OUTsurance Group Limited (OUT) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the results presentation for the OUTsurance Group for the 6 months ended 31 December 2025. As per usual, I'll be taking you through the operational view, then I'll hand over to Jan for the financial review, and then I'll close things off with the outlook. So if you look at the macroeconomic trends, first of all, to start with CPI inflation. So previously, we have remarked that we do see over time a loose correlation between CPI and our own claims inflation as well as premium inflation. However, we also pointed out that generally, claims and previous inflation have been higher than CPI inflation for quite some time because of trends like -- frequency trends like climate change, urbanization and on the severity side, you have technology like solar panel has been more exposed to damage in case of events like hail. So while we've seen CPI increase over the last year, I think most of our markets, Australia and South Africa have been quite profitable. And as such, we've seen a declining premium inflation in those markets. I do think the exception though is home insurance in Australia, where we've seen the large natural peril events in the last 6 months, and we've seen that trend starting to change around. Also with the geopolitical events in the Middle East, generally, the outcome of that would be inflationary. And as such, we also expect that the CPI inflation as well as claims inflation is likely to turn because of supply chain pressures and activities like that. Overall, though, our business model is quite resilient to that. We have quite strong pricing power. And as such, whenever inflation is higher, we seem to be able to weather the storm. And it also, in some cases, leads to higher shopping behavior, which is also positive for a business that's growing organically like ours. If we were to look at interest rates, I think it's fair to say that interest rates remained higher for longer, and it came down less than expected. And with these events that we're observing globally, we actually also expect that the previously expected downward trajectory is most likely not going to realize to the same degree. And overall, that is also positive for our business in terms of investment income, which we can earn on our ever-growing reserves. In terms of the exchange rate, I think the most significant one there is really the Australian dollar to rand exchange rate, where we've seen the rand strengthening significantly over the last 2 years. And that has provided a headwind in terms of our overall growth because of the Youi growth in rand terms being lower. That said, again, the global developments might have some impact on that. But overall, I think it's worth noting the headwind that the strong rand has provided in terms of our Youi premium growth and earnings. Then in terms of the operational review, if we were to look at OUTsurance South Africa, as mentioned, premium inflation continued to trend lower, in line with expectations on the back of the strong profitability seen by ourselves but also wider in the market. We saw satisfactory new business growth supported by the OUTsurance broker channel. And that is quite positive. As we remarked previously, that broker channel or our tied agents give us access to a segment of the market we didn't have access to before. Typically, high net worth individuals or business owners are not as keen to deal with a call center, and this is where this channel has been quite beneficial and been doing well. We also saw a good claims performance in South Africa for personal lines despite higher natural peril claims. There were some notable events in Gauteng but they were well absorbed into the overall claims ratio. And then we -- what was quite pleasing is that we saw a notable improvement in cost efficiency, which contributed to the higher underwriting margin. And yes, that is quite positive for the business, and we'll elaborate on some of the drivers a bit later on. In terms of growth, growth in gross written premium for personal was 7.1%. But if one were to exclude the FNB homeowners book, which is in runoff, that growth for Personal Lines is 8.8%. Now in the context of much lower premium inflation, that is quite a positive story in terms of unit growth. In terms of profitability, we saw 10.8% growth in operating profit. And important to note here that the segmental comparison excluded the high share-based payments, it normalized for that. Okay. Then in terms of OUTsurance SA business, satisfactory premium growth, again, driven by the broker sales force. The Direct segment had more muted growth. Excellent claims performance as the OUTsurance broker business is maturing but also because of good underwriting execution. We've observed economies of scale in the broker channel, and we saw a large reduction in the cost-to-income ratio. And we think there's some more room to scale further but that channel has really now come of age in terms of margin and viability. Growth overall for Business OUTsurance at 12.1% gross written premium and profitability, 54.2% growth. And that much higher growth in profitability is because of that broker channel moving from sort of breakeven towards its target margin successfully. Then looking at Youi Direct, Personal and Business. We've seen good new business growth achieved by Youi Direct. Premium inflation continued to trend lower for car, while home was sort of range bound. And as pointed out earlier, with the high natural peril seen in the last 6 months, we do see that premium inflation for home turning around. We saw the significant increase in the natural peril claims for the period compared to a fairly benign period in the comparative period. But we'll show in the graph slightly later in the presentation, the volatility over a short period like 6 months but how it tends to even out once you look at a full year. Good progress was made also towards delivering cost efficiencies. So if we look at the Youi Direct growth, delivered 23.8% gross written premium growth in Australian dollar terms, which was a strong performance considering the lower premium inflation. Profitability, operating profit reduced by 43.2%, and that was purely the effect of the unfavorable weather experience in the 6 months. In terms of Youi CTP, despite the strong premium growth, Youi CTP book delivered a disappointing operating result. And while previously, the challenge to get to breakeven was one of a cost ratio challenge, we have now scaled successfully. The current problem is more a loss ratio problem. And some of it is triggered by the increasing cost, especially in New South Wales and the whole market is taking pricing action to increase premiums to catch up towards the new norm. So we are focused, and it's our highest priority to achieve that target loss ratio over the next couple of months. Growth, 51.8%, as we mentioned, and that's allowed us to achieve the scale and achieve the target cost ratio. But yes, we need to fix that loss ratio to fix the target profitability. Then if we were to look at OUTsurance Ireland, it's continued to scale customer volumes in line with our original business plan. Claims performance is tracking in line with budget, and it demonstrates the adequate risk selection