business playing out. We originally said 2026, there'll be '27 or beyond a year or so later than we originally thought, considering the operating environment to which we're running the business today. On building out better businesses, and this -- we call these pillars, each of these four, focus really here is on how we run IAG. How do we improve the capability and how do we simplify the way we run out and remove the complexity of how we run our company. And we're very focused here. We know one of those key deliverables in this pillar is around the profitability of CGU, WFI business and Jarrod's on track for that business to contribute at least $250 million profit next year, and we'll talk about that more. And we know the reason that's occurring and the why we're on track is we've built out the capability we have a different team that's running that business today. And we've also taken significant actions around pricing and portfolio management that are giving us the confidence of what's going to happen next and delivery of the return profile that we're expecting. Across our business, the rollout of our enterprise platform is enhancing. There's a lot in this, but it is enhancing our pricing capability. It is improving our capacity to include the perils rating factors at a more granular level. And importantly, what it's also doing is the speed -- it's improving the speed to which we actually can price. And so these are all helping us in how we're building out a better business. And what they're doing, of course, is helping us address the macro issues that we're operating our businesses in. Same time, we're investing in things that support our business. Motorserve and Repairhub are businesses that are supporting our claims processes, and they're going very well. And what happens, for example, in the rapid repair model, what that does, of course, it allows us to -- for our customers' cars to be repaired and returned quick and we know better customer experience and better financial outcome for us. On the way we run the business, when I sort of set this up 2.5 years ago, we were very focused on 3 distinct businesses with 3 unique customer propositions and different market segments that we're servicing. And I'm very keen that, that is the way we're running our company in those three different business units. And what we're doing is I'm continuing to make sure that greater decision-making is embedded within those businesses effectively closer to our customers. We made some changes really to reduce this in the last month or so to reduce the size of the corporate office to really sort of continue to play out that business model. I've talked about costs, and we have been disciplined around the way -- the cost of running our company. And Michelle is going to give us a bit more color around that this afternoon. But you'll also see that within the cost structure of our company, we are increasing where we're investing in capability for the future. So we're not just about the now. We are also investing for the future, and you'll see how we've attributed that. I mean the key takeaway here on this part of our strategy is really that we're improving capability and removing complexity and that's happening now. And we'll start seeing the benefits of that flow through now in our financial outcomes. Our third pillar is around creating value through digital. And we know that our long-term success is a simplification of the way the digital transformation is going to occur, right? And we know that, that creates many, many benefits in the way we run the company. We've made significant progress here around what is, has been historically a complex technology platform to which how we run our company. I've said this a few times, but our ambition is to have a common core insurance platform right across our entire personal lines business, we'll have commercial separate across Australia and New Zealand with essentially a common platform across 2/3 of the group, which creates a huge amount of value. We've already built features and functionality for all the releases across our direct and partner business, including our New Zealand localization. This is not an idea. We have this built and now we're deploying it. And we've already done that with the claim systems and we've deployed a whole lot of customer applications like the online claims tracker NRMA. The big advantage, of course, now is we can lift things we build there and put it into New Zealand. And you'll see some examples of that. Other examples are, we've made whole -- invested a whole lot around artificial intelligence, around motor loss capability across -- essentially, what we've done is we have significantly reduced claims time by using AI. And you'll see some examples of that when we -- in the showcases this afternoon. And Julie is on track to really deliver on the $400 million of value out of the claims process over the next couple of years. And then just the last one of the pillars that I want to talk about for us sort of wrap up is around managing our risks. And I just want to comment on some of the legacy issues that we've been dealing with and that we have dealt with over the last couple of years and where we're at today. We know we took a prudent approach to liabilities around COVID-19 and the business interruption exposure. We've had the test cases. We're making progress on finalizing those claims and those provisions are coming down. So we know that around the topic. I mean we've had some challenges around legacy pricing issues. And for us, our remediation is largely complete now, and we're waiting for the final judgment around the ASIC civil penalties. Although we're expecting that penalty will be within the provision that we already have on our balance sheet for this. So we're not expecting any new news. We've had some challenges around payroll, and we're running a process around payroll remediation. That's now substantially completed as well. We've had issues with BCC Greensill and that is still going through the courts and likely to be like that for the next year or 2. We're defending those matters, and there's no change in our overall position around that topic. And of course, while we've still got a lot to do, we're acknowledging that this is probably always moving, we have significantly strengthened our overall risk and governance processes of how we run our company. We have delivered that already. And we have a common risk governance program, which we call RQ, that's embedded right across our organization. And just lastly, within this topic, the innovative way to which we manage our balance sheet, and in particular, the way we manage reinsurance with quota share partners. We've renewed the vast majority of those arrangements to the end of the decade. So what we've done is really firm up a fairly substantial amount of the capital we used to run our company for a long period of time. And Michelle is going to step us through that in more detail later in the session. So just sort of come back to Now. We know that the markets which we're running the businesses in today, are kind of a bit different than when we did this online 18 months ago in December 2021. We know we've had this big emergence of inflation. It's immediately impacted our claims costs, had quite a material impact in the running of the company. We know that some -- we were in a cycle that just kept on going around perils, and we had a pretty tough 3 years there. But we know that cycle is coming to an end. And we know that reinsurance capital -- there's been a material change in the market, and there's been a contraction of supply essentially that's driven up pricing and that we have to factor that into the way we run our company. We talked about claims inflation a fair bit in February and what that -- and the actions that we have taken to manage these pressures and the actions partly around how we're managing claims, but partly around what we've been doing around pricing. What we've done here is just showing you, again, some of the charts that we had in December. We just updated them through for this bit of the calendar year. And you can see what's happening. This is our Australian direct businesses motor and home portfolios. And you can see a few things. You can see the material price increases that have been flowing through those portfolios and the cumulative impact that is having on our business. What they also show is the inflationary impacts. And you can see the moderation of that over the last 6 months, although some of those inflations that we had some real spikes in calendar -- last calendar year. Now those inflationary impacts are still high, so they're higher than what we thought they'd be 12 months ago, but they're definitely moderating. And we've got plenty of evidence around that, and Julie is going to cover that in a lot more detail when we go through her presentation. The other side of the graph -- other side of the page, sorry, is something that we put together, which really shows the sort of portion of reinsurance and perils as a portion of the premiums that we collect. We've made this all at 100%, so we don't confuse it with quota shares. But essentially, what this is showing in 2016, we're paying $0.13, $0.14 in the dollar for every dollar of premium we collected at IAG. That was roughly on $12 billion of premium -- or $11.5 billion to $12 billion of premium. And you sort of look at it today, and that number is more like 19% on a much bigger premium pool. So there's been a material shift in perils and reinsurance costs, which I think is the best way to look at this together over the last 5 years, which we've had to reflect in pricing. That's $0.05 to $0.06 in every dollar of premium that we collect has changed because of that -- and that's on a higher premium base in the first place. And of course, that's a graph that's spread across all of IAG. In reality, it's a lot tougher in the property classes, where a lot of those perils and reinsurance costs actually get allocated. So we've had to deal with that and that's been reflected in our pricing. I mean, the reality here is we continue to see, though, despite that pricing and some of the way we've been responding, and you'll see a lot of evidence of this today. You'll see the strength of our customer metrics are very strong. Our customer numbers have been maintained and are growing a little bit. Our renewals are very, very strong, really demonstrating the strength of our brands and our Net Promoter Scores some of the things we do internally really strong as well. And of course, what we're really saying there is the strength and stature of our brands, particularly our retail brands and experience our customers are having with our company is very favorable. And that's really holding our business strongly together. Message out of that slide is really material rates are flowing through. inflation is moderating, although it's still high. There have been material changes in perils expense in global reinsurance markets. We're pricing for all of these, and you're going to see near-term margin improvement flow through. Of course, our response can't just be pricing. We're also working with governments on initiatives that are going to improve resilience and reduce risk in the community. That's got to be the long-term solution for our countries. We're an active participant in many conversations around mitigation solutions building codes, plan planning and planned relocation. These are topics that we as a company and the number of execs are heavily involved in this in Australia and New Zealand influencing the way we're building out our countries unless we get on top of this, we've got more problems ahead. And of course, what we're doing is sharing our knowledge and skills and making sure that we're an active participant in those debates. In relation to FY'23, I mean some commentary around this as well. And I've sort of made some half-on-half commentaries as well as I step through this. So with premium growth of our company. We continue to see a hardening market across Australia and New Zealand. And so our second half growth will be stronger than first half growth. And the vast majority, almost all of that growth, is going to be price. So that's what you're going to see in the premium line. In relation to our reported margin for FY'23, sort of breaking that down to a few elements. The underlying margins of our business are going to be stronger in second half than first half, primarily driven by improvements in our Australian businesses as we really see the full benefit of rate increases, less inflation and the earn-through of that starting to impact the overall results. Although I'll still highlight there is still timing differences in the earn-through. Remembering on these graphs, we don't earn that on day 1, that's being earned over 12 months. What that's also saying is we get the full benefits of that in FY'24. And that's going to be a theme when we talk to you about our FY'24. I'll also highlight, and Amanda will step us through this, New Zealand, similar themes at the topline. There's lots of growth, lots of premium pricing going through those portfolios, and we're starting to see the earn-through. Against that though, we've probably seen slower margin improvements there compared to -- we see a little bit in New Zealand, but not as much as what we're seeing in our Australian business, really driven by some of the continued higher inflationary environment in New Zealand post these large events that we've had in the North Island, breaking other elements that are going to be in there. We will see a small net reserve release in this positive in the second half. And we also anticipate some favorable credit spreads as part of our results for FY'23 as well. That's going to -- against that, so there's two relatively small positives. We also -- against that, we're likely to see our perils moderately above our estimates for the full year, and that's assuming a normal June month, and we don't want to talk about that. Wish us any bad luck on that. In relation to other features of our FY'23 results, sort of below the line and net corporate expenses, just two things I want to highlight. We are -- we will be looking again at our business interruption provision. We released $360-odd million at the half, and we should expect a further release in the second half. And as Michelle flagged, in February, we've also been looking at our footprint, and we're likely that we're just going through a process of reducing some of it and there's -- there'll be likely to be a small provision that we need to put in place around that surplus space and as we're exiting some of our premises over the next short while. So there'll be a small extra corporate expense for that. Of course, those provisions will be finalized as part of our year-end process. So sort of based on that and sort of where we're at in the direction of the organization, gives us confidence around what we're saying around guidance, around premium growth of around 10%. We'll be delivering for the full year. Remember, half-on-half will be stronger second half than first half. In fact, the theme is both -- the same for both of this. And of course, secondly, we're trending towards around a 10% reported margin for the full year for our insurance result. So just in wrapping up, just some commentary again on medium-term targets. We are improving the underlying margins of our business happening right now. But there is some timing here as well. Not everything on that graph or previous graph is going to be in the P&L this year. So there's an earn-through impact. We've clearly got some very strong topline growth. And we've also got higher investment income within our shareholders' funds that's impacting the return profile we're getting there. And what that does is allow us to increase that ROE target to 13% to 14%, which we think is realistic and achievable over the medium term. In terms of margins, because of the improved investment trends and increasingly confident around Jarrod's delivery of $250 million within his business. And we're just seeing real momentum in relation to what's happening within the margins of the company. Of course, at the same time, the world is not standing still. So we're continually pricing for the environment. We know reinsurance costs are probably still moving. So we need to stay ahead of that curve. We know perils allowances will be going up again as part of our '24 sort of '25 thinking. And of course, we've got to manage inflation. And at the same time, all of that has flow on impacts to our customers who are already experiencing some challenges. So we've just got to put that into the package of our -- of what we're doing within our margin expectation. The topline is growing at a rate that I haven't seen since I've been at IAG. So I've never seen sort of our business consistently reprice everywhere and have to do with the factors that we're dealing with. I'll also say our retention and our customer metrics are all really strong. And it's a pretty challenging market out there for our customers, but those metrics are still very strong within our company. So we think that's sort of medium-term insurance margin of around 15% as sort of being a realistic outcome for our enterprise. And so giving the efficiency of our capital structure that we have, so it delivers a pretty good return for shareholders and improved ROE and EPS, as I mentioned. So on that note, and I'll be back later, I'll hand you over to Julie, who's going to do a bit of a deeper dive into our direct business.

