Good morning everyone. Standing in the Sydney office here, and many, many people I'm sure are online and listening in.

Welcome everyone. Let me begin, of course, by acknowledging and pay our respects to elders past and present.

As usual, I'm joined by our CFO, Jeremy Robson, and we'll present the financial results for the six. We'll, as usual, run through the presentation, and of course we have a team here who can join us in support for the Q&A session that follows.

I'll start with a brief recap of how we believe long-term value is created at Suncorp. This is a slide I put up every time.

It's our purpose slides, where our purpose is delivered through our people, supporting our customers and the community, but in that order, and growing business for our shareholders. To the headline result.

At the outset, this has been a challenging half for the whole insurance industry as we've responded to the extreme weather. The group's net profit dollars and cash earnings of $270 million were well down when you compare it to the prior period, at a net cost of $1.32 billion, which is for our allowance for the half year.

Of course, I'd also make the point that the NPAT in the prior period, sale of Suncorp Bank, which was $252 million. An income of $259 million was also down on the prior period, and of course it was impacted by the negative mark-to-market movements in the bond portfolio.

However, of course, the flip side of this is that the investment portfolio is currently yielding 5%, and that creates a tailwind for us. As insurance profits are subject to the weather, with favourable periods driving results.

Consistently, there are also times when the reverse occurs, and consistent with that purpose of adding long-term value. While we've experienced significant, the way we show up to support our customers during these events is what ultimately drives and underpins long-term value creation.

Headline result has been impacted by those two factors. The underlying business continues, and that's reflected in the solid growth of our consumer business, which has remained at the top end of our guidance range at 11.7%.

We've also further consolidated our market leadership. You'll hear later in the presentation our key strategic initiatives, the Digital Insurer program of work and our AI program are on track to deliver material value, and as Jeremy, flexibility when it comes to the structure of our reinsurance program.

Balance sheet and cash. The board has determined an interim fully franked dividend of 17 cents per share, the 8%.

Our disciplined approach to capital management enabled us to complete a $168 million buyback program over the half year, and we'll recommence the buyback post the results and continue by the end of FY26. On this slide, I focused on growth right across the business, and at an aggregate level, our business has delivered premium growth of 2.7%.

Below the headline number, premium growth was driven by both rate and unit count. Home written premium grew 7%, with unit growth of 0.4%.

We continue to grow our share of low and medium natural hazard risk as high or extreme. Our motor portfolio grew by 5.8%.

Again, that's a very satisfying outcome in the context of a highly competitive market. Key growth was achieved across most portfolios, but is of course moderated from its prior levels by the pricing increases that were implemented across New South Wales and most recently in Queensland.

Our business tells a slightly different story. Growth contracted over the half and was impacted by a challenging commercial, due to the softer market environment and of course heightened competition.

Jeremy moves, adds and changes. Now, given the significance of weather events over the half, I've included this slide, which profile of the first half natural hazard events.

As I mentioned earlier, we dealt with nine declared natural hazard events through the half, and we managed natural hazard claims at that net cost of $1.3 billion. On the bottom left-hand side, causes.

Hail was by far the most significant contributor, accounting for approximately three quarters of event-related claims, more than $700 million from hail. The majority of those events arose in the periods.

Now the financial cost of these events seriously underestimates their true. I've been on the ground across many of the affected areas and I've seen the great work our teams are doing to support our customers.

Meteorological and our disaster management capabilities in our event management centre in Brisbane have accelerated our response, while our mobile across 27 affected communities, engaging with customers on the ground proximate to the events that they've just experienced. Our scale in motor insurance repair meant we could quickly stand up a pop up where more than 4,000 vehicles were assessed over the course of two weeks, significantly speeding up the repair process.

It is like this long-term value is either created or eroded. While the impact on profits will be felt in this half year, our ability to support our customers will be rewarded over the medium term.

With that, I'll hand over to Jeremy to go through the result in more detail.

Thanks very much, Steve, and good morning everyone. I'd like to start off by reinforcing a few key points on the group result before we get into the details.

You've said our reported NPAT was impacted by elevated natural hazard. Underlying insurance result was up 6%.

I just want to emphasise a couple of key points. We delivered good unit growth in both home and motor, demonstrating the value.

Whilst the Suncorp business has elements that are cyclical, these are a smaller subset of our business. Most of our portfolios are driven by input cost chain pressures and natural hazard costs remain a feature.

We expect acceleration in GWP growth, reflecting the impact of higher pricing already implemented across a number of portfolios. The higher yields that gave rise to the first half mark-to-market losses are a positive going forwards and give us an exit yield of nearly 5%.

Our expense ratio reflecting our ongoing control of costs. At the same time, our capital position is strong and we have reaffirmed our target for the buyback.

We have optionality on reinsurance as markets continue to soften, which we're going to explore further. We remain confident that our natural hazard allowance is set at an appropriate level.

I also note the strong prior year reserve releases of $65 million, 90 basis points, in commercial and workers, but with some offset in consumer. Now let's get into the results in a bit more detail and we'll start.

The underlying ITR remained in the top half of the 10-12% range at 11.7%. Dynamics included the earned through of pricing, continued improvements in insurance costs, partially offset by the increased resilience built into the natural hazard allowance.

