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Steve Johnston: Good morning, everyone. Standing room only for the external participants in the Sydney office here and many, many people, I'm sure, online and listening in. So welcome, everyone. Let me begin, of course, by acknowledging the traditional owners of the lands on which we meet 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 first half of financial year '26. We'll, as usual, run through the presentation. And of course, we have other members of the leadership team here who can join us and support us for the Q&A session that follows. As always, 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 delivered through our people, supporting our customers and the community, but in that order, will always result in a sustainable and growing business for our shareholders. So to the headline result. And at the outset, I would acknowledge that this has been a challenging half for the whole insurance industry as we've responded to the extreme weather. The group's net profit after tax of $263 million and cash earnings of $270 million were well down when you compare it to the prior period as we managed 9 separate weather events at a net cost of $1.32 billion, which is $453 million above our allowance for the half year. Of course, I'd also make the point that the NPAT in the prior period included the one-off gain on sale of Suncorp Bank, which was $252 million. Net investment 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 investment -- the investment portfolio is currently yielding 5%, and that creates a tailwind for future earnings and future margin. As you know, insurance profits are subject to the vagaries of weather and investment markets with favorable periods driving higher profits. But as we've said consistently, there are also times when the reverse occurs. And consistent with that purpose of ours, our focus as a general insurer is on creating long-term value. And while we've experienced significant natural hazard activity in this half year, the way we show up to support our customers during these events is what ultimately drives and underpins long-term value creation. So while the headline results have been impacted by those 2 factors, the underlying business continues to perform strongly, and that's reflected in the solid growth of our consumer business and our underlying insurance trading ratio, which has remained at the top end of our guidance range at 11.7%. We've also further consolidated our market-leading expense ratios. As 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 will point out, we have maximum flexibility when it comes to the structure of our reinsurance program. Balance sheet and capital position remained very strong, and the board has determined an interim fully franked dividend of $0.17 per share, representing a payout ratio of 68%. Our disciplined approach to capital management enabled us to complete $168 million of our on-market share buyback program over the half year. And we'll recommence the buyback post the results and continue to target around $400 million by the end of FY '26. So on this slide, I've focused on growth, which I know is going to be a key topic of interest, growth right across the business. And at an aggregate level, our business has delivered premium growth of 2.7%. Below the headline number in consumer, strong premium growth was driven by both rate and unit count. Home written premium grew 7% with unit growth of 0.4%. Now pleasingly, in Home, we continue to grow our share of low and medium natural hazard risk and we shrink that which we classify as high or extreme. Our Motor portfolio grew by 5.8% with unit growth of 2%. Again, that's a very satisfying outcome in the context of a highly competitive market. In Commercial and Personal Injury, GWP growth was achieved across most portfolios, but is, of course, moderated from its prior levels. In CTP, portfolio growth was driven by the pricing increases that were implemented across New South Wales and most recently, in Queensland. Now our New Zealand business tells a slightly different story. Growth contracted over the half and was impacted by challenging market conditions, particularly in commercial due to the softer market environment and, of course, heightened competition. Jeremy will go through all the GWP moves, adds and changes in more detail in just a moment. Now given the significance of weather events over the half, I've included this slide, which provides a deeper insight into the profile of the first half natural hazard events. As I mentioned earlier, we dealt with 9 declared natural hazard events through the half and we managed more than 71,000 natural hazard claims at that net cost of $1.3 billion. On the bottom left-hand side of the slide, you can see the top loss causes. Hail was by far the most significant contributor, accounting for approximately 3/4 of event-related claims and driving claims costs of more than $700 million from hail. The majority of those events arose in the October and November event periods. Now the financial cost of these events seriously underestimates their true impact on the communities. 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 in the aftermath of the events. Our meteorological and our disaster management capabilities, which many of you have seen and are housed in our event management center in Brisbane have accelerated our response while our mobile disaster response hubs have been active across 27 affected communities, engaging with customers on the ground approximate to the events that they've just experienced. Our scale in motor insurance repair meant we could quickly stand up a pop-up motor assessment center, where more than 4,000 vehicles were assessed over the course of 2 weeks, significantly speeding up the repair process. Now it's in moments like this, long-term value is either created or eroded. And while the impact on profits will be felt in this half year, I'm very confident that the way we have mobilized to support our customers will be rewarded over the medium to longer term. So with that, I'll hand back to Jeremy -- hand over to Jeremy to go through the result in more detail.
