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Nicholas Hawkins: Well, good morning, everyone, and welcome to our first half financial results presentation. I'm joined here today by our Chief Financial Officer, William McDonnell, and members of the group leadership team of IAG. And we're holding this briefing in IAG Sydney offices on the lands of the Gadigal people. We acknowledge the traditional owners of country throughout Australia, and we recognize their continuing connections to lands, waters and the communities. And I pay my respects to the elders past, present and emerging. My key callouts this half are the resilience of our business and our confidence for the future. The headline profit is a strong outcome and demonstrates our underwriting discipline and ability to absorb the seasonal weather impacts that we've experienced, of course, while putting our purpose into action. Our on-growth outcomes were good across the majority of our portfolios, particularly in retail, where the underlying growth across Australia and New Zealand is around 4%. We've maintained our focus on pricing discipline. And this is delivering results. Our strong, stable earnings funded the RACQ acquisition from organic capital generation, and we're in a position to announce an on-market share buyback today of up to $200 million. The outlook is strong. We're forecasting top line growth in high single digits and maintaining our FY '26 reported insurance profit and margin guidance despite the severe weather that Australia has experienced. When it comes to supporting our customers, the experience measures in our much loved brands are strong, and our retention rates continue to remain really high. Over the half and continuing into this calendar year, we've seen hailstorms, bushfires, flooding across Australia as well as terrible landslide in New Zealand, and I've spent time visiting impacted customers and communities. And of course, as always, I'm incredibly proud of our frontline teams and the role they play in supporting rebuilding efforts. Of course, this reinforces the critical role that we play as a shock absorber in Australia and New Zealand while also playing a leadership role in advocating for risk reduction, ensuring a sustainable and insurable future for Australia and New Zealand. And this slide is important. It really highlights the strategy of IAG in action. It demonstrates the quality of us and the success in delivering a more stable earnings profile, which is much less at the mercy of weather. The last 6 months have shown the strength of our model in a period that has tested the entire industry. Our proactive strategy to manage payroll's risks and maintain underwriting discipline is delivering clear results. We also attribute our success to the world-class customer franchises and leading brands, which are now supplemented with RACQ and to the operational improvements we have made right across our businesses. We have transformed our commercial businesses, and they're delivering valuable contribution. In Australia, this is well above the original $250 million target that we set. And our sophisticated reinsurance program provides a significant strategic advantage and materially improves the group's earning profile. Combined, these factors create much greater certainty around our future earnings in a world where there's increasing demand for the protection that we provide. Now turning to growth. Our retail businesses in Australia and New Zealand are delivering with solid underlying growth of around about 4% for the half, complemented by the strong margins they've delivered. In addition, we've strengthened our business with the RACQ acquisition, which contributed a 6% growth this half and will deliver around about 9% growth in the second half. Our commercial businesses, particularly in New Zealand, have some challenging market dynamics, and we've also seen the impact of a weak New Zealand dollar in the results. Our Australian commercial business delivered solid underlying growth of around 3.5%, and it benefits from the WFI rural business and greater focus on SME. So our business in Australia here is less exposed to the global capital that is impacting corporate insurance markets around the world. Going forward, we'll maintain our vigilance on pricing and underwriting disciplines, ensuring we can continue to deliver strong and sustainable profits. In relation to our margins, we're in a strong position coming into the result, and we continue the positive momentum over the last 6 months. Pricing capability, underwriting disciplines and claims supply chain initiatives are driving and improving our claims ratios across IAG. Our comprehensive reinsurance arrangements supported the margin by keeping the perils allowance relatively stable and delivering an increase in profit commissions. And disciplined cost management is providing a material benefit through an improved expense ratio. The sustainable and ongoing underlying benefits have offset the temporary reduction in investment returns and some one-off impacts from RACQ in the half. And so as we head into the second half of the year, investment yields have rebounded strongly and the RACQ portfolio is now protected by our comprehensive reinsurance arrangements, delivering the targeted synergies. If I sort of turn now into the divisions, I'll start with our Australian retail business, which has delivered top line growth of 14.4%, which does include 4 months of RACQ, building on underlying growth of that business of around 4%. Within all of that, the underlying growth is around 7% in our home portfolio, where we've been growing both customers and policy numbers ahead of system. So we've taken a little bit of share across Australia. Underlying growth is lower in motor at around about 1.5%. And we're here, we chose to maintain discipline when pricing new business in the highly competitive market, particularly here in New South Wales, but importantly, our retention in our motor book continues to remain really strong. That said, we have responded to some of the competitive challenges. Changes made -- the changes we've made in the last quarter within our New South Wales business are improving new business volumes, and we're seeing that occur in January and in fact, in the month -- in the weeks of February already. Our Australian retail business continues to generate strong financial results and high levels of customer trust. Before RACQ, the retail business delivered an insurance margin of 14.7% and an underlying margin that's actually increased half-on-half from 15.2% to 15.9%. When we incorporate RACQ into that, the Queensland weather events are affecting the headline and the underlying result with a reported margin for retail of 7.4% and underlying of 13.4%. RACQI's integration is on track, and all the costs associated with that are reflected above the line result -- in the above-the-line result, and we're well protected, as I mentioned before, from our comprehensive program from 1 January. Beyond the financials, Julie and the team are ensuring Australia -- our Australian retail business remains set up for success. Key customer metrics, such as TNPS, have improved further from our already strong starting point. And NRMA Insurance has again been rated the most trusted insurance brand by Roy Morgan and continues to climb in ratings by brand strength and brand value. NRMA Insurance continues to support climate resilience through the establishment of the NRMA Insurance Help Fund and will continue to position NRMA as