Tower Limited ($TWR)

Good day, and thank you for standing by. Welcome to Tower Limited Half Year Results Announcement 2026. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Naomi Ballantyne of Tower. Please go ahead.

Good morning, everyone, and thank you for making the time to join us for this investor call and presentation of our 2026 half year results. I am delighted to be speaking to you for the first time today as Chair of Tower. With me in Auckland is our Chief Executive Officer, Paul Johnston; and Interim Chief Financial Officer, Simon Hoole, who will take you through the results and then answer your questions. Tower's half year results demonstrate the strength and resilience of our business. Despite a considerably more challenging operating environment marked by higher weather-related claims, pricing pressure, and economic uncertainty, we delivered solid underlying earnings with an underlying net profit after tax of $36.8 million. This performance underscores our ability to navigate headwinds while continuing to invest in sustainable growth. The Board is pleased to declare an interim dividend of $0.05 per share, reflecting our commitment to delivering consistent shareholder returns underpinned by robust earnings and a strong capital and solvency position. We are continuing to make good progress on our strategy, growing our customer base, strengthening the quality of our portfolio through risk-based pricing and building a clear pipeline for future revenue through partnerships with Trade Me, Kiwibank, and from midyear, Westpac, supported by our new brand campaign. We are also investing in technology, innovation, and AI to support the next phase of Tower's growth, improving efficiency and customer experience. These actions position Tower to continue delivering sustainable earnings growth over time even in a demanding environment. We remain unwavering in our commitment to transparency and fairness, and that means doing the right thing for our customers. While it is disappointing to identify a further substantial remediation issue linked to a legacy pricing system, we have moved to correct it and remediation is now underway. With my personal experience, I understand how difficult and, at times, disheartening it can be for today's leaders, staff, shareholders, and customers to deal with issues that have arisen over time, particularly those associated with older technology with its inherent lack of data insights and ways of working. Much of this work is necessarily focused on identifying and putting right historical issues. It's complex, time-consuming, and costly, and it does reduce the capacity to invest in new innovations that would improve experiences and outcomes for current and future customers. That said, this is important work, and we are committed to doing it properly. I want to acknowledge the ongoing work of today's Towers team in working through its legacy systems and processes to finish the job of finding and putting right those old wrongs as quickly as possible and to the satisfaction of our regulators. While we are sharply focused on resolving these historic issues and reducing the risk of reoccurrence, it is also important to recognize that growing an innovative business may at times involve getting things wrong. Success is not defined by the absence of issues, but by how we respond to them, identifying issues, addressing them decisively, and then learning from mistakes to prevent recurrence. Paul will provide more detail on the remediation program shortly. Before I hand over to Paul, I would like to touch briefly on the broader New Zealand Inc. context. The government's review into insurance availability and affordability is a critical conversation for New Zealand. At Tower, we are leaning into that challenge because we know that accessible, affordable insurance is essential for Kiwi households. While external factors matter, there is a lot within our control as insurers. Tower is taking the lead in 3 key areas. We have led the way with plain English policies, giving customers more visibility into what drives their premiums and how they change over time. We are also helping them understand key risks, especially climate risk, so they can make informed choices. We urge the broader industry to continue to lift standards in these areas for the benefit of all New Zealanders. The second area that Tower has focused on is using technology to reduce costs and improve experience. Through digitization, use of data, and AI, we are simplifying processes, speeding up claims responses, and running a more efficient business. This helps keep premiums as low as possible, while our pricing approach ensures customers benefit where underlying risk is lower. Thirdly, we are increasingly looking beyond traditional models to innovate for the future. Tower is developing parametric cover and exploring usage-based pricing, more flexible options, and loss prevention solutions, products that reflect how people live today and that make insurance simpler, more relevant, and more proactive. While we focus on what we can control, systemic issues require collective action. Government levies and taxes already account for nearly half of an insurance premium and the cumulative impact of regulation, though well-intentioned, adds significantly to cost and complexity. Clear prioritization and greater coordination across regulators and government would help manage these pressures more effectively. There is, of course, another key factor in the affordability challenge. Long-term affordability and access to insurance ultimately depends on addressing the root causes of risk. That means the government and councils investing in resilience, infrastructure, flood protection, stronger building standards, and more disciplined land use planning. Risk-based pricing also plays a vital role, sending clear signals about where risk is increasing and resilience investment is needed, helping customers, communities, and governments make better decisions. We need to empower customers with information. Tower has made its assessment of hazard risk visible and accessible because informed decisions are critical to building long-term resilience. Our approach is working. Most of our customers are now benefiting from lower natural hazard premiums, while those with higher exposure receive clearer risk signals. At the same time, the overall quality of our portfolio is improving. Ultimately, maintaining a strong and competitive insurance market depends on getting this balance right, investing in resilience, pricing risk appropriately, and directing effort where it will have the greater impact. That is what will support affordability, maintain access to insurance, and strengthen the resilience of our communities. As a Kiwi and Pacific business, with decisions made here in New Zealand based on our deep and focused knowledge of this market and a shared understanding of the daily lives of the communities we serve. We are closely connected to those communities, and our focus remains on building long-term value for our customers, our shareholders, New Zealand, and the Pacific. I will now hand over to Paul and Simon, who will take you through the results and outlook before we open for questions.