Consumer benefited from the earned through of pricing, with margin remediation in home. For New Zealand, whilst the 80 basis points, the group contribution was impacted by the relatively low dollar.

The commercial portfolio was impacted by pricing pressure in property and fleet, with margin expansion in the CTP portfolios. Looking forwards, we expect the second half margin to continue to be in the top half of the target range, through price increases and platforms remediation, but we do expect with ongoing moderating prices.

On to the next slide then, and I'm going to quickly touch on overall growth. Growth in the first half was particularly strong in the consumer portfolios, Vero and AA in New Zealand.

GWP growth was good in CTP and fleet, by lower prior year adjustments. Whilst more muted than the overall market, the commercial portfolios were impacted by the current cycle.

We expect to see acceleration in GWP growth in the second half, and you can see that on the chart, to deliver full year 26 growth around the bottom of the mid single digit guidance range. Inflation in parts and labour is ongoing and pricing has been adjusted to reflect this.

We pick up with further product launches in Vero specialty lines and rate remediation in platforms. Significant pricing has gone through the Queensland and New South Wales CTP portfolio into the second half, and workers will also benefit from ongoing additional rate decreases are expected to moderate in our New Zealand commercial portfolios.

I do note, of course, that the outlook is subject to the competitive environment, particularly. Now, in the context of growth, I'd like to remind you of how we work at Suncorp.

On the chart, I've divided our portfolios where pricing is primarily driven by input costs and those that are more exposed, or directly exposed to global. In the first group are portfolios that require important capabilities.

That's things like repair networks and brands and brand presence, cycles that are driven by input costs, such as supply chain inflation, natural hazard events and reinsurance costs. In the second group are exposed to global capital flows.

Now, less than 10% of our book, some of the property and professional indemnity portfolios in Australia, as well as much of the New Zealand commercial business. To leave you with here are: firstly, insurance input costs tend to differ to CPI, and they continue to be elevated with ongoing events as well as natural hazard costs.

Then secondly, the global capital insurance cycle in our commercial portfolios, we have a good position across the group. I also note we benefit from this softer cycle in our reinsurance program for the whole of our business.

Regional results and start with consumer. In motor, GWP growth and moderating AWP, albeit with further pricing put through late in the half in response to ongoing.

In home, GWP grew by 7%, as we continued to price for higher natural hazard allowance and underlying claims inflation, but reflected the continued low system growth. Now, pleasingly, you can see we saw an improved portfolio mix with a higher proportion of low-risk homes.

Underlying ITR for consumer improved from 9. With margin remediation ongoing in home and motor at the top end of its range, looking forward to the consumer margins to expand modestly as pricing earns through motor, but with some moderation in home due to the phasing of the natural hazard resilience allowance.

Next, then, to commercial and personal injury. GWP performance was mixed, reflective of our diversified portfolio.

Digits, reflecting our market-leading capability in this segment, reflecting the results of our disciplined approach to pricing. In Queensland, GWP was up 9% and we continue to engage constructively with the Queensland premium equalisation.

Specialty lines continues to grow, with four new lines now launched and live in market. Then the property and profin, albeit to a lesser extent than overall market, and workers, as I said before, was lower with the impact.

Underlying ITR was a little lower, with improved margins on CTP being offset by competitive pressures on property. Now importantly, property and profin margins remain at the top end of the range and provide manage the portfolio through this current pricing cycle.

The business continues to perform strongly from a profit perspective, with an underlying ITR comfortably above the top end of the range, and reinsurance costs have moderated rapidly. Whilst the business is well diversified, GWP contracted due to varying pressures across the portfolio.

In consumer, our business in both home and motor, whilst the intermediated channel brokered book of business. GWP growth for commercial conditions, as well as the impact of a weaker New Zealand economy.

We are seeing some signs, as well as an improved outlook for the New Zealand economy. Going forwards, we expect margins to remain attractive, albeit to normalise down towards the top end of the New Zealand target range as moderating prices earn through the book.

Now to natural hazards, and it's evident, as Steve said, the high elevated natural hazard events. The experience of $1.353 million above the allowance.

Now, just to put this into context, the highest retention ever in a half, one of the most severe halves this century, and it was significantly impacted by hail events in terms of weather patterns and less clear connection to climate change dynamics. This is national natural hazard claims costs, and that was primarily driven by weather conditions that were prevalent over the half.

Now whilst this is a disappointing result, it should be taken in the context of a natural hazard in seven out of the last 11 years, including this half, and four of the last six years, and that's based on the current reinsurance program and current. Over an 11-year period, we would have cumulatively been below the allowance by over a billion dollars, again including this first half result.

We were with the additional resilience flagged at the full year 26 result, is a probability is expected and it's the long-term performance that drives value. Looking forward, the second half allowance remain the best guide for expected second half of this year, and I do note that the January performance and the storms and floods we saw in Sydney earlier in the month was.

Next, the related topic of reinsurance. As previously flagged, we continue to review our and our key objectives are optimising capital efficiency relative to volatility, all with the overarching goal of maximising long-term shareholder value creation.

We met these objectives when placed in July last year, but a softening market may provide the opportunity. In the meantime, our program provides robust protection as well as drop down cover against large events in the second half now, and retention for further events will be limited to $260 million and further limited for any subsequent large events.