early on in the business. Measured against plan, we're achieving our operational milestones. And we've previously guided that we're looking at a monthly breakeven in 5 years from launch. Now as a reminder, we launched April 2024. So we're looking towards a monthly breakeven towards April 2029. Gross written premium more than doubled from EUR 4 million to EUR 17 million in the current period. And what we can already see is the operating loss increased by 20%, which is well below the premium growth, and it shows the business starting to scale in terms of the cost-to-income ratio. We also expect the monthly losses expected to turn lower in the current 6 months as opposed to the prior 6 months, which we expect to be the peak in terms of the burn rate. The onerous loss is also growing proportionately slower in line with the scaling of the in-force book. Then if we were to look at OUTsurance Life, I think it's important to provide context here just in terms of the strategy and the history. When we launched OUTsurance Life, it was with a fully underwritten product. And the thinking was to cross-sell this product to our short-term insurance client base. But what we learned over time was that people aren't buying fully underwritten cover at a high level through the direct channel. And as such, we had to adapt our product to get better product and channel alignment. And as such, the product is now much more focused on the segment 1 million to 2 million some insured that's willing to buy direct and with less comprehensive underwriting and a less frictional process. And that pivot to better align the product and the distribution channel has enabled faster growth, but also a lower cost ratio, which has really benefited this OUTsurance Life direct significantly. Then Shoprite Funeral partnership, that continued to deliver satisfactory growth. And worth noting is the extraordinary reduction in the yield curve placed significant strain on the operating result for the period. So the value of new business written in the period increased by 67% to ZAR 285 million. The VNB margin improved from 23.1% to 25% following the operational improvements I alluded to. But then, yes, the benefit of lower expense and increasing new business volumes was muted by the impact of the lower yields, resulting in 5.9% growth in operating profit. That said, with the geopolitical environment and some of the developments we are seeing, that might also impact the yield curves going forward. So we're sort of closely monitoring that position at the moment. Then if we look at the property and casualty new business premium performance, then I think it's pleasing to report that our new business premium, excluding BZI, which we sold, increased by 24.2% year-on-year despite the negative offset of the stronger rand. If you were to look at the period there, say, from December '22 to December '25, it's pleasing to note that we actually managed to double that new business volume over that 3-year period. Youi Direct continued to be the most significant contributor there. However, all the OUTsurance SA segments also delivered nice growth across all the segments. And then as the company scales, OUTsurance Ireland's contribution is expected to become more meaningful and contribute to the diversification in the group. If we look then at the 10-year gross written premium profile of the property and casualty book, and you can ignore those sort of those blue blocks, that is BZI, which we sold, then I think it's quite pleasing to see that positive ramp-up the last 5 years. And it's in our core direct businesses, which means it's a high quality of growth, which generally allows a good translation of top line to bottom line. So if you look at the last year, GWP accelerated by 17.4% if you exclude BZI. And if you adjust for the stronger rand, then the gross written premium growth would have been 20.3%, which is a really strong result, especially in the context of the lower premium inflation. In terms of the overall group, Youi represented 62.6% of gross written premium for the period. And yes, that illustrates the significance of Youi in the picture. OUTsurance Ireland contributed 1.7% to the group's gross written premium. Then the all-important operating profit for the last 10 years. And there you can see that loosely, you do see the accelerated growth the last 5 years and the top line to bottom line conversion coming through. That said, over a 6-month period, as I pointed out earlier, there is a lot of volatility. However, once you look at the 1-year picture, it's much more stable as some of the overs and unders in terms of natural perils on a monthly basis start to even out. So that correlation between operating profit and premium growth is much -- even much clearer if you look at the annual picture. That said, operating profit, 11.1% up despite the much higher retained natural perils at Youi. And OUTsurance SA benefited from the structural reset of the share-based payments. And it's important to note that, that OUTsurance SA level, that's sort of the new norm because remember, the prior 2 years or so was quite depressed by that share-based expense, which is now out of the system. And Youi's contribution, as we noted there, was weighed down by the increase in natural perils. But as I said earlier, it's probably better to monitor this over a full year. Here, on the graph on the left, we're actually illustrating that volatility in the 6-month period. And you can see that sawtooth pattern there. And that shows you that the natural -- retained natural perils for Youi literally doubled from 8.6% to 17.2%. At a group level, it increased from 6.5% to 12.4%, very volatile over a 6-month period. But importantly, I think if we look at the underlying operational performance, that is a very pleasing one. And if you look at the graph on the right, first, the working loss ratios, therefore, the loss ratio, excluding the natural perils you can see OUTsurance SA improving from 43.9% to 42.6% but then Youi also improving from 51.9% to 50.9% despite the rapid growth, which is a really commendable performance there. And that speaks to the underlying quality of business being written. Then if we were to look at the earnings impact of the growth initiatives. So as we flagged previously, our appetite here and importantly, it's measured over a full financial year is 10%. So again, because of the volatility in the 6-month period, when your earnings get depressed because of natural perils, your denominator is smaller, and that could cause it to be more volatile. However, we expect to be inside the 10% once we get to the full year because of the moderating effect of the natural perils but also because as flagged earlier, OUTsurance Ireland, we are expecting to be past the peak of the burn rate. And in terms of CTP, we are taking quite strong pricing action to catch up to the moving target in terms of pricing there. So I think that is quite good context over there. I think in the medium term, OUTsurance Ireland is likely to be the only contributor here once we've achieved breakeven with CTP at Youi. And as flagged earlier, we're looking sort of at a monthly breakeven by April 2029. So that's in a nutshell, the operational update. I'm going to hand over to Jan for the financial update.