Thank you, Nick. I'm really pleased to join you to provide an update on the focused performance and outlook for direct insurance Australia. I'll share with you the actions that we're taking to respond to this high inflationary environment and our near-term focus on our existing customers as our source of growth. Direct Insurance is the largest business division within the IAG Group and it houses our leading Australian consumer brands. Over the last 18 months, we've simplified our brand portfolio from 8 down to 3 go-to-market brands. Our core brands comprise NRMA Insurance, the strongest insurance brand in Australia as well as RACV insurance, the second strongest insurance brand through our joint venture. In a challenging market, I am buoyed by the strength of this franchise. We have the strongest brands in the market with a customer base that's resilient to inflation and that's enabling us to put price through our portfolio while maintain leading retention rates. We've also launched Roland, which offers digital-only policies on a subscription basis, supported by IAG's full claims experience. Roland focuses on a younger segment with innovative, flexible, value-oriented products, creating more choice for our customers and providing go-to-market optionality for us. Our brands have scaled over their 100 years of operation by delivering home, motor and small business products extremely well. We continue to simplify our product set, reducing over the last 2 years from 58 down to 14 individual products. And this has been supported by the launch of our new enterprise technology platform, which makes it easier for us to move product change, price and services to the market at pace. Our foundation of simplified brands and streamlined products has allowed us to extend our reach to help more than 5 million customers and deliver more than $6.5 billion worth of premium today. We are pleased with how we placed the commitment of our people and our momentum. But I thought it was just worth pausing and reflecting on the environment that we're operating in and the nature of the challenges that we've been faced with in the direct portfolio. As we emerged from COVID, 2022 presented us with one of the vicious periods that Australia has experienced with more than 9 major weather events and upwards of 200 rainy days. We normally receive around 35,000 to 40,000 motor claims a month, and we repair about 4,500 damaged homes. When combined with last year's events, our claims volumes more than doubled, placing pressure on our business and, in fact, the whole industry. Our business as usual claims, those 35,000 to 40,000 cars have also been impacted by global and local inflation. And while economic inflation is said to have peaked late last year, it's forecast to moderate slowly as pressure on supply chains unwinds. And this is what we are observing in our business, both spikes in the first half and moderation in the second, and I'll provide you with some more detail on that shortly. In terms of peril claims, a large portion of these events are passed through to our reinsurers and reinsurance costs have risen. Whilst renewal in December of the quota shares secured our access to long-term supply, reinsurance remains a critical input into our pricing that needs to be passed on to our customers. So turning to our customers. In the first half of FY'22, the Australian population, again, started to grow. Population is the key driver of demand in personal lines insurance. And with 1.6% growth over the 12 months to September '22, there are positive signs for the longer-term outlook for our industry. For the first time in many years, Direct Insurance's organic growth has followed this trajectory, but it's the substance and quality of that growth that I'll set out for you today. In December 2021, we outlined Direct Insurance's strategic vision. It focused on two things: Improving the quality of our claims business to support our margin; and focusing on our brands so that we are in a stronger position to reach more customers, pretty simple. Both of these things remain critically important for the long term. However, against the backdrop that we've just talked through, our absolute current focus is on stabilizing profitability within our business now. And to that end, we've doubled our efforts on claims and supply chain initiatives. Prior to 2021, we deployed our enterprise technology platform across our entire claims environment, and we've launched new motor repair capability, but we were yet to really unlock the value that both of those things offered. We estimated that doing so had the potential to generate $400 million of value by FY'26. 18 months in, I'm pleased to say that our teams created $70 million of recurring savings through identifying and eliminating inefficiencies and continuing to extend our repair footprint. I'm really glad that we stated this ambition early and commenced the journey before inflation issues emerge as it places us on good footing for the future as claims costs begin to mitigate over time. Our ambition for growth is to extend our portfolio organically by 750,000 customers over 5 years through maintaining our share and participating in selective market expansion as it emerges, ensuring that we capture the value that our brands should command is an important part of our vision and it's really important to our culture. That said, we've been very clear that our key priority is not to chase churn, but to focus on the customers that we already have. And while our customer numbers have grown by 200,000 since July '21, it comes from increased retention of our existing base with new business volumes reducing this year, and I'll cover that off in more detail in a moment. It's a clear focus on creating more profit through claims and maintaining our market position that combines to deliver our ambition and supports the group's performance in FY'24 and beyond. So turning now to inflation and the current environment, including the strong actions that we're taking, both on rate, but also on repair network performance as we navigate this complicated time. As you can see in this chart, between August and October of 2022, motor claims costs spiked. We experienced inflation in those months in the mid-teens. In talking with other insurers subsequently offshore, this is a trend that's been experienced all around the world as claims frequencies returned to normal and supply chains tightened. For us in our portfolio, this inflation was felt mostly in our New South Wales and Victorian portfolios due to our large market shares. In New South Wales, was driven by demand. And in Victoria, by total losses and capacity constraints. We've anticipated and were pricing in a level of inflation putting through increased prices into FY'23. However, the sudden spike in the first quarter was more than we anticipated. And when we observed it, which was quickly, we responded immediately and even more strongly with increased rates. As you can see from the graph, inflation is mitigating, but there's still variability month-on-month. Our rate increases are now running above the inflation curve and our intention is to keep them there until at least we see an underlying -- reduction in the underlying claims volatility. Rating action has not been our only leverage point. Within the motor claims supply chain, we've also been taking rapid action by increasing capacity and focusing on utilizing the IAG repair network where we can deliver a better customer outcome at a more effective cost. Motorserve triages claims into our partner repair network with more than 15% of our total volume now repaired by our own shop Repairhub. We have a fixed repair cost for every vehicle through Repairhub and a predictive cost model in place with our partners, and this gives us good cost control. In summary, we're pricing strongly and strengthening our competitive advantage across our own motor repair network. On the property side, we have been ahead of the inflationary trend with significant and progressive rate increases implemented from March 2022, helping us to respond to inflationary costs, but also preempting increased natural perils and rising costs of reinsurance. This chart shows nonperils inflation. And it list together with the price of reinsurance and any change in our retained perils costs that informs our pricing action. The uplift in rate that you can see on this chart reflects future changes that we anticipate to both reinsurance and our retained perils that we're pricing ahead of now. Similar to the motor portfolio, in property, we've also focused on improving supply chain performance. And we've extended contracts with our long-term -- extended our contracts and our long-term relationships with our suppliers. We've restructured our contracts to provide us and our builders with better cost certainty. We focused on reducing and closing outstanding claims as quickly as possible, and we've continued to strengthen our risk selection and underwriting approach. We are confident that our actions to address inflation and the input cost changes are appropriate for the future. The current environment has sharpened our focus on driving digital and data-led innovation through our business. For us, it's about improving customer experience, reducing claims handling time and delivering more efficiency into our cost base. Luke will share in more detail in the showcases shortly, but to highlight a couple of examples. Over a 6-week sprint, we launched Claims tracker, which has enabled customers to lodge and track their claims digitally. More than 600,000 customers have used this service with more than 1 million individual interactions and this has reduced call center volumes by 5%. This capability has now been deployed and adopted by our intermediated and New Zealand businesses. Claims tracker also supports customers who've had a total loss. At the point of lodgement, AI is used to triage the vehicle and predict total losses, allowing customers to opt into a self settlement process. Total losses make up about 10% of our volume. And so far, this capability has serviced 30,000 customers predicting accurately 4,000 total losses. Average claims time -- average claim settlement time for total losses is now days rather than -- is now hours rather than days and our fastest lodgement time achieved in 27 minutes from lodgment to settlement. But of course, technology is not the answer to everything. Good old-fashioned claims discipline will always be key to our business. Our focus on open claims has seen the closure of more than 30,000 additional claims this quarter, and that's helping us improve profitability and stabilize performance. So far, from our initiatives, $70 million of value has been generated from our claims of the future program, and we are on track to achieve the $400 million strategic goal. So let me now turn to growth and touch on our customer portfolio. The direct insurance brands in Australia now serve about 5 million customers annually across all of our products, home, motor, CTP and small business. Of these customers any one year, about 700,000 of them have churned historically. This means that for Direct Insurance's brands just to stand still, we need to attract 700,000 new customers annually and more if we would like to grow. Of course, growth is not just about attracting new business, reducing churn and retaining existing customers is a significantly more stable, cost-effective and profitable form of growth, and it's that, that we've been focused on since December '21. We've taken the following clear actions: We focused on our existing customer base. And over the 12 months between FY'22 and FY'23, we've increased the number of retained customers by 4% or 160,000. We have intentionally reduced new business volumes to avoid churn in the market and our new business volumes have come down by 5%. We've increased the number of products sold per customer to 2.1 across our portfolio, which drives retention, and we've strengthened our product renewal rates. So these are individual products relative to the customer numbers. And we're achieving rates of 96% in property and 91% in motor. For direct insurance, it's really important to understand the construct of our customer base. We are fortunate to enjoy a very loyal base that we've built over time with recognition of their tenure and the number of products they hold. And we are one of the few companies to recognize both. This has included extending recognition over the last 2 years through our loyalty program, where we've launched incentives and offers that promote risk reduction. This further strengthens the quality of our customer base and our performance, and it also puts risk mitigation measures in the hands of our customers to help them manage these challenging times. We also have a very clear understanding of the profitable segments of our portfolio. And when we are in market, we take a short-term and modest approach with very targeted offers. Because of our price point in the market and the focus of our marketing materials on a quality customer, our customer base is more able and to withstand the challenges presented in the current economic climate. That said, our focus is on efficiency and we've reduced our cost to serve by carefully managing expenses and headcount in the direct business. Our established brand platform, together with our pricing capability that we'll walk you through in the showcase, means that at the right time and in the right areas, we will be well placed to extend our footprint. There remains plenty of opportunity across Australia to find profitable, high-quality customers with whom to grow. So to conclude, I just want to end with our focus. It's very clear and it's very simple. We're taking strong action on pricing to stay ahead of inflation. We're driving efficiencies through our claims and supply chain. We're focused on our existing long-term customer base as our primary source of growth, and we are on track to deliver our strategic objectives and performance through FY'24 and beyond. And I'm now going to take you -- hand you over to Jarrod, who's going to take you through developments in the intermediated business.