Now, of course we'll continue to review our options on reinsurance and update the market accordingly. On then to investment performance.

The average underlying yield on insurance funds was lower than the PCP, reflecting lower recently bond carry. I do note our tech reserve investment managers.

The higher yield environment continues to support an attractive ex-5% mark. Now we've made some changes to our investment allocations in line with our strategic asset allocation.

We've reallocated from inflation-linked bonds to structured credit in insurance funds and rebalanced from cash into property in shareholders' funds. Going forwards, we'll continue with this rebalanced outlook for inflation in particular and as suitable opportunities arise.

Turning then to expenses, 4%, and that's whilst our total expense ratio reduced by a further. Expense growth was largely in our growth-related costs.

That's driven by investment in the digital insurer policy admin system and investment in AI spend in marketing in response to elevated competitor activity, and then run the business expenses increased modestly as productivity improved and technology inflation. Going forwards, we aim to operational efficiencies as we continue to invest in our key strategic modernisation and operational transformation, including AI.

Finally, capital remains strong with $700 million of CET1, and I'll just make a couple of points on the usual capital waterfall. The share represents a payout ratio of 68%.

That's around the midpoint of our target range and is fully franked. The GI, largely from the high natural hazard experience in the half, some business growth rebalancing that I referenced.

The other category you see largely relates to the weaker New Zealand dollar, and then the completion of the buybacks in the first half was largely in line with our expectations. Now importantly, the buyback is expected to resume after the first half result and we continue to target $400 million for FY26.

Going forwards, capital turn to shareholders using on-market buybacks, as we previously flagged, managing capital in the top half of the range as opposed to hard on the midpoint in order to optimise ongoing capital flexibility. With that, I'll hand you back to Steve.

Thank you, Jeremy, and moving to the next slide, and here we provide our digital insurer platform modernisation program of work. Remind you of the progress that we have made in replatforming both our contact center and our pricing environment in Australia and in New Zealand.

As we touched on in our investor, first release of our new policy administration system went live in April last year for new home and motor portfolios, New Zealand joint venture. The system has started to deliver more, and we remain confident the expected benefits that are baked into the AAI digital insurer business plan will be realised over time.

We're now well into the delivery of our second release in our AAAMI brand, which is of course, now we're targeting this release for AAMI home and motor new business around the middle of this year and migration, which will follow soon thereafter. Before I move to the outlook, I wanted AI, which, as you all know, is a topic of key global interest, particularly as it relates to insurance.

A lot of time on this at our investor day back in November, but as usual with these tech, a lot has happened in the past four months. On this slide, I've recapped the Suncorp AI story so far.

It does AI to improve customer outcomes and importantly to support long-term returns. To be towards the front of the AI adoption curve.

We have market-leading AI capability within our Suncorp team and we have established partnerships with leading AI technology companies and BPA partners. Now our processes and know-how AI can be deployed alongside automation.

Our Agentic AI program of work that we showcased at Investor Day. We are on track with initial deployments across our claims and though we see opportunities right across the value chain of insurance to enhance the customer end-to-end processes.

Additionally, we continue to progress our broader technology roadmap, which is replatforming our business with SaaS-based, cloud-enabled core systems where importantly AI. We already have AI enabled across our enterprise engine.

On this slide I provided a snapshot of just some of the AI capabilities that are embedded into the core, some of which is already in place and more to come. Of insurance, we see material opportunities for AI to improve product design in a hyper-personalised insurance future.

From a customer perspective, all along reducing our loss and expense ratios and importantly addressing insurance affordability. As a distributor, both strengthen the effectiveness and deepen the customer engagement across our market-leading brand portfolio.

This will equally apply to consumer and commercial, or as premium pools move. In summary, AI will significantly improve our capability distribution, but over time it will allow us to carefully and selectively assess other opportunities.

To the outlook, and I'd like to summarise a few of the key points for the full year. GWP growth is expected to be around the bottom of the mid-single in commercial in Australia and New Zealand.

The underlying ITR is expected to range. The operating expense ratio is expected to be approximately 25, but with an increasing proportion of expenses allocated to growing the business.

Balance sheet targeting a payout ratio around the midpoint of that 60 to 80 percent range of cash earnings. We'll be restarting the buyback as soon as possible with the target of around 400 million over the course of the year, the full year.

Rally around our purpose. We are focused at this point in time on the needs of our customers, supporting them with best-in-class event response capability.

Our brands remain well supported and our broader customer base. We are investing in modern technology, which alongside AI transformation will deliver leading customer experience.

We enter the second half with a strong capital position, active capital management, all of which will deliver improved shareholder returns. As general on reinsurance, as markets continue to soften.

With that, let's move to questions. We'll go way along the front panel here.

Nigel.

Nigel Pittaway here from Citi. First question, just, can we just clarify exactly what we mean by bottom of mid-single-digit range?

Does that mean 4 to 6 percent is the range and 4 is the interpretation?

Pretty sensible arithmetic to me, Nigel. Yes, mid-single digits.

We would suggest would be 4 to 6 and bottom is 4.

Fair enough. Thank you.

Motor then. I was wondering whether you can sort of elaborate on what actually inflation in the period.