[Foreign Language] and good morning, everyone. Thank you for joining us for our 2026 half year results. Here is an overview of our presentation today, which will include the key drivers behind our strong HY '26 underlying result as well as factors that have impacted reported profit. We'll also provide an update on our second half priorities and how we plan to leverage what makes us different to further enable growth. Before moving to our priorities, let's take a moment to highlight what sets Tower apart. We are a Kiwi-owned insurer and our competitive advantages uniquely position us to meet the ever-evolving needs of our customers. First, in customer experience and technology, we lead with transparency and simplicity. Our streamlined platform and product set deliver clearer, more consistent outcomes for customers. For example, through My Tower, we provide premium breakdowns, year-on-year premium comparisons at renewal and our assessment of natural hazard risks for their homes. We continue to enhance our digital capabilities, both through My Tower and our partnerships, enabling more customers to interact with us seamlessly across channels. At the same time, our AI-enabled contact center is improving service quality and efficiency, ensuring faster, more personalized service for our customers who call us. Our targeted approach to risk selection and address level risk-based pricing allows us to price more accurately, remain competitive and improve the overall quality of our portfolio. These capabilities underpin our strategy, giving us a strong platform to deliver sustainable growth and even better customer outcomes over time. Tower has seen strong operational and business performance in the half year. We've delivered a solid underlying result alongside strong customer and policy growth and a subdued loss ratio. Reported profit reflects a number of non-underlying items, including customer remediation and other one-off costs, which I'll come to shortly. On the back of this performance, the Board has declared a fully imputed interim dividend of $0.05 per share. Simon will take you through the financials in more detail. The first half of FY '26 unfolded in a more challenging external environment marked by pricing pressure and continued global volatility. Tower's performance was influenced by strong customer growth, particularly in lower-risk segments, which reduced average house premiums as well as an increase in weather events following the relatively benign conditions of FY '25. Despite these challenges, our focus on delivering simple and rewarding customer experiences drove solid policy growth in the half, largely driven by our partnership channel. We continue to attract and retain quality risks in a competitive market. Weather activity increased compared to the prior period, driving higher BAU claims costs. In the half, New Zealand and the Pacific experienced several substantial storms with Tower recording 4 of these as large events in New Zealand. Overall, the result reflects a shift away from the unusually benign conditions of the prior period with underlying performance supported by portfolio quality, growth, and continued execution of our strategy. We continue to take decisive action to position Tower for stronger outcomes and to deliver value to both our customers and shareholders. This includes passing underwriting and cost efficiencies on to customers as premium savings, which is helping to support strong policy growth even through the economic slowdown. We are also managing the impacts of weather events through our address level pricing, supported by a large event allowance of $45 million for the full year. Our digital and technology investments continue to drive efficiencies while we optimize our reinsurance program to strengthen margins. Finally, we're maintaining a conservative investment portfolio to help reduce volatility. These actions demonstrate our focus on active management through the cycle while continuing to build a stronger, more resilient business. Despite a soft rating cycle, increased competition, and broader economic turbulence, Tower continued to deliver disciplined growth in the half, benefiting our customers along the way. We welcomed 15,000 new customers with growth particularly strong in house policies alongside more moderate growth in motor and contents. This performance aligns with our strategy to grow our home portfolio where customers tend to hold multiple policies and demonstrate stronger retention over time. Importantly, we are achieving this growth alongside continued improvements in risk quality. In the half, we expected -- our expected average annual loss from 4 key perils reduced, and this is also reflected in our new business mix with over 90% of new policies rated as low or very low risk for flood, sea surge, and landslide. This is driven by a deliberate strategy to grow where we see the strongest long-term value while strengthening the resilience and quality of our portfolio. In customer experience and efficiency, we are seeing clear benefits from our continued investment in technology, data and automation. Customer outcomes continue to improve, reflected in a higher Net Promoter Score, improved service delivery and a more seamless customer experience across all channels. Digital adoption is also progressing strongly. Across New Zealand, a growing proportion of customer tasks are completed digitally, making it easier for customers to access and manage their insurance while also helping to reduce our cost to serve. Efficiency gains from our AI-enabled contact center introduced in late FY '25 continue with average call handling times reduced by 2 minutes. In claims, our motor assessing platform integration is delivering meaningful reductions in manual effort. During the half, we completed our first fully automated motor claim from lodgment to approval and payment with no manual intervention. We also expanded automation across the claims process. Finally, we streamlined our geographical operations by closing our Rotorua office, improving efficiency and customer experience through centralized contact centers. We're proud to see these efforts recognized through recent industry awards. Last week, the Kiwi Adviser Network named Tower the 2026 Outstanding Referral Partner. In April, Canstar awarded Tower Home & Contents Insurer of the Year for 2026, the third consecutive year. Tower also received a 2026 Canstar Innovation Excellence Award for our launch of sea surge and landslide risk-based pricing. Weather activity increased in the half compared to the unusually low levels last year. We experienced 4 large events in New Zealand during the period and 1 large event early in the second half. This marks a return to more typical conditions and remains within the range we planned for through our large events allowance. Our reinsurance program ensures we remain well-positioned to respond to any further events. Tower remains focused on putting things right for customers who did not receive the full discounts or benefits they are entitled to through our customer remediation program. The increase in the remediation provision predominantly related to a now historical -- a now resolved historical discount error where a minimum premium embedded in pricing algorithms prevented eligible discounts from being fully applied. Most refunds owed to customers related to a legacy system, which required complex analysis to complete. Remediation activities are well-advanced, and our focus is on proactively contacting affected customers, apologizing, and progressing payments while continuing to engage constructively with the regulator. The root causes of remediations are largely linked to migration, system, and process issues, and this program also reflects our broader investment in strengthening systems and controls to prevent recurrence. Beyond remediation, we also recognized additional non-underlying items, including for the closure of our Rotorua office, partly offset by a small release related to Canterbury earthquake provisions as well as other costs linked to regulatory change and intangible asset write-offs. I will now hand you over to our Interim Chief Financial Officer, Simon Hoole, who will talk you through the details of our financial performance this year.