Thank you, Julie, and good afternoon, everyone. Today, I'd like to provide an update on the activity we have completed in the Intermediated Insurance Australia division to position us to deliver at least $250 million insurance profit next year. I will also address the foundational steps we are undertaking to strengthen the core insurance capabilities within our business. This will set us up for long-term success. But I want to be clear, the focus to date has been on simplifying our business and building their foundational, risk acceptance, underwriting and pricing skills that are critical in any consistently high-performing intermediated business. As we deploy more structured underwriting practices, we are regularly assessing and shaping our portfolio by targeting the most preferred segments by the varied distribution channels available to us. Our pricing teams play a critical role as we implement more granular models. These capabilities will be critical to success of our business through any phase of the insurance cycle. Let me touch on the business mix and distribution that's available to us. We have a broad portfolio across personal lines, SME in agri, commercial mid-market and corporate customers. Corporate is the smallest segment and will be so for the foreseeable future. This customer mix, along with a diversified distribution capability via partners, underwriting agencies, authorized representatives and most significantly brokers provides options to us of where to distribute product and also gives us the ability to maintain scale as we shape our portfolio to our targets. This year, we will write premium of approximately $4.8 billion through those customer segments and distribution channels. In the past, the business may not have fully utilized its capabilities, nor realized earning potential. Financial performance is improving, and we are better aligned to our core strengths. To supplement our existing capabilities, we have strengthened the executive leadership team. specifically in the areas of pricing, product and underwriting. The new leaders we have attracted are accelerating the change I'm looking to drive through the business. Bringing new capability and in short, improving our business. We're currently operating in a favorable market environment. We're seeing the market generally looking to recover higher claims and other costs through rate. This has been a key driver in growth of the intermediated insurance market in recent years. We expect very similar conditions to persist in FY'24. We consistently see investment in technology across the market as an ongoing focus whether that be brokers or insurers. And this is as the industry looks to remove frictional cost, improve efficiency and provide affordable product offerings. In FY'22, we implemented Ambition 26. This is our 5-year strategic plan. We have also brought this to life for our people by expanding the goals in this plan beyond those just financial. Despite significant increases in cost as a result of the combination of perils and reinsurance plus higher-than-anticipated claims inflation in FY'23, we remain confident of meeting the FY'24 target. We have already set the operating structure, made pricing decisions and written a reasonable portion of the business that will determine earnings next year. As a key data point, in the second half of FY'23, we will put through an average price increase of 15% across the portfolio. That's up from just under 11% in the first half. That acceleration of rate in the second half earned through in FY'24 and provides the impetus for improved earnings. At this stage, we anticipate mid-teen increase in rate earned next year. I want to be clear, the $250 million target does not represent peak earnings for the business. Although it is a significant improvement from where we have been, it still provides an inadequate return for shareholders. We have one more year to run in Horizon 1 of our Ambition 26 strategy. In FY'24, simplification remains our primary focus. We'll also be laying the groundwork to invest in the strategic transformation of the business, with technology, a key component of this. I want to provide some specifics on what has been implemented to date to improve our business with the focus on delivering $250 million plus next year. We've introduced structured portfolio management practices, implemented a biannual review discipline that includes ongoing monitoring of metrics set during those deep dives. We've exited specific personal lines portfolios and undertaken optimization activity in target segments across our commercial portfolios. In long-tail classes, we have completed a ground-up review of rates in FY'23. This was driven by the liability issues that emerged in our year-end valuation last year. We have taken very specific portfolio actions exiting certain segments and being very clear on appetite as informed by that valuation. The team has delivered new pricing tools providing far more granular and accurate pricing for our liability and our agri portfolios. Price increases have been deployed across the remainder of our business at a much faster pace than historically achieved. We have also delivered improved granularity for natural perils. Following on from the significant work on pricing, we've also undertaken tactical reviews of the entire product suite; introduced rigorous product lifestyle management; and started strategic rationalization plans. The enterprise platform was critical in securing the ANZ partnership. We will onboard customers to a modern platform, offering a digital experience, not only at the point of sale, but more critically along the claims journey. For ANZ, enterprise platform also enables us to leverage the pricing and perils capability of the group. We also benefit from reusing technology and adopting the learnings from the deployment in our Australian and New Zealand direct businesses. Within claims, we are seeking to reduce frictional cost and effort in the claims transaction benefiting our customers, but also our business. In FY'23, we've continued to add features to our CGU claims broker portal with full digital lodgement and allocation now enabled. We are leveraging the capability and success of this portal within WFI, where we will go live with an equivalent solution in Q1 next year. We expect to see benefits ramp up through FY'24 as utilization increases. Expense remains an ongoing challenge, but we are driving improvement through disciplined controls. In a high inflationary environment this year, we'll reduce our direct administration cost by $9 million over prior year. You may have noted at the top of the slide, we have a retention rate of 82% on the portfolio year-to-date and this is below 85%, our target. Our analysis shows, however, we're retaining the business we want to keep. We are comfortable focusing on achieving adequate rate at the expense of retention whilst it doesn't negatively impact the portfolio mix. As we move into FY'24, top line growth will continue to be largely rate-driven, with some of this already deployed in market through multiple pricing increases applied this year. We will continue to respond to cost pressures in our business through the adjustment of rate. Our ability to deploy rate at pace continues to improve, and it's a capability we will further strengthen. Improved profitability is our primary focus in FY'24. $250 million is our ticket to play before we can grow the business. I see the opportunity for this business and we have begun preparing for Horizon 2 and 3. Nonetheless, I want to give comfort that we won't get ahead of ourselves and our team are driving towards the common near-term goal. In FY'24, we commenced a strategic transformation program across our insurance technology platforms. We'll be absorbing the cost of that program within our expense base. Doing so does not impact our confidence in delivering our targets next year. I'll talk a little more to this piece shortly. Through Horizons 2 and 3, we will drive the strategic transformation that will reestablish CGU as a market-leading -- as a market leader in the broker space. With a more competitive cost base alongside enhanced core insurance capabilities, profitability will continue to improve. With these capabilities embedded in the business, we will then turn our attention to growth. Our business is moving towards a modern end-to-end platform solution that will enable a leading core insurance capability. We have started global best practice across North America, Asia and Europe. We've also taken learnings from the experience of our direct businesses in Australia and New Zealand as they deploy enterprise platform. We are clear on the most economic approach to realize the level of capability we aspire to. While also keeping in mind, maximizing speed to value and that's finding the right balance between long-dated technology choices and expediting benefit realization. This investment was referred to as commercial enablement. It will deliver strategic capability to our business that will support our medium-term margin targets and enhance the pork capabilities we are building in the business. As an example, we'll improve our underwriting capability by deploying a tailored underwriting workbench with embedded rules and controls. This provides a platform for CGU to offer more dynamic service and product proposition within a much stronger control environment. Commercial enablement further aims to support more efficient operations across the business through reduced manual interventions, lowering our operating costs. Create frictionless engagement pathways for our partners and brokers by increasing straight-through processing, particularly for our high-volume commoditized business. It will enhance risk management practices through further development of embedded and automated controls and will create a more agile business that can quickly adapt to the changing external environment. I'm confident in delivering our FY'24 insurance profit target. We have made significant headway towards this goal already. A proportion of the premium volume that will earn and impact FY'24 profit outcomes has already been written. Rate increases applied and portfolio decisions made. I will ensure that my leadership team continue to maintain this goal as their priority, the enhanced capability we have in the business, particularly pricing, product and underwriting, positions us for long-term success. Combining the expertise of my leadership team with the tactical focus on efficiency, responsive pricing and underwriting capabilities, I see the building blocks are in place that ensure the business is set up to achieve the $250 million insurance profit next year and our medium- to longer-term strategic goals. With that, I'll pass to Amanda Whiting to update you on New Zealand.