Jeremy Robson: All right. Thanks very much, Steve, and good morning, everyone. I'd like to start off by reinforcing a few key points on the group results before we get into the details. Now whilst as Steve said, our reported NPAT was impacted by elevated natural hazard losses and mark-to-market losses, our underlying insurance result was up 6%. I just want to emphasize a couple of key points about the result. We delivered good unit growth in both home and motor, demonstrating the organic strength of our brand portfolio. Whilst the Suncorp business has elements that are exposed to the global insurance pricing cycle, these are a smaller subset of our business. Most of our portfolios are driven by input costs and upward supply chain pressures and natural hazard costs remain a feature. We expect acceleration in GWP growth in the second half including 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 were a positive going forward, and give us an exit yield of nearly 5%. Our expense ratio reduced a further 40 basis points this half, reflecting our ongoing control of costs at the same time as investing in the business. Our capital position is strong. and we have reaffirmed our target for the buyback of $400 million for FY '26. We have optionality on reinsurance as markets continue to soften, which we're going to explore further. And 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. We saw releases ahead of expectations in commercial and workers but with some offset in consumer. Okay. So now let's get into the results in a bit more detail, and we'll start with underlying ITR. The underlying ITR remained in the top half of the 10% to 12% range at 11.7%. Dynamics included the earn-through of pricing, continued improvements in the expense ratio and lower reinsurance costs, partially offset by the increased resilience built into the natural hazard allowance. On a portfolio basis, consumer benefited from the earn-through of pricing with margin remediation in home. For New Zealand, while the portfolio increased 150 basis points, the group contribution was impacted by the relatively lower growth and the weaker New Zealand dollar. The commercial portfolio was impacted by pricing pressure in property and claims repair costs in Fleet with margin expansion in the CTP portfolios following our disciplined pricing actions. Looking forward, we expect the second half margin to continue to be in the top half of the target range with the earn through of CTP price increases and platforms remediation but we do expect some headwind from New Zealand with ongoing moderating prices. On to the next slide then, and I'm going to quickly touch on overall growth before moving to the divisions. Growth in the first half was particularly strong in the consumer portfolios with unit growth across home, motor and AA in New Zealand. GWP growth was good in CTP and Fleet but workers was impacted in the first half by lower prior year adjustments. And whilst more muted than the overall market, the commercial portfolios in both Australia and New Zealand 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. In motor, inflation in parts and labor is ongoing and pricing has been adjusted to reflect this. We expect commercial growth to 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 portfolios, and this will continue into the second half, and workers will also benefit from ongoing additional rate. And then we see price 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 in the commercial portfolios. Now in the context of growth, I'd like to remind you of how we see insurance pricing cycles work at Suncorp. On the chart, I've divided our portfolio into 2 broad categories, those where pricing is primarily driven by input costs. and those that are more exposed or directly exposed to global capital flows. In the first group, our portfolios that require important capabilities. So that's things like established supply chains such as motor repair networks and brands and brand presence. This portfolios are subject to cycles that are driven by input costs, such as supply chain inflation, natural hazard events and reinsurance costs. In the second group is business with direct exposure to global capital flows. Now less than 10% of our book is in this group and includes some of the property and professional indemnity portfolios in Australia as well as much of the New Zealand commercial business. The 2 key points I'd like to leave you with here are: firstly, insurance input costs tend to differ to CPI, and they continue to be elevated with ongoing inflation in motor and home repair chains as well as natural hazard costs. And then secondly, while Suncorp does have exposure to the global capital insurance cycle and our commercial portfolios, we have a good degree of portfolio diversification across the group. I also note, we benefit from this softer cycle in our reinsurance program for the whole of our business. Okay. So I'm now going to move to divisional results and start with Consumer. In Motor, GWP increased 6% with good unit growth and moderating AWP albeit with further pricing put through late in the half in response to ongoing repair cost inflation. In Home, GWP grew by 7% as we continued to price for higher natural hazard allowance and underlying claims inflation. Unit growth was positive but reflected the continued low system growth. Now pleasingly, you can see on the chart on the bottom left, we saw an improved portfolio mix with a higher proportion of low-risk homes. Underlying ITR for Consumer improved from 9.4% to 9.9%, with margin remediation ongoing in Home and Motor at the top end of its range. Looking forward to the second half, we expect consumer margins to expand modestly as pricing earned through Motor but with some moderation in Home due to the phasing of the natural hazard resilience allowance into the second half. Next then to Commercial and Personal Injury. GWP performance was mixed, reflective of our diversified portfolio. Fleet growth was strong in the double digits, reflecting our market-leading capability in this segment. CTP growth was good, reflecting the results of our disciplined approach to pricing. In Queensland, GWP was up 9%, and we continue to engage constructively with the Queensland government on reform, including a premium equalization mechanism. The Vero Specialty Lines continues to grow with 4 new lines now launched and live in market. But then the property and Profin portfolios reflected the softer cycle, albeit to a lesser extent than overall market, and workers, as I said before, was lower with the impact of prior year adjustments on premiums. Underlying ITR was a little lower with improved margins on CTP being offset by competitive pressures on property and claims inflation in Fleet. Importantly, property and Profin margins remain at the top end of the range and provide important flexibility as we manage the portfolio through this current pricing cycle. Turning then to New Zealand. The business continues to perform strongly from a profit perspective with an underlying ITR comfortably above the top end of the range, and that's as claims inflation and reinsurance costs have moderated rapidly. Whilst the business is well diversified, GWP contracted due to varying pressures across the portfolio. In consumer, unit growth continued in our Direct AA business in both Home and Motor, whilst the intermediated channel was impacted by the exit of a brokered book of business. GWP growth for commercial continues to be impacted by the softer market conditions as well as the impact of a New Zealand -- a weaker New Zealand economy. But we are seeing some signs of a bottoming of the commercial pricing market as well as an improved outlook for the New Zealand economy. Going forward, we expect margins to remain attractive, albeit to normalize down towards the top end of the New Zealand target range as moderating prices earned through the book. Okay. Now to natural hazards, and it's evident, as Steve said, the half was significantly impacted by elevated natural hazard events. The experience of $1.319 billion was $453 million above the allowance. Now just to put this into context, first half '26 for us was the highest retention ever in the half, one of the most severe halves this century, and it was significantly impacted by hail events, and those are relatively random in terms of weather patterns and less clear connection to climate change dynamics. The first half result also included an increase in attritional natural hazard claims costs, and that was primarily driven by the higher rainfall and wetter 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 allowance that is sufficient in 7 out of the last 11 years, including this half and 4 over the last 6 years, and that's based on the current reinsurance program and current exposures and costs. Over that 11-year period, we would have cumulatively been below