You've obviously made some comments there about and total claims, but I was wondering. Also whilst we're still on motor, I think you mentioned that you put through price increases towards the end of the half, which seems to have gone key competitors.

I was wondering whether you've seen any change in competitive this half.

I might quickly just, and Jeremy can top up and Lisa potentially as well around what we're seeing in inflation level. The discipline that we apply is that we monitor inflation very carefully across the whole insurance portfolio.

You can't look at insurance inflation through a proxy of CPI. Some of the work we've done to try and understand the differential between CPI inflation running at between 3 and 4 percent higher than CPI.

In motor, let's start with motor. Obviously some of the dynamics in motor have been masked by the significant reduction in inflation as the repair chains became more.

The big disruption in motor. Those repair chains have broadly settled down, but labour rates remain elevated.

That's the first point to make. The second point to make is when you think about motor, often we tend to look right over the horizon.

What's going on in motor at the moment, there is a very significant short-term dislocation with electric vehicles in the market, particularly with Chinese origin. That will disrupt supply chains for a period of time.

We saw that with the vehicles where it took periods of time to get supply chains working and get repair capability in the network at the moment. We're also seeing elevated costs across repair, not to the extent they were post-COVID, but certainly still elevated relative to COVID.

We're seeing some impact. Bias to replace parts now with the technology that's embedded in them versus five or six years ago.

They're all the factors that we monitor very carefully. Again, I believe we need to focus on covering inflation in our pricing, and that's what we tended to throughout last calendar year and into this year.

Those price and we're very confident that they will be sustained. On the home side, just the underlying dynamics in home are not dissimilar.

On the hazard book, we've obviously had a pretty challenging half with and we will go back through our modelling to understand the allocations of hazard premium loadings that we put across the whole portfolio continue to be relevant. I expect that there will be some adjustments to pricing, particularly in some geographies off the back of that and also in New Zealand where we tend to see the New Zealand numbers as relative to the size of the New Zealand market, they're quite material events.

Past couple of years there's some changes in pricing there. On the home side, the underlying factors, and they relate largely to large loss fire, severity of large loss fire.

We've talked about lithium batteries. That continues to be a dynamic.

Stabilised a bit in the portfolio, not so much frequency, but more severity and similar trends in escape of frequency is moderated or stabilised and reasonably well elevated. The biggest dynamic in home, and we'll talk about this, I'm sure for the next chain and the pressures that are on trade availability, that will flow through nationally.

When we think about inflation, we think about that dynamic that elevates relative to CPI elevated for some period of time, and our overarching in our group and discipline within the group. You saw it when we stood out of the market previously, and we're prepared to do that, have a confidence around the trajectory of inflation, we will price to it in a disciplined way, and I think that's been evident in our previous performance and continues to be the case.

Home for that matter. I'm not sure any of those inflation signals to Suncorp, and I'll just add another two.

One is total loss, which is sort of nearly 50 percent motor claims. What we've seen there is we've seen not an increase in frequency in theft, but an increase in the average cost of theft.

We're seeing more modern vehicles getting stolen. That's been a bit of a trend.

Victoria seems to have stabilised a bit, but still at a high level. Third-party claims, which were a reasonable component of claims as well.

We've seen elevation in credit hire, which I think others have called out as well.

No comment on units in the first six weeks?

Look, I think the hierarchy of decision making inside the organisation, make that clear. We will price to inflation, outland somewhere between one and a half and two and a half percent, so that we're tracking with market.

In home, it's a little bit more nuanced. Home system rate is negative, point four in an absolute sense doesn't sound spectacular, but relative to system it's good.

Importantly in our home book, it's the distribution of units and customer growth relative to... Our target for the portfolios will be to cover in half to two and a half percent.

Above that or below that, and covering inflation, our primary objective is to cover inflation on a book that's got... I think that's the right way, disciplined way to look at the portfolio.

All right, on the reinsurance, just aside from obviously softer pricing, has the sort of experience that you've had in the first half of this year in any way changed your approach to insurance cover? Is it really the case that aggregate covers are likely to be more available?

I think they've edged closer to availability every year. That's usually the case.

Aggregate cover in our arsenal. Since we divested the bank, obviously, across the group, and so an aggregate cover would be something that we would have always aspired to.

12 months ago, when we went through the process, it was a commercially available product. We couldn't make it work.

That the continued softening of those markets and the profitability of the reinsurers across the broader catastrophe will put us proximate to go through that process. We firmly believe that as a...

to pick and choose what markets we play in in this country. We have a fantastic reinsurance panel with great partner provide that volatility protection, which we think is the last part of our....

Thank you.

Kieran.

Morning, Kieran, Chidgey UBS. Much the area that GWP growth on slide 12 that you put up, you're flagging better growth in second.

Commentary seems to suggest most of it's coming from price. A couple of questions, interested in if you can give us the types or level of pricing you're talking across each of those segments, and then secondly sort of you have in each of those, and volume implications if you do have.

It's fair to say we've emphasised price that's already obviously CTP. They're filings that have occurred, they're scheduled.

They will come in, New South Wales CTP. Ahead of price is inflation, at that overarching level looking to price to inflation.

I think if we go through it, rate going through motor in the second half, as we've said, we've already started to put that through in the back half of the first half. Maybe a little bit more rate, but home's pretty reasonable from a margin perspective at the moment.