Thanks, Jarrod. [Foreign Language] It's great to be here to actually present in person around what's happening in New Zealand. Over the last 18 months, I've been strengthening my leadership team. I've been focusing on the core business health and accelerating our digital transformation program in New Zealand. And what I wanted to do today is just take you through a brief overview of the New Zealand business. It wouldn't be fair to do that without taking you through what's been happening with the major events recently, so I'll do that as well. And look at some of the FY'23 external factors, along with a review of our 2-phase strategy and how we're bringing that to life. So just a reminder, IAG is New Zealand's largest general insurer with #1 market position in both personal lines and commercial lines, serving over 2 million customers. And that means we've got a relationship with 1 in every 2 households in New Zealand. We've got two broad business units. First of all, there's our business division, which is our intermediated business, serving brokers and it's under the NZI brand. And secondly, we've got our Consumer Brands division, which houses our direct brands and our partner brands. And just as a reminder, AMI and State are our direct brands and AMI is the largest brand, State is the third largest brand in New Zealand. We also service 3 of the 4 largest banks under our partner brands. So this year, we've experienced the devastating impacts of the North Island floods and Cyclone Gabrielle, which were the second and third largest loss events to occur in New Zealand and within the space of 3 weeks. The effects have been felt really widely across the whole North Island and impacted many communities. And the combined impact of those has resulted in an unprecedented number of claims, along with a group financial impact of $284 million. I'm pleased to say, though, that approximately 30% of those claims have now been closed, and that includes over 90% of motor claims and 70% of content claims. Our experience tells us that the quicker we can close claims, the better our customers are, the better off our retention levels are and the better off our financials are. So there's no doubt that there's still a really long road ahead of us here, and settling claims remains a really large focus for us. One of the things that I'm most proud of is always just the way we show up. I'm really proud of our ability to support our customers at their time of need, and this time was no different. Our claims hubs were in the communities first and we will be the last to leave. I personally visited Hawke's Bay a few days after Cyclone Gabrielle actually, and the scale of disaster is immense. The TV scenes or screens just do not depict the type of damage and turmoil that's occurred there for those communities, particularly from the silt damage. We've been collaborating with government and communities on our climate response as a result of this. Well, actually just gives us more of an impetus really. We want to focus on managed retreat in New Zealand. And along with our risk-based pricing approach and leadership on risk mitigation will play an extremely important role in the country actually. So in FY'23, it's fair to say that the external environment in New Zealand has been challenging, and that has impacted our customers and our New Zealand full year results. In addition to the weather events, we think we have had system growth headwinds, higher claims frequency and upward pressure on costs. Firstly, system growth in New Zealand has been below historical norms. Population growth in 2023 is predicted to be about up 0.8%, which is lower than our pre-COVID levels of about 2%. Personal motor vehicle registrations are down 6%. And and the housing market has been subdued and building consents are down. Second, in addition to the high volume of open weather claims, motor claims frequency has returned to pre-COVID levels. And thirdly, we've seen significant upward cost pressures from claims inflation and reinsurance, especially in the second half of the year. Our teams are monitoring those external factors really closely to forecast changes in those cost drivers and respond accordingly with the required rate increases. So I'm going to talk through a couple of those examples in our portfolios. In Personal Motor, we've experienced a sustained rise in claims inflation, particularly again in the last 6 months. That's now starting to stabilize at 16% year-on-year. Part of the story is our upward inflationary pressure for parts, paint and non-contracted labor. But it's also due to a mix change with more vehicles being enabled with ADAS technology and they are costing more to repair. Total losses have increased in the last 2 years and a key factor of that has actually been motor crime in New Zealand. But the team have been really decisive in our approach to rate changes. Despite all the changeable conditions due to those open claims, our personal lines motor rates have been tracking upwards and are currently around 20% year-on-year. In our home portfolio, inflation has been relatively stable, although above historical norms. And the bigger drivers of rate changes have been increases in our natural peril allowances and reinsurance costs. Excluding the impact of the EQC levy, rates are up 20% to 30% year-on-year in home across different brands. And the benefit of these higher rates is starting to materialize. In FY'24, we'll see the full earn-through of those. In our commercial portfolios, we took an early stance, and we led the market on rate rises this year. In commercial motor, claims inflation is lower than personal motor vehicle at about 11% year-on-year, and we achieved rate increases of 15% to 20% year-on-year, delivering strong GWP growth. In commercial property, claims inflation has been within our expectations, and we've seen a strong uplift in some insured revaluations. Rate increases have accelerated over the year. in response to those higher net peril allowances and reinsurance costs and we are currently achieving year-on-year premiums of over 20%. And also based on our risk appetite, we've reduced our exposure on some accounts. In FY'23, as I've just mentioned, our teams have been putting through rate increases across all portfolios and increasing the frequency in which we make those rate changes. We have strong retention rates at 92% for both AMI and State but this isn't all about rate. We've been tightly managing admin costs and wage inflation is largely being offset through those efficiency and automation initiatives. And we're paying really close attention to affordability for our customers. In claims, we're focused on straight-through processing and automation. And we want to make it easy for our customers. So this is also delivering savings of 80 FTE in FY'23 with more to follow next year. Greater digitization is also driving benefits for our customers and our cost profile. We've seen a 12% uplift in our sales through our digital channels for our direct brands. and we launched broker connectivity with our largest personal lines broker this year. In FY'24, we're going to continue to see strong rate growth through across our portfolios. We'll also see increased use of AI to optimize our claims journey, and we're going to secure more volume benefits in our supply chain and roll out 3 more Repairhub sites. And in FY'24, we'll start migrating our direct customers onto the new enterprise policy platform. This is a really huge opportunity for us. In addition to driving operational efficiencies, the new platform is going to enable improved pricing for peril risks. But more importantly, we'll create a simpler experience for our customers. In claims, we've seen and are experiencing the benefits that we can drive from being just on that one platform. And I'm thrilled that we're on the cusp of extending those benefits to customers through our sales and service functions. So in summary, in FY'24, as we respond to those events, adapt to the slower growth in the macro environment and manage the digital transformation, our focus in New Zealand will remain on Phase 1 out building the foundation phase. And as Nick alluded to, this means we're pursuing a slightly longer pathway to our growth of 250,000 customers. Our business division under the NZI brand serves our broker partners. And our NZI has partner advocacy scores 25 points lower than our key competitors. The business team has retained market leadership and achieved 83% customer retention in commercial lines, all while managing risk and significant rate changes. In FY'23, we focused on simplifying and automating where possible, and we're on track to reduce manual workload by 7,000 hours, and we're continuing to decommission products. In FY'24, alongside Jarrod, we'll start to invest in a new commercial platform, which will significantly increase the levels of automation, deliver improved underwriting and pricing and enable more efficient broker connectivity. Today, less than 10% of our SME business is automated, and we want -- we've got a target of more than 80%. The larger SMEs and corporates with more complex needs, we continue to deliver a really high-touch service and build those strong tripartite relationships with the broker and the customer. One of the ways in which we do that is through our value-add risk advisory services. These services give us a seat at the table outside of renewal time. So we can sit down with our customer and the broker and talk about how we assist them to reduce risk. Through our Fleet Fit program, we've got a suite of 14 different product offerings and that can be tailored to help commercial motor customers reduce the likelihood of a claim in the first place. So to bring that to life and to break up the presentation, I thought I'd show you a little video of Mahana Stone. He's one of our NZI customers. He's implemented the Guardian Seeing Machines, which is part of the Fleet Fit program. And what that's about is keeping his truck drivers safe. [Presentation]

So as I was saying, our assurance services really move that conversation with our customers away from want to price to want to value, and we're seeing great results from that program. In fact, people who have that Fleet Fit program have a retention rate of 96%. So that's a true win-win for everyone. In claims, we are already making great strides on delivering on our improved digital customer experience and reducing costs. So the diagram here is depicting our customer claims journey, which we're in the process of automating and using more AI to deliver straight through processing. One item I'd like to call out was the very timely launch of claims tracker for motor vehicle claims in February of this year, which is very helpful given the events that we were having. And since it's gone live, it's had 39,000 visits and we've seen a 33% increase in the share of digital customers who are actually going online and booking or repair themselves without having to call us. And that delivers immediate benefits for our customers but also frees up our call centers. And in FY'24, we're going to roll that out for our content claims as well. Part of the claims strategy has been to bring in-house the key parts of the value chain. We want to reduce costs. We want to use our scale effectively to drive volume benefits, and we want to enable investment in new technologies and innovation and, of course, to optimize the customer experience. Last year, we acquired 100% of First Rescue, which is a roadside assistance business, and it provides customers with road service as well as towing services. We're currently integrating that to create an Uber-style experience where you can book and track the arrival of the roadside rescue vehicle. Repairhub is another fantastic example. The cost to repair is 20% lower than external market providers, and it's delivering a first-class customer experience with an NPS of plus 93, which is almost unheard of. You'll hear more about that in the claims breakout session. So in summary, I just want to reiterate that IAG has a unique leadership position in New Zealand. The business is achieving strong GWP growth through rate. We're making good progress on closing event claims for our customers. In FY '24, we have 3 key priorities: The first is to ensure that we deliver margin and retain our customers. The second is to launch our enterprise platform, platform for our direct brands in New Zealand. -- and to commence the development of our new commercial platform. And the third is transformation. To maximize the benefits from the new technology, we're going to need to deliver new digital and data capabilities, adopt new processes and create a more customer-centric organization. Once the enterprise platform is live, then we will actively pursue customer growth. Together with my team, I'm really looking forward to keeping you updated on our progress. And now I'm going to hand over to Neil to give an update on the group's technology transformation.

