Tower Limited (TWR) Earnings Call Transcript & Summary

Hello, and thank you for standing by. Welcome to Tower Limited Full Year Results Announcement 2024. [Operator Instructions] I would now like to hand the conference over to Michael Stiassny to begin.

Thank you, and good morning, everyone, for making -- and thank you for making the time to join us for this investor call and presentation for our 2024 full year results. With me in Auckland is our Chief Executive Officer, Blair Turnbull; and our Chief Financial Officer, Paul Johnston, who will take you through the results and answer your questions shortly. The 2024 financial year has been a strong one for Tower. Following an extremely challenging previous year, it is particularly pleasing to be recording underlying net profit after tax of $83.5 million and reported profit of $74.3 million. These results have been hard one. While significantly aided by the absence of large events in the period, more importantly, the business has achieved year-on-year improvements in business-as-usual claims, premium growth and operational and digital efficiencies. These are the measures that ensure Tower remains well positioned to deliver value to shareholders. I'm very pleased to announce that we have declared a final dividend of $0.065 per share. This brings our total dividends for the fiscal year to $0.095 per share. And while still subject to High Court approval and shareholder vote at the Tower Annual Shareholder Meeting on 11 February, the Board has also approved a return of $45 million of excess capital by way of a scheme of arrangement. This capital return is expected to deliver meaningful earnings per share accretion, further demonstrating our commitment to returning value to our shareholders. Tower has entered the NZX 50 Portfolio Index, a significant milestone that recognizes our company's growth and stability. This achievement is a testament to our strategic initiatives, which have led to improvements in customer experience and overall business performance. We are acutely aware that the current sustained economic downturn is affecting almost everyone, including many of our customers. Ensuring insurance remains affordable and premiums stabilize is a priority. Blair will talk about how Tower began moderating premium increases, particularly for low-risk assets, as inflation settled in the second half. Those efforts are continuing to ensure Tower can remain competitive and profitable, while providing good value and a great customer experience. Tower's competitive positioning has for some time been underpinned by risk-based pricing. We continue to believe that this is the fairest way to address both affordability and the impacts of climate change, ensuring that our pricing models are transparent, sustainable and equitable. By setting premiums that reflect actual environmental risks, we are incentivizing our communities and policyholders to adopt sustainable practices and invest in resilience measures. This approach helps to reduce overall risk and financial burden, but importantly, promotes fairness and encourages community-wide preparedness and adaptation. And from a cost perspective, our customers who take positive steps to mitigate risks are rewarded with lower premiums, while those with higher risks pay accordingly. This differentiation encourages responsible behavior and brings transparency to our pricing structure, allowing customers to see a direct correlation between their actions and their insurance costs. By doing so, we foster a more equitable and resilient market, ultimately driving our company's success and sustainability in the long run. In closing, I'd like to thank the whole Tower team. It was indeed a very good result. We're paying a dividend. The business remains strong and well capitalized and has achieved sustained premium growth. None of this would be possible without the vision, dedication and commitment of all our people. As you will be aware, Blair is stepping down as CEO in February after the ASM. The Board joins me in thanking him for the strong contribution he has made to Tower during his tenure. I'll now hand over to both Blair and Paul, who will take you through the results and outlook before we take questions.