A lot of the price is around margin, we think a little bit more in motor. CTP in, we've got another $25-ish on New South Wales CTP this month.

We got another $6, I think, in April or so, and that price is already in situ. Work pricing in Western Australia and Tasmania needs to lift probably towards the top end of the single digits.

You've got price going through those portfolios. Then there's a set of elements like Vero specialty lines.

We expect to see continued growth there and continuing growth from the first half rollouts, and their repeats, if you like. In New Zealand, rate deterioration started in second half 25, and so the first as a base is already in that second half 26 growth number.

Rate growth in motor in New Zealand, particularly in the AA portfolio. Then in workers, I flagged that we had these prior year adjustments, that's burner adjustments.

We haven't seen the same favourability this year that we saw last year. Of course, the corollary on that is you're doing better on claims, sort of net P&L neutral, but it does come through in the second half as well.

That's the range. There's a range of pricing that's in.

There's some new business that's coming through, and then there's some one-offs, if you like, but...

Thanks. Sort of specific for Investor Day late last year, you continued to flag desire to grow market share to part of the business.

I think the growth this period is suggesting that strategy is on hold in the current cycle. Can you just give us a refresh for how you're thinking about commercial over this calendar year?

There is some exposure to the commercial cycle, particularly at the top end, and we have to be conscious of that. Overarching concept of discipline, we are going to maintain our discipline in those markets, particularly in property and profin.

Our strategy there will be to be very cautious around growth, maintain it, and as the cycle starts to change, be in a position to capitalise on that as others are potentially remediate the bottom end of their targets. If we can grow sensibly, but with good margin sufficiency, and the margins are in the top end of that range, then we feel we'll be extremely well-placed when that cycle starts to change and others start to remediate.

Now is not the right time to do that, in our view, particularly with the margin performance.

I'd also just add, Steve, that when you talk about commercial, it's a broad church. Certainly the growth in top-end commercial property, and to some extent profin.

We've had very strong growth in fleet, which is a big part of our commercial business. We've had growth in other...

We had a relatively weak growth number on packages in the first half. We need to get more rate through that portfolio.

It was the other one that Shane mentioned before. It's a broad church, and parts of it are doing well and sensible and good margin, makes sense for us, et cetera.

It's the top-end commercial property and profin where there's a bit more pressure.

Kieran, the other way of looking at home and motor, but particularly motor, is geographically in insurance.

That's my next question.

Right, okay, well I'll answer it now. Obviously there's a view and the work that's going on there, and again, in Queensland, we're more comfortable growing in motor, obviously targeting some of that potential to RSEQ and their acquirer start to merge.

It's been a softer spot for us historically. We feel more CIO now than we might have a couple of years ago.

We think there's a big opportunity in New South Wales. If you look at the market share leader in New South Wales, some of their performance, there is an opportunity there for us growing in New South Wales.

Then South Australia, unit volume count performance in both those markets, better than the average of the 2% that we talked about. interest to capitalise on some of the dislocation in those markets.

If you look at it macro, nationally, but geographically, opportunity, and then in New Zealand, we're getting 3% unit count growth there attributed to the new policy administration system, but we have an embedded benefit that we believe in both at the written premium level, but particularly in volume, through the implementation of that new portfolio.

I'll hand over, but the Victoria motor picture, how have you seen experience there?

Look, I just don't see the same Victoria as I talked about in those other states. We are pricing to the higher, which is largely, it's not so much frequency, accident frequency, or otherwise theft.

Victoria would be a market where we'd be looking to grow with system, maybe a bit more in home than motor, but grow at system, but price to the inflationary environment. There is opportunity, both in terms of frequency, but particularly severity.

In terms of that, it's not geographic per se, but brand reach. One we don't reference is Bingle.

Bingle's grown 15% GWP on the same times units. That is an example of the reach and further stretch as we continue to roll that out.

Andrew?

Hi guys, Andrew Buncombe from Macquarie Securities. Just two from me, please.

On the catastrophe experience in the month of January and rolling. You've said in the slides that that experience was in line with the allowance.

This time around, you've put half for the allowance. My question is, was the experience in line with a straight line average, or somewhat?

Very conservatively, I think you said in line with the allowance. I would call it within the allowance.

We might have been a little bit better than what are we touching wood. We had some weather in Queensland last weekend, which is very immaterial, which will be a big reasonable event in New Zealand, but not within our means at the allowance level.

I think it's there or thereabouts. There's nothing of this calendar year that sort of says that we're anything sort of askew to the allowances we would track.

We said that the second half allowance is probably the best guide for the second half experience, which holds true. The second half allowance, theoretically now the enlivenment of the drop-down covers in the second half.

There's probably conservatism in that statement a little bit, and the January experience, that outcome.

Then the other question from me was in relation to 90 basis point impact from a release in the first half. The full-year guide is still 30 basis points.

How should we be thinking about the second half? Should we expect a strengthening?

The expectation outlook is more around the underlying business before. I think it was 20-40 basis points, 30-40 basis points on CTP, and we continue to expect to deliver that for the full year.

When it comes to the other portfolios, there's sort of plus minuses around them, quite fairly in the second half. We're really just calling out what we expect to see on the reserve releases.