Thank you, Paul. GWP growth of 1% was challenged due to lower average premiums from growth in lower-risk properties, which attract lower pricing and increased competition, partially offset by increased policy volumes. The BAU claims ratio increased to 44% from the unusually low 38% reported in the prior comparable period driven by targeted rate decreases and increased storm activity. The ratio remains favorable relative to long-run averages of between 48% and 50%. Tower expects it to continue to trend upward through the remainder of the financial year while remaining below long-term averages. Large event costs for the half were $18.5 million. The MER increased to 31%, reflecting the soft premium cycle and continued investment in technology and growth initiatives. Tower's AI-enabled contact center platform reduced the time customers spent interacting with the company by approximately 15% in the first 7 months following launch. Overall, we are reporting a solid underlying profit performance for the half year ended 31 March 2026, delivering underlying net profit after tax of $36.8 million and a reported profit of $22.9 million. Reported profit includes strengthening of provisions for customer remediation costs, costs associated with the closure of our Rotorua office and software impairment. Underlying NPAT was $36.8 million in HY '26 compared with $61.7 million in HY '25. Starting with business growth. We saw a modest positive contribution of $0.7 million due to higher net insurance revenue, offset by the associated increase in claims and operating expenses. BAU claims then reduced earnings by $11.9 million as prior year rating reductions earned through HY '26, alongside a return to more normalized weather patterns and claims frequency in the current period. Large event costs also had a material impact, reducing earnings by $11.1 million year-on-year with large event claims of $18.5 million before tax compared with $3 million in the prior period. Investment income was a further headwind, decreasing by $3.5 million, reflecting lower yields and mark-to-market impacts during the half. Overall, the year-on-year movement for the half is in line with the shift from unusually favorable conditions in HY '25 to a more normalized operating environment in HY '26, while still demonstrating the underlying resilience of the business. Premium growth for the half was 1%, in line with the softer rating environment we are currently seeing across the market, which is highlighted in the bottom chart. This continues to provide some relief for customers following the premium increases experienced in recent years. Importantly, this outcome needs to be viewed alongside strong policy growth. In New Zealand, house GWP increased by 2%, supported by 9% growth in house policies as we continue to prioritize this segment. In motor, GWP was broadly flat despite 3% growth in policies, consistent with decisive rating actions, where we have reduced premiums to balance growth and competitiveness in a softer market. Our partnerships channel continues to perform well, delivering 8% GWP growth and contributing to overall portfolio expansion. Retention has also improved, increasing to 79%, up from 78% in the prior period, in line with our focus on delivering customer value and service improvements. On the right-hand side, you can see our GW trend over time with steady growth from $216 million in HY '22 to $301 million in HY '26. Finally, the chart below highlights the shift in effective average premium with downward pressure across both house and motor as market conditions have softened. While rating pressure is moderating premium growth, we are continuing to grow volumes in a disciplined way, supporting long-term portfolio quality and customer outcomes. The BAU claims ratio increased to 44% in half year '26 compared with 38% in the prior period. This shows a return towards more normalized levels as the benefit of prior pricing actions in HY '25 begins to earn through. Across both motor and house portfolios, we have seen an increase in claims frequency and severity. This has been driven primarily by a higher number of weather-related events in the half, reinforcing the importance of our ongoing focus on pricing discipline, portfolio quality, and risk selection. Looking first at motor, frequency has increased to closer to historical levels at 12.4%, while severity is at just over $3,100 per claim. In house, frequency has increased to around 7% due to a higher incidence of small weather-related claims, while severity has also increased to just over $4,000 per claim. In addition to BAU claims, we experienced 4 large events in the half with an estimated cost of $18.5 million. MER increased by 1% to 31.4% in HY '26, within our full year FY '26 MER guidance of 31% to 32%. As shown in the bridge, this reflects a number of offsetting movements. Scale efficiencies from business growth reduced MER by 0.4%. This was offset by increases in marketing spend to support revenue growth and strengthening our brand in a competitive market and software costs to improve the customer experience and streamline processes. This modest increase in MER is consistent with our deliberate investment into support future growth, efficiency, and resilience, while continuing to capture underlying scale benefits from the business. Net investment income for the first half was $5.5 million, which is $4.9 million lower than HY '25. This is driven by a combination of lower investment balances, reduced yields, and market-to-market losses from market volatility during the period. Tower continues to remain a conservative investment strategy focused on high credit quality and liquidity. Our portfolio is predominantly invested in highly rated bank and government securities, and we maintain a relatively short duration with a target of around 6 months. This positioning helps manage risk and reduces exposure to market volatility while providing flexibility as interest rate conditions evolve. Looking at the chart on the left, core portfolio yields have declined from their peak in early FY '24, although there has been a modest uptick more recently with the running yield at 3.4% as at 31 March, 2026. Looking forward, we expect yields to move broadly in line with OCR settings and for investment income to remain influenced by both rate movements and broader market conditions. Tower's capital position remains strong with a solvency ratio of 143% as at 31 March, 2026. Our adjusted solvency margin was $90.1 million at balance date, stated net of the interim dividend of $0.05 per share. This remains comfortably above our internal target solvency margin of $84.3 million, providing a solid buffer to absorb volatility and support ongoing growth. We were also pleased to have our A- financial strength rating reaffirmed by AM Best in April 2026, highlighting the resilience of the balance sheet. Tower continues to maintain a strong capital position and financial flexibility, supporting both regulatory requirements and our ability to execute on our growth strategy. Thank you. I will now hand back to Paul, who will provide an update on our guidance and second half priorities.