a leading help company as we attract new customers in 2026. Turning to our New Zealand retail business, where Amanda and the team have delivered strong results in a challenging economy. We have reset the strategy and brand positioning and the benefits I demonstrated in the results delivered. The AMI connected customer strategy and roadside motor support initiative are delivering above-market growth in policies. Our headline growth was 3.4% in New Zealand dollars, and it's good to see volume growth contributed to the majority of that 3.4%. Reported insurance margin continues to be strong at over 28%, with an improved underlying margin of 26%. And we achieved this through improved capability. Our scale and targeted claims initiatives are driving improvements in our cost to repair, and our pricing capability enabled by the rollout of the retail enterprise platform is delivering improved underwriting profitability. Our new Chief Executive, Phil Gibson, joins the business on 23rd of February, and we're looking forward to welcome him into the leadership team. Our Australian intermediated business is showing the benefits of disciplined execution of core underwriting, pricing and expense management strategy. This is clear -- there is clearly a soft market in some commercial lines. So it's pleasing to be able to report underlying growth in this business here in Australia of 3.5% and our strong reported margin of 17.5%. That reported margin, though, was boosted by $86 million of prior period reserve releases, demonstrating the strength and prudence of our reserving approach, which continues to deliver value. Notably, Jarrod and the team have delivered a strong improvement in the expense ratio, realizing the benefits of last year's revised operating model that we put in place. We're driving our technology transformation towards a continued investment in commercial enterprise platform. Based on the successful implementation so far and confident in the benefits that have already been achieved, we are accelerating this program to complete 12 months earlier than what we previously anticipated. From an operating perspective, our rural and regional businesses, WFI, has improved its NPS to 63, and our investment in the brand is continuing to strong premium and earnings growth. Looking ahead, we're confident this business will continue to deliver improved financial returns powered by strong foundations and ongoing investment that we're making in capability. And then finally, our New Zealand Intermediated business, NZI, which has demonstrated its resilience, maintaining strong discipline in what is clearly a soft market. In local currency terms, premiums was down 10.4%, while the stable underlying insurance profit of $78 million reflects the discipline that we're putting in place. The reported profit was also strong at $86 million with a margin of 20% and you'll see on the chart, the prior corresponding period did include the benefit of benign perils environment. In the soft New Zealand market, our core strategy is to leverage our strong customer relationships, combined with assurance tools to drive retention. During recent renewals, we retained 33 of 34 of our large accounts. Before I hand over to William, I just want to highlight the progress on our key strategic alliances with RACQ and RAC in WA, which will expand our ability to protect more Australians. We successfully completed the RACQ acquisition on 1 September, and its integration, as I mentioned before, is progressing well. It's been great to welcome more than 800 new people to IAG and have the opportunity to serve the club's 1.7 million members. We're committed to the alliance with RAC, which would see it maintain its highly regarded local brand and WA-based services while strengthening the business through our technology, global reinsurance arrangements and scale. We're confident the partnership would ensure RAC members and in fact, Western Australians are well protected for a safe, sustainable and connected future. [indiscernible] we're going through the process of reapplying for approval under the ACCC's new mandatory merger regime, acknowledging the decision that we received in December. I'll now hand over to William, who's going to run us through the financials in a bit more detail.
William McDonnell: Thank you, Nick, and good morning, everyone. I'll start with the high-level financial summary shown on Slide 15. We're pleased that, in this half, we've generated over $500 million in NPAT, demonstrating our strong earnings capacity and capital generation. In addition to funding the RACQ acquisition and the buyback of up to $200 million that we've announced today, we're also paying an interim dividend at $0.12 per share, representing a payout ratio of 56%. This strong profit is down slightly from the prior corresponding period headline, which was boosted by the $140 million business interruption provision release and $215 million in favorable payroll experience. In this result, the reported insurance margin of 13.5% has been impacted by the RACQ severe perils experience. However, excluding this, we recorded a very strong 17.7%. Finally, on this slide, I'll note that the underlying insurance profit of $804 million, or 15.1% margin, also allows for the additional costs from our strong reinsurance protections, including our long tail adverse development cover and the stop-loss perils protection, which I've previously indicated, have a 50 to 100 basis point impact on margin. I'll now focus on some of the key financial line items. Slide 16 shows the benefit of IAG's comprehensive reinsurance protections. There were several material peril events in this half, and we've recognized recoveries against the adverse experience on the ex-RACQ business. This is a demonstration of our strong downside protections, and it results in net perils being in line with our half year allowance of $646 million. Separately, until the 1st of January this year, RACQ operated its previous stand-alone reinsurance program. The severe Queensland weather events saw the portfolio experience over $800 million in gross peril claims or $224 million net of reinsurance, which was $152 million above its $72 million payroll allowance. For the full year, we have a revised payroll allowance of $1,465 million, which reflects the inclusion of the RACQ portfolio into the group reinsurance program as well as an increase in the quota share to 35%. Our nonquota share reinsurance costs increased by 8% this half to $676 million. $60 million of this cost relates to the RACQ business, so excluding this impact, we saw a 1.5% decrease. We also had a favorable 1st of January renewal, providing further margin support into 2026, and we've now integrated RACQ into our broader reinsurance program, which delivers the target of at least $50 million in synergies on an annualized basis. In terms of the underlying claims, which exclude all perils reserving and discount rate effects, the ratio has improved by 70 basis points from 1H '25 to 51.9%. This figure includes an approximately 50 basis points negative impact from our RACQ, and excluding this, the underlying claims ratio improved 120 basis points. This ratio was assisted by around $115 million of profit commission on reinsurance arrangements compared to around $40 million in 1H '25. New Zealand saw a proportionately greater allocation of the profit commission based on its strong earnings. This further contributed to the strong improvement in its underlying claims ratio. In RIA, there was a modest improvement