Thank you, Marthinus, and good morning, everyone. I'm going to just recap on the key themes that's driven our consolidated results on the group. So first of all, as Marthinus has mentioned, we've seen the good organic growth momentum against the backdrop of declining premium inflation. On the claims side, we know that the results have been heavily skewed due to the natural impact or the natural perils impact incurred by You for the 6 months under review. But when one looks through the claims ratio, the working claims ratio improvement really illustrates the good quality of earnings that we've achieved across the group. From a reinsurance perspective, we cited at the last results engagement that we were experiencing favorable reinsurance renewal terms, and that played through also in our results in this period, particularly if you consider the net earned premium growth profile, which is slightly higher compared to the gross written premium profile across our operating segments. From an investment return perspective, we have seen lower weighted interest rates, both in South Africa and Australia and Ireland for the period under review but that was more than offset by the higher equity returns in the South African market over the last 6 months. Clearly, as indicated, we don't necessarily see rates declining further in the near term, and that's particularly illustrated in Australia, where the rate cycle has come to an end with a recent rate hike by the RBA in February this year. From an expense perspective, we illustrate across our segments that there's strong delivery and cost efficiency across the group and also the rebase of the share-based payments expense has had a meaningful impact on the results of the South African group. And then also the stronger rand has diluted some of the volumetric performance achieved by Youi. And as such, we are illustrating Australian dollar results as well as rand results for the different Youi segments in our interim results circular. Looking then firstly at the consolidated results of OGL and OHL. And I'll remind our listeners that OGL refers to the listed group and OHL refers to the unlisted holding company of the insurance business, of which 7.2% is owned by a minority interest. Looking at OGL specifically, normalized earnings was up by 7.7%. That is fairly different to the 12.6% growth that we've achieved at an OHL level. And the driver of that difference is the lower income that's been achieved by RMI Treasury Company, where in the comparative period, Polar Star had an exceptional performance, which did not repeat in the 6-month period. The normalized ROE was 32.3%, and I'll speak to the OHL ROE specifically in a following slide. The diluted normalized earnings per share was up by 8.1% and our interim dividend is up by 36.2%. The big differential between the growth in the interim dividend as compared to the earnings per share growth is considered against the fact that the South African earnings base has shifted significantly with 68% growth in OUTsurance SA's normalized earnings. And that's been largely impacted by the reversal of the share-based payments expense. And as Marthinus mentioned, that is now the new norm of the expense base and earnings base going forward, all else being equal. Also important is that Youi, which pays a lower dividend ratio compared to the South African group, had a 43% reduction in its earnings. So when one considers the earnings -- the dividend contribution from the underlying subsidiaries, that results in the interim dividend being much higher compared to earnings growth. When we roll forward to the full financial year, we do expect the dividend to then grow in line again with the earnings base. So this is an interim reset in terms of the size of the dividend, which just needs to be appreciated. On the interim special dividend perspective, we have an interim dividend of 30.3%. And as we have commented before is that the special dividend that's being paid out of RMI Treasury Company represents the net proceeds that we generate from asset monetization in that entity. During the course of the last 6 months, we successfully sold the interest in Intersect, which is the major contributor to the special dividend. OHL's normalized earnings increased by 12.6% Right. Then looking at the ROE specifically on this slide, we have seen that OHL's ROE increased from 34.9% to 38.9%. And that is trending above our guided range of 30% to 35%. And one factor that has driven the increase here is that we paid a fairly large full year dividend at the end of last year and also the effect of consolidating Youi's net asset value at a lower closing rate has resulted in a fairly large growth differential between the net asset value of the group and the earnings of the group pushing up the ROE outcome. Looking at investment income, which is quite topical for the period under review. We have seen that given the strong underwriting performance in the South African business that the variance in investment income impact of that has been more muted on the overall result. And here, we are showing the investment income result net of the unwinding effect or what we call the insurance finance expense of our insurance liabilities. For Youi, the investment income was more meaningful in the 6 months, and that's due to the lower underwriting result being achieved. But also structurally, Youi's liabilities are growing faster than premium due to the fact that the CTP book has been growing quicker and the CTP book commands a higher liability level when you express it as a percentage of your premium profile compared to what the shorter-tail motor and home policies would. So therefore, we are seeing faster liability growth emerging out of Youi, which has offset some of the effect of having a lower weighted interest rate play through in the 6-month period. Looking then at the OUTsurance SA segment specifically. So here, I'll focus on OUTsurance SA Personal and OUTsurance SA Business. So here, we've seen for OUTsurance SA Personal, a good outcome in terms of gross written premium growth of 7.1%, and that's against the