Kia ora, and good morning, everyone. Thank you for joining us for our 2024 financial results, and thank you, Michael, for those kind words. Here is a summary of our results, which demonstrate Tower's positive operational and business performance. Sustained gross written premium, or GWP, growth and enhanced business efficiencies, continued improvements in claims performance, along with unusually benign weather in New Zealand and the Pacific, have delivered a positive result for shareholders. The strong result is underpinned by our strategy of delivering simple and rewarding customer experiences, combined with our use of digital technology and data. It has been enabled by more than $150 million we've invested in the past 5 years in digitization and data, operational capability such as our Suva hub and streamlining our business, investments that are now supporting growth and efficiency and continuing to build our business resilience. I will talk you through these points in more detail shortly, but first, an overview of our performance this year. Gross written premium for the year to 30 September 2024 increased to $595 million, up 15% on FY '23, excluding divested portfolios. And this was predominantly driven by prior period rating increases designed to mitigate the impacts of inflation, crime and increased reinsurance costs following the 2023 catastrophe events. Customer numbers decreased by 2% to 305,000, partly due to our tightened risk appetite for higher theft motor vehicle models. Tower reduced high-risk motor policies by 5,000 in the year. We expect to see growth in customer numbers in FY '25 as we target higher quality risks, enabled in part, by our risk-based pricing capability to target customers with lower risks. Rating increases, enhanced processes, a reduction in motor theft claims due to targeted underwriting actions and lower crime as well as calmer weather in comparison to prior years have led to an improvement in the BAU claims ratio to 48%. We are pleased to see our management expense ratio further improved to 31.4%, thanks to our GWP growth combined with disciplined cost control and improved efficiencies from investments in digitization and streamlining the business. Tower experienced no large events incurred during the financial year, which is rare. Looking back over the past 20 years, there have only been 2 years where no large event costs have been incurred. Large event costs for FY '24 were negative $2.3 million due to the absence of large events and a favorable revision of prior year large event costs. This is a reduction from $55.6 million of large event costs in FY '23. Reflecting our positive operational and business performance, we are reporting an underlying profit after tax of $83.5 million, up from $7.1 million in FY '23. Reported FY '24 profit is $74.3 million compared to a loss of $1 million in FY '23. And on the basis of these results, Tower will pay a full year dividend of $0.065 per share, bringing the total FY '24 dividend to $0.095 per share. Premium growth continued in FY '24, increasing 15%. The prior period rating increases that were designed to mitigate the impacts of inflation, crime and increased reinsurance costs following the 2023 catastrophe events have taken effect and were the predominant driver of the GWP growth in the year. In FY '24, we were particularly pleased to see our proportion of house policies increase as we focus more on the home insurance market. Nearly 1/3 of our house insurance GWP growth came from volume. In line with risk-based pricing, we offer more favorable pricing to lower-risk vehicles and apply higher premiums to those that our data shows will potentially incur higher claims costs. In FY '24, this approach led to a reduction of motor policies, while GWP from our motor portfolio grew by 13%. Tower's adoption of risk-based pricing and underwriting continues to give us a competitive advantage by enabling more accurate risk selection and pricing. At the end of FY '24, 91% of house policies rated low or very low for flood risk, a 1% improvement from FY '23. We continually review premiums to ensure we provide good value and competitive prices for our customers while also ensuring that the premiums we collect cover the cost of the claims we pay out. As we signaled at the half year, we began to moderate premium increases, particularly for lower-risk assets in the second half of FY '24 as inflation began to settle. Our retention rate for our New Zealand risk portfolio remains stable at 77% with just over half of our customers holding multiple policies with us. To help our customers manage their insurance and affordability, we introduced ways to save, a My Tower feature for our New Zealand customers that offers useful tips and options to reduce premiums. And in FY '24, 29,000 customers used ways to save, with 16% of them making changes to their cover that resulted in lower premiums. And on average, those who adjusted their