Thanks, Amanda. Good afternoon all. As you've heard from Jarrod, Amanda and Julie, we've got strong plans in place to deliver on our commitments. And of course, enabling our business, our customers and colleagues is really central to that. You're also aware that we've been investing significantly in addressing the complexity and the legacy architecture of our organization to drive simplification and transform the experiences that we provide. Our intent is really clear. We're extremely focused. It's on enabling the strategies you've heard from Nick and our business leaders today from enabling a national NRMA brand to embedding AI in our claims processes to new levels of pricing agility and to driving value from our data assets. And the work has been delivered in four streams. Over the next 10 to 15 minutes, I'll share some evidence points on where we've come from, where we are now and also, of course, where we're headed to. As I mentioned, our transformation activities are organized across four streams. All four streams have progressed materially over the last 2 years. Streams 1 and 4, our claims and operations streams are most progressed. And that's where we've seen the greatest acceleration in innovation and optimization and delivered value. Stream 2, our personal line stream, is focused on enabling our sales and service functions. This is also well progressed and is now into the onboarding and scaling phase. And as you heard from Jarrod and Amanda we're now starting to invest significant time in enabling our intermediated businesses Stream 3. This afternoon, we'll get downstairs and we'll see some of these enablement activities come to life in the deep dive sessions. And it's really the outcome of collapsing some of those many boxes on the left-hand side of the page, into the consolidated purple boxes you see on the right-hand side of the page that represent our strategic platforms. And finally, before I dive into each stream, I'll just reiterate something Nick said to me at the start of this journey and it was -- this is the executive team that's going to lean in, simplify our operations and modernize our legacy platforms. We're not passing it down the road. It's really happening. And you can see the coverage of our strategic platform is really starting to grow over time now. It shows how we're simplifying and reusing capability across our brands, making it easier to deploy changes, more efficiently and deliver capability at scale. And from a technical and build delivery perspective, we're a bit more progressed than in my first [ pair ]. So to Stream 1. Our first order of business has been to address our claims platforms. It's well known that we had 16 independent claims platforms, which would largely align to the brands that we've launched or acquired over the last 25 to 30 years. We're now in a fundamentally different place. We have one core enterprise platform solution for claims management across the company. It's a modernized platform, simplify processes, providing the environment for innovation and for delivery of digital use cases on top of that transformed core. Where we've seen this come to life is summarized on the slide in three boxes: Firstly, we could be far more elastic, scaling our claims capability in response to major events. In the New Zealand floods, we saw digital channel peaks of 67%. And as you heard from Amanda, we deployed automation to address pain points in just a few days. We were able to scale up our partner arrangements as well, really rapidly onboarding an additional 200 people using the enterprise platform to support our customers. And given the increasing severity of major claims events, we see this as really critical to our future success. Second, we now provide a truly digital-first experience for our customers. This includes our mobile application channels, providing us with low-cost, highly effective ways to keep customers engaged and informed through their claims process. and we'll demonstrate it this afternoon. In the claims domain, we're now into a rhythm of agile delivery, continuing to simplify our operations and lift experiences, deploying small automations and enhancements that make the difference for our customers and our people. And it's this ability to deploy many, many digital use cases on top of the transform core that makes us an increasingly digital business. And we're going to see the same pattern across each of the streams of the transformation with claims being the most mature. So stream 2, our personal line sales and service transformation. This is supported by our policy, pricing, billing, distribution technologies. And this is our #1 priority at the moment. It's the equivalent of the claims journey that I just described, consolidating multiple systems into one strategic solution that can then be used across our brands in both Australia and New Zealand. We've built a strategic capability from the front-end web and mobile capability right through the core policy, pricing and finance integration solutions, and we know it works. It's deployed. It's live in our Western states. And as our customers renew their policies, we transition them from our heritage brands onto the NRMA products on the strategic platform. Our focus now is on rollout to additional brands and geographies, including Eastern state in Australia and for our personal lines in New Zealand. And over the next 18 months, we'll have the capability deployed to NRMA, AMI, State, across our mass volume businesses in Australia and New Zealand. Michelle is going to talk later on the investment profile. This investment is within that profile. From a delivery perspective, it's built and live. We're now into the phase of enhancing and incrementally adding capability to those platforms. I think from a business and a customer benefits perspective, there's a step change here. There's a step change in pricing and personalization capability. And we're also taking the opportunity to radically simplify our business. We'll move from 1,000 product variations or more than 1,000 product variations to 16 core product sets. And what we've seen since deployment, and as you heard from Julie earlier, is the power of more granular, more agile pricing and the opportunity to utilize AI in our quote flows, improving pre-filling, achieving better conversion rates and a more personalized experience. We've also proven that we can build capability once and deploy across the group. We've moved from four separate mobile application technologies to one, creating just a fundamental shift in New Zealand in the mobile customer experience, and we've seen that both in end-user app ratings, external assessments but also in the metrics of our business, a 12% increase in our digital sales volumes. So that takes me to our third stream. It relates to our intermediated businesses, both in Jarrod's Australian business and with Amanda in New Zealand. This stream is twofold. Firstly, using the enterprise platform for our partner business. And secondly, considering our brokered and our commercial businesses. Our partner businesses represent over $1 billion of GWP. This stream has progressed significantly. In addition to the deployment of the enterprise platform in WA and South Australia and the Northern Territories, we've also, as Nick mentioned, localized debt for New Zealand's needs and deployed it with one of our key bank partners in New Zealand. And that proves out the capability and gives us confidence in a different market and a different pattern with a partner. From an IIA perspective, we've also released an embedded insurance version of the platform for one of our partners in Jarrod's business. And as you've heard, these capabilities also provided that confidence and capability to win significant new partners with the example being ANZ. Now that we've got those patterns deployed and in production, our focus is on continuing to complete the consolidation for those intermediated partners and, of course, reusing that capability wherever we can across the group. The brokered and commercial business is the second piece I mentioned, and that represents $4 billion of our business. And in that space, we've delivered a number of tactical improvements and defined a roadmap that allows us over the longer term to support the ambition of IIA and New Zealand through to FY'26. This will add underwriting automation and workflow solutions. It will further consolidate administration systems and create a really good toolkit for our commercial businesses. And that takes me to our final stream. The final stream of our transition is, the work we've been doing behind the scenes to transform the way we operate. Again, consolidation has been a big focus. So we now have our HR, our procurement platforms, our risk platforms, our automation platforms, all consolidated across Tasman making it easier for our people to get their jobs done. From an automation perspective, we've seen significant take-up of the automation platform across the organization, both in response to perils events, but also in back office delivery across different divisions. In my case, in the technology space, we've leveraged the automation platform for vulnerability management and testing in particular. It takes me to cloud. From a cloud perspective and an infrastructure perspective, we've materially moved to a SaaS platform and cloud infrastructure for our operational platforms. In particular, our modernizing of our risk systems and enabling the organization to have visibility of operational metrics enterprise-wide has been a really significant shift. We're also really well progressed in modernizing our core platform infrastructure. The enterprise platform we've been referring to across our products and policy capability is cloud-enabled on AWS. It's within IAG's private cloud and integrates with other cloud solutions, payments, identity, data management. So in summary, we're well progressed in delivering the modernized enterprise platform that we know will provide for our customers and for our people. From my perspective, the key with all of the transformation streams is that they're enabling the full organization to engage and consume and innovate with technology. Our role is to continue that fundamental simplification and consolidation of our operations and get to a core set of modernized platforms and processes that are usable across the organization. We've now deployed our end-to-end solution for personal lines and partner businesses. That gives us a great deal of confidence, and we've also built capability as we've gone through that, to continue onboarding additional brands and geographies. We'll now commence with the commercial business enablement that's so critical to our business plans in IIA and New Zealand. And the transformation as a whole is making us a digital, scalable business that would react quickly to our environment. It ensures we'll be there for our customers when they need us most. And we're through the hardest bit of the build and delivery phases now. We're really into business onboarding. And with that, thank you for your time. I'm going to hand you back to Nick.

Thanks, Neil. But sort of thank you team as well, we sort of launched and have talked through a whole range of things that we're actioning now to sort of building out the business. And sort of there's lots of plans in place, as you can see. But also I think that -- what we're also trying to demonstrate is we're actually delivering stuff now, and we're pretty focused on those outcomes and really improving our business for the Now as well as building out for the future. I am seeing a change tack now. We're going to have a break -- a couple of breakout sessions. And so those on the webcast, we're just going to pause for a period. We're back in here, Mark, at 4:15?

Yes, probably a bit later. Maybe 4:25.

Okay. So we're going to be -- we're running slightly behind. So we're going to be back in here at 4:25 sharp. So those on the webcast will be standing here -- Michelle will be standing right here at 4:25. Those in the room, check your badge, you are either in group 1 or group 2. And so we got -- this is sort of a 20-minute showcase on perils and pricing, a 20-minute showcase on claims and you're going to flip in that 20 minutes. There is morning tea or afternoon tea, sorry, not morning tea, afternoon tea on the way, grab something as we walk. We're going down the floor, down to Level 10. If you are in group 1, which is around claims, Mark and Amanda are taking the lead on that. If you're in group 2, Julie and [indiscernible] are leading that. So for those in the room, Julie group 2, Amanda group 1. So if you can stand, grab your afternoon tea, find your leader, and I'll show you where we are. And we're just down one floor on the Sussex Street side of the building. [indiscernible] back at 4:25. [Break]

Okay. So I heard the music off. So I'm hoping that's a sign that we're good to go. So good afternoon, and welcome back to those watching on the webcast. Everyone here in the office has just had the benefit of a deep dive into our climate peril modeling, our pricing capability and our claims management expertise. I am very conscious I stand between all of you and Q&A, and I've got a sense there a lot of Q&A waiting to come. So we'll try and keep this fairly brief. What I'd like to talk to you about this afternoon is our capital structure, the interaction of capital, reinsurance and natural perils allowance, our cost base and some initial thoughts on our approach to AASB17. In terms of our capital structure, like other financial services companies, APRA sets us a regulatory minimum. It won't surprise you to know the risk of stating the obvious, we have no or very low appetite to breach that regulatory minimum. And as a consequence, our management capital targets contain significant buffers. So our CET1 target is currently 0.9 to 1.1x, and our PCA total capital target is 1.6x to 1.8x. Our intention is to always ensure our balance sheet and our capital position is strong. In terms of our equity capital, we announced back in October last year that we would be using $350 million of the reduction we saw then in our BI provision over the following 12 months to buy back shares, where $115 million or 23.1 million shares through that. We try to make it so that you can't guess when we're buying. So we're not operating in the market every day, but we continue to look to achieve that over that 12-month time frame. In December last year, we also made the decision to refinance our $400 million capital notes 1. And these have a first call date tomorrow. The new capital notes to have a lower margin, 3.5% compared to the 4.7% that we had on capital notes 1, which goes partway to offsetting the increase in the base rate. Some of the investors took up our refinancing offer back in December. So we currently have about $220 million on our balance sheet, which will be redeemed tomorrow. In addition to our prudent approach to equity and debt or hybrid capital management, our unique whole of account quota share reinsurance arrangements provide significant benefits. We're fortunate with our strategic partners. In January this year, we locked in long-term arrangements with 3 of 4 of those partners, the most material agreement through to 2029. And these continue to provide a materially consistent financial outcome. So we've renewed 30% of the 32.5% of our quota share program, and we expect to finalize the remaining 2.5% before the end of the financial year. The quota share arrangements provide us with significant capital certainty over the next 5 to 7 years. And this is particularly valuable in the hard reinsurance market we find ourselves in today. One of the other key benefits of our Whole of Account Quota Share arrangements is that we do not need to place 32.5% of our main catastrophe reinsurance program. So moving to reinsurance. I'm going to start with the simple messages from this slide then provide a bit more detail. But once I get through the first 4 bullet points, you can switch off for a little while, if you like, or listen to a bit more detail. So those simple messages are: our main reinsurance program in 2023 compared to 2020, now attaches at a higher level and requires further losses before activation of our aggregate covers, meaning we have the potential for more volatility in our earnings. This has required us to increase our perils allowance by 15% and our capital requirement by 6 points over this period. Looking forward, there is the possibility that as we purchase our aggregate reinsurance on 1 July this year and then put in place our 2024 calendar year cat program on 1 January, we could see further increases in our retentions. The hard reinsurance market means that we've also seen an increase of around $220 million or 50% over this period from 2020 to 2023 for the cost of these catastrophe and aggregate reinsurance covers excluding our quota share. You can all switch off now for the next little while or you can listen to a bit more detail. So I've shown on this slide a comparison of the reinsurance program in 2020 compared to the current program as we started this calendar year. We show these diagrams on a gross basis, as Nick did in his earlier slide at a 100% level, which ignores, I'm mean, that's not something we ever do, our Whole of Account Quota Share arrangements. Our Whole of Account Quota Share arrangements means that our exposure for any event, which is represented by the wide areas on this diagram is only 67.5% of the gross claims costs. The key difference between 2020 and 2023 is the attachment point for the first and second events. Now I recognize that this year with the 2 events that Amanda talked about that we had in New Zealand, we had some additional cover for the second event in New Zealand. But basically, in 2023, our attachment point for the first 2 events was $350 million. In 2020, the first event was $250 million and the second event was $200 million. There are other changes between the 2 programs with the 2020 program providing greater protection and it included a stop lever -- stop loss cover also. So as we've said previously, the hardening of the global reinsurance market means that we're now paying more for less cover. To put the reduced cover in perspective, back in FY '20, our natural perils allowance post-quota share, that's a number you're familiar with, was $641 million. This was increased to $909 million for this financial year, FY '23, an increase of $268 million. And based upon our modeling, I would say to you that a $135 million of that $268 million increase was linked to these changes in our main cat and aggregate reinsurance programs. There's also been a material capital impact as the Insurance Concentration Risk Charge or ICRC. So I don't have to say that too many times, has significantly increased. The ICRC is the higher of 2 calculations. The vertical requirement, which is based upon one large event or the horizontal requirement, which is based upon multiple midsized events. In 2020 and other years prior to FY '23, the broad range of reinsurance covers that we had in place means that it was the vertical limit that applied. This was 67.5% of our maximum event retention. So if I take a $250 million first event retention back in 2020 was $169 million with the ICRC. In FY '23 as the global reinsurance markets have hardened. The horizontal limit has become the key driver of our ICRC, which is now at $365 million, an increase of $196 million. So if I put that into CET1 ratio terms about 8 points associated with our capital. As you would expect, as you would hope, but we definitely are, we're currently in the process of negotiating our aggregate reinsurance renewals for 1 July. These represent the light blue and lilac boxes on the diagram. I expect to be announcing the outcome of this renewal in July. And depending upon our ability to purchase these components at economically rational prices, this purchase may result in further increases into FY '24 in our natural perils allowance in our ICRC. As we've previously indicated, and as I'm sure you've taken away from the presentations from Julie, Jarrod and Amanda, they're very clearly focused with their teams on pricing for these increases in retained perils and reinsurance costs. In addition, our strategic Whole of Account Quota Shares assist us in mitigating some of these headwinds giving us a structural competitive advantage, particularly in this hardening reinsurance market. You need to switch back on now. We're going to talk about costs. So as Nick commented earlier, we're pleased with our discipline and achievement in keeping our operating costs at around $2.5 billion during FY '21 and FY '22. We remain on track to be at this level again in FY '23, and I look forward to confirming that in our results announcement in August. As I called out in my comments in February with our half year results, we are working to optimize our property usage. And I've noted in the footnote on this slide that we're currently forecasting that we'll include in net corporate expenses an impairment of approximately $20 million to our right-of-use asset that we recognized under the leasing standard AASB 16 associated with that optimization. Basically, whatever areas we sublet, we won't achieve as much as we're paying in rent for those, but it's an economically rational decision that makes sense for us to do that and manage our costs going forward. So it's flagged by Nick earlier, given wage and other inflationary pressures combined with additional investments we're making in technology across a range of areas, including areas like data security, it is likely I would say certain that our group operating costs will increase on an absolute dollar basis from FY '23 to FY '24. But despite this anticipated increase in group operating costs, as we head into FY '24 and '25, we expect our group administration ratio, excluding levies to continue to reduce. It's likely to be around 12% in FY '23, down from 12.7% in '21 and '22. As we keep the level of cost growth below our top line growth, which is what you'd expect given the rate increases that we're seeing going through the top line growth. So finally, I thought I'd provide a brief update on our proposed approach to AASB 17, which will apply to IAG from 1 July this year. For those of you unfamiliar with this new accounting standard, and I would imagine most of you are very familiar. It will provide a consistent framework for reporting across insurance companies in most jurisdictions other than the United States. The new standard will not impact on our capital, solvency or business strategy. It's also not expected to have a material impact on our profitability or dividends. However, there is a considerable amount of complexity in some of the technical adjustments in our transition to the AASB 17 approach. And I will probably spend a fair bit more time talking about these at our results announcement in August. At this stage, it is likely that, while there will be some adjustments to the statutory reporting of our P&L, the most material adjustment will be to our balance sheet. This involves the application of a cost of capital approach in determining the risk adjustment in our insurance liabilities, resulting in a statutory balance sheet with a lower probability of adequacy. So today, the probability of adequacy under AASB 1023 is around 90%. What we expect, broadly speaking, is the balance sheet will fall to a probability of adequacy closer to what we have in the APRA capital requirements at the moment on the basis of our capital calculations of around 75%. We also expect lower volatility in our reported results with risk adjustment movements likely to be smaller than risk margin movements we would have seen in previous periods. In August, we will provide an update on our onerous contract testing in area, I'm sure you'll be interested in that applies at a more granular level than the current liability adequacy testing. From a reporting perspective, based upon your feedback, for the foreseeable future, we intend to provide the current information in our future disclosures, including GWP, net earned premium and the insurance profit, concepts that don't naturally fall out of the AASB 17 statutory reporting. As we've outlined today, our medium-term targets are based upon our current reporting methodology, and we'll obviously be providing detailed reconciliation between the 2 approaches. So I'll now hand back to Nick, and I think we're going to move to Q&A.