the allowance by over $1 billion, again, including this first half result. So we remain confident that our natural hazard allowance with the additional resilience flagged at the full year '26 results is appropriate. And we note that short-term variability is expected, and it's the long-term performance that drives value. Looking forward, the second half allowance remained the best guide for expected natural hazard experience in the second half of this year. And I do note that the January performance, and that's with the bushfires in Victoria and the storms and floods we saw in Sydney earlier in the month was in line with the allowance. Next, the related topic of reinsurance. As previously flagged, we continue to review our program against our reinsurance framework and our key objectives are optimizing capital efficiency relative to our cost of equity and managing volatility, all with the overarching goal of maximizing long-term shareholder value creation. Our FY '26 program, best met these objectives when placed in July last year, but a softening market may provide the opportunity to reassess additional cover. In the meantime, our program provides robust protection, limiting exposure to the need for reinstatements as well as drop-down cover against large events in the second half now enlivened. That means our maximum retention for further events will be limited to $260 million for our next large event and further limited for any subsequent large events. And of course, we'll continue to review our options on reinsurance leading up to the July renewal, and we'll update the market accordingly. On then to investment performance. The average underlying yield on insurance funds was lower than the PCP, reflecting lower risk-free returns and lower inflation-linked bond carry I do note our tech reserve investment managers, again performed strongly with good alpha. The higher yield environment continues to support an attractive exit yield, which is currently around the 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 and insurance funds and rebalanced from cash into property in shareholders' funds. Going forward, we'll continue with this rebalancing, but being mindful of the market outlook for inflation in particular and as suitable opportunities arise. Turning then to expenses. Operating expenses increased by 4%, and that's whilst our total expense ratio reduced by a further 40 basis points. 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 capability. We also increased our spend in marketing in response to elevated competitor activity and then run the business expenses increased modestly as productivity improvements continue to help offset wage and technology inflation. Going forward, we aim to keep our run costs as low as possible through operational efficiencies as we continue to invest in our key strategic priorities of platform modernization and operational transformation, including AI. And so finally for me then to capital. Our capital position remains strong with $700 million of CET1 above the midpoint of our target range. And I'll just make a couple of points on the usual capital waterfall. The final dividend of $0.17 per share represents a payout ratio of 68%. It's around the midpoint of our target range and is fully franked. The GI capital usage you see on the waterfall was largely from the higher natural hazard experience in the half, some business growth and then some of that investment portfolio rebalancing that I referenced. The other category you see largely relates to the weaker New Zealand dollar. And then the completion of the $168 million of on-market buybacks in the first half was largely in line with our expectations. Importantly, the buyback is expected to resume after the first half results. And again, reaffirm that we continue to target $400 million for FY '26. Going forward, capital access to our needs is expected to be returned to shareholders using on-market buybacks, as we've previously flagged. I do note that we have a preference for managing capital in the top half of the range as opposed to hard on the midpoint in order to optimize ongoing capital flexibility. And with that, I'll hand you back to Steve.
Steve Johnston: Okay. Thank you, Jeremy. And moving to the next slide. And here, we provide a quick update on our progress in delivering our digital insurer platform modernization program of work. Now at the bottom of the slide, I 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 update last November, our first release of our new policy administration system went live in April last year for new home and motor portfolios in our AA Insurance New Zealand joint venture. The system has started to deliver more simplified underwriting and greater automation, and we remain confident the expected benefits that are baked into the AI business plan, but also into the whole digital insurer business plan will be realized over time. We're now well into the delivery of our second release in our AAMI brand, which is, of course, our flagship national consumer brand. Now we're targeting this release for AAMI Home and Motor new business around the middle of this year and migration of existing policies at renewal, which will follow soon thereafter. But before I move to the outlook, I wanted to update you on our approach to AI, which as you all know, is a topic of key global interest, particularly as it relates to insurance. Now we spent a lot of time on this at our Investor Day back in November, but as usual, with these technology-based disruptions, a lot has happened in the past 4 months. On this slide, I've recapped the Suncorp AI story so far. It describes how we are well placed to leverage AI to improve customer outcomes and importantly, to support long-term returns. We believe we are uniquely placed 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 BPO partners. With these, partners know us, know our processes and know how AI can be redeployed -- can be deployed alongside automation and process redesign. Our agentic AI program of work that we showcased at Investor Day is now in full-scale delivery. We are on track with initial deployments across our claims and customer services processes, though we see opportunities right across the value chain of insurance to enhance the customer experience and to transform end-to-end processes. Additionally, as I outlined on the previous slide, we continue to progress our broader technology road map, which is replatforming our business with SaaS-based cloud-enabled core systems, where importantly, AI is embedded into the core. We already have AI enabled across our enterprise-wide telephony platform and our earning pricing engine. And on this slide, I provided a snapshot of just some of the AI capabilities that are embedded into the core replatforming program of work, some of which is already in place and more to come. As a manufacturer of insurance, we see material opportunities for AI to improve product design in a hyper personalized insurance future and to transform claims processes from a customer perspective, all along reducing our loss and expense ratios and importantly, addressing insurance affordability. As a distributor, we see opportunities for AI to 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 between those portfolios over time. In summary, AI will significantly improve our capabilities and efficiency in both manufacturing and distribution but over time, it will allow us to carefully and selectively assess other opportunities across the insurance value chain. So to the outlook, and I'd like to summarize a few of the key points for the full year. GWP growth is expected to be around the bottom of the mid-single-digit range given the current cycle in commercial in Australia and New Zealand. The underlying ITR is expected to remain in the top half of the 10% to 12% range. The operating expense ratio is expected to be approximately 50 basis points below FY '25, but with an increasing proportion of expenses allocated to growing the business. We maintained our disciplined approach to the balance sheet, targeting a payout ratio around the midpoint of that 60% to 80% range of cash earnings. And finally, as we've covered off, 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. So in summary, our team continues to rally around that 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 multi-brand strategy allows us to reach a broader customer base. We are investing in modern technology, which alongside AI transformation will deliver leading customer experience and competitive pricing. We ended the second half with a strong capital position, active capital management, all of which will deliver improved shareholder returns. And as Jeremy has covered off, we have optionality on reinsurance as markets continue to soften. So with that, let's move to questions. Why don't we just work our way along the front panel here, Nigel?