Thank you, Simon. As we move further into the next phase of our strategy, we remain focused on delivering sustainable growth while continuing to invest in digital technology and innovation to provide easier, faster, and more personalized experiences for customers. A key priority is launching our new partnership with Westpac alongside the referral of the Kiwibank back book. Together, these initiatives are expected to support customer growth and broaden our distribution channels. We are also enhancing our contact center capability and driving further digital adoption to improve both efficiency and the overall customer experience. We remain focused on progressing our use of AI, embedding it carefully in areas that can deliver clear value, particularly in operational efficiency and service delivery. Alongside this, we are building stronger customer data foundations to enable more personalized and targeted customer experiences over time. Finally, we'll continue to progress customer remediation and implementation of regulatory changes, ensuring we meet our obligations and strengthen trust with customers and stakeholders. For FY '26, we now expect GWP to grow by low-single-digits, down from our previous guidance of 5% to 10% due to lower average premiums and subdued market conditions. While we expect benefits from digitization and efficiency initiatives to emerge, we -- our ongoing investment in growth, technology, and customer experience is anticipated to keep MER between 31% and 32%. This supports underlying NPAT, excluding large events of between $87 million and $97 million. We have maintained our large events allowance at $45 million for the year. On a statutory basis, assuming full utilization of that allowance, we expect underlying NPAT to be in the range of $55 million to $65 million. Any unused portion of the large events allowance at year-end would flow through to improve the full year result. Our combined operating ratio is expected to be between 86% and 88%, supporting strong underlying profitability. Reported NPAT will continue to be impacted by non-underlying items, including customer remediation activity and costs associated with regulatory change. Looking further ahead, we have set clear medium-term targets for FY '28. We are targeting GWP of more than $750 million, representing a compound annual growth rate of over 7.5%. Over the same period, we expect further efficiency gains with the management expense ratio improving to between 28% and 30% and a combined operating ratio of between 85% and 87%. Overall, these targets reflect our confidence in the strategy and the strong foundations we have built, positioning Tower to deliver sustainable growth and long-term value. Thank you for your time this morning. I will now hand back to the operator to ask for questions.