The other portfolios, we will see strengthening and releases, but we would expect those.

Andrei

Andrei Stadnik (Executive Director and Equity Research Analyst of Financials, Morgan Stanley): from Morgan Stanley, can I ask around the OPEX ratio fell nicely in this half. Do you think the OPEX ratio can continue to fall, and can it continue to fall into FY27 even if premium growth were to slow?

We have to have opportunity from our operational transformation agenda with the AI in it. OPEX ratio is where premiums go.

We still see a reasonable premium insurance pricing cycle. What we're saying is for that 90% of our portfolio premium growth to run through the portfolio, that obviously helps.

The other one then is the absolute expense number. For us, is thinking about the mix of that expense though.

One of the things that we are fixated on is trying to keep that run, the cost business as flat. It's not always possible to keep it absolutely flat, but as flat as possible, and then to reinvest back into the grow the business expenditure.

That's expenditure on our insurer policy admin platform modernization and operational transformation. We see value in that.

To the extent overall margin outcomes, then that's a good outcome. And Andrei Stadnik (Executive Director and Equity Research Analyst of Financials, Morgan Stanley):

for my second question, can I... Based on the internal modeling we received from the insurers, your catastrophe budget is sufficient seven out of ten years, and IAG is over nine out of ten.

Right, at the moment catastrophe budget is at the bottom end of Australian. How are you thinking about catastrophe budget increasing next year?

If there is an aggregate reinsurance cover, would...

Look, I think at some point, for Australian consumers, it becomes, for example, 100% adequacy on catastrophe losses, because from a perspective, and it doesn't make sense in terms of what insurance... Now we have, and we have all ostensibly lifted over the last few years from what we modeled.

Actually, in practice, it was probably much less than 50%. We've all lifted from there.

There will undoubtedly be variations in modeling. Our modeling, we all use different models, and so what might be the variability in some of that modeling.

I think we feel pretty happy it is at the moment, but having said that, as we've always said, if there was opportunity to try and strengthen it a bit further, delivering that margin outcome, but we don't feel uncomfortable with the way it's set at the moment. Yes, I don't think an allowance per se.

It would sit on top of the natural hazard allowance wherever we set that.

Hi, Vera Kong from Bank of America. Just a question on margin prong.

Last year you said you were tracking above the top end of the 10 to 12% underlying ITR, which you'd reinvested into a higher hazard allowance. I'm just trying to understand the moving parts here.

Have you reinvested some of the additional excess margin?

Portfolios on the margin walk. We have seen a little bit of margin expansion in home, come through home where we have that portfolio has been in remediation where the target range was.

We're now actually up towards, if not above the top end of the range. In motor, we were above the top end of the range.

We're now back to... In commercial, we are sort of around the...

around, if not a little bit above the range across the aggregate portfolio range. When we think about are we reinvesting in growth, et cetera, what we try to do, as Steve said, is that margin, and then make sure we're optimizing our growth relative to that margin outcome.

We mentioned many times, you can take a complex business and simplify it, incremental capital, back to our book capital return, back to the Suncorp business in its entirety, and then back down into the portfolios. That's the target margin that we would aspire to.

We cover the cost of inflation, level of market levels growth in some portfolios, particularly home, the story is more about improving the quality of the home book and in aggregate delivering at system growth. Commercial, we think there's an opportunity at the other end of the...

and get back to that natural market share. CTP, because we've got an overweight position in Queensland.

You can take a very complex business and reduce it down to something that's a little bit more simple in terms of how we sort of intellectually...

Thanks. Just drag in excess capital in the period from higher insurance liabilities, I'm presuming because the claims get settled in the coming months?

Theoretically eventually it gets, have a fair tail on them. We would expect some of that to get unwound.

I think natural hazard impact on claims. We also see some impact on things like mix.

New Zealand growth was lower than, higher in New Zealand relative to the group because it's relatively high profitability. You get a mix impact from that in that capital movement in the first half as well.

Those were a couple of other movements in there as well as the...

Just last one on capital management, given this, can I ask why the buyback was paused so early?

It was less about the capital position per se, but more about the confluence of events. We were right up against the sort of getting towards the end of the half-year period.

Obviously that Christmas period is a period where you probably don't do much trading. Something sort of was reasonably proximate.

I think just with the October and November, we thought it best to pause, but we'll restart it as soon as possible after this result.

Richard Elmer from CLSA. Just would like to ask a little bit about risks to your pricing aspirations.

Sensitivities last year around sort of prices. You guys are acknowledging the input cost discussion ahead of CPI by somewhat challenging.

Can you just give a flavour of any regulatory or political engagement that you're not going to get hard pushback from any unforeseen corners?

I have a good to deliver a profit outcome that's significantly down on the PCP and probably in an aggregate level below our targeted returns. I think what we've done as an industry is educate policymakers and regulators that we have got a sense that are above our cost of capital through benign weather or favourable investment.

We need that to deal with six months or so. Yes, there's an ongoing dialogue.

Affordability is a huge challenge for Australia more broadly and for New Zealand. The new Minister for Assistant Treasurer is very focused on that agenda, particularly for the sort of two percent or whatever it is that can't obtain affordable insurance.

As an industry, I think we're working constructively with the government, constructively with Treasury about how we might find an industry-wide solution for that solution has to by definition be industry-wide. It can't be one or two players that solve this problem.