Nigel Pittaway: It's Nigel Pittaway here from Citi. First question, just I mean, can we just clarify exactly what we mean by bottom of mid-single-digit range? Does that mean 4% to 6% is the range and 4% is the bottom. Is that a correct interpretation?
Steve Johnston: It's pretty sensible arithmetic to me, Nigel, yes, mid-single digits. We would suggest would be 4% to 6% and bottom is 4%.
Nigel Pittaway: Okay. Fair enough. Moving on to Motor then. I was wondering whether you can sort of elaborate on what actually surprised you in terms of Motor inflation in the period. You've obviously made some comments there about pressures across repair and total claims, but I was wondering for a bit more color there. And 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 the opposite direction to one of your key competitors. So I was wondering whether you've seen any change in competitive dynamics in the first 6 weeks of this half?
Steve Johnston: Quickly, just -- and Jeremy can top up on lease potentially as well around what we're seeing in inflation. At the highest level, the discipline that we apply is that we monitor inflation very carefully across the whole insurance portfolio. And we've often said that you can't look at insurance inflation through a proxy of CPI. Some of the work we've done over the past 6 months to try and understand the differential between CPI and insurance inflation would put insurance inflation running at between 3% and 4% higher than CPI across our portfolio. So in Motor, let's start with Motor. Obviously, some of the dynamics might have been masked by the significant reduction in inflation as the repair chains became more accessible post COVID. So a big, big disruption in Motor. Those repair chains have broadly settled out, but labor rates remain high. 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 to an automated vehicle world. But what's going on in motor at the moment, there is a very significant short-term dislocation with electric vehicles coming into the market, hybrid vehicles coming into the market, particularly with Chinese origin. We've seen a lot of that happen. And that will disrupt supply chains for a period of time. We saw that with the introduction of the first round of electric vehicles, where it took periods of time to get supply chains working and get repair capability where it needed to be, and we're seeing a little bit of that in the network at the moment. We're also seeing elevated costs continuing in labor, labor rates across repair. Not to the extent they were post COVID, but certainly still elevated relative to what they might have been pre COVID. And we're seeing some impact of parts supply, some parts inflation, a bias to replace parts now with the technology that's embedded in them versus repair them as might have happened again 5 or 6 years ago. They're all the factors that we monitor very carefully. And again, to the overarching methodology for the group, we believe we need to focus on covering inflation in our pricing, and that's what we tend to do, and that's what we saw towards the back end of last calendar year and into this year. So those pricing increases have gone in, and we're very confident that they will be sustained. On the Home side, just to jump forward to probably your next question, the underlying dynamics in Home are not dissimilar to what we've seen before. So on the hazard book, we've obviously had a pretty challenging half, with a high predominance of hail-related events and we will go back through our modeling to understand the allocations of hazard premium to hail and whether the loadings that we put across the whole portfolio continue to be relevant. And 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 small numbers in relation to the group. But relative to the size of the New Zealand market, there are quite material events that have been going through in New Zealand now for the past couple of years, had some changes in pricing there. On the Home side, the underlying factors continue to be the case 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, stabilized a bit in the portfolio, not so much frequency but more severity. And similar trends in escape of liquids, where frequency is moderated or stabilized and severity continues to be reasonably well elevated. The biggest dynamic in Home, and we'll talk about this, I'm sure, for the next 5 years will be the supply chain and the pressures that are on trade availability, particularly in some geographies, but that will flow through nationally. And so when we think about inflation in the portfolio, we think about that dynamic that elevates relative to CPI, and I think we'll continue to have it elevated for some period of time. and our overarching sort of methodology within our group and discipline within the group. And you saw it when we stood out of the market previously and we're prepared to do that from time to time when we don't have the confidence around the trajectory of inflation. But when we do have confidence around it, 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. Do you want to?