backdrop of a declining premium inflation environment. Once we exclude the runoff effect of the homeowners cover book, the result was an acceptable 8.8%. Operating profit was up by 10.8% for the period. And I will remind our listeners that we centralized the abnormal share-based payments expenses in the previous period in the central segment. And therefore, that share-based payment reset has not affected our 2 reporting segments in this set of results. The combined ratio improved to 64.9%. And as illustrated by the green bar there and a result which is commendable is the reduction in the cost-to-income ratio from 19.2% to 18.4%. And that's on the back of various cost efficiency drives across the South African business. The claims ratio declined from 45.4% to 45.1% for the period. Moving then to OUTsurance SA Business. And here, we do show the combined effect of the broker channel and the direct channel. Gross written premium grew by 12.1%. The lion's share of that growth is due to the expansion of the OUTsurance broker channel, where we've seen a good cadence in new business growth on the back of expansion in the headcount of the sales force as well as improved productivity metrics. The Direct book had more muted growth or more inflationary growth that played through in the 6-month period. Operating profit was up by a strong 54.2%. And the lion's contributor to that was again the OUTsurance broker book, which is moving towards its target margins and delivered a very pleasing performance from a financial perspective. The combined ratio was at 72.5% and the purple bar here illustrates the improvement in the cost-to-income ratio from 31.7% to 28.9%, and that illustrates the improved economies of scale that we are seeing in the maturing OUTsurance broker business. The claims ratio improved from 49.5% to 43.6%, and that's attributed to the maturing risk selection, pricing capability and also the stability of the in-force book of the OUTsurance Brokers business. The OUTsurance brokers business now contributes to 60.3% of the overall gross written premium of the Business segment. Looking then to Youi's results. We have changed our reporting segments for Youi due to the runoff of the BZI book. And going forward, we will be reporting in 2 segments for Youi, which is Youi Direct, which is a combination of the personal and commercial products sold through the direct channel and then separately the CTP channel. We have provided users of our financial statements with a prior reconciliation that illustrates the reporting segment changes that have been made. So I'll therefore focus on Youi Direct, where we've seen in rand terms, gross written premium increased by 19.1%. If one eliminates the effect of the currency movement, in dollar terms, gross written premium grew by 23.8% and net earned premium by 30.6%, illustrating the favorable play-through of the reinsurance dynamics. The significant decline in operating profit, as we -- Marthinus touched on, is due to the effect of the natural perils increase. Youi has also delivered good claims -- good cost efficiency with a cost-to-income ratio decreasing from 30.1% to 29.8% despite the investment in growth. Then moving to OUTsurance Life. Marthinus spoke to the operational gains that we've seen in OUTsurance Life. In the last 6 months of the year, we have ever seen an extraordinary reduction in the yield curve, which negatively impacted the results of OUTsurance Life on a net basis. That effect was mostly felt in the direct channel, where there was a 43.8% reduction in the operating profit for the period. The Funeral partnership continued to perform in line with expectations, generating a profit of ZAR 51 million for the period. Again, there was some offset from the share-based payments effect in OUTsurance Life as well, where we have seen a reversal of the ZAR 99 million loss in the prior period to a ZAR 13 million surplus in the Central segment over the current period. And that effect provided some shock absorption to the net impact of yield for the period. The contractual service margin, which is an IFRS 17 measure of your future profits contained in your in-force book increased by 26.7%. We have changed our measure of enterprise value for OUTsurance Life, and we have moved away from embedded value reporting and adopted a new framework, which we refer to as the comprehensive equity framework. We believe that this simply aligns with the new measures under IFRS 17 and provides an easy and transparent measure of the progress of value creation in the Life business over the course of time. We provide more information on this comprehensive equity framework in our interim results circular. Pleasingly, this measure has also increased by 27% for the 6-month period, illustrating the strong new business growth, which we have delivered in OUTsurance Life. The value of new business was up by 61.9% to ZAR 285 million for the period. And the majority of that value creation is in the Life Direct business where we've seen significant expense reduction but also improved cadence in new business policies accepting. The VNB margin increased marginally from 23.1% to 25% for the period. Moving then to the balance sheet aspects of the business. All our businesses are trading within a very good solvency outcome at the moment. The only standout item was the reduction in OUTsurance Life's SCR ratio over the period, and that has a direct link to the impact of measuring of solvency capital requirement against the lower yield curve, which played through in the 6-month period. However, OUTsurance Life remains comfortably within its targeted SCR range of 1.3 to 1.7x. As illustrated in the earlier slide, one needs to consider the dividend payout ratio at 80.4% against the change in the mix of contributions coming from Youi and OUTsurance SA during the 6-month period. We expect that the dividend payout ratio will again normalize to the mid-70s in line with historic periods as we work towards the full year outcome for the dividend. I'll hand back to Marthinus to discuss the outlook for the remaining period of the financial year. Thank you.