I know we're running a few minutes late. So why don't I just bring the team up, and we will just go straight to Q&A.

Julian from Goldman Sachs. Just an initial question on your guidance. So just to round it out. So you say that you're trending towards your target guidance there for FY '23. Can you just clarify exactly what is needed in the remainder of the financial year to get there?

Yes. I mean we sort of -- I mean, the logic there is we had a position at 31 December, we've obviously had material perils in New Zealand in the first couple of months of this calendar year. The current run -- and so therefore, we're sort of now catching up and heading towards 10% and the run rate per month is obviously beyond that, and that's why we're sort of coming from that direction out. But that's why we're saying, if I look at the full year number of that guidance of 10%, we're -- we're heading towards that and the intention is we'll be around that number at 30th of June. That's why we used that expression essentially because we're catching up because of position at 31 December, plus, if you add in the perils, significant perils we had in New Zealand. The run rate is more than that, and we're closing the gap basically.

And then just on the commercial portfolio, just the target there of $250 million. Just interested in understanding how the upcoming renewals and also the renewal into 2024 impacts your expectations on that? How are you pricing for that?

So when you're talking -- the reinsurance renewal? Yes. So really, the biggest impact on pricing for us is was the reinsurance renewal at 1/1 of this year. And we estimated what the price for that would be. We made adjustments in October. It was actually slightly more than that. So we've adjusted our pricing in March to recognize that increase and we're driving that price through the portfolio now. So likewise, that the 1 month has far less impact on our commercial portfolio, but any adjustment that comes through there we'll price into the business.

Andrew from Macquarie. Just a couple for me, please. The first one again for Jarrod. We've seen new group margin targets. How should we be thinking about the earnings or the margins in your division over that medium term?

Yes, certainly moving more towards the group margin target. I think, I made a comment. We won't -- will no longer be a drag against group margin, and that's the intention for the business over the medium-to-longer term.

And then I mean, also I have a comment just at the portfolio level. I think we should expect in the sort or 15% over time, that sort of the direct and the New Zealand business will probably be above that. And Jarrod's business, yes, it's improving a lot. But in the next couple of years, I think getting to 15% will be a challenge. So the blend of that is sort of the way I would see that. The New Zealand and direct business above and Jarrod hitting towards.

The second question that I had was in relation to Slide 15. So it was the chart that showed the premium rate increases and the claims inflation for motor. And then obviously, the claims line was on a 6-month rolling basis. So if you draw a straight line, it implies the exit rate is close to 0, that surely can't be right. Can you give us an indication of where the run rate is at right now?

For?

Claims inflation for motor, please.

The for claims inflation in motor? I mean it's obviously improving. And I think it's in sort of the 5% to 10% type [indiscernible] -- if I use -- the question is what's the spot rate? Yes, something in that order.

And then the final one for me. There was a couple of comments both in Nick and Julie's presentation about refocusing on margin rather than volume growth. Where is that coming from? Why now? Has that -- this been pushed by reinsurance negotiations?

No, I think it's -- I mean it's -- I think it's a broader comment, actually, that we're sort of reflecting on the current environment, reflecting on what we're seeing with inflation, affordability. What's happening in Australia or New Zealand, the significant perils we've had in both countries, the impact of reinsurance pricing, and I mean that's a factor, but I don't think it's fair to sort of fully attribute it that way. We just -- we sort of step back from that and say, actually, we set an outlook 18 months ago and an ambition. Sort of the ambition still there, we're just sort of reflecting on the current environment and sort of adjusting really some of that. I mean, I think the most relevant is New Zealand, where that environment has been materially impacted by a number of factors, and we're just sort of pushing it out a little bit. But that's the time. And it's the sum of those, not sort of one particular thing. And we're sort of also saying, let's be realistic in this, and it's okay to correct some of these if the environment changes rather than being fixated on them, sort of to our detriment. So that's why we're saying what we're saying.

And Nick, if I can just add to that. I think one of the things that Julie and Amanda or if both been focused on from day 0 when we talked in December '21 is profitable growth. And they've been very consistent in that, but I know there's been some concerns about are we chasing volume against margin. That's never been the case in what they've been looking at. And I think it's just -- you're seeing it reflected through in the performance of their businesses and the choices they're making.

Yes. I think maybe just to sort of build a tiny bit. There's just a lot of change in the market. So if you look at the pricing environment, you're seeing property prices moving around a lot, same on motor. The claims costs, whilst they're stabilizing, there's still month-on-month movements. And so just in that environment, we're still very focused on growth. And yes, we've heard the perception that it's for us growth over margin, not the case. It's very much as the customers we've got and the ones that we know, they're loyal to us, we understand their risks and how do we just maximize that as our source at the right time. There'll be other opportunities, but we want to see a more stable pricing environment first.

Kieren Chidgey from Jarden. Just extending sort of that conversation into the medium-term guidance. So you've moved away from 15% to 17% down to 15%. We're just sort of facing into a high bond yield environment. You're talking about the expense ratio improving with a good growth year-on-year. The motor inflation does seem to be sort of easing as pricing is accelerating at the same time. So just wondering sort of what have been the other drivers in that change over the past 18 months in terms of your medium-term margin outlook? Is it saying something about your ability to reprice risk in the current environment from an affordability point of view?

I think there's sort of a range of things. And one of the outworkings obviously, on the economics of our -- of our balance sheet is that we naturally with the growth that's been occurring, so the ROE starts drifting up, too. So it's sort of combined with, you know what? Higher investment returns on shareholders' funds, we start delivering a higher ROE of 13% to 14% for the 15% margin. And we're not the only ones that are getting that. So we're sort of -- it's a bit of a market comment, too, about ROEs drifting up and so what's the margin you need to deliver for that sort of ROE. But yes, we're very concerned about affordability. There's material rate changes flowing through pretty much all our portfolios across Australia and New Zealand and in fact, across our entire industry, as you know. And so therefore, when looking at that, and not just now. I mean the -- we do see outlook of continued inflation, maybe moderated, but still we're going to have some. We don't expect reinsurance prices to fall off a cliff. So we expect that that's still going to be some challenging environments there. We know our perils allowances will be drifting continually moving up. So we're going to have to continue to reprice the portfolio going forward. Affordability just becomes more and more and more of an issue. And so we're just being what we think sensible on that margin, still does deliver that 13% to 14% ROE, which we think is pretty good.

Right. And sort of the more shorter-term outlook moving into '24, like if we're talking about 15% over the medium term. How should we be thinking about '24? You've talked about costs. We can see yields in the market and pricing is obviously accelerating. So the big unknown is obviously your cat budget and reinsurance costs. At this stage, should we be thinking about something well below 15% for '24 given those potential cost impediments next year?

Yes. I mean, we're not giving guidance today. We'll sort of package that up with our results in August. But I mean I don't see sort of -- I see us continuing to sort of the run rate of how we're going at the moment. And with the aim that we'll be lifting up. We've got -- no, I think you've summarized the headwinds. So it's not like all the prices going forward and our cost structure is flat. Actually, we'll continue to see cost inflation. We still continue to see reinsurance costing, and you're going to continue to see us lifting up the perils allowance. So that's going to be -- we're going to be covering price needs to cover all of that. And we're facing into increasing affordability challenges in the communities of Australia and New Zealand. So I think there'll be a step-up towards next year, but we'd like to be delivering that 15% pretty quick.

Andrei Stadnik, Morgan Stanley. If I can ask a question on the motor claims as start -- initial -- as my first question. Just in terms of the feedback we're getting from the industry, it seems a little bit different in that sense that everyone else is seeing motor claims inflation to be -- continues to be very stubborn and that's actually what you're seeing in New Zealand as well. So is there anything in specific about your portfolio? Anything specific about the way you measuring claims inflation that makes the outcomes different and better?