Jeremy Robson: Steve, I'll just add just back to Motor and Home for that matter. I'm not sure any of those inflation signals that we're seeing, particularly idiosyncratic to Suncorp. I'll just add another 2. One is total loss, which is sort of nearly 50% of the motor loss claims, motor claims. And that's -- what we've seen there is we've seen not an increase in frequency and theft, but an increase in the average cost of theft. So we're seeing more modern vehicles getting stolen. So that's been a bit of a trend. Victoria seems to have stabilized a bit, but still at a higher level. And then the other one is third-party claims, which were a reasonable component of claims as well, and we've seen elevation in third-party claims, particularly from credit hire, which I think others have called out as well.
Nigel Pittaway: Okay. And no comment on units in first 6 weeks?
Steve Johnston: Look, I think put the hierarchy of decision-making inside the organization, make that clear. I mean we will price to inflation. Our preferred target is to have units land somewhere between 1.5% and 2.5%. So that we're tracking with market. In Home, it's a little bit more nuanced because the home system rate is negative. So 0.4% in an absolute sense, doesn't sound spectacular, but relative to the system, it's good. And importantly, in our Home book, it's the distribution of units and customer growth relative to the risk characteristics. And so our target for the portfolios will be to cover inflation and grow units in motor at 1.5% to 2.5%, thereabouts. But if we're above that or below that in any period of time, and we're covering inflation. Our primary objective is to cover inflation on a book that's got 26%, 27% market share. I think that's the right way and disciplined way to look at the portfolio.
Nigel Pittaway: All right. And then maybe just a question on the reinsurance. I mean 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 when you come to buy your reinsurance cover? And is it really the case that aggregate covers are likely to be more available?
Steve Johnston: Well, I think they've edged closer to availability every year. And by definition, that's usually the case. We would like an aggregate cover in our arsenal. Since we divested the bank, obviously, that's amplified volatility 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 of pricing it and seeing whether it was a commercially available product, sensible product in the market, we couldn't make it work. Our anticipation is that the continued softening of those markets and the profitability of the reinsurers across the broader catastrophe covers that we're offering, will put us proximate to that availability. Now we've got to go through that process. We firmly believe that as a primary insurer, we don't have the opportunity to pick and choose what markets we play in, in this country. And so we have a fantastic reinsurance panel with great partners, and we'd like to see some support to provide that volatility protection, which we think is the last part of our story.
Kieren Chidgey: Okay. Kieren Chidgey, UBS. I might just start on a similar area, the GWP growth on Slide 12 that you put up, you're flagging better growth in second half across each of the portfolios. But the commentary seems to suggest most of it's coming from price. A couple of questions. Interested in if you can give us sort of, I guess, a feel for the types of level of pricing you're talking across each of those segments. And then secondly, sort of your view around the competitive backdrop in each of those and volume implications if you do have to push above market on price?
Steve Johnston: Yes. I mean it's fair to say we've emphasized price. And we've emphasized pricing that's already been put into the book. Now some of that, obviously, CTP, their filings that have occurred, they're scheduled, they will come in. We know what pricing we put through New South Wales CTP. But ahead of price is inflation. And so when you think about price, think about us at that overarching level, looking to price to inflation, but...
Jeremy Robson: Yes, I think if we go through it, so motor, we see a little bit more rate going through motor in the second half. As we said, we've already started to put that through in the back half of the first half. In Home, maybe a little bit more rate, but Home is pretty reasonable from a margin perspective at the moment. So a lot of the price is around margin remediation relative to where inflation is. So we think a little bit more in motor. CTP, as Steve said, it's pretty much already in. So we've got another $25-ish on New South Wales CTP this month. We've got another $6, I think, in April or so in Queensland. So we can see that price is already in situ. Workers' pricing in Western Australia and Tasmania needs to lift, probably towards the top end of the single digits. So you've got price going through those portfolios. Then as a set of elements like in Vero Specialty Lines, we expect to see continued growth there and continuing growth from the first half rollout and then there's some sort of like non-repeats, if you like. So in New Zealand, we expect the rate deterioration to start to bottom, but also the rate deterioration started in first half -- in second half '25. And so the first half -- second half '25 as a base is already in that second half '26 growth number. We expect to see some rate growth in motor in New Zealand, particularly in the AA portfolio. So that will support that. And then in workers, I flagged that we had these prior year adjustments, that's burner adjustments on claims, wage adjustments. We haven't seen the same favorability this year that we saw last year. Of course, the corollary on that is you're doing better on claims, so it sort of net P&L neutral, but it does come through the GWP line. We wouldn't expect that to occur in the second half as well. So that's the range -- there's a range of pricing that's in relative to margin remediation. There's some new business that's coming through and then there's some one-offs, if you like, baseline adjustments that aren't recurring.
Kieren Chidgey: And sort of specifically on commercial, I think it's sort of your Investor Day late last year, you continue to flag, desire to grow market share to a natural level in that 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?
Steve Johnston: Yes. Obviously, as Jeremy pointed out, there is some exposure to the commercial cycle, particularly at the top end, and we have to be conscious of that. Again, back to the overarching concept of discipline, we are going to maintain our discipline in those markets. We've got good margin sufficiency, particularly in property and Profin. And our strategy there will be to very -- to be very cautious around growth, maintaining ourselves within that margin range. And as the cycle starts to change, be in a position to capitalize on that as others are potentially remediating portfolios that they've driven below the bottom end of their targets. So if we can grow sensibly and conservatively, 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 to go harder. But now it's not the right time to do that in our view, particularly with the discipline that we need to display around the margin performance.