premiums through ways to save in the year saved $122 each. A range of factors have influenced premium increases over recent years, including inflation, crime rates, weather events, reinsurance costs and supply change (sic) [ chain ] pressures. While it costs more now to cover our customers' assets, we continue to manage these impacts through risk-based pricing and business efficiencies, which we cover later in this presentation. Our focus on customer experience, combined with our use of digital technology and data has increased our overall Net Promoter Score to 38, up from plus 28 in FY '23. Customer experience improvements have been seen across both our digital and our contact center agent-assisted customer journeys. And in FY '24 in New Zealand, 63% of sales tasks, 45% of service tasks and 64% of claims tasks were completed digitally. And active My Tower users increased by 5% to 164,000, demonstrating that our online journeys continue to resonate with customers. The benefits of our core platform now live across the Tower Group and our 300-strong Suva hub team continue to be realized, contributing to a pleasing reduction in our sales and service contact center abandonment rate now at 8%. We were pleased to win the first place Supreme Award for Customer Retention in the New Zealand CRM Contact Center Awards. And this year, Canstar also announced Tower as the winner of its Home & Contents Insurer of the Year Award. The independent research panel noted the outstanding value offered by Tower's insurance products, especially its Standard and Plus policy options, which Canstar stated feature comprehensive insurance cover at affordable prices. An important part of delivering a positive customer experience is fixing things when we don't get them right, and we have made significant progress in remediating customers identified as being owed a premium refund due to errors in applying our multi-policy discount. We've identified multi-policy discount refunds of around $12 million, including GST and interest, owed to 66,000 customers and have repaid $11.5 million by 31 October. While addressing outstanding remediations, we are also identifying and developing strategies to tackle the root causes of these incidents, and this approach aims to increase business resilience, support positive customer experiences and promote sustainable growth. We are pleased to have achieved a further reduction in our management expense ratio to 31.4% in FY '24, down from 32% in FY '23. And it's clear that the $150 million Tower has invested in the past 5 years is realizing benefits in targeted growth and operational efficiency. The expansion of our Suva hub has delivered well in this respect. And in the year, our Suva team answered 55% of all New Zealand sales and service calls to Tower, an increase from 16% in FY '23. In FY '24, we completed the sales of our Solomon Islands business and Vanuatu subsidiary. Tower stopped offering commercial rural insurance in November 2023, and the planned exit of existing customers at renewal will be completed at the end of January 2025. Our commission ratio continues to improve, reducing to 1.5% in the year from 2.1% in FY '23, partly due to legacy portfolio purchases and referral arrangements that have reduced total commission. By decommissioning 71 virtual servers in the year and moving more of our services to the cloud, we have continued to streamline and modernize our technology delivery. BAU claims ratio significantly improves. And in FY '24, our BAU claims ratio improved from 55% in FY '23 to 48.1%, thanks to effective pricing and underwriting, efficient claims management and external factors. Targeted rating across our house and motor portfolios have reduced claims from higher-risk policies. General rating increases implemented to offset inflation and increased reinsurance costs are also continuing to earn through. Tower's efforts to improve processes and implement new technology to deliver faster and more efficient claims management include a new digital motor assessing tool. Online motor and house claims are also now automatically being allocated to repairers. Among others, these initiatives have seen the number of open BAU claims in New Zealand halve and claims turnaround times decreased by 1/3. External factors have also played a part with calmer weather reducing the frequency of claims in New Zealand and the Pacific region. Motor vehicle crime also reduced in the year. Underlying business performance. Our underlying NPAT, excluding large events, was $81.9 million in FY '24. And as you can see from this chart, we are steadily improving our underlying business performance and improving half-on-half. The fundamentals of our business are performing well, and investment income is also benefiting from higher interest rates. I'll now hand you over to our Chief Financial Officer, Paul Johnston, who will talk you through the details of our financial performance this year.