and the ratio was steady in IIA. Across IAG, we're focused on operational efficiencies to mitigate ongoing claims inflation, including an array of artificial intelligence initiatives. And some specific callouts for each division are: in RIA, we saw benefits from claims handling and supply chain initiatives while experiencing a further moderation in motor inflation, assisted by a reduction in total loss claims, which was partly offset by the ongoing impact of third-party credit hire activities; IIA has seen improvement in long tail experience, improved cycle times and reduced fraud but slightly adverse large loss experience in commercial property, predominantly in the first quarter; and in New Zealand, we're seeing reduced frequency levels compared to prior year in the home and commercial property portfolios. During the half, we've delivered a material reduction in the expense ratio. Our admin costs on an ex levies basis has improved 20 basis points compared to 1H '25 and a material 80 basis points compared to the temporarily elevated level we saw in 2H '25. This includes the impact of the acquired RACQ business and ongoing technology investment, including Gen AI capabilities. This positive trajectory is anticipated to continue for the remainder of the financial year, and I'm confident in the work the team is doing to achieve a level below 11% in FY '27. Investment income has been a solid contributor to this result, although slightly lower than previous halves. The income on technical reserves of $90 million was impacted by mark-to-market movements following the increase in the risk-free rate towards the end of the period. The underlying investment yield declined 90 basis points from 1H '25 to 4.6%. We continue to deliver a spread of around 100 basis points above risk-free with positive active manager performance. Given recent market movements, we also expect an uplift in the yield in the second half of the financial year. The exit yield at the half year was around 5%, and based on the recent increase in the 2-year Govy rate, our investment team is currently forecasting a further yield improvement. Our shareholders' funds income delivered a strong contribution of $186 million with the majority of this reflecting a strong performance in the equities portfolio. The shareholders' funds portfolio remains defensively positioned with a growth asset weighting just under 30%. On capital, we finished the half with a CET1 position above our target range, and I've shown some of the material movements in this waterfall. Our solid earnings are the source of capital generation during the half, and this has been partially offset by the payment of the FY '25 final dividend. The other major item is the 21 point impact from the completion of the RACQ acquisition. Other call-outs in the waterfall include the stop-loss reinsurance recovery that I mentioned earlier, which reduces the excess technical provision. This is a timing issue at the half year and is expected to unwind by the end of the financial year. And lastly, the weaker New Zealand currency relative to the Australian dollar has a negative impact on the foreign currency translation reserve. Given the strength of our capital position, we're confident in being able to fund the RAC acquisition and announce an up to $200 million buyback. We've shown this waterfall chart previously to demonstrate that our current surplus and the projected organic capital generation can fund the RAC acquisition. It's another example of the confidence we have in the downside protection from our reinsurance program. We've indicated an 8 point benefit, which includes the reinsurance recovery timing impact that I mentioned on the previous slide as well as the capital benefit from increasing the whole of account quota shares to 35% from the 1st of January. We're not providing 2026 NPAT and dividend guidance, but you can see we've included an indicative 23 points of capital, reflecting earnings in line with our through-the-cycle 15% margin target less the final dividend. This is consistent with analyst consensus expectations. We've also included a net 5 point impact of other capital movements, and this reflects the potential benefits from our capital-light strategies that I've previously discussed. Finally, I'll remind you that we've maintained our CET1 target range at 0.9 to 1.1x despite the risk reduction from the downside protections from our comprehensive reinsurance program. As I said last time, our confidence in the projected earnings quality means that we're increasingly comfortable to operate in the lower part of the capital range. With that, I'll now hand over back to Nick.
Nicholas Hawkins: Thanks, William. If I sort of turn you now to guidance for FY '26. So firstly, with growth, and we're forecasting to deliver premium growth of high single digits for the full year. And this is slightly lower than our expectations at the beginning of the year, with a key driver for the change being the impact of the strong Aussie dollar relative to the Kiwi dollar and a slightly softer New Zealand commercial markets. We do, though, expect second half growth to be double digits, which is stronger than the first half. And of course, that includes 6 months of the RACQ portfolios and our retail businesses growing at least or above the 4% that we've just delivered in underlying growth in the first half. We'll also maintain discipline in our commercial businesses where we expect markets to remain soft. We're maintaining our FY '26 insurance profit guidance of $1,550 million to $1,750 million, which aligns to our target to deliver a 15% reported insurance margin and reported ROE on a through-the-cycle basis. Importantly, we're retaining our range but do expect to be around towards the bottom of those range, really reflecting both the strong underlying performance that we've been delivering together with against that the one-off RACQ impact that we've absorbed before the full comprehensive reinsurance cover came into play on 1 January. Our ability to retain this guidance range, despite those -- these perils, really does reflect the strength and the resilience of our businesses. Five years ago, we set out to create a stronger and a more resilient IAG, with reduced volatility and a capital-light profile. And here is the successful model that we've created with some of the best customer insurance brands in the world and Julie, Jarrod and now Phil are set up to grow these businesses. We've got a modern, leading scalable technology that supports our brands and our partner brands with insurance products that meet the needs of their customers. And as we look to support 10 million Australian and New Zealanders, we will deliver strong, sustainable shareholder returns driven by a stable margin and low volatility and capital efficiency, which improves the ROE. The results we delivered today are a combination of everything that we put in place. William and I now, of course, are happy to answer any questions. And why don't we start in the room?
Kieren Chidgey: Kieren Chidgey from UBS. A couple of questions, if I can. I might start, Nick, on GWP growth. Just interested in a little bit more color predominantly around sort of the home and motor book in Australia, you talked about 4% underlying growth in aggregate, but perhaps you can give us a feel for the composition between rate and volume and some of the differences between home, which looks like it's done better. And sort of I suspect you've seen some volume or unit loss in your motor book in the period?