Jeremy Robson: I'd also just add, Steve, that when you talk about commercial, it's a broad church. And certainly, the growth in top end commercial property and to some extent, Profin has been weak. But we've had very strong growth in Fleet, which is a big part of our commercial business. We've had growth in other parts of commercial as well. We had a relatively weak growth number on packages in the first half. We need to get more rates through that portfolio. It was the other one which I had mentioned before, we need break-through packages. And so I think the key point there is commercial is a broad church, and parts of it are doing well and sensible and good margin, makes sense for us to continue Vero Specialty Lines, et cetera. But it's the top end commercial property and propene where there's a bit more pressure.
Steve Johnston: Kieren, just to add to your first question. I mean, the other way of looking at Home and Motor, but particularly Motor is geographically because there's a lot going on geographically in insurance.
Kieren Chidgey: That's my next question.
Steve Johnston: Right. Okay. I'll answer it. So obviously, there's a Queensland activity with RACQ and the work that's going on there. And again, Home and Motor are different portfolios for us in Queensland. We're more comfortable growing in Motor, obviously, particularly in Southeast Queensland, and we'll be targeting some of that potential disruption that occurs as those portfolios, RACQ and their acquirers start to merge. New South Wales, it's been a softer spot for us historically. We feel significantly more comfortable with the performance of GIO now than we might have a couple of years ago. And AAMI is obviously very strong in that market. And we think there's a big opportunity in New South Wales for us now. And if you look at the market share leader in New South Wales, some of their performance might be an opportunity there -- there is an opportunity there for us growing in New South Wales. And then South Australia and Western Australia, where the unit volume count performance in both those markets is better than the average of the 2% that we talked about. And again, to varying degrees, there will be opportunities for us to capitalize on some of the dislocation in those markets. So if you look at it macro nationally opportunity, you look at it geographically opportunity. And then in New Zealand, with AI, we're getting 3% unit count growth there. Not all of it is 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.
Kieren Chidgey: Steve, just a quick follow-up, and then I'll hand over. But the Victoria Motor picture is kind of skipped over Victoria. How have you seen experience there?
Steve Johnston: Look, I just don't see the same material dislocation opportunity in Victoria, as I talked about in those other states. We are pricing to the higher inflation in Victoria, which is largely so much frequency, accident frequency or otherwise theft. But in the aggregate of the whole portfolio, Victoria would be a market where we'd be looking to grow with system in both Home and Motor, maybe a bit more in Home than Motor but grow at system but price to the inflationary environment. And there is a delta on theft to the rest of the country, both in terms of frequency, but particularly severity.
Jeremy Robson: Steve, just to add in terms of that sort of geographic per se, but brand reach, one we don't talk about often, sort of refers as Bingle. Bingle as growing 15% GWP on the same time last year, but half of that is rates and half is units. That is an example for us of a brand that's got further reach and further stretch as we continue to roll that out. Andrew?
Andrew Buncombe: Andrew Buncombe from Macquarie Securities. Just 2 from me, please. The first one is on the catastrophe experience in the month of January and rolling forward the last couple of weeks as well. You've said in the slides that, that experience was in line with the allowance. This time around, you've put slightly more of a skew on the second half for the allowance. My question is, is the January experience in line with a straight line average or some sort of shape?
Steve Johnston: Very conservatively, I think you said in line with the allowance, I would call it within the allowance. So we might have been a little bit better than the allowance. What are we, touching wood, with sort of 18 days into February, and we had some weather in Queensland last weekend, which is very material and some weather ongoing in New Zealand, which will be a big reasonable event in the New Zealand, but not well within our means at the allowance level. So I think it's there or thereabouts. So nothing happened in the first 6 weeks of this calendar year that sort of says that we're anything sort of a skewed to the allowances that we would track.
Jeremy Robson: Yes, we said that the second half allowance is probably the best guide for the second half experience, which holds true. But the second half allowance theoretically, we should improve a little bit because of now the enlivenment of the drop-down covers in the second half. So there's probably a conservatism in that statement a little bit. And the January experience was actually slightly better than that outcome.
Andrew Buncombe: And then the other question from me was in relation to reserve releases. So 90 basis point impact from a release in the first half, correct me if I'm wrong, but my understanding is the full year guide is still 30 basis points. How should we be thinking about the second half? Should we expect a strengthening?
Jeremy Robson: I think the expectation outlook is more around the underlying business performance. So we achieved, I think it was probably 40 basis points, 30, 40 basis points on CTP in the first half. And so we continue to expect to deliver that for the full year. When it comes to the other portfolios, they're sort of plus margin, obviously, in the first half with some bigger plus minuses around them. I don't think we expect all of that to reverse necessarily in the second half, but really just calling out what we expect to see on the CDP because that's where we expect to get the reserve releases. The other portfolios we will see strengthening and releases, but we would expect those to net to a neutral-ish number. Andrei?
Andrei Stadnik: Andrei Stadnik from Morgan Stanley. Can I ask around the OpEx ratio? So OpEx ratio fell nicely in this half. Do you think the OpEx ratio can continue to fall into FY '27? And can it continue to fall into FY '27 even if premium growth were to slow?