Julie, I'll get you to come in. I mean I don't think -- I mean, we have got a fair chunk of our claims being managed through our in-house providers. So there's some advantage we'll be getting through that. And sort of -- the New Zealand situation is a little different than Australia as we highlighted, and we are definitely seeing more challenges there. Julie?

Yes. I think when we look at our portfolio, I guess the really big challenge for us was August, September, October, and it was unexpected. So we were pricing in sort of 8% to 10% inflation. And as I said, we observed sort of 15%, 16%. So really hit us hard in those months because of our scale, really in New South Wales and Victoria. So I think we immediately started driving both into pricing action was already there, but pushing rate through straight away. And you can see where the rate level is now on our Motor portfolio. And you can see the new business price variability in the market at the moment. And also, we started repair activities right then. So what do we need to do? How do we reduce leakage? How do we tighten this up? How do we pull extra capacity? And what do we do to really try and get on top of this quickly? We've still got inflation. I don't want that to be the message. It's there, and it's moving around, but it's stabilized. The other thing that's quite -- so the other thing that's quite pronounced in our portfolio is the size of the Victorian book and in Victoria through our fantastic partner, RACV. It sells a higher proportion of total losses at sort of market value. And we saw really significant volume of secondhand car prices, market values increase. I mean, this is not new. This is kind of known. So we saw a really big impact of that in the first half. And in a relative sense, secondhand car prices have come down and total losses have stabilized. Maybe you people are driving a bit better now after being back on the roads longer, but -- so we've kind of seen that effect. It's still there, but we think we -- it hit us earlier. We saw it earlier, we acted early, and we're actually now starting to see some price change come through the motor book in new business volumes for other players that we're thankful for actually.

And my second question, can I ask actually around the customer volume wins that you showed on that slide by State. So Victoria is very strong with about 60-odd thousand. The New South Wales substantially below that, about 30-odd thousand and then Queensland actually went backwards a touch. So can you explain what are some of the advantages? It just RACV is a better motor club in terms of helping you to execute in Victoria, like what are -- what's working so much about in Victoria than New South Wales and Queensland?

Yes, yes, happy to. So again, it's different constructs in each state. So in Victoria, RACV, a wonderful business, dedicated database of customers that all have roadside assistance, and they sell multiple products to them. So lots of growth through Victoria, and that's been consistent over the last number of years, by the way. New South Wales is a pretty hotly contested market. There's a lot of price competition in New South Wales. And we've also had a huge number of events in New South Wales. So growth has been a little bit slower in New South Wales, pretty strong on home actually, but slower on motor, much more competitive, as I just said. You can go and take a look at the distribution of prices in New South Wales motor at the moment and relate that back to the last question, I guess. Queensland, tough market for us with NRMA always has been. Wonderful brands out there in the form of Suncorp and RSEQ that really drive the market. And we just haven't been focused on that region as strongly. We don't sell CTP there, and that's a really lead product. So we're more cautious around growing in Queensland, but thoughtful around it. We see it as an opportunity, though, as we do all the other states. So we've got about 30% shares, 35% shares in New South Wales and Victoria. And that's why the NRMA brand and its national footprint, we think, gives us an opportunity to reach the 750,000 target over time through growth in other areas.

And I think that we've got evidence also now in WA and South Australia, where we're rolling out that NRMA brand that's going pretty well actually. So we sort of -- I mean, obviously, it's a traditional New South Wales brand. But what we're evidencing and sort of seeing in the growth of WA and South Australia, there's a strong brand recognition there. And so that sort of gives us a sense of an opportunity, I think.

It's Nigel Pittaway here from Citi. I wonder if I could just revisit a couple of the earlier questions, first of all. Just on this guidance, trending around 10% reported insurance margin for the full year. Can we be absolutely clear? Are you reiterating the guidance you gave? So you're going to get 10% curious, so I think, I could have fun. Secondly, just in terms of medium term, what do you actually mean by medium term? Because we used to have the guidance of 15% to 17% for medium term, it should probably hit this year or next year. Is that medium term shifted? Or how should we interpret?

I don't think so. I mean, Nigel, we're not sort of giving guidance today, but we sort of used the expression, medium term to sort of 1 year out is probably the -- is how I'm thinking about when I use that expression. So -- I mean not 5 years out, so that sort of was the way I described it.

Okay. So FY '24, it's no, but FY '25.

Yes.

All right. Secondly, just I mean in terms of the reinsurance, I mean, obviously, one of the potential implications of the current environment is that you end up with more -- even more volatility on your books. I mean how do you cope with that when setting apparels elapse, because, yes it's all based on probabilities. So how are you going to address that potential when you think about your perils allowance, maybe?

I mean I'll make a high level annuity coming to Michelle, that what we're finding is the lower levels of our reinsurance are really expensive. And because they're sort of -- they've migrated from low frequency to high-frequency covers. And so therefore, we had a rule of thumb in our play, so we sort of wouldn't pay more than $0.50 in the dollar for reinsurance, and we've broken that in the last couple of years. And so we end up paying quite a lot for some of the lower-level covers. And sort of rightly between us and our partners, we're sort of saying, actually, maybe that risk just goes to you and we don't sort of have this risk transfer. So I mean that's the theme that's happening. And essentially, we're filling that gap with our own allowances. And I think that's an economically rational decision, because if you're paying $0.70 in the dollar or $0.75 in the dollar, you sort of -- there might be a good reason why you might want to retain that risk. And the other -- the residual amount is quite modest.

Yes. So Nigel, really good question. And I know answering this in the context of we've missed our allowance probably 9 out of the last 10 years on an unfavorable perspective. But as you heard in one of the breakout sessions today, we've been continuing to invest in building out our modeling. That modeling is sort of comes up with a range of possible outcomes. We need to choose a point in that. We have, over the last couple of years, put some step changes through as we've seen that, as we've flag today, we'll put another step change through again into FY '24. We're not providing guidance on that number today. But I think we've called that out quite strongly. And again, as you've heard in terms of the pricing decisions Julie, Jarrod and Amanda are making, they're anticipating that, which is good, which is what you want us to do. But there's no certainty around it. I mean, I know I'm talking to a lot of our reinsurance partners, whilst some models might have anticipated 2 events within 3 weeks in New Zealand earlier this year, they would have been 1 in 300, 1 in 400 type assumptions. So there's been some changes happening. We look to respond to that. We're always coming out with numbers based upon our best forecast. And as you heard Julie talk about the history of the level of investment we make in building out that capability. But Mark Leplastrier has said to you, there's one certainty, the numbers will be wrong. We're just trying to make that margin of errors smaller as we move forward.

Okay. And maybe just a question on the frequency of motor claims. Are you seeing any pickup in frequency over and above to maybe pre-COVID levels? Is that something that you might be seeing on or no?

Sorry [indiscernible] beyond where we sort of were 3 years ago?

Yes. Yes, at least, yes. The Pre-COVID.

That sort of activity. I mean the themes remember for us has been, where we should have been having a sort of -- where we were in 2019, where we should have been starting to see a frequency reductions driven by sort of frequency of avoidance technology pollution avoidance technology in motor vehicles within -- not just in Australia, but hardly anywhere in the world. We actually were seeing that. And sort of the theory there was distracted driving people on mobile phones, texting and we sort of any benefit of frequency was offset by that essentially. So that was sort of where we -- that was we were almost in a holding position pre-COVID then obviously, we've had big disruptions. And I'll get Julie to make a comment. But I mean for -- the general theme is sort of back to that level. It's an interesting thing also about some of our roads and country roads in particular, and windscreen damage and things like that and the fact that some of them have been maintained, post events as well as they should have and we're seeing some of those smaller type incidents more of, probably not high as material, but we're seeing some frequency on there. I mean, do you want to comment?

Yes. Look, motor frequency is at the level it was pre-COVID for the relative size of the portfolio. I shared with you kind of what our monthly claims are from motor earlier in the presentation. And you can kind of see like -- like scale portfolio, you see that like clockwork now each month. So you -- there's very little variability. I think to Nick's point on volumes. To Nick's point, we did have -- we have had some mix differences. So we did see an unbelievable number of windscreen claims as everybody did, by the way, if you speak to any of the windscreen suppliers late last year through pot holes. So I mean, I've learned one more [indiscernible] and I came to know over the last sort of 12 months, I can assure you. So real -- a lot of change occurring that's stabilizing now though. So even the mixes are kind of going back to pre-COVID levels as that sort of heavy rain is leaving the system. A bit different on motor -- on property -- sorry, I'll hand over to Amanda a bit different on property. We're definitely seeing lower frequency on non-perils claims in property, which we think might be structural. A little bit too early to call that, but more people working from home, more maintenance, more at home when something goes wrong, we're seeing lower frequency on home claims.

Amanda, do you want to?

Yes. I think the only thing I'd add is that we saw some volatility post COVID, when people were allowed out again, particularly in our CMV portfolio, had a lot of volatility in that space that sort of calmed down again now, and we're seeing very similar frequency rates to pre-COVID.

I'm Anthony Hoo at CLSA. I just had a question on costs. You've talked about FY '23 flat cost base. I also talked about a lot of spending on technology. I'm just wondering if you can talk about -- is there some element of pushing cost back into FY '24? And what does it say about -- you haven't given us a strong indication of what the magnitude of the '24 increase will be. Can you talk to that as well in terms of the timing of that is? I'm just wondering, are you pushing cost back to '24?

So I wouldn't say pushing back, but part of why I included the 2 smaller graphs on the bottom of the slide is to show our capitalization profile of software. And you would have seen in the half year results, last year full year results because it's an intangible asset, we had a capital drag, so we were capitalizing that. We don't start amortizing until the assets come into use with those investments. So we've started some amortization, but the second graph I showed you was the amortization profile. So part of the cost discussion that we're having is, you'll see from the graph in terms of the investment in technology assets is sort of coming to a peak in FY '23, starts coming off, but we have added to that the investment in the commercial systems, and we've called that out on the chart. But you'll see our amortization over the next few years is really going to grow significantly. Over the medium term, that will be offset by the benefits from the investments we've made, but you don't get all of the benefits straight away as you start realizing that. So I wouldn't call that sort of pushing it. I'd say we're complying with our accounting policies as we should do, and that's why we've called that out quite deliberately. We haven't put a number on the absolute dollar increase of the 2.5%, but if you think about things like back in 2021, when we set that target, we were probably thinking wages inflation was 2%. It's now more sort of 4% to 5%. You think about some of the inflation we see in technology spend as we move more to Software as a Service, and Neil could probably talk about that. So it will be a bit of an increase in the absolute dollars.

And then just a second question in relation to costs. There was a comment in one of the slides in relation to commercial portfolio, saying that the global trend towards more tech, more data spending, the language suggests that you're saying that Australia is bit behind. Is that right? Is that interpretation correct?

I mean, as a market or as a company?