Nicholas Hawkins: Yes. I mean that's sort of the overall story, is we obviously got an acquisition coming in that's delivered 6% first half. It's going to deliver 9% second half. We've got sort of currency going against us between New Zealand and Aussie, but the retail business are going pretty well, I think. Commercial is in a soft market. And so that's some challenges there. But I mean, Jarrod's business grew at 3.5% underlying, pretty pleased with that. NZI's quite tough. So then we sort of come into, I think, the Australian retail, where we are and where we're going. I mean within that, the Australian retail, the home portfolio grew just over 7% underlying, pretty pleased with that. Volume and price, I'd say we held and probably grew a little bit of share around Australia, real strength, great brands, the proposition we're delivering, the service that we're delivering, really feel pretty, pretty strongly about that. Motor, as you say, was quite tough in the last 6 months. That underlying you see in the pack, we called it out. Our underlying motor was around about 1.5% in total. We found New South Wales particularly tough. It's been highly competitive. Sort of behind all that, it's a new business story around -- our retention rates at IAG and our retail business are holding, in fact, improving slightly. So it's really there's a lot of traded new business that's happening in the market, very competitive. I mean what we have done -- and Julie and the team have sort of wanted to maintain their diligence. We also know that in Victoria, we've had frequency issues around car theft and some challenges there on just increasing claims cost that we've had to reflect in pricing, so there's a trade here. What we have done, we've reflected that in pricing. We just -- we're looking again at our new business pricing in New South Wales, where we've definitely been under pressure, probably the most in motor. And we just slightly adjusted our go-to-market. What we have seen, though, in the last month or 2 is a tick up in our new business volumes in motor, so we can see us actually improving. So we'd probably drop back a little bit of share. We're holding and probably even starting to grow a little bit now, really driven by that new business. Retention rates are strong. And so we're seeing some signs of just slight adjustments to that strategy working with our general results, and we've got a couple of weeks of February we can see that looking a bit better as well. So I mean the overall story here is we had underlying in our retail business, for Trans-Tasman, it's about 4%. There's always ups and downs in that. But the underlying, we expect that to be stronger in the second half. A little bit of volume and price flowing through. So we sort of expect a stronger second half retail growth than the first half is sort of the story I want to leave the investors with.
Kieren Chidgey: Nick, just specifically on the motor book, I know you don't provide margins by portfolio, but the actions you're having to take on price to improve new business, how should we think about the implications in the margin?
Nicholas Hawkins: That margin is -- I mean that -- there's ups and downs in that margin. We've got the strong underlying margin that we sort of started the 6-month period with in the retail business. We've got RACQ that came in that we've had to unwind certain arrangements that were in place. And we have won all the RACQ costs above the line, so just -- there's nothing below the line at IAG. So all the integration, first half, unwinding some of the reinsurance arrangements, that's had a bit of a drag in the first 6-month period. That's going to come off going forward. We made those adjustments, won those costs, changed things around. And so within that overall targeted margin that we sort of talked about for retail, yes, we can make some pricing adjustments within the portfolio that it doesn't go to the heart of -- is that a margin story? No, we have some pricing adjustments that can make us more competitive in New South Wales. We're seeing it happen, and that won't go to margin. We're probably also seeing some of those inflation and claims stories just come off a little bit. So there's probably room to come down a little bit, too.
Kieren Chidgey: And second question, just sort of taking that discussion into group margin sort of outlook. There's a lot of noise in this result, obviously, with RACQ making an underlying loss. The group is still looking pretty good at 15.1%, but as we look forward, that loss, hopefully, in RACQ unwinds. I'm keen on your thoughts on what the underlying run rate there is from a margin point of view. You've got synergies coming in. You're talking about a higher underlying yield. You've got admin expense savings coming in. You've got a quota share that's been dialed up in the second half that should, in theory, give you a high margin as well. So there's a lot of positivity in terms of that underlying margin trajectory that to me would suggest you should be tracking closer to 16%. But keen on your thoughts.
Nicholas Hawkins: Yes, so just 1 on that big list of things, probably just adding we've unwound and removed some of the specific quota share arrangements that RACQ had for the first 4 months, those -- they've all gone. And there was definitely a drag from all that and we've replaced that with our programs. So there's ups and downs. I mean, I'm working on the basis that when we're doing this presentation in August, we're not talking about RACQ as part of any sort of ups and downs. It's just part of the portfolio. Of course, within Julie's business, we've got different products, different states, different portfolios, and they're not all exactly the same. But as a package, we'll be delivering it to sort of the margin that you mentioned. And some of the -- I mean that's why we've called them one-offs. We genuinely believe there's some one-off things that have occurred that are sort of -- have brought that margin down in the first half, and that's not going to be part of our story in the second half.
Kieren Chidgey: Okay. And the group 15% target, Nick, you've had for a while. Will that be revisited at the end of the year, particularly post these quota share changes and sort of everything else that's coming through in the [indiscernible] commission?
Nicholas Hawkins: Yes, we've added 2.5%. So it's not hugely different. We're at 32.5% whole of account quota shares, and we've moved to 35% at 1 January. I mean the financial sort of profile, call it that, is we're trying to run the business at our through-the-cycle 15% ROE with way lower volatility, capital-light, you know that story. That relates to about 15%. There's definitely some upside on that. We sort of talked about these profit commissions as part of these comprehensive programs that are coming in from a few places now. There's a 100, 200 basis point additional opportunities there, and we've talked about that before. Now we don't want to bank that in every year because we've got inherent volatility in running of our business. But importantly, the cost of all of that is in the 15%. So that's the message that we want to keep reminding investors that we're -- within our earnings profile is the cost of the protection that's giving us the earnings protection, right? So the downside risk of IAG and its earnings profile is a lot different than probably most other market participants. And you can see that on one of the pages that I went through, there's a little bit of RACQ that wasn't included, but that's all now included from 1 January. And so sort of the certainty of future cash flows are a lot stronger. But yes, there's some -- I think that 15% ROE, 15% margin, that sort of math is consistent but with some upside on that, which is what we talked about.
Simon Fitzgerald: Nick and Will, Simon Fitzgerald from Jefferies. Just wanted to maybe start off just with the Queensland situation with the hail, et cetera. Just interested to know what your sort of thoughts are going forward in terms of pricing? And I'm also curious to know what your sort of thoughts are in terms of the consumer and affordability because I would have thought that you're now starting to sort of heat up on some of those levels.