Jeremy Robson: Yes. I think -- I mean, we have to have opportunity from our operational transformation agenda with the AI in it. Obviously, a key determinant to the OpEx ratio is where premiums go but I mean we still see a reasonable premium outlook. So the chart I put up around that insurance pricing cycle. What we're saying is for that 90% of our portfolio, there's still a fair bit of premium growth to run through the portfolio. That obviously helps an expense ratio. So that's one part of the equation. And the other one then is the absolute expense number. I think the key thing is for us is thinking about the mix of that expense though. And so one of the things that we are fixated on is trying to keep that run the cost business as flat as possible. And 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 things like the digital insurer policy admin platform modernization and operational transformation, and we see value in that. So to the extent we can do that and achieve our overall margin outcomes, then that's a good outcome.
Andrei Stadnik: And for my second question, can I -- just coming back to the catastrophe budget. Based on the internal modeling we received from the insurers, your catastrophe budget is sufficient 7 out of 10 years. QBE based on their modeling is 8 out of 10 and IAG is over 9 out of 10, right? So at the moment, the catastrophe budget is at the bottom end block of Australian listed peers. How are you thinking about catastrophe budget increase in the next year? And if there is an aggregate reinsurance cover, would that help limit the increase?
Jeremy Robson: Yes. Look, I think at some point, for Australian consumers, it becomes difficult to price, for example, 100% adequacy on the catastrophe losses because it just doesn't make sense from a consumer perspective, and it doesn't make sense in terms of what insurance is there for. Now we have -- and we have all extensively lifted over the last few years from what was a 50% type number modeled. Actually, in practice, it was probably much less than 50%. So we've all lifted from there. I think there will undoubtedly be variations in modeling. So our modeling won't be the same as other people's modeling. We all use different models. And so one thing to have to think about is what might be the variability in some of that modeling. I think we feel pretty comfortable with our natural hazard allowance where 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 or within the realms of delivering that margin outcome, then that could be a possibility for us. But we don't feel uncomfortable with the way it's set at the moment. And yes, an aggregate cover. I don't think an aggregate cover would change the natural hazard allowance per se. It would sit on top of the natural hazard allowance wherever we set that.
Freya Kong: Okay. Freya Kong from Bank of America. Just a question on margin progression in the walk there. Correct me if I'm wrong, but last year, you said you were tracking above the top end of the 10% to 12% underlying ITR ratio, some of that 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 into growth?
Jeremy Robson: Yes. If we go through the portfolios on the margin walk, we have seen a little bit of margin expansion in consumer, and that has predominantly come through Home where we have -- that portfolio has been in remediation. It was below where the target range was. We're now actually up towards, if not above the top end of the range in Home. And then in Motor, we were above the top end of the range. We're now back towards the top end of the range in Motor. And then in Commercial, we are sort of around the -- around, if not a little bit above the range across the aggregate portfolio there. And obviously, in New Zealand, we're above the target range. And so when we think about are we reinvesting in growth, et cetera, what we're trying to do, as Steve said, is manage the business to that return, to that margin and then make sure we're optimizing our growth relative to other brand assets, et cetera, relative to that margin outcome.
Steve Johnston: I mean we mentioned many times, I mean, you can take a complex business and simplify it quite materially through our targeted returns on incremental capital back to our book capital return, back to an ITR for the group or the Suncorp business in its entirety and then back down into the portfolios. That's a target margin that we would aspire to. We cover the cost of inflation, and we'd like to get some level of market levels growth in some portfolios, particularly Motor where we've got scale. Home, the story is more about improving the quality of the home book and going and in aggregate, delivering at system growth. Commercial, we think there's an opportunity at the other end of the cycle to grow ahead of system and get back to that natural market share. And CTP, because we've got an overweight position in Queensland, we're prepared to seed some share. So 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 seek to run the business.
Freya Kong: Okay. And just some capital questions. There was some drag in excess capital in the period from higher insurance liabilities, I'm presuming because of the cat claims. Will these get unwound as the claims get settled in the coming months?
Jeremy Robson: Some of them do get -- I mean, theoretically, eventually, it gets unwound, but some of these events have a fair tail on them. So I would expect some of that to get unwound. I think the largest driver was that natural hazard impact on claims. You also see some impact on things like mix. So New Zealand growth was lower than the rest of the group. And so the excess tech is higher in New Zealand relative to the group because it's relatively high profitability. So you get a mix impact from that. And then there's always a bit of seasonality in that capital movement in the first half as well. So those are a couple of other moves in there as well as the rebalancing of investments.
Freya Kong: Great. And just last one on capital management. Given the strength of the capital position, can I ask why the buyback was paused so early into the end of last year?
Steve Johnston: Yes. I mean it's less about the capital position per se, but more about the confluence of events that we were dealing with at that particular time. So we were right up against sort of getting towards the end of the half year period. So obviously, that Christmas period is a period where you probably don't do much trading anyway. So the timing sort of was reasonably proximate and I think just with the nature of the events unfolding through October and November, we thought it best to pause. But we'll restart as soon as possible after this result.
Richard Amland: Richard Amland from CLSA. Just would like to ask a little bit about risks to your pricing aspirations. There were some political sensitivities last year around sort of prices. You guys are acknowledging the input cost discussion that you've had, trying to push ahead of CPI by a magnitude, might be somewhat challenging. Can you just give a flavor of any regulatory or political engagement that you've had that gives you comfort that you're not going to get hard pushback from any unforeseen corners?