Thank you, Blair. Looking at the consolidated results, we can see that GWP has increased by $68.5 million or 15%, excluding divested portfolios compared to FY '23. This growth was driven by an appropriate mix of rating and underwriting actions alongside modest volume growth in the house portfolio. Rating and underwriting actions have significantly improved the BAU claims ratio to 48.1%. The absence of large weather events in the year, combined with a favorable release from the FY '23 Vanuatu cyclones has contributed another $2.3 million to the result. Pleasingly, the MER improved to 31.4% as a result of expense efficiencies and scale. Higher investment balances and yields have seen net investment income increased by $7.2 million to $21.6 million. Underlying NPAT, including large events, is $83.5 million, up from $7.1 million, reflecting Tower's resilience and agility following catastrophic weather events experienced in FY '23. Tower's FY '24 reported profit after tax is $74.3 million, up from a loss of $1 million in FY '23. Reported profit was impacted by an increase to customer remediation costs and a strengthening of the Canterbury earthquake provision. Here is the bridge between underlying NPAT in FY '23 of $7.1 million and underlying NPAT of $83.5 million in FY '24. You can see that calmer weather with no large event costs, business growth, improving BAU loss ratio and higher investment income have driven this result. Reported profit was impacted by the strengthening of the Canterbury earthquake provision, an increase to customer remediation costs and provisions and other non-underlying costs, partially offset by the gain on sale of the Solomon Islands business. Our BAU claims ratio has significantly improved to 48.1%, driven by Towers' prior period rating increases and efficient claims management. Additional external factors, including inflation easing, lower crime and relatively benign weather have also contributed to this improvement. As shown in these graphs, inflation has impacted the insurance industry in recent years, but it began to level off in late FY '24. For example, the severity or cost of motor claims went up 4% in FY '24 compared to 12% in FY '23. Our rating ability allows us to respond quickly to external factors. For our customers, as inflation began to stabilize later in the year, we implemented more moderate premium increases, particularly for low-risk assets. This included a review of motor pricing performance for the 100 most common makes and models, including all years and specifications, representing 70% of Tower's motor portfolio. The review led to a reduction in premiums of varying levels for 71% of the models evaluated. Risk-based pricing predominantly helps protect Tower from large events. However, we're also seeing it contribute to the improved BAU claims ratio. Each year, Tower pays out on claims for weather events that don't meet our $2 million threshold for a large event, and these are reflected in BAU claims. Our efforts to attract lower-risk properties have contributed to house frequency flattening in FY '24 and severity increasing at a slower rate. As previously mentioned, external factors, including calmer weather, have also played a role. We are pleased to see our management expense ratio continue to reduce with a 0.6% improvement over the year to 31.4%. Increased scale from business growth and efficiencies enabled a 4.2% reduction in MER with a further 0.3% decrease in net commission expenses, which was mainly driven by an increase in reinsurance profit share commission income. A 0.4% increase in amortization was due to prior year technology capital investments, while continued spend on investments to deliver key strategic initiatives drove a 1.4% rise. Staff and other costs increased by 2%, partly driven by inflation. This year-on-year increase also reflects the payment of staff incentives in FY '24. These were not paid in FY '23 due to the company missing nominated NPAT targets following the catastrophe events that year. This increase was partially offset by cost efficiencies. In FY '24, net investment income increased to $21.6 million before tax. This was $7.2 million higher than the same period last year. This increased income is due to a larger investment balance and high interest rates in FY '24. Tower maintains a conservative investment policy with a focus on high credit quality and liquidity and a target duration for the core investment portfolio of 6 months. Our strategy has mitigated the impact on our profit from macroeconomic factors and mark-to-market movements in the past. This allowed us to benefit from higher interest rates through FY '23 and up to half year '24 when the running yield on the core investment portfolio began to decrease, finishing the year at 4.9%. The outlook is for interest rates to continue decreasing through FY '25. Tower's reinsurance strategy shields against the volatility of major events, ensuring financial flexibility to support growth and robust solvency. Our reinsurance arrangements for FY '25 include catastrophe reinsurance of up to $80 million for 2 events. This was increased from $750 million in FY '24 due to business growth. The excess for each event would be $18.8 million. We have also purchased cover for a third event of up to $85 million with a $20 million excess. Our FY '25 retention limits and program premium increases were mitigated by our 3-year rolling contracts, and we are pleased to sign a significant multiyear contract with a global reinsurer that will help to mitigate future increases. Tower's FY '25 large event allowance is $50 million. Full utilization of the large events allowance is assumed in our guidance for the year. We have recorded one large event in FY '25 so far, the Dunedin flooding event in October, which has an estimated cost of around $3 million. Our increased profits, along with the progress made in settling catastrophe event claims and collecting the recoveries from reinsurers this year have further strengthened our solvency position. As a result, our parent solvency ratio has improved to 212% compared to 139% in FY '23. Tower's regulatory solvency position is calculated under the new Reserve Bank of New Zealand Interim Solvency Standard, which applied from the start of this financial year. We note that the RBNZ is consulting on a further amendment to the Interim Solvency Standard, which is expected to be issued and effective this financial year. The proposed changes to the Interim Solvency Standard are likely to have a material impact on Tower's regulatory solvency position and will reduce the solvency margin. Accounting for the final dividend, we are now holding $171.4 million above the regulatory minimum capital required for solvency. This is an increase from $79.8 million as at 30 September 2023. In accordance with the Interim Solvency Standard, the planned capital return of $45 million is not yet taken into account in the solvency position and is expected to be deducted from solvency in FY '25. We were pleased that the RBNZ reduced Tower's license condition from $15 million to $0 in the year, and Tower's A- credit rating was reaffirmed by AM Best. The Board has declared a final dividend of $0.065 per share, bringing total dividends for FY '24 to $0.095 per share. The Board has also conditionally approved a return of $45 million of excess capital to shareholders by way of mandatory share buyback. These conditions are noted in our market announcement. Thank you. I will now hand back to Blair, who will provide an update on our guidance and priorities for FY '25.