Nicholas Hawkins: Yes. I mean guess I'll answer that, the second bit first maybe. Just on affordability, I mean we -- compared to where we were a couple of years ago, actually, sort of the premium rate environment is obviously better. It's still tough and we're still seeing costs increase, inflationary pressure within the business. We're sort of seeing mid-single digits in motor more than that in property just as a theme. Against that, there are some frequency ups and downs as well, so it's not as directing that into pricing and there's other things, reinsurance markets are more favorable. So there's not -- there's always parts to our story. It's never as simple as just one thing. Maybe I'll say this, right, that we are seeing our retention rates -- I mean this is a retail question, I think. Our retention rates are strong and improving. So that -- I mean that goes to the quality of the franchise, the brand proposition. But also, I think that sort of sticker shock that we've seen maybe in the past has caused greater frequency to churn. That's what I'd say in the market has changed a little bit favorably. We do know, though, that new businesses, as I mentioned, around motor, is very competitive. But I would say that it's more stable, would be the way I would describe it. So specific, Queensland had a lot of perils across the industry, like a lot. And there was a lot of events. It wasn't sort of one big event. It was multiple events, and that's been followed by bushfires and storms in early in this calendar year. That will be impacting the overall pricing environment in certain geographies a little bit.
Simon Fitzgerald: And then just a little bit about the above average reserve releases. Just wondering if we could get a little bit more explanation in terms of the drivers of that.
William McDonnell: Yes. Thank you. So...
Nicholas Hawkins: Can I just make a comment? One thing, we're very pleased. I mean, nothing worse than a reserve top-up and that -- we've spent a lot of time and Jarrod and the team are setting us potentially in the long-tail classes, obviously, within our commercial businesses. We spend a lot of time going back through that, really ensuring that we're not in that position. So that the lens to which Jarrod and the team have around reserving long-tail liabilities is a bias to conservatism. So that's just the -- and we know that we disappointed a number of years ago with some top-ups that I was not happy with. I would say just the bias of our business and the way we're conducting and creating our balance sheets and reserving our loss ratios are definitely taking a conservative bias. I mean that's -- I know there's some detail, sorry, but I think that's the setting of the reserves in the first place.
William McDonnell: Yes, exactly. So we believe our reserves are strong and -- but a feature of those strong reserves is that we also will have releases. Just to give you a little bit of color in there, so in the releases, we have some releases across long-tail lines. We have some releases from the remaining part of that business interruption provision. On short tail lines, we also have some releases from prior period from perils positions in prior years. We have some increase against that in motor and home, where average claim sizes increased a bit for both fire and water losses. But obviously, the net of all of that is the release that you can see.
Andrew Buncombe: Andrew Buncombe from Macquarie Securities. Just 2 from me. Hopefully, the first one is an easy one. Apologies if I missed it in the scrum of announcements this morning.
Nicholas Hawkins: I hope I can answer then.
Andrew Buncombe: What is the new attachment points on the volatility cover now that Queensland is included?
William McDonnell: It is $1,465 million.
Andrew Buncombe: That is the attachment point. That hasn't changed since Q went in.
William McDonnell: No, it has changed. But of course, it would come down a bit for the change in the quota share but then goes up for RACQ coming in.
Andrew Buncombe: So it's still flush with the allowance?
Nicholas Hawkins: Yes. So maybe that's -- there's ups and downs in that a little bit because of some of the mechanics of the 32.5% to 35%. But it's the attachment of the allowance. Yes. So there's no gap between allowance and attachment.
Andrew Buncombe: Yes, that's perfect. And then the second one, just in terms of the capital waterfall slide, there was still the 5 basis points of additional capital optionality from additional reinsurance. I'm just wondering whether that's contingent on getting the Lloyd's license by [ 1 7 ].
Nicholas Hawkins: Maybe I'll make a comment. Then you come in, William. The concept of us being capital light is one that is part of the thing about IAG. And so there's a cost to that, and we -- there's various structures that we've got in place. And we have quite a lot of optionality around how to make that all happen. And we're trying to create some variability in the forms and structures to which we're delivering a capital-light strategy. Lloyd's is kind of just one of the many, many ideas that we've done. So we shouldn't -- I don't want to overweight that as a thing. And so we are constantly thinking and looking for -- I mean we've got traditional structures we could just expand, which were -- in a way, were just done with 32.5% to 35%, and we've got many other counterparties that would like to be part of that. So that would be -- but we're always looking at what are some other ways we can do that, just to make sure we've got appropriate diversification in counterparty structure tenure. So that's the package. So it's not -- we're not sort of relying on one thing. But I mean you can comment specifically on Lloyd's, but that's just one of many ideas.
William McDonnell: Yes. I don't have much to add to that. But we continue to believe, as we set out at the Strategy Day a year ago, that a logical next step for us would be to bring a bit of additional reinsurance behind the intermediated businesses. So that's something we continue to explore.
Nicholas Hawkins: It's definitely -- just on that Lloyd's. There's definitely a lot more examples of that happening in the market. And that's probably a good thing because that means sort of nontraditional capital providers will be getting more familiar with structures like that, and that will probably ease off transaction. It will make it better. Right, and I also thought [ Mark ] was better because Mark's guiding -- for those on the video, Mark's guiding me to go to the video. So I apologize. So go to the video.
Operator: Your next question comes from Julian Braganza with Goldman Sachs.
Julian Braganza: Just the first one, could you -- can you maybe just talk a little bit more just about the premium rate increases that you're seeing at the moment across the portfolios? And also just the claims inflation, if you could put some numbers just around it, that would be great.