It also needs to come with support from the government in turn. There's an ongoing dialogue.

There's no answers to that just yet, but it is an active part at the individual company level, at the ICA level. We're working constructively with the government around that.

On that, I think the factors that drive insurance inflation that I've talked about, don't use CPIs, are well understood now, I think. We are very conscious as a business that while we might talk about inflation, there's a consumer with the cost of living challenge sitting off the back of that.

Over time, with AI and digital insurer, we need to get better at designing new policy for that subset of consumers who are really challenged to continue with their...

Couple of questions, if I may. In the allocation of strata premiums from home into commercial, does that reflect the pressure on them from the commercial property cycle, or you've got the sign of further strata growth insurance plans?

Michael, do you want

to... Thank you.

It's VSL, various specialty lines. One of the products we do want to enter into is strata.

We have a small strata book in our doors a year. Full process is bring that across and then run that direct book right next to the intermediary from a pricing point of view, distribution, knowledge.

It makes a lot of sense. It's probably just the foundations of building out that strata opportunity.

Great. Thanks for that.

Then in terms of your internal reinsurance, presumably because of the fall in reinsurance costs, should we expect further falls in that looking forward, possibly similar level in the second half, and then if the reinsurance cycle continues to fall, maybe further?

The key driver was retention. That's internal reinsurance between Australia was an increase in the retention in the New Zealand business.

The Australian business just provided less risk, which was then funded effectively through tier 2 diversification. It didn't have any impact on...

Now is probably a more appropriate level. That's the baseline.

In a bit, might move down a little bit, but the key one was just the retention levels.

Correct. Arjun, principally the improvement due to claims costs, how much of that was due to reinsurance, or alternatively if you want through a rate?

Most of it will have been. A chunk of it will have been earned through reinsurance costs year on year, and you can see a reasonable reduction in reinsurance rates, but we don't split it out between those two categories.

You can see a reasonably chunky reduction in reinsurance year on year, particularly relative to some others. Our price positions are on AWP.

You probably have a stamp it on the back of the envelope on it.

Finally, the retention ratio is due to roll off in bank transitional costs.

Nothing. With the bank transitional costs, they're all provided for as part of the bank sale process and they're all baked within the price year.

That's all the P&L of the insurance business is immunised.

Great. Thanks very much.

I think we've got a couple of calls on the phone.

Morning guys. Just to be super clear, it seems like the guidance where you now have expense ratio to 50 basis points, as well as yields holding up compared to initial expectations.

It's something super clear, what is offsetting those to embarrassment?

I'll get Jeremy to go through it in more sophistication than this.

Is that the answer?

All New Zealand, Julian. Obviously we've got a period of time where the underlying margin in New Zealand is significantly lower.

We expect that that will come back within the guide rails, maybe premium adjustments that have already been made and it's starting to... It's the reverse of what we've talked about in home and motor to some extent.

A little bit relates to the natural hazard allowance phasing. We loaded more of the resilience, that $100 million, into the second half than the first half.

There's a little bit of that. The key one is fall in New Zealand.

If you have the New Zealand underlying margins coming back to 16% in the second half, just to be clear.

Explicitly call out what it is, but it's something ahead of 15%.

That's fair. Second question, you mentioned growing in mortgage properties as an opportunity for growth.

I totally understand what gives you confidence with 50% pricing and how competitive you'll be versus peers and what it is.

Okay. Low-risk portfolio in home?

Yes, look, I think the first point I'd make is that this doesn't... You can see, I think from a period of time where we started to apportionment of growth between low, medium and high from 2021 to 2026, it's about 4% in aggregate.

This doesn't happen immediately. The composition of it all and go to the margin drag story is to better risk select, better focus on that low and medium natural hazard area, but at the technical level, close to the technical level for high and extreme.

When we talk about that in its totality, yes, we're improving the quality of the book. It's just making sure that the cross-subsidy that potentially sat in those three...

around and we're getting closer at an aggregate home portfolio level to pricing actual and technical at the same rate. That has an impact on the distribution of risk between the three areas, but also margin.

When we talk about remediation of the home book, remediation is probably not the right word, but you can see two things. One is we're now growing at system or ahead of system way with a focus on low and medium, back to the top end of the range or slightly above the top end of the range.

That's the way we think about it. It's more about making sure that the cross-subsidy that might have sat there previously, that we need to price closer to technical.

Because as subsidy there of any significant magnitude, then others in the market who don't risk areas will what parts of the portfolio,

the lower risk parts of the portfolio. Got it.

That's clear. Your AI transformation.

broadly the disruption in that area, you've talked a lot about AI, it's more. Yeah.

I think if I heard correctly, it's AI, particularly around various of the domains. One of the key elements that everyone is looking at is AI relative to where you sit in the adoption curve.

Easily sit sort of in the fast follower or follower territory, watch others make mistakes and potentially benefit from that, or you can be more at the leading end. Very much approximate to the position and the leading position that we seek to take in AI, making sure that when we implement AI initiatives right across the value chain, but particularly on making sure that we don't disrupt the customer experience.

Digital started to flow through insurance and particularly banking and others that adopted it early, obviously made some mistakes in the early adoption of it. We're going to adjust our risk settings to reduce or have a risk appetite to reduce those, ensure that we're not falling behind the market.