Thank you, Jan. Yes, I think a highlight for us for the remaining 6 months is the high-quality organic growth opportunity as we illustrated there, the good translation of top line to bottom line we've seen in recent years. So all our operating segments are well positioned for ongoing organic growth given our growth momentum and our relatively low market share in key segments. Now at the moment, there's a lot of geopolitical uncertainty in the world. But I think what is important is that we've illustrated previously that our business is quite resilient to some of these potential headwinds. And typically, when you think about the headwinds, higher inflation, slower economic growth, those are typical outcomes. But I mean, we've illustrated that our business can do well in both cycles because we have strong pricing power in terms of the inflationary component but also then when consumers are under pressure, they tend to shop around more. And for a business that's growing organically from a low base, higher shopping activity is generally quite good. Also, our focus on cost efficiency and risk selection ensures resilience and that strong top line to bottom line conversion. It was really pleasing to see the progress being made in terms of cost efficiency across the group. And as we previously remarked, we built our own core systems. That is a key driver in some of the operational areas, but we also see the use of AI tools especially in some of the support areas, making a difference and the technology allows for greater efficiency and greater automation. Then in terms of delivering on the OUTsurance Ireland business plan, that is a core focus area to ensure profitable operation at scale. And as we flagged earlier, we expect the current 6 months to show a turning point in terms of the burn rate. And the stronger top line to bottom line conversion and simplifications is also boosting our ROE in the group. Then if we look at the outlook, we expect the decreasing trend in motor premium inflation to settle, especially if we do see some supply chain issues because of the global developments and home inflation in Australia is definitely expected to pick up because of the quite severe natural peril activity in the previous 6 months there. Yes, as I already alluded to, our business model is quite resilient. So hopefully, if the global developments blow over quite quickly, and we do see the more positive economic growth, that will be great for us. We'll be able to capitalize on higher vehicle sales and stronger consumer spend. But on the other side, if times are tough and we see more shopping behavior, that could also be positive for us. We also expect a favorable reinsurance renewal because of sustained softer market conditions, which we also observed at the 1 January renewals in the market but also because of low reinsurance recoveries. I mean most of the natural perils experienced in the 6 months was actually retained by ourselves. And then lastly, we aim to continue with the simplification of the group structure to present a focus and easy-to-understand business. As Jan alluded to, we're foreseeing that roll-up of the minorities happening over the next 12 months. That's it in a nutshell. Thanks a lot for your time, and then we're happy to take questions.