As a market.

Jarrod, you come in? I mean, I'm probably as a market, but definitely as a company. Jarrod?

Yes, I guess we see, particularly North America is probably ahead of where we are in Australia as a market in the investment and what they're achieving with that investment, how they're using AI and data to inform decisions. That's probably what we observed, when we were looking at what our ambition and the capability that we're looking to build through commercial enablement.

Siddharth Parameswaran at JPMorgan. Just 3 questions, if I can. Firstly just on the guidance for this year. Michelle, you're saying that you are including some reserve releases in your assumptions for the 10% margin this year. I was just wondering if you could comment whether your reserves are actually completed? It's usually seems a little unusual to have completed them before the year is up. I was just wondering if you could give us some clarity on how you have comfort around those.

So Sid, I think you're referring to the comment Nick made that our current forecast suggests that we may see some small releases and he said small in the second half, some benefit from credit spreads, but that would probably be offset by perils being above the $1,145 million that we talked to you about in February. It's a forecast. It's an indication. We do a may hard close. So we've obviously got some views around that, but they need to go through a formal audit and review process, but it was more in terms of calling out the elements you would see between reported and underlying based upon our current forecast.

And so, Sid we've done quite a lot of work on that. And I mean, importantly, I think the other point we're saying, by not saying it, is our long-tail reserves are stable.

Okay. Great. Okay. If I could just ask the second question, perhaps on the longer-term picture on margins of 15%. Michelle, one of your peers, your largest peer basically commented that they were changing their approach to setting perils allowances to shorten the period -- the look-back period. And I think they said 5 out of the last 9 years, with their revised reinsurance structure, et cetera, they would have met those allowances. Could you just comment on how -- whether you're changing your approach at all in terms of your perils allowances given that you've missed 9 out of the 10 years?

So we've been enhancing our modeling, which was what I was trying to communicate in answer to Nigel's question, and we have internally done a similar piece of analysis. And I think it's sort of probably 6 or 7 out of the last 11 years with the modeling that we have in place now, we would have met it. And so then you look at the scenarios around the extreme events that we've seen in New Zealand this year and in New South -- well, in the East Coast Australia last year. So they're the sorts of things. One of the reasons we haven't provided you guidance for next year as we work through to really pressure test that understanding it. So yes, we continue to invest heavily in that. And ultimately, we'll come up with an estimate. What you'd like to see as a trend going forward, where the variability can -- is plus or minus, not always were unfavorable, and that's what we're looking to change with the enhancements we've made to our modeling approach. So I feel like I'm on the side looking through people...

So the -- so 7 is with the revised reinsurance structure that?

Correct. Correct. So the same sort of analysis that you've seen one of our peers do, we've done internally to have...

And also heading where our perils allowances are heading.

Yes. Okay. Okay. Great. So it should be a [ spirit ]. Okay. And just maybe, Nick, just around the 15%. I mean we've had margins this year and last year, which are well below that. Well it's had a lot taken below the line. I mean some stage, 15% medium term through the cycle would imply that you get more than 15% at a portion of that. So -- and we've seen the charts you're showing is showing rate increases nearing 20% across your book inflation dropping to single digits. Should we be expecting a period, where we get above 15% and that should be imminent?

I mean, I'll throw in some variability around perils as well that set the lag, Michelle were talking before. I mean -- I mean, at the moment, I mean, I think it's really important that we don't forget, yes, pricing is flowing through our portfolio. There's a lag as that's being earned as we know, the earn through. And our input costs are not nothing. No change. I think, we do believe we're going to continue to see inflation, maybe not at the level we saw in first half '23, but at an elevated level. Perils -- the conversation you were just having, allowance are definitely going up, and we expect reinsurance. So -- yes, that 15% is over a period, so we should expect to outperform that some years. I would have thought the main driver of that though will be more driven by perils.

It's really important, Nick is that, that we're realistic about what we're looking at, particularly with the affordability challenges that we see for our customers across the various portfolios and all of those pressures together, which is why we've been really deliberate to set in the -- the medium-term targets that we've talked about today and deliberately set around 15%, not the broader range that we've seen there before because we're trying to balance all of those factors to create maximum value.

Sure. But just to be clear, I mean, Michelle, you're saying 6 out of the 9 years looking back, you would have met those.

You're going to quote me exactly. I was sharing with you some internal management analysis probably going to come back to haunt me.

Can I -- I say, that the real story there is on that slide we have and I think it's really important we look at reinsurance and perils together because there's a real relationship there as we're effectively dropping off lower levels of reinsurance and calling our perils, the way we were discussing it with Nigel. So that's sort of we've gone from 13%, 14% to [ 19% ]. So we're taking -- there's a lot of premium. As we're allocating a lot of costs either directly in reinsurance and allowances to that sort of peril -- natural perils event. And therefore, it's going to be the way Michelle described that the look back is considering how we're now pricing looks a lot more positive than what our actual experience was. And let's hope that we have some years where -- where we have sort of delivered greater than 15% margin for the reasons that we just said.

Okay. Okay. Just a question on growth, if I can. The -- I mean, you're sticking with the 10% growth target. The rates environment seems to have strengthened materially in all your divisions, but doesn't seem like that GWP growth target has changed. I'm just wondering if you could comment on what's happening on lapses? And also just in relation to some of the growth initiatives you targeted 1.5 years ago at your Investor Day back then. I think could you just give us some comfort that you are actually getting similar customers to what you're targeting? Are we actually seeing the benefits of those impacts?

Yes. I mean I'll make some high level and maybe Julie, Amanda come into. I mean -- we remember, for this current financial year, we started the sort of single high-digit growth -- something like that. 7% to 9% or something like that. We're sort of -- that's now 10%. There is some currency in that. And we're saying 10% absolute. That number is probably slightly stronger underlying. Obviously, the second half is a lot stronger than 10% because the first half was...

7.5%.

7.5%. So there's sort of [ demise ] around that. At a high level, we sort of stepped through. We've got 200-odd thousand customer growth in our direct business, we're pretty pleased with that. And I think the way Julie's stepped us through it, a lot of that's been driven by retention and existing customers rather than -- I think there was a slight perception that we were aggressively pricing and winning new business, and that's sort of not the story here at all. So we feel -- I mean, I would describe it as on track. I don't know if you want to comment?

Yes. I mean last time we talked to you, we talked about kind of 4 focus areas. So growing nationally, and you can see what we've done with the NRMA brand. There's still a long way to go there markets -- our market shares are still pretty low. We talked about capturing the attention of a younger generation, I think we said. So that's pointing our ROLLiN' brand, recognizing that our customer groups are getting sort of older with more higher asset owners and trying to create some optionality around how we create a relationship. It's growing very slowly, successful, but it's slow and it's small, but an option for the future. In terms of small business, again, I think we talked about digitizing small business. We're really happy with that. Small business, again, like the economy is kind of going up and down a little bit at the moment in terms of new business registrations. But the work we're doing, particularly with the NRMA brand, we're sort of seeing 8% to 10% growth in volume coming through our direct small business. And we're micro small. We're not as impressive as Jarrod's portfolio our size. So we're very small, but we're seeing really good growth there. But we're just being cautious like -- we don't want to go out and put crazy prices out in the market. We're not chasing it. There's a lot of advertising out there. You can see it all. And so we're trying not to do that. We're trying to be really rational and use our scale, our brands, our people and new technology and capability to really try and improve the quality of the portfolio.

Yes. And look, we kicked off our growth plans in the first half of the year, and we're starting to see some good green shoots of growth. And what we've done now, though, post these peril events is we're sort of how to look at this and gone. Actually, we really just need to make sure that we're responding to these events and make sure that we are retaining our existing customers because being the largest market shareholder, we've got a very high number of products per customer and actually losing one of those customers is nowhere near as good as gaining a new one. So I think our focus is right for now. And like Julie said, we need to be cautious here and make sure that we're growing in the right areas. We've got plans. We believe that they are absolutely right, but I want to hold at least until sort of the back end of FY '24, where we've got the right technology in place to really be able to offer new customers a different experience.

Any other questions in the room? Mark is giving me the...

Mark is giving the [indiscernible]

Kieren put his hand out.

Kieren [indiscernible]. Kieren, last question and then I'll just make some closing comments. You turn the mic off [ Avry ]. You're feeling under pressure? Sorry.

Question for Jarrod. Just on sort of the length of pricing cycle, we've seen commercial pricing up since 2017, industry combined ratio is 85% -- industry combined ratios, I think, is sitting at 85%. So we're seeing sort of your competitors making pretty good ROEs at this juncture yet. So your business still has some way to go. You've got this big investment in technology, still ahead of you. So just wondering how reliant you are on that pricing cycle remaining strong right through next year and possibly into '25 to achieve those goals?

And for those on the line, the start of the question is essentially around length of the commercial cycle from here to Jarrod.

Yes, Kieren. Look, our forecast and what we're seeing in the market at the moment, and this is a big renewal season, June, is pretty consistent behavior through the market on the vast majority of portfolios. So we're achieving our rate. I did mention we're a few points off on retention, but that's okay. We're comfortable with that. We're achieving the rate that we need in the portfolio. So -- to your point, no, Kieren, I've given up predicting when this market cycle will change because this is the longest firm pricing market cycle we've seen in commercial in my 30 years in the industry. But there's different cost drivers. We haven't seen the level of perils increase. We haven't seen the reinsurance increase. We haven't seen claims inflation, which is impacting commercial, not to the same extent as personal, but we're seeing that come through. So there's a number of cost drivers still going through the commercial side of the equation. The only area we're really seeing pricing flat and coming off is in commercial D&I but that's a very particular segment that saw significant increase for a handful of years. But that's the only area we're seeing that we're able to achieve our pricing. So we believe it's going to be a fairly consistent market through next year at least.

Just a couple of closing comments then. So firstly, thanks for attending in person and those in line. I mean, our story is really -- it's been a tough couple of years for us. We've had to deal with a whole lot of stuff. Some of that are unexpected, obviously, but we can really fill the progress that we're making. That we hope we have provided some of those sort of financial signals that we're seeing and the confidence that we have got around some of those outlook, both the near term, but also medium term as well. And we really can see a little bit of momentum in our business and delivery of that 13% to 14% ROE, 15% margin and the things we have done to set ourselves up. And I think importantly, we're not just all about the now, is it either. And I hope you're seeing what we're doing about how we're investing in our business. So the piece of work that Neil talked us through around just this massive simplification of our company is really setting ourselves up quite differently, building out some of our businesses and what we're doing with some of our people, particularly in some of the commercial parts of our business, it's really a bit of a step change at IAG. And so we're definitely investing. And finally, I hope you can see that we're joined up that we're sort of running this as a team. We understand there are different segments, different parts of our organization, but we're really focused on really building out this sort of simpler, stronger IAG that really should be delivering the returns that you should expect. So thanks again for those online. We'll say goodbye those in the room. We ask you that we welcome you to join us for a drink at the back here. Thanks very much.