Thank you, Paul. In the year ahead, Tower will continue to invest in creating leading customer experiences while targeting the right risks at the right price. And this includes applying landslide and sea surge risk ratings to policy renewals and adding these perils to our automated customer-facing quote-to-buy tool where customers can already see their homes risk ratings for earthquake and flood hazards. We will continue our focus on increasing new business from home insurance policy sales by targeting higher-quality risks. And at the same time, we expect our motor book to grow as our pricing becomes more attractive for lower-risk vehicles. We will also continue to grow through new partnerships, including Kiwibank, homes.co.nz and HealthCarePlus, who joined us in FY '24. In the coming year, we are looking to further increase customer retention by improving our online policy renewal experience. And through these initiatives and more, we are targeting annual underlying GWP growth of 10% to 15% out to FY '27. In FY '25, we will continue to focus on delivering efficiency and process improvements, and we're aiming for 80% of all New Zealand service tasks to be completed via digital channels by the end of FY '27, up from 45% in FY '24. Following the launch of our new motor assessing system in the year, we plan to launch a new house assessing system in FY '25, and this is all about continuing to drive down assessment times and repair costs. We also intend to implement a new contact center platform in FY '25, designed to deliver greater frontline efficiencies and improved customer experience. As we examine and improve our systems and processes, we are committed to addressing the root causes and applying lessons from the errors that led to customer remediations. Our work to streamline the business continues with the New Zealand commercial rural portfolio due to complete migration from Tower in January, another step forwards or step towards decommissioning our last legacy technology system in New Zealand. The graph shows the journey Tower has taken to steadily improve our efficiency over the years, and this work will continue with Tower targeting an MER of less than 26% in FY '27. Ultimately, we want to have a positive impact on people and the environment. So we will continue to invest in initiatives and products that foster sustainability and future climate change resilience. An important part of our business strategy is to build an effective and distinctive staff culture across our New Zealand and Pacific locations. We're committed to making Tower an even better place to work, enabling us to attract and retain talented people and empower our teams to show up in the best possible way for our customers. And this slide shows some of our FY '24 people-related metrics that we are proud of, and we are continually working to further improve. These highlight our staff engagement and gender pay equity scores and our people's growing participation in our community volunteering initiatives and our various cultural representation groups. Last week, we were particularly pleased to win the Excellence in Workplace Diversity, Equity and Inclusion Award at the 2024 ANZIIF New Zealand Insurance Industry Awards. And you can read more about some of these achievements in our annual report released today alongside our results materials. We also released our inaugural climate statement today, and this covers in detail the climate change risks and opportunities we've identified, along with our strategic responses aimed at supporting a low emissions and resilient future. Innovation is key to our ongoing success. One cost-effective alternative to traditional insurance is parametric insurance, which we now have implemented in 3 Pacific nations. In FY '24, we partnered with global insurtech, CelsiusPro, to offer this product on a digital platform. And our goal is to reach 10,000 parametric insurance policies by the end of FY '25. Tower has set an absolute science-aligned reduction target of 21% for our Scope 1 and 2 emissions by the end of the 2025 financial year. And using FY '20 as our base year, our FY '24 Scope 1 and 2 emissions shows a 20% reduction on FY '20 levels and a 9% reduction on FY '23. We continue to support education that addresses climate change and promotes a more equitable, resilient and sustainable future by awarding 5 university scholarships in New Zealand and Fiji in FY '24. Guidance and future targets. In FY '25, Tower expects GWP growth, excluding revenue from sales of subsidiary operations of between 10% and 15%. We have set a prudent large events allowance of $50 million. We expect further improvements to our management expense ratio, which we anticipate will be less than 29%. And we are targeting a combined operating ratio of between 87% and 89%. Assuming full utilization of the $50 million large events allowance, Tower anticipates underlying NPAT to be between $50 million and $60 million. We are targeting a return on equity of between 13% and 17%. And you can see we have also disclosed a range of medium-term targets for FY '27. Here are our priorities for FY '25, which we have a key focus on enhancing our customer experience. We will continue to work through customer remediations and associated proceedings while implementing the lessons learned from these experiences. We're also focused on the Conduct of Financial Institutions, or COFI regime, which comes into force in March 2025, to further advance fair customer outcomes. And this year, we are implementing a new end-to-end customer management solution to further enhance the customer experience, increase efficiency and reduce risk by being a single source of the truth. We will expand risk-based pricing and offer greater transparency of customers' landslip and sea surge risks. And importantly, we will continue to pursue efficiency, digitization and process improvements that deliver benefits to our customers and drive value for our shareholders. These priorities aim to continually enhance our customer experience, positioning us to deliver sustainable premium growth and attractive long-term shareholder returns. Thank you for your time this morning. I will now hand back to the operator to ask for any questions.