Nicholas Hawkins: Yes. I mean I'll do sort of around the ground. So the problem is we end up being quite high level, don't we? What we're experiencing, obviously, commercial markets are quite tough. At the -- I mean, in Australia, we've got WFI and we're sort of at the SME smaller end of town. So we're definitely seeing rate flow through those portfolios and I mean Jarrod delivered 3.5% underlying. I'd say in New Zealand, that's a lot tougher. And probably average premium is relatively flat or even slightly negative, but our 10% is really also driven by -- often, we're taking a smaller share of risks so that we're just sort of coming back as well. And it's not such a volume game. We might be taking a smaller share. So that's sort of driving the 10% more than -- it's not a 10% price reduction. It's 10% reduction in sort of exposure almost. The price is flat or probably slightly negative. That's driven by lots of factors around the world. So then into the retail businesses. If I start with New Zealand, I would say the -- I mean the margins in the retail businesses are strong, obviously. We had -- we sort of talked about 3% to 4% growth there and sort of expect that to be stronger in the second half underlying. At the moment, that would be mostly volume and not much price as an average across that retail, I would expect that to be stronger in the second half, price as well as continued volume. So that's why that number will be higher in the second half compared to first half. We are putting through rate in New Zealand on our retail business now. And then that sort of comes into Australia, where I expect home to be similar, second half to be -- to what we've just experienced first half. We are seeing sort of mid- to high single-digit claims inflation. We're seeing reinsurance costs come more favorable. We're seeing some movements in frequency. We had a discussion around Queensland hail. So there'll be some perils-affected areas that will be different than others. But I would expect rate increase to be flowing through in home in sort of that 5% to 10%-type range. And then motor, we've had high single double-digit almost rate increases in motor, particularly inside Victoria. There's probably a bit of pressure coming off that and similar in New South Wales. We are seeing a little bit of relief around inflation. That's why the comment around new business for motor, we made. And so it's probably slightly lower. And then if I look at what's driving that, reinsurance is obviously slightly more favorable. We are seeing a little bit of cost increase year-on-year. We call it -- we call everything inflation now. I just keep using that word but we're seeing year-on-year cost increases in repairing a car that's smashed. Against that, though, it's like total losses and sort of value of secondhand cars coming back a little bit in some markets. So that -- this is sort of working favorably against some of these. But so that sort of mid-single-digit type rate increases. The thing about motor, I'll just say again, Julie and the team are all over this. We definitely have found it a bit tough and we're not happy with 1.5% underlying growth for the first 6 months, and we'll expand that in the second half.
Julian Braganza: Okay. Great. That's clear. And then maybe just in terms of margin expectations by division, you've flagged there as well that New Zealand margin is quite strong. So just as that starts to normalize, where will the expansion come from? And how are you expecting the expansion to be in, whether it's intermediated through expense ratio benefits or even just in the retail business from here?
Nicholas Hawkins: I mean there's a few parts to it out there. I mean we know that commercial businesses, we really set ourselves up differently here in Australia, and there's an opportunity. We sort of set Jarrod and the team a target of $250 million. They're delivering against that. And they've got a lot of strategies in place to improve expense ratio, capability. We're deploying technology now and we're accelerating into that program of work. So we really see -- I mean we've said many times that our starting position in the CGU business here in Australia, we're starting behind some of our global competitors, and we just can't keep -- that can't be the structure of us going forward, and we're closing that gap. And I would expect to continue to see that over the next number of years. And so that's probably some margin improvement there. We know that within Julie's business, retail here in Australia that -- I mean we called -- we sort of called it out, some one-off. That's not really saying anything about the business we bought. That's just saying we bought them. We had some very large perils, we had to unwind some arrangements in place all in the first 4 months. We took all that cost into the margin. We haven't tucked anything below the line. So there's some -- there's obviously that drag will be gone in the second half. So we should see some expansion there. And then probably in New Zealand, which is a high -- which the margins are pretty strong there, there's probably some risks that, that could drift down a little bit as a blend. Against that, we've got profit commissions. We've got quite a few things going our way and from how we see the next sort of 6, 12, 18 months.
William McDonnell: And if I could just add. So then, RACQ obviously will get -- will be a lot closer to its run rate because, as we said, the reinsurance synergies, which originally we talked about getting those synergies of in excess of $50 million in the first full year, which would be FY '27, we've already got that from the 1st of January. Against that, the underlying for the RACQ part will just have a little bit of a drag in the second half because we've got a little bit more reinstatement premium just to expense that we incurred during Q2 under its old program.
Julian Braganza: Okay. No, that's clear. And then maybe just a question around just the stop-loss and the profit commission. So $115 million this period, I just want to understand, again, any comments on how conservatively that estimate is being estimated at? And is there further upside on a best estimate basis? And secondly, how much did you rely on your stop-loss protection over the last 6 months? Are you able to provide some commentary just to help us understand the other side of the equation in terms of just the benefits that you're getting on that stop-loss aggregate?
Nicholas Hawkins: Yes. So just to take that second part. So for the stop-loss, we -- ex RACQI, we were $137 million. Perils were over allowance before allowing for that. And then so the stop-loss recovery accrued at the half year is $137 million. And then I think your other question, you're asking about the $115 million of profit commission. Did I get that right?
Julian Braganza: How conservatively is that being booked? Or is that now a more best estimate view of profit commissions?
Nicholas Hawkins: Yes. So we -- I mean, we assess that with some risk adjustment on it. So that is a conservative calculation. And that number includes both profit commission on the multiyear peril stop-loss and on the whole of account quota share. And indeed, the increase relative to last year is mainly whole of account quota share profit commission. But I'd say all with the risk -- on a risk-adjusted basis.
Julian Braganza: Got it. And just as a final question for me. Is there a reason why the BI provisional rates was taken in the reported margin as opposed to the corporate expense line this period?
William McDonnell: So we said -- I mean, we said last year when we did that substantial release of $140 million, $200 million pretax, we said at that time that the remaining part of the provision, which I think was about $50 million, we would then just treat as BAU. And you'll remember previously, we also had our dividend policy, was about paying out net of BI and then we just changed that. So we just treat it as part of BAU now.
Nicholas Hawkins: At a practical level, I mean we obviously are calling it out, and we're not including the underlying margin. Actually, I just don't want anything below the line. We're trying to make our results super simple, that's just part of our normal process. It's relatively modest amounts of money now. And so it's sort of in the spirit of simplicity in the way we report go-to-market, run our company, we just wanted to run along that. And the same on the negatives, remember? So that's why we -- in Julie's business, we've had to wear some of the additions, some of the sort of one-off costs associated with the acquisition, where everything is just -- everyone's had to wear everything in their business unit results. And that's sort of how we want to run it. Julian, I don't want to open up a can of worms, but I'll also just say a comment on that recovery from the stop-loss. That's also a drag in our capital. So even that -- so that's -- let's not go down a hole on this one, but there is a $130-odd million drag on our capital calculation from that. Now we settled that at 30th of June, so that will go away. But -- so that's sort of the way APRA rules work. So there's probably -- the capital is slightly stronger than the way we represented it by $135 million because that's not -- that recovery is not recognized from an APRA point of view. But of course, it's real, and we'll -- that position stays, we'll cash settle that with the counterparties at 30th of June.