Thanks, Matthias. We have a number of questions on the webcast, which we'll deal with first. So Michael Christelis asked, can you give a sense of the level of claims from the Victoria fires in January?

Yes, we're not in a position to disclose the exact numbers, but they were fairly immaterial compared to the storm and claims of the prior 6 months.

[ Trinity ] and [ Gouania ] you asked if we disclose the broker channel GWP contribution to SA Personal. Trinity, no, we don't. The contribution is escalating over time but it would still be a fairly immaterial contribution that the broker channel is making to the Personal Lines business. Baron from JPMorgan. Baron, I think we did deal with the investment income question in terms of what we expect going forward. However, we're not making adjustments to our investment portfolio with regards to trying to take advantage of current market conditions. Our investment income allocation is fairly passive, as you know. And therefore, we don't see any changes being made other than slightly rational changes to take advantage of changing yield environment. But the construct of our investable assets is expected to stay the same. Matthew Pounsett has asked if shopping behavior in Australia has moderated with premium inflation.

Yes, Matthew, I think that's definitely the case. But with home insurance premium inflation expected to pick up and with CPI also picking up, that is normally a bit of a leading indicator and now the potential supply chain issues, I mean, that trend could reverse again.

Arun Rajaratnam has asked if the -- in terms of the natural perils exposure in Australia, which state was affected most? And is there any risk of over-indexing to natural peril threats in Australia compared to peers?

So Queensland were affected the most. And we launched in Queensland as a business. And as such, I mean, our market share growth was higher there initially. But over the last number of years with our improved growth, we see a much more national sort of footprint emerging. And as such, I think our diversification is improving over time. Also, our growth into CTP is certainly also contributing to better diversification emerging over time.

Matthew Pounsett has a question on AI and self-driving cars and asks whether the risk is more pronounced in Australia with regards to autonomous driving progress and the impact of the premium pool on the industry.

Yes. If I had to take an estimate, I would think the risk is probably a bit higher in Ireland and then Australia and the lowest in South Africa. I saw quite a good paper recently from Goldman Sachs on the U.K. market where they're projecting it because at the moment, we're still in a phase where we actually see real growth in vehicle claims where the net effect of the increase in average cost per claim is more than the reduction in frequency. But obviously, we expect a turning point on that as we progress to Level 3, 4 and 5, and they model that out. But certainly, I think Australia is probably going to be affected a bit sooner than South Africa because I think the new vehicle pool or the pool of vehicles get replenished faster there than South Africa. But overall, it is quite a gradual progression because of all the hurdles that's required to be passed in terms of infrastructure, legislation, affordability of technology and then just the cycles required to replace the car pool. Also, in terms of the longer term, because of this real growth in home, because of climate change, the proliferation of solar and more expensive technology exposed to damage as well as urbanization, what we actually expect to see is that the insurance industry as a whole is probably not going to shrink but over time, the contribution of property is probably going to get larger and sort of make up for the long-term shrinkage potential in car. What is still not clear is you might also, over time, get different perils arising from car like cyber and that in car might be an insurable -- become an insurable peril. So there might also be some offsetting effects. But I think very long-term self-driving cars is definitely coming into the future. But yes, if you have time to try and get all of that Goldman Sachs paper, they have like a base case scenario, which shows like a 31% shrinkage by the year 2050 in terms of the accident-related pool of claims cost in the U.K.

Warwick from RMB has a question on the timing of the BZI runoff and its related impact. Warwick, we are seeing a fairly orderly and linear runoff over the course of the financial year, and we expect that the book will be completely runoff by the 30 June 2026 mark. So we don't see a major differential between the runoff profile between the first half and the second half of the year. And a related question that you had in terms of stranded costs, we've already taken measures to optimize overhead costs related to BZI. So there's no risk of impacting -- the BZI runoff impacting the cost-to-income ratio in subsequent reporting periods. Warwick, we don't disclose specifically our new business mix between motor and home. And the third question that you have in terms of our equity exposure on the South African balance sheet. We optimize our equity exposure across the total set of investable assets, Warwick. And our point of optimization is that equities represent 15% of our total investable assets pool. If you had to ring-fence that exposure across the shareholder capital pool only, then a large proportion of the shareholder capital would currently be exposed to equities. But as I mentioned, it is important to take a total balance sheet view with regards to that. Jared Houston has asked, are you able to give some guidance on the Polar Star performance for the 6 months given the extreme volatility in commodities? Jared, I think it's exactly that. I think the trading conditions for Polar Star have been quite difficult. And as such, we haven't seen a significant profit emerging over the previous 6-month period. [ Marius Steigmann ] has a few questions. We'll see to how many we can get, Marius. What is your Youi personal underwriting margin target? And when can you return to this level?

So the Youi Direct underwriting margin target is 15% for car and 13% for home. And I mean, if you look at the working loss ratios, which we disclosed, they're absolutely in line with achieving those targets. So it's just the volatility of the natural perils on top of that. And if you look through the cycles, I mean, it is normal, and we believe we are able to adequately price for it through the cycle. So this is more like a temporary diversion because of a short measurement period as opposed to a long-term structural issue.

What is the risk that South Africa industry premium rates revert downwards on strong results and pushes for market share gains from many players?

Yes. I think most players are quite rational in terms of doing sustainable activities and achieving target margins and ROEs. Yes, profitability has been strong, and I think contributing factor was that everyone had to adjust premiums and underwriting conditions to things like load shedding and vehicle theft. And both those trends have turned positive load shedding, very positive vehicle theft a little bit. And as such, profitability is quite strong. But again, I mean, what we see with the developments now and globally, I think there's a strong possibility that claims inflation, supply chain challenges might emerge. So I don't foresee like a price war or anything like that. I think one has to prudently monitor the claims cost development and adjust accordingly.

[ Marius, ] do you have a specific question around the confidence interval on our insurance liabilities. On the short-term business, we target a 85th percentile in terms of calibrating our risk margins from an IFRS perspective. and that's been unchanged for a number of years, and we don't see any reason to increase our risk margins. As illustrated in the presentation, we consistently see a positive runoff of prior year reserves in our current year claims ratio, if you study our recent results. So we're quite comfortable that our risk margins are adequate. And at Youi, we target the 75th percentile as a confidence interval. So there's no single measure for the group. One has to assess that at a subsidiary level. And also as illustrated in Youi, we tend to see the prior year positive contribution coming through in current year claims ratio, if you refer to that disclosure. [ James Gomes ] have asked, can you please give us a sense of how big advertising is in the Youi cost base? James, we unfortunately don't disclose acquisition spend. We do see that as a competitive metric. And then from a new business market share, we also don't disclose that specifically. RedClick has been bought by Zurich Insurance. What does that mean for market dynamics in Ireland?

Yes. I mean, generally, we quite like that because it means consolidation, fewer competitors. So -- but it will be interesting to see whether they retain the brand and in what way it gets integrated overall. But for us, there's no real downside in that.

[ Rob Widenbach ] has asked if the -- given the reinsurance market, if it opens up the potential of buying aggregate covers again in the Australian market.

Yes, we do think that is something that should be considered as part of our reinsurance renewal to see if there's appetite in the market for that. But yes, everything has got an economic price. But with the softening market, that might -- we might get to a point where that makes sense again.

There's a question with regards to new car sales in South Africa, where there's been a decline in new car prices due to imports of more Asian brands. To what extent is this trend influencing the premium pricing of newly insured vehicles in your motor portfolio? And does it have any implications for premium inflation assumptions going forward?

Yes, we're fairly indifferent. So we insure all cars from all countries, all types of drivetrains, EV, hybrid, ICE. So we're indifferent. We think they're all insurable. I mean what we have seen is this mix change. And I think part of it is with consumers being under pressure in South Africa. We've seen the car pool aging a bit and then people down buying, buying smaller cars. And I think the Chinese cars have just provided another option of affordable cars, which are newer with new technology embedded. Over time, I mean, it will emerge what the pricing of in terms of the trends and spare part costs and those things will emerge over time. But it's all insurable. And I think overall, it's positive for consumers. I think just looking a bit wider, I do think it's important that these manufacturers must be encouraged to manufacture locally just in terms of job creation and economic growth to make sure that what we do is sustainable because the car industry in South Africa is a very important employer and an important one for our economy.