[Operator Instructions] First question comes from Kieran Carling from Craigs Investment Partners.

First question is just on your guidance for FY '26. So good to see strong policy growth, but that GWP is clearly tracking well below your previous guidance range of 5% to 10%. So I guess a couple of questions here. What has been driving the rating pressure in home after we saw a stabilization through November last year? And what gives you confidence that you can meet your new GWP growth guidance just given the volatility in that guidance range through FY '25 and now FY '26?

Kieran, thanks for the questions. Yes. So it's remained a particularly challenging economic environment out there, obviously, much more so than what we expected at the beginning of the year. We obviously also didn't expect a war, which we believe will continue to impact New Zealand for the remainder of the year. And so fundamentally, for us, we've kept premiums lower than what we anticipated, both -- which is both a good thing for customers from an affordability point of view, but also, as you're aware, it's a very competitive environment out there as a result of that as well. So fundamentally, that's what's changed for us is premiums have been lower than average, particularly in house. And then also we have rolled through our sea surge and landslide risk-based pricing as well, which has resulted in a lower average premium per customer for that. On the flip side of that, though, of course, we've grown house policies by 9%. So while average premiums might be a bit lower for the remainder of the year, we have a bigger business and a bigger portfolio of house customers for when that pricing cycle does turn.

So I guess just a follow-up to that. Can you sort of talk us through what assumptions you've got in place for your new guidance, the mid-single -- sorry, the low-single-digit growth? Like what are your assumptions around rating increases or decreases for home and motor? And also, can you just touch on what contribution you expect the Kiwibank back book and Westpac to add that plays into that guidance?