Steve Johnston: Yes. I think it's never good to deliver a profit outcome that's significantly down on the PCP and probably driving returns on capital at that actual level and an aggregate level below our targeted returns. But I think what we've done as an industry and particularly at Suncorp over many years, is educate policymakers and regulators that we have got a cyclical business. So when we do generate returns that are above our cost of capital, through benign weather or favorable investment markets that we need that to deal with events like we've seen in the last 6 months or so. Yes, there's an ongoing dialogue. Affordability is a huge challenge for Australia more broadly and for New Zealand, but particularly Australia and the incoming of the new Minister for the Assistant Treasurer, Dr. Mulino is very focused on that agenda, particularly for the sort of 2% of the population or 3% or 4% or whatever it is that they can't obtain affordable insurance. And so 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 problem. But in the industry-wide solution, has to, by definition, be industry-wide. It can't be 1 or 2 players that solve this problem. And it also needs to come with support from the government in terms of resilience and mitigation. So there's an ongoing dialogue. There's no answers to that just yet, but it is an active part of the minister's agenda and at the individual company level, at the ICA level, we're working constructively with the government around that. Beyond that, I think the factors that drive insurance inflation, and I've talked about, don't use CPI as a proxy are reasonably well understood now, I think. But we are very conscious as a business that while we might talk about inflation, while we might talk about pricing to inflation, there's a consumer with the cost of living challenge sitting off the back of that. And over time, with the things we're doing with AI and digital insurer. We need to get better at designing new policies, new premium, new product for that subset of consumers who are really challenged to continue with their insurance.
Unknown Analyst: A couple of questions, if I may. In your analyst pack, you talked about the reallocation of Strata premiums from Home into Commercial. Does that reflect the pressure on them from the commercial property cycle or you've got a sign of further strata growth insurance plans?
Steve Johnston: Michael, do you want to?
Michael J. Miller: Thank you. It's a clear strategic move. So with VSL, Vero Specialty Lines, one of the products we do want to enter into is strata. And so we have a small Strata book in our personal lines business. It's about $120 million a year. Thought process is bring that across and then run that direct book right next to the intermediated book, and grow it as one from a pricing point of view, distribution, knowledge. It makes a lot of sense. So it's probably just the foundations of building out that Strata opportunity.
Unknown Analyst: Great. Then in terms of your internal reinsurance, there was a big drop in the premiums you are booking in terms of internal reinsurance, presumably because of the fall in reinsurance costs. Should we expect further falls in that looking forward, like possibly a similar level in the second half and then if the reinsurance -- the cycle continues to fall, maybe a further reduction next year?
Jeremy Robson: The key driver was retention. So that's internal reinsurance between the Australian business and New Zealand. And the key driver was an increase in the retention in the New Zealand business. So the Australian business just provided less reinsurance to the Australian business, which was then funded through Tier -- effectively through Tier 2 diversification. So it didn't have an impact on capital. So I think the level we're at now is probably a more appropriate level. That's the baseline. But yes, I mean as markets soften a bit, might move down a little bit, but the key one was just the retention levels.
Unknown Analyst: Great. And then with the improvement in your underlying margins, principally the improvement due to claims costs, how much of that was due to reinsurance or alternatively, if you don't want to answer that, how much was due to the earn-through of rate?
Jeremy Robson: Yes, most of it would have been -- a chunk of it would have been earned though rate. I think if you look at the accounts, you can probably see where reinsurance costs are year-on-year, and you can see a reasonable reduction in reinsurance rates. But we don't split it out between those 2 categories. But you can see reasonably chunky reduction in reinsurance year-on-year, particularly relative to some others. And you can see in the pack where our price positions are on AWP. So you probably have a stab on the back of the envelope on it.
Unknown Analyst: Yes. Okay. And finally, how much of the expected drop in the expense administration ratio is due to roll-off in bank transitional costs?
Jeremy Robson: Nothing. So with the bank transitional costs, they're all provided for as part of the bank sale process, and they were baked within the profit that we recorded on the sale of the bank last year. So that's all the P&L of the insurance business immunized from that bank sale process. Okay. I think we've got a couple of calls on the phone.
Operator: [Operator Instructions] Your first phone question is from Julian Braganza with Goldman Sachs.
Julian Braganza: Just a first question on underlying margin. Just to be super clear, in terms of the guidance where we now have expense ratio like 50 basis points as well as yields holding up better than expected into the second half compared to initial expectations. So typically, what is offsetting those 2 impact in the margin and commercial rate?
Steve Johnston: Well, I'll get Jeremy to go through it in more sophistication than this, but the answer is pretty much New Zealand is the answer. So pretty much all New Zealand, Julian. Obviously, we had a period of time where the underlying margin in New Zealand is significantly elevated above its usual guide rails. We expect that, that will come back within the guide rails maybe towards the top end of the guide rails through premium adjustments that have already been made and starting to -- it's a reverse of what we've talked about in Home and Motor to some extent.
Jeremy Robson: There was a little bit related to the natural hazard allowance phasing. So we put -- loaded more the resilience that $100 million into the second half than the first half. So there's a little bit there. But the key one is that margin fall in New Zealand.
Julian Braganza: So just to be clear, so you have the New Zealand underlying margins coming back to 16% in the second half, just to be super clear?
Jeremy Robson: Well, we've never really explicitly called out what it is, but it's something ahead of 15%.
Julian Braganza: Got it. Just on second question, you mentioned growing in low risk properties as an opportunity to growth over medium term, so trying to understand how you're thinking about that from the perspective of a drag on your GWP going forward? And also secondly, