NobleOak Life Limited (NOL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the NobleOak Life Limited Half Year '26 Results Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Anthony Brown, CEO. Please go ahead.

Thank you. Good morning all, and welcome to NobleOak Life's financial results presentation for the first half of financial year '26. I'm Anthony Brown, CEO of NobleOak, and I'm joined today by our CFO, Scott Pearson. Today, I'll start with an overview of the highlights from the half, and then I'll hand over to Scott to cover the financials in a bit more detail. Then I'll take you through an update on our strategy execution and the outlook for the rest of financial year '26. And finally, we'll open up for some questions. Before I get into the results, I'd just like to remind you about what sets NobleOak apart. We remain Australia's most awarded direct life insurer and with a business model built on predictable annuity stream revenue from in-force premiums. Our customer-first culture, high-value products, combined with modern systems and a strong focus on AI-led transformation continues to support both growth and efficiency. And importantly, our transition towards an APRA-aligned life company structure will further enhance capital efficiency and flexibility, providing a strong platform for long-term growth. All of this underpins strong and increasing cash flows, disciplined capital management and meaningful optionality as we scale. So Slide 5 summarizes the key operational highlights for the half. We're really pleased to see continued strong sales and lapse outperformance drive in-force growth across both our direct and our advice channels. We further gained market share in both segments, supported by product quality, great service and disciplined insurance management. We executed well against our growth strategy with new products and partnerships, including the launch of a major new direct alliance partner with one of Australia's largest health insurers, nib, which has subsequently launched and a new strategic partner product launch Futura with our NEOS partners. Capital remains sound and within our target range, and we continue to embed AI across the business in a prudent way to drive efficiency and improve customer experience. All in all, it's been a very productive half for NobleOak. So just turning to Slide 6 with some of the financial highlights. The half year '26 marks a major milestone for NobleOak as we passed the halfway point on our journey to our long-term target of $1 billion of in-force premiums. In-force premiums at NobleOak increased to $505 million, which was up 19% over the last 12 months, driven by strong sales and better-than-industry lapse rates. Underlying NPAT also increased by 11% to $9.6 million, reflecting stable margins, operating leverage and good cost management. Our new business market share and in-force premium market share both continued to grow, reinforcing our position as a leading challenger in the market. Capital remains well within our target range with a regulatory capital multiple of 174%, supporting both growth and ongoing investment in the business. I'll now hand over to Scott to cover some of the financials in a bit more detail. Thanks, Scott.

And thanks, Anthony, and good morning, everyone. I'll start on Slide 8 with an overview of the group's financial performance. As Anthony mentioned, in-force premium at December 25 has grown to $504.8 million, a 19% growth over the last 12 months for a 9% increase in the 6 months since June, reflecting strong sales and retention. New business grew by 11% to $33.8 million in the 6 months as we continue to take over 10% of market sales. Lapse rates increased as the portfolio matures, but remains below industry average at 12.4%. Underlying NPAT grew in line with guidance by 11% to $9.6 million. Statutory NPAT of $6.3 million was impacted by the increase in our provision for potential Victorian stamp duty exposure to $6.5 million. Importantly, though, total exposure is now capped at approximately $8.5 million. Importantly, underlying performance remains strong. The ongoing margin stability supported by improved operating leverage and insurance margins that continue to benefit from our customer -- our conservative risk retention sees our results remain strong. Turning to Slide 9 and the Direct segment. Direct in-force premiums increased to over $100 million for the first time to $103.5 million, supported by continued market share gains. In the first half, we made changes to our direct sales function to improve performance, scalability and accelerate AI adoption. These structural changes impacted new business performance in the short term, but are designed to build momentum in the second half and beyond to be supported by our new nib partnership. Pleasingly, lapse rates reduced to 13.5%, around 2% below the total industry average. The repurchase of the RevTech Trail Commission in December '24 reduced commissions paid by approximately $2.5 million over the first 12 months and contributing strongly to margin expansion. As a result, underlying NPAT in the direct channel grew by 49%, which was a very strong result. Moving to Slide 10. In the strategic partner channel, in-force premiums grew by 23% to $401.3 million. Growth has been driven by our strong partnerships with NEOS and PPS with the launch of the new Futura product in October already building market awareness. Underwriting margins were impacted during the half by higher TPD claims experience. I note that this increased TPD claims experience is a market-wide phenomenon. And importantly, NobleOak's conservative risk retention strategy continues to significantly mitigate the impact of claims volatility that we've seen during the period. Turning to capital on Slide 11. We remain well capitalized with capital adequacy ratio of 174%, which remains in the top half of our target range. The net capital movement in the half reflects the benefit of the RevTech Trail Commission repurchase, the utilization of our tax losses and offset by the Victorian stamp duty provision increases. Overall, our capital position continues to provide flexibility to fund growth, invest in the business and progress with the life company transition. In summary, these are healthy results as we continue our growth trajectory and manage industry-wide claims experience, our Victorian stamp duty changes and our transition to the life company, and we continue to invest in the business. With that, I'll hand back to Anthony.

Thank you, Scott. Just turning to Slide 13. We'll cover some of the financial year '26 strategic priorities in the first half. So as mentioned, we launched the new nib product range and we will now be providing access to more than 1 million nib members with a fully digital nib-branded life insurance product set. We're very excited about the potential for this partner. And given the natural adjacency of purchasing health and life insurance together, we do expect it to be a big success for NobleOak in the coming years. We're also really pleased to have launched the Futura product on the NEOS platform. It's a new product with NEOS that targets a different market segment and complements our existing advised products. Futura has delivered good early growth since December, and we, again, do expect to see some benefits from that product in the coming periods. As we announced at our financial year '25 results, we continue to embed AI across the business in a very practical and disciplined way, focusing on delivering tangible business outcomes. We've deployed an AI underwriting tool that automates data analysis and triage, freeing up our underwriters to focus on more complex risks and higher value judgment calls. This is improving speed, consistency and quality of underwriting decisions. And over 90% of our staff now use AI tools in their daily activities, which does support greater efficiency, scalable productivity growth and eventually a structurally leaner operating model. By improving underwriting turnaround times and lifting conversion rates, we're driving stronger growth while lowering our cost to serve. And importantly, we're leveraging our data. As our models improve with scale, they strengthen our competitive advantage by giving us a structural advantage in cost speed and customer experience. So we've delivered strong progress in the first half. There's naturally more to do, but the direction is clear, invest where AI improves efficiency, growth and long-term competitiveness. Finally, just turning to the outlook for financial year '26 on Slide 14. After a strong first half, we are reaffirming our financial year '26 guidance. We expect in-force premium growth to be more than 15% and underlying NPAT growth of more than 10% for the full year. This outlook reflects continued sales momentum, disciplined underwriting and further benefits from scale and automation. I'm really excited about the outlook for financial year '26 and look forward to updating you further on our progress through the year. That concludes the formal presentation. Before I open for questions, I just want to thank you all for your time and continued interest in NobleOak. It's greatly appreciated. I'll now open up for Q&A. Thank you.

[Operator Instructions] And today's first question comes from Philip Pepe with Shaw and Partners.

Congratulations on another good result at the in-force premium level. Just on strategic partners, just on the TPD claims going up. Is there a particular segment? And has that continued into the second half where that's occurred?

Bill, your question is about TPD experience and you indicated whether it was a specific segment. It is an industry-wide development, which is primarily driven by mental health claims experiences across the industry. So we are seeing it in each of the channels. The strategic partners have a higher proportion of TPD within our direct book. That is where we're seeing the experience come through. We are -- I guess, as you know, Bill, the -- it's actually not had a significant impact on the aggregate results, albeit depressing those results due to our risk retention being lower in those segments.

Excellent. And just a second question, how has the relationship with nib started? Typically, it's a younger than average customer base. So it would be great to get some of your their clients on board to your book early. How has that relationship started in terms of them converting health insurance customers into both health and life insurance customers?

Yes. Thanks, Philip. It's Anthony here. Look, we're only literally a few weeks since the launch, but it's a very engaged partner. So we're really pleased with the cultural alignment, the alignment in targets between us and nib and their desire to really make it work. We saw a sale on the first day, and we are seeing some traction already with their membership base. But the active marketing won't really start for the next -- until the next couple of months. So we'll get a really good idea in the second half of this financial year.

If I can squeeze in a third one. It looks like you'll now be the last remaining independent life insurer in the country. Does the change in ownership of ClearView make any difference to you at all? Is it an additional selling point to your customers saying, well, the last Australian-owned company out there?

Good question, but we didn't see that news come out. So [indiscernible] has been a big talking point within NobleOak. Look, I think you're right. Our perspective is net-net, it's a positive for NobleOak. There's one less competitor. And ClearView will soon -- if it goes through, which we do believe is likely, ClearView will no longer obviously be listed on the Australian ASX. So we'll be the only purist life insurer listed, which, again, we do think is a positive as well. Zurich is a good competitor. They're well capitalized. They'll obviously integrate ClearView in the next couple of years. So they will be slightly distracted, no doubt, doing that, but they'll still be strong at the end. So we don't think it's going to have a massive change in competition going forward. But we certainly think in the short term, there may be opportunity for us when there's a little bit of integration work happening between those the 2 businesses.

And our next question comes from Nick McGarrigle with Barrenjoey.

Just wondering in the direct business, underlying NPAT second half '25 through to first half '26 was down a reasonable amount. Just the drivers there. It seems like it was insurance margin related. Just trying to get a sense on where the leverage was lacking in direct given the in-force is obviously growing, but profit went backwards half to half.

Could you repeat the question, please, Phil? Apologies. can you just repeat the question, please?

Looking at the direct underlying NPAT in the second -- in the first half of FY '26 versus the second half of FY '25 went backwards. And I'm just trying to understand what costs or margin there was half-to-half to drive profit to decline when in-force is up? Just curious on that.

I'll take with that [indiscernible], Nick, I don't -- you're talking about -- in both periods, we had the first half -- second half last year, we saw a significant increase as we saw the RevTech commissions coming in the first -- in the second half last year, and we had some favorable claims experience as well, I think, in the second half of last year, which in the results in direct in the first half of this year, the claims experience are more closer to your normal expectations. I think you'll find that's the main drivers, Nick. I think the expense ratio has actually come down a bit. So we should be seeing margin expansion in that segment as the product grows.

That does conclude our question-and-answer session. I'll now hand back to Mr. Brown for closing remarks.

Yes. Thank you all. Thanks very much for attending. And I just wanted to say thank you all to the NobleOaks team for a strong 6 months. And yes, I hope we have a wonderful year. Thanks for dialing in. See you later.

Thank you. That concludes our conference for today. You may now disconnect your lines.