[Operator Instructions] Our first question comes from the line of Kieran Carling with Craigs Investment Partners.

Well done on the strong result. First question from me. You delivered 20% GWP growth in the first half, which dropped to 8% in the second half. Can you just give us a steer on what the composition of the 10% to 15% growth looks like in FY '25 just between volume and price? And just particularly off the back here comments around the reduction in motor premiums across 70% of your most common makes models?

Thanks, Kieran. Paul here. Absolutely. So next year, we are looking to revert back to more 50-50 between premium and volume growth. And as we've highlighted, we're going to use our targeted risk-based pricing to attract those risks and those customers that are valuable to us, and we'll be able to do that through that lower premium and that targeted pricing with both house and motor.

Okay. And just looking at your MER targets, you've been a little bit more conservative with your FY '25 target, which is now less than 29%. And I can see that the FY '26 targets have been pushed out to FY '27. Can you just comment on why that is? And I guess, what your expectations are for where that MER stabilizes in the medium term?

Sure. So longer term -- medium and longer term, we're still looking to continue to grow scale and realize digital and operational efficiencies. So that management expense ratio target will continue to decline beyond the target that we've released in FY '27. And I guess the reason why we've probably delayed it slightly is just the impact of inflation and as that flows through in both sort of staff and operational costs and then also the cost of investment and digitizing everything. But the key point is that we will continue to bring that target down over the medium and the longer term.

Great. And then last one is just on your BAU claims ratio. Obviously, some good improvement there in FY '24 with some of the structural tailwinds as well as the benign weather. Are you expecting that to settle below its historical average under more normalized conditions? Where do you see that settling?

Yes. No, we see BAU claims sitting around the 50% on a normalized basis. As you point out, and as we've been at pains to say this year, we have had some good luck with some benign weather and so on and which has benefited that ratio this year. And we are just targeting 50% in the short, medium and long term.

Our next question comes from the line of Andrew Buncombe with Macquarie.

Congratulations on the result. Just one question from me. It's in relation to the reinsurance program on Slide 18. The attachment point on the catastrophe Tower has gone up 11% next year. And I'm just trying to understand how that can happen when volume growth for home is about 5%, deductibles for customers would be getting higher. the reinsurance prices would be getting lower, and you've also got the 3-year roll on the contracts, which should minimize the movement. So why is the attachment points on the reinsurance contracts going up faster than the underlying risks?

Andrew, it's purely mechanical as the -- we had some 3-year contracts roll off and needing to be renewed and reset at the go-forward retention limits. And so we still have -- we still had a few existing 3-year contracts in place that kept it down at $18.8 million, but some of the lower ones from 3 years ago rolled off.

Yes. So going forward for the next 2 years, we should be expecting that attachment point to be increasing at the same pace as maybe your P&L or your net exposures. Is that right?

Yes, approximately. As we've called out, we have signed more 3-year deals at slightly higher than this -- well, yes, around this rate. And so the mix of those expiring in future, we'll continue to let it rise a little bit. But subject to no other changes in the market, we don't see it rising significantly.

Congratulations on the results.

Our next question comes from the line of Will Twiss with Forsyth Barr.

Yes. Thanks. [ Gents ], I appreciate the extra detail on FY '27. So that's great to see sort of best-in-class as far as information disclosure there, so well done. First question for me sort of carries on, on a similar vein with regard to the GWP growth and the sort of composition of that. Obviously, customer numbers have fallen a little bit, and I understand, yes, sort of with regard to reassessing the sort of risk-based pricing there. But just interested in your confidence in the composition of that going out to FY '27 in that plus 10% to 15%.

Obviously, we're very confident in that because that's why we put the target out in the market. Yes. And as I highlighted earlier, we do expect it to fall somewhere within that range of 50% rate or maybe even lower as inflation falls in the long -- in the medium to long term and then organic growth. But I guess the key point for us is that all of our growth is targeted.

Yes. And just with regard to the customer numbers, have that sort of falls started to stabilize? Or are you still continuing to try and get rid of a few extra policies on a risk basis?

No, we've -- it's stabilized and actually, it's starting to go the other way in the last month or 2.

Yes. Good news. And then just with regard to the sort of FY '25 guidance, I note on one of the slides with regards to the capital return not being included in your capital ratios. Just interested just to confirm with regard to the actual FY '25 guidance, if it has or if it hasn't accounted for the fact of the capital return?

Yes, it has accounted for it. I mean the FY '25 guidance is P&L, whereas the capital return is balance sheet off the solvency, as you know. But yes, I mean, we absolutely have taken account of that capital return in our projections for FY '25 and beyond.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back to Michael for closing remarks.

Thank you, everyone. I think the sentiment of the questions clearly shows where we all are in regard to the performance of Tower this year. It's been bloody good. Another shout out to management and to Blair. We're all exceedingly proud of where we got to. We're doing our job and looking after our shareholders, and we hope that continues in the future. So thanks for taking part.