We have various questions to understand the impact of yields on OUTsurance Life's performance for the 6 months. I think it's important to illustrate that we do hedge the interest rate risk inherent in the insurance liabilities of OUTsurance Life. But nonetheless, even though that is hedged economically, it doesn't always play through symmetrically in reported earnings. And therefore, the net impact I can guide was a net negative around ZAR 100 million net negative impact on OUTsurance Life when you consider the gross exposure and the offset provided by the hedge. [ Marius Steigmann ] asks, when we expect for CTP to breakeven and will losses increase in the near term?

We don't expect that for losses to increase in the near term. We have already put through significant rating action, and it in New South Wales, and it's in the process of earning through the book. Hard to give an exact date because you are dealing with a bit of a moving target, but we're absolutely disciplined in solving that. I mean we've illustrated many times before, we're about the bottom line, not the top line. So we're very strongly focused on turning that one around quickly. I mean, in fact, our appetite was really to be at breakeven and profitable after 5 years. But I think the goalposts have just shifted with that bigger common law claims trend that's happened in New South Wales has shifted the goalpost. But what is positive, we have scaled. The cost ratio is on target. It's now merely a case of fixing that loss ratio.

[ Michael Klopper ] commented on the material increase in natural perils in Australia over the last 9 months and whether that is enough to end the soft reinsurance environment.

It has been a sharp increase over the last 6 months. I mean, from the start of the year, it hasn't been that severe. And -- but I think what is important is to look at the mix, what has been retained by insurers versus what is picked up by reinsurers. And I think instead of just 1 or 2 massive events, we've seen a multitude of smaller events. And as such, the majority of the losses have been retained by the primary insurers, the direct insurers. And as such, the impact on the reinsurance market is not that significant, and that's why we see the soft market persisting because the profitability of the reinsurers would still be strong.

There's a question from Hein [indiscernible] from News24, whether the current disruption in the Middle East exposes clients to supply side constraints when considering the increasing penetration of solar panels and the risk related to hail damage.

Yes. I mean it's hard to predict the exact outcome, how it's affecting shipping, whether there's insurance available for shipping and what the shortage will be. But I think generally, at least hailstorms tend to be sort of confined to certain areas. And if you look at the overall sort of stockpile of solar panels, I do think most of those events should be able to be absorbed. So I wouldn't panic too much about it. But I do think in the long run, we are going to see some shortages here and there but it's very hard for us to predict overall.

Jared has requested detail on the capital injection made in Ireland. Jared, as we guided originally before the business launched, we injected EUR 100 million to provide initial funding to the Irish venture and then a commitment to provide 6 increments of EUR 10 million per annum thereafter. So far, we've made 2 out of those 6 increments contribution, and therefore, we have 4 to go. Over and above that total expectation of EUR 160 million in capital, we do estimate that up to the breakeven profile the business will probably require between EUR 20 million and EUR 30 million more than what we originally anticipated in our business plan prior to launch. That is not a function of purely of a longer or a deeper breakeven period but it's also a function of increasing regulatory capital as the book scales and the capital that needs to be absorbed by that larger book. So that is an important perspective when considering that expectation of more capital. And we think it's very much an acceptable delta on the overall capital requirement when considering the long breakeven profile of the business. [ Marius ] has asked a question on supply chain inflation. He notes that per his assessment, SA imported inflation is currently running at minus 10% against vehicle exporting countries. What will the impact be on SA motor book? And is this currently driving lower SA motor loss ratios, which could be reversed by the global uncertainty factors you mentioned below. So to be clear on the question, I think [ Marius ] is saying there's an observed reduction in import costs for vehicles and could that impact premium inflation?

Yes, I think it's possible. It's possible that it reverses, although the current positive experience is a bit driven by frequency and not just severity. But yes, if severity were to change for the worst because of this, and that's what normally happens in these scenarios, then it is likely to push up. vehicle inflation, claims inflation and cost. But I don't expect shocks in premiums pretty soon because the market is generally fairly profitable. So some of it could be absorbed and some of those effects tend to take longer to wash through the system. So I don't foresee shocks in premiums in the near term because of what's happening globally.

I think that concludes all the questions we have on the webcast. I'll just check with the operator to see if there are any verbal questions.

We have no questions on the conference call.

Excellent. Thanks, everyone. Then thanks for your time and being able to accommodate us. And I mean, you have our contact details, and we'll have some further sessions. So if you have further questions, we'd be happy to deal with that. Thank you very much.

Thank you.