Yes, that's a very good call out about Westpac and Kiwibank. Obviously, as we communicated at the beginning of the year, there will be tailwinds for us in the second half of this year and, as we go forward, in the next 2 years. Those are both big opportunities for us, particularly the Westpac business. Rates, similar levels to what we've got at the moment. And actually, the chart on page -- just looking it up, of our presentation is probably the best guidance of what we see rate doing in the market and our assumptions there. So around about sort of a decrease of about 4% or 5% for average house premium and about minus 3% for motor. And we would -- we are assuming and we would like to be able to hold that sort of level for the remainder of the year. Obviously, if the economic impacts of the war and global supply chain does happen to kick in, and inflation becomes a real challenge for New Zealand, then that might turn that, in which case, we'll react accordingly as we've done in the past. But that's sort of what we're looking at from a rating point of view for the remainder of this year. And then as you called out, Westpac and Kiwibank, and continued investment and quite strong investment in marketing and brand as well. Hopefully, you've caught our new campaign that we went live with about 2 weeks ago.

Yes. Cool. Okay. So really, the ability to hold your NPAT guidance is just spending on the BAU claims outcome. Is that a fair assumption?

I think it's really dependent on 3 things, actually. Good customer volume growth with competitive pricing. It -- yes, you're absolutely right about that loss ratio, although we are, of course, forecasting and still expecting that loss ratio to creep up by the end of the year. We are expecting it over the medium term to get back to our 48% to 50% long-term average. And it's -- I think it's actually quite remarkable performance-wise that it's at 44% for this half, given the amount of weather activity and storms that we've had in the last 6 months. And so some of those have crept into the large events loss ratio, but some of those have stayed in BAU as a result of our risk-based pricing. And so, yes. So that loss ratio does continue to perform well, as you pointed out. And then holding -- continuing to invest really strongly in technology and marketing and brand while realizing efficiencies means that we'll hold that management expense ratio where it is, give or take. So the combination of those 3 things is really what we're expecting to manage through this cycle and deliver a pretty strong full year underlying NPAT.

Next question is just on the topic of your large events allowance. I mean you made the decision last year to reduce it from $50 million to $45 million. Are you still of the view that was the right decision? I guess I'm just looking at it in the context of this year, including that $5 million post 31 March, you used $23 million or $24 million. If we were to have a cat event in the next couple of months, is it fair to say that you've more than exhausted that allowance between your $20 million excess and your reinsurance reinstatement?

Well, our reinsurance reinstatement is $20 million. So if we were to have a cat event, then that would be $20 million. If it were to hit the reinsurance later, absolutely. But look, we made -- we did the math. We didn't make a judgment decision. We did the math. And as our portfolio quality has improved with the rollout of risk-based pricing, a 1 in 10 average loss cost for the portfolio reduced from $50 million to $45 million. And so that's why we've always said that we maintain that large events allowance at $45 million -- at 1 in 10. And the math is that 1 in 10 is $45 million. And so I guess that's half of the answer to your question. The other half, I would say, is if you look historically at large events, they are loaded to the front half of the year because that is the cyclone and storm season in our part of the world. Obviously, we can get hit with a large event at any time of the year, but it's -- historically speaking, we always tend to get more costs in the first half of the year. And, well, sort of officially cyclone season in the Pacific runs until the end of April, which is a month after our half year. So -- and that's, I guess, is kind of reflective of when the weather -- the Wellington weather storm hit as well.

Cool. And then maybe just a final question on the topic of AI, you've talked a bit about the contact center. We're now hearing a lot of global insurers pitch AI as a structural expense ratio lever. Can you just give some more color on any other initiatives you're looking to utilize? And maybe to what extent the AI capabilities in your business are factored into your FY '28 targets?