That's the sort of aggregate risk review. Clearly, we also need to evolution, like all major corporate players, that we're investing in our people to re-skill them, retrain them and set them up for that AI world.

Risk profile. We're doing a lot of work on risk profile at the moment to make sure that when we implement, disrupting the customer experience and that we're continuing to deliver, but we can do it in a more efficient way.

Steve, just to add that net, net, yes, we're at risk around it, but we see it as a net opportunity, an opportunity from the business, how we can run it more efficiently, more effectively, better claims experiences, etc. Insurance is ready-made for that sort of opportunity.

There's been market chatter around how AI may impact on distribution. Again, we feel well positioned, from a commercial perspective, with our brand portfolio and how we over a long period of time have dealt with that distribution.

Obviously, there's distribution potential benefits for us if we're early adopters, and we have to manufacture a product, and manufacturing a product in insurance, and it's about claims management. That's where we see material benefits as a manufacturer of insurance products.

To our product is better, more personalised, to make our claims processes better and to continue improving. If you've got all of those things working, you're going to drive material benefit.

If you just sit there, think it's a distribution opportunity, and you don't focus on risk selection, pricing, and the book that's skewed to areas that you might not want it to be skewed to.

Thanks.

Good morning, everybody. A few questions if I can.

Firstly, just Queensland CTP, Steve. It has been a drag on your margins, quite a sharp drag from where we were with commercial margins previously.

With the price increases that you're pushing through, does that get... Where are you at with your discussions with the regulators on change?

Thanks, Sidd. I think it's well known that sort of 12 to 18 challenging, very much reflective of what we believed wasn't a sustainable scheme going into the future, bringing it back to three insurers, with us holding around 60% market share.

The discussions with the Queensland government, the regulator, have been very constructive. We've had, I think, four consecutive premium increases.

From the start of the journey, we would have said those four and the quantum are sufficient, but there has been some deterioration in the scheme. We still believe there's more pricing that needs to go through the scheme, but it is on a trajectory that we would have in the portfolio.

In terms of the broader scheme reform, there's a couple of components there. There's proposals around a premium equalisation mechanism.

We think that's supported. Now in a process of having it legislated, and that doesn't happen overnight, but we think that there's support for it, and the wheels of government are...

We think that's occurring, and a new scheme regulator, not yet appointed, but the old scheme regulator, new scheme regulator coming in, and we think that that's, we're having some concern at the moment.

Just a second question, just on the difference between underlying and check on two components. The 0.3% of NEP that you expect, is there any thought about—I know there was a favourable release this period, but you had previously indicated that might start to drift towards zero.

Question. The second question was just around the risk margin strain.

I think there was a risk in the half, and I think that should be an ongoing strain reported in underlying. I just want to confirm that that will be consistent.

Reserve releases, the court would said we expected 30 basis points this year, and as I said before, that's around the CTP portfolios a little bit, but we sort of expect those to be net, net. What was 50 basis points a few years ago.

It's now 30 basis points. I expect over time it may come down to two reasonably clearly, and demonstrated delivery on, I think, is that to the extent that comes down, we will manage our guidance ranges that we're giving.

I think it's come down to a smaller number. It's becoming less significant, and we will manage that within the underlying ITR.

Then the risk margin question. In risk margin adjustment that we saw this half was really off the back of the natural hazards.

To some extent, natural hazards adjustment, because obviously we get the claims on it, we put more risk margin on. I don't know that we would ordinarily expect, because it was connected to that event pattern we had.

There should be something in there, I presume? There

will be something there, yeah.

Great. You do have some drop-down covers.

You would have done some of reinsurance recoveries and maybe things which may help you out for it. Just wondering if you could help us understand if you are expecting any gains that you had in the first half.

What should we expect as a possible set of recoveries in the second half?

Yeah. It is fair that on most of deductible erosions have pretty much been, as I said, enlivened, give or take a couple of million dollars.

They're now pretty much inference. Technically, and we have done the modelling on it, technically, when you model that through the allowance, you get in the second half than the original budget for the second half.

You're correct. It's a little bit lower than the budgeted allowance, because there is excess against those programs.

Great.

Okay.

Okay. Anything more in the room here in Sydney?

Nothing more?

Hi. Just a quick question on the Vero.

Do these new products compete with global capital? Are the launches with the cycle more broadly?

Michael.

Firstly, strategically, VSL is around getting product breadth. When you do these smaller products, you do them very, very well.

You get the right underwriters in there, your brokers and your clients. They're also not by themselves.

I think you just bring products and the more general products together and do multi-line, like we do them. We look for premium pools where there is opportunity, where there is size, and where we can get.

The second part of that question is how do we tactically actually fund it? We look at our own capital.

We look at overseas as well. If we can find them cost-effective to us, then we like.

That's quite fluid, though. We don't have to.

Quite frankly, if it makes sense economically to use that capital, we will. That's sort of the thought process there.

And

just to add that sits in there, through the underwriting, through the brokerships, some of it helps immunise some of that global capital.

Yeah. Correct.

Thank you.

Nothing else in the room? If not, thank you everyone for coming down or being on the phones, and we'll look forward to catching up over the next couple.