Julian Braganza: But it should [indiscernible] the full year.
Nicholas Hawkins: Yes, and the capital reversal at 30th June, so the capital number's gone. We highlight that in the detail in the pack, but I don't want to miss the opportunity just to highlight it.
William McDonnell: Yes. It's purely a half year effect because at the half year, we haven't technically got to the attachment part.
Nicholas Hawkins: It's a positive to the capital account.
Operator: Your next question comes from Siddharth Parameswaran with JPMorgan.
Siddharth Parameswaran: [indiscernible] questions if I can. Firstly, just RACQ, I just want to understand some of the moving parts in that result in the first half '26. I calculate the underlying margin at minus 7%. And I think, Nick, you said that you're expecting that book to come in similar to the group. Maybe that was including the reinsurance synergies. But even if I include what you expect to get, it still has a very, very low underlying margin, near 0. So just wanted to understand where -- how we should think about -- well, firstly, is this book coming on a lot worse than you thought? And what steps you're taking to remediate it.
Nicholas Hawkins: Yes, sure. I mean, there's a few parts there. Obviously, there were some headline perils that impacted that number, but I know you're talking underlying. So sort of you park that. Within that, there was some -- what we see as pretty unfavorable reinsurance arrangements, particularly around the way the quota share, which is quite a drag, and we call that underlying. So that's not really remediation. That's just been sort of 1 January that's changed. And so that drag that was in that P&L -- and the way that arrangement worked was it was compounded by the perils, sort of the arrangements get a lot worse because of the perils. Unfortunately, that all plays out in underlying, so we didn't call it perils, it also have impacted the actual underlying margin. We have completely -- all those arrangements are canceled, so those don't exist anymore. So I would say that, that business is sort of coming into us pre-synergies as we expected. Probably we're sort of running high single digits, close to maybe 10% type margin. And then we sort of had the synergies and benefits and opportunities and some of the things we can do differently with that business, we sort of quickly get that business to sort of that 15% plus type margin that the blend of the retail business is operating at. And I don't see that as that much of a stretch. And so that's -- so sort of the words -- I don't think of this as a remediation at all. I think of this as we've materially changed some of the drivers of that just by changing the arrangements, which is what we've done. Of course, we've got an environment where pricing flowing through in Queensland, and so there are changes we are making. And then against that, we're developing -- we'll be delivering synergies. So that's why I said I don't expect RACQ to be a major theme or a theme really in the second half. There's a tiny drag that William highlighted before around some of the reinstatement on some of the reinsurance that we paid in -- during the spring, but that's relatively modest. So I don't see this as a remediation story at all, but I see it as a great business that's coming into IAG that's going to deliver some solid returns into Julie's business.
Siddharth Parameswaran: Okay. I mean I'm just wondering, would they read certain premiums in the first half?
Nicholas Hawkins: Yes.
Siddharth Parameswaran: Yes. So were they material? They might have impacted those numbers.
Nicholas Hawkins: A little there.
Siddharth Parameswaran: I think if my numbers are right, but yes.
Nicholas Hawkins: Yes, Sid. I mean, unfortunately, we don't call the unfavorable quota share reinsurance arrangements perils. So we sort of call that reinsurance. So we sort of highlight the actual perils cost. The knock-on impact into the underlying margin driven by the perils, it was quite material. That's why I sort of have the confidence -- I don't see this as the way you described it. I see it as 1 January, this business is sort of operating maybe a little bit below where the rest of the retail business is operating. But if we put in the synergies, benefits, it definitely sort of gets us there.
William McDonnell: And we wrapped both of those parts up in the -- when we talk of the $174 million that we talk about in terms of the one-off RACQ impact associated with perils. So some of that is the underlying part as well.
Siddharth Parameswaran: Yes. Okay. Just a second question just around rates versus inflation. So just -- I mean just the comments you've made through your report suggests that -- I mean you're saying home, you're getting high single digits on claims inflation, low to mid-single digits. These numbers seem higher than what you're getting on rate and quite a bit higher. I'm just wondering, on a go-forward basis, are you hoping to cover the inflation?
Nicholas Hawkins: I mean we know that's a problem with some of these spot sort of parts of the story. We know that in property, reinsurance and perils is a big chunk of the cost. We know our reinsurance costs are more favorable in '26 versus '25. We know that our perils allowance are capped in the way we've put in place those reinsurance arrangements and discussion we had before around having the volatility cover [indiscernible] the perils allowance. So yes, some elements are growing like that. We know there's some ups and downs in frequency as well. So I think, Sid, if your question is how does all that work and what does that do to margin, I mean, we're comfortable that the pricing that we are going to market with is covering the cost, the inflationary costs that we're experiencing, factoring in frequency, factoring in what's happening with perils allowance, factoring in what's happening with the cost of reinsurance. And that's the package because, as you know, there's more to pricing than just the cost of building products. There's more to that story. So that's the blend that we're experiencing in relation to inflation. I don't -- will this one be a margin -- this is -- we're pricing to maintain the margin of the company and grow the business.
Siddharth Parameswaran: Okay. Just one final question. It's been asked a couple of times. So I just want clarity around that profit commission contribution. So I think there was -- I mean you said $115 million taken in the half last year, I think it was around $85 million for the full year. I just want to [indiscernible]. I think it suggests an annual run rate of up to $200 million before it was possible. So it seems we're tracking ahead of that, and that's taking in both your underlying annual reported margins. So it doesn't suggest that there's more upside, but you seem to be suggesting that there is more upside. So I just want to be clear, what is the final message you want to give us on profit commissions contribution to this result versus what is likely going forward?