Yes. Great question. I mean AI is obviously the buzzword of the day for everybody. And so for us, we really have -- well, 4 key objectives with AI actually, and only one of them is around cost efficiencies. As you know, we've focused pretty hard on making the business as efficient as possible already. And so the others are around customer service excellence and enabling our agents and our people who interact with our customers to have the information at hand and be quicker and more thorough with our customers. The third is around our innovation and driving future product innovation and getting to more of a hyper-personalized product and service portfolio for our customers. And then the fourth one is using AI to actually enable an uplift in risk and embedding compliance by design across the organization using AI. And so it's not actually explicitly embedded as a lever in our 3-year MER target. We'll continue to invest in technology to deliver those benefits for us, and we'll continue to maintain an eye on our spend. Where we're using AI across the organization, as you said, we've made some great strides already with AWS in our contact center, and that's really paying dividends for us. We've also obviously rolled it out to every person across the organization. And actually -- so there's a lot of use cases coming through that people are starting to build across the organization. And actually, an interesting one that one of our team in risk showed me yesterday, actually, was an internal policy AI library tool. So anybody can look up any of our policies and procedures to be able to get -- to understand what they need to be doing in the moment rather than having to search through a myriad of docs. So things like that more at the smaller end of the scale. We're also doing something -- we've done a proof of concept, and now we're operationalizing it in claims around where a Tower person does have to look at a claim, there is an initial claims review process they need to go through where they need to check everything. And that can -- if it's a complicated claim, that can be a time-consuming process. And so we're using AI to actually turn what can be a half an hour to a 40-minute claims review process down to seconds review process. And then ultimately, though, still keeping the claims person in the loop and giving them what that next best action is on that claim or even writing the e-mail or sending -- or whatever that next best action needs to be for the person. So we're using it across everywhere. But fundamentally, it's going to be about how do we make service more efficient and effective for our customers and then use it in the future for innovating our products.

Next, we have Donna Fu from Citi.

Just a few questions from me. You mentioned earlier in the call that remediations are well advanced and that the discount error is resolved. Does this imply that the remediation charges should finish now?

Look, I mean, what I can say, Donna, obviously, is that we've provisioned now for everything that we see upcoming in front of us right now. We've been pushing to be innovative and different as an insurance company over the last 6, 7 years, whether that be simplifying our systems -- pulling out old ones, simplifying our systems or our risk-based pricing and so on. And we're going to continue that push. And so as we do that, we may make the odd mistake. And the key for us, as we've been doing over the last couple of years, is identify that mistake ASAP, fix it so that it doesn't happen again and then remediate the customers. And so that's what we've been doing with the remediation program. And this one is -- it's unfortunate, and we're sorry that it has occurred, but we found it and we've now provisioned for it, and we've also provisioned for the other remediations that we do have on the go. And so we hope that we've got everything in front of us, and we certainly feel that we've provisioned for everything that we need to.

Yes. Okay. Got it. And then you're pretty clear on the low-single-digit GWP guidance for FY '26. So if we take this to mean, say, 3% or 4%, then you'll need to see at least 10% GWP growth in both '27 and '28 to reach your medium-term target of $750 million, could you just help us step through the drivers behind this and whether it -- and your confidence in reaching it, particularly given the downgrade today?

Yes, absolutely. Look, there's probably 3 things to that. One is, yes, the rating cycle has stayed lower for longer, and so that's where we're at this year. However, as we're aware, economic cycles turn and insurance rating cycles turn as well. And so we have a bigger business with a lot more customers now for when that cycle turns. So from that point of view, we're comfortable holding our 3-year guidance. The other element to it, of course, is the new business that we're doing through partnerships channel, with the new Westpac business and also the Kiwibank back book is a good thing for the remainder of this year and into next year. And we're continuing to -- then the third thing is we're continuing to grow that partnership business. And -- as I'm sure you're aware, it's over $100 million business for us. It's been growing double digits for us in the last couple of years. And so we continue to see good growth from that, and we'll continue to push hard in that area of the business using a lot of the digital technology that we're building, particularly with the Westpac integration, and that's really leveraging a lot of our digital technology today that we'll then be able to leverage across the whole partnership business.

Yes. Okay. And then what about your assumptions around inflation in the second half given the war? I mean, are you still willing to reprice on the back of this, particularly given what you say about the current competitive environment?

Yes. So look, as I said to Kieran's question, our desire is to be able to hold rates low for as long as possible for our customers. But one of our core advantages is that we have that one core system with the one digital layer and 14 core products. So we can react very, very quickly as we've done over the last couple of years with pricing. We were the first, 18 months ago, to be dropping pricing quite substantially as inflation came off. And so we can react quickly as and when we look, obviously, all the time at our -- at inflation indicators. And we, actually, have an inflation committee as exciting as that may sound, but supply chain costs. And so yes, so we're having this conversation in depth yesterday. And at the moment, we're not seeing anything that will cause us to react. But if we do, we will.