William McDonnell: So the 100 to 200 basis points upside we talked about before was in relation to the whole of account quota share profit commission. The $115 million for the first half includes also the perils protection profit commission, which was pretty much that was the $40 million you saw last year in the same period. So that increase from year-on-year is largely what's happened to the whole of account quota share profit commission, which I think we indicated we believed would be starting to emerge this year and increasingly become a feature of our results. And of course, we get that because the underlying business is performing well and generating profit. And then the profit commission above a certain level, then we just have that sort of like multiplier on the profits that we are generating across the business.
Nicholas Hawkins: And Sid, I'd use 100 to 200 on that. I mean we've got some -- we now have, I think, a better structure where we have a few different drivers, which is what William just went through. So we're not sort of relying just on one thing. Obviously, in itself, that gives -- we're more diversified in the earnings stream of the profit commission, so that -- and I'd be sort of using 100 to 200. There's potential upside in a period that -- where the company's sort of delivering results like we're delivering.
Siddharth Parameswaran: Sorry, upside on first half '26?
Nicholas Hawkins: No, just in total. In total, in total.
Siddharth Parameswaran: In total versus which period?
Nicholas Hawkins: Just, I mean, there will be a little bit of volatility here. I just think in relation to sort of if you're factoring in what could profit commission add to the IAG results, I'd be using 100 to 200 basis points on average. There may be some volatility in that, right?
Siddharth Parameswaran: Okay. Okay. In total. Okay. So we're already getting -- we're already at the top end of that included in this...
Nicholas Hawkins: Yes. But these are multiyear deals, right? So that doesn't mean 1 year can't make more than that, but they're all multiyear. I mean we're trying to -- we are trying to run a capital-light, confidence in earnings profile, but there's a cost to that. So the downside risk on the cash flows of IAG have mitigated because of the actions we have taken, and there's definitely some upside that we can receive. We're just being cautious about that, right? We don't want to get to a position where we disappoint on these. So I think using 100 to 200, yes, it might be slightly more in some years, but as a way of valuing the company, I'd be thinking that way.
Operator: Your last question today comes from Nigel Pittaway with Citi.
Nigel Pittaway: Most of my questions have been answered. But I think I just want to delve a little bit more into the margin volume trade-off in the Australian retail book. I mean it seems as if this time, you're obviously disappointed in motor units. You're slightly happy with home units. But my understanding is home maybe got a little bit more competitive towards the end of the half, and it seems like you're putting in price increases there. So I mean are you really sort of in a position you think where those units, you can improve on that unit growth given the action we're needing to take on pricing to cover the claims inflation you've identified.
Nicholas Hawkins: Yes. Thanks, Nigel. I mean we're seeing -- I'm not sure -- I mean, our business is very strong in home is what we're experiencing, strength of the brand, go to market. We know we perform well with some of these large perils have occurred in spring of '25 and then what's happened January and February this year. And actually, we're not really seeing what you said in our home portfolio. We're seeing the business be very strong. On motor, we just found it really tough on new business. I mean, our retention on motor is still great, improved slightly. It's a new business story mode. We took a price position in Victoria. We obviously had just a lot of disruption in that market that's real. And so Victoria and New South Wales, but particularly in New South Wales as well. That new business, we really found quite tough, and Julie and team have been all over this. And we sort of -- we've seen some probably slightly more positive inflation around our pricing points. So we sort of changed that slightly. The evidence that we've actually got is in the last few months in that we are -- our new business volumes are increasing. So we know that we are growing our business slightly more today than we were 3 months ago, and we know we're winning more new business. And that has -- and that our retention rates are holding and probably slightly improving. So that -- if we can keep running that story, that will be a good story for the next 6 months. And we're sort of spending a lot of time on this, and that story is playing out. So we feel pretty good about the second 6 months for where we're at the pricing. Obviously, it's helpful, the business has got a strong margin and some of the one-offs from that conversation we've had with Sid around RACQ, some of that drag is going to go away. So we sort of have a neater story in the second half retail business here in Australia. It's definitely been tough though, and it's been a very competitive motor in Australia.
Nigel Pittaway: Okay. And then maybe just on the topic, because you're on the profit commissions as well. I mean is there any sense to which that release for the whole of the account this time has been influenced by the relatively high perils because that doesn't get the benefit of the stop-loss in terms of the profit commission accumulation.
Nicholas Hawkins: I mean, actually, the biggest perils, of course, were in the RACQ business, which we're in the -- which is why we didn't get the protection.
Nigel Pittaway: Yes. But still relatively -- still quite a bit higher than [indiscernible] stripping out RACQ.
Nicholas Hawkins: Yes. No. We've got a methodology we're employing. We're trying to take the volatility out of that. We're trying to take a conservative lens on that. We have got multiple arrangements now that sort of make that more of a blend, which is better rather than just having one. A bit like the whole capital structure in a way, we're trying to diversify by counterparty, by product, by design so that we really have a package, and we can -- within that, within -- we've got this big picture earnings volatility covers. Now we're into the detail on an element of it and the way that's being delivered. We're trying to even create diversification in the way that works so that we can ensure that's more of an annuity. That's the concept we're putting in place.
William McDonnell: Yes, it's not all on identical terms and indeed, the duration is also -- there's a range of durations on it.
Operator: As we come to the end of the call. I'll now hand back to Mr. Hawkins for closing remarks.
Nicholas Hawkins: Mr. Hawkins, I feel like I'm talking to my dad. Thanks, everyone. I mean, we -- thanks for turning out. We're pretty pleased with the result. You can see the strength of the franchise, what we've delivered in the first 6 months. That leaves us in good shape for the second. We've got expectations of sort of underlying growth or growth in our retail business as we expect stronger second half than first. We've got RACQ for the full 6 months, which will deliver around about 9%. Margins are strong. We know commercials are challenging, but we're being very disciplined in our underwriting approach. And we expect to have a strong 6 months and look forward to talking to you again in August. Thanks, everybody.