Okay. Yes. And then finally, I mean, have you seen any motor frequency benefits in the month of April and May, given the war and what's happened with the fuel prices?

Yes, nothing material at this stage. You could maybe say that we're starting to see a small benefit in May, but it's still early days. And so whether that's real or whether that's just sort of April was an interesting month with a lot of holidays, too, in New Zealand. But yes, there is -- maybe we're starting to see a little bit of a benefit from that in May. But again if we'll react as and when we see it, too.

[Operator Instructions] Next, we have Grant Lowe from Jarden.

Can you hear me okay? So just around the customer remediation costs, can you just sort of confirm my understanding like the -- I think the provisions on the balance sheet at year-end covered the end of that multi policy discount. So none of the sort of post-tax cost that's been reported today is in relation to that. That was all previously provided. Is that correct?

Absolutely correct. Yes, absolutely. Yes.

Okay. And so like a 10.9% post-tax implies circa $15 million pre-tax. I'm just wondering how much of that relates to cash spend in the period sort of on identification, remediation, quantification, et cetera, versus the provisioning for future cost, be that repayments or anything else? Can you -- would you be able to provide for that rough split?

Yes, it's a good question. So the total is really made up of 3 things. One of them is this provision for the minimum premium remediation, which is the majority of it. And then as you said, there is some costs for the project team, the remediation project team in there. And then we also do have a little bit of dollars in there for the other -- some other remediations that we've got on the fly as well. And I would point out that the balance sheet actually reflected provisions for some other remediations, not just NPD in the past. So over the last couple of years, we've been working hard to strengthen the foundations and look under every rock to pull out every remediation. And so we've been provisioning for that as we go, and we've just upped it a little bit for the others. But as I said before to a previous question, we've got everything that we see in front of us now.

Okay. And so is there still an active work stream with the project team or otherwise to sort of continue sort of quantifying or identifying new things? Or are we kind of like through the cash spend part and the team rapt up what they're doing and we now sort of know the number? Or is there sort of still risk? I guess where I'm getting to, is there still risk that there's a team doing some digging and they find something next week.

So the team will continue on to continue to pay out and refund the customers. For a few of the open remediations, we do still need to finish the quantification and the exact identification of which customers we need to refund to. But for all of those, though, that are open, we've got estimates on what the cost of those are, and we've provisioned for those. So yes, so work will continue on the actual program, but we've estimated and provisioned for what we see in front of us. And then as far as finding new ones, the team is no longer actively looking for them. But of course, across the business, as and when we find them, we call them out ASAP and we fix them and so on. So as I said before, there is a chance that we might -- in trying to push the envelope and doing good things for our customers, we may make a mistake, but we want to make sure that we've got the controls or the people in the organization to call it out and fix it ASAP. But I guess the key answer to your question, as I said, is we've got estimates for everything that we know in front of us.

Yes. Okay. No problem. And so just one other question from me. In relation to the dividend, so your payout policy, which I haven't got in front of me. But just given the strong growth that you're forecasting in terms of the FY '28 $750 million GWP, how do you think about balancing that growth with regulatory capital? Like is it conceivable that we could see a lower dividend payout ratio over the next couple of years just to support that regulatory capital base?

No is the short answer. We -- as the business grows and as that customer base grows, you're right, we will need to hold more regulatory capital, but we've factored those into the forecast. And so no, our strategy over the last couple of years has been to pay a strong and steadily increasing dividend year-on-year. And I'm wrapped with the $0.05 dividend this half actually. Given where we're at in the economic cycle, it's the second largest half year dividend we've paid since 2016. Obviously, the larger one was last year, but last year was an outstanding outlier of a year. And so this half year dividend of $0.05 is sort of reflective of that strategy to continue to increase it incrementally, but keep it strong and steady through the cycle.

Thank you for the questions. This concludes the Q&A session. I will now hand back to Naomi for closing remarks.

Thank you, everybody, for joining us this morning. I hope we've answered not just the questions of the people that asked them, but also in doing so, a number of other questions. As Paul said, we are proud of the performance that we have had over the first 6 months of the year and are looking forward to the next 6 months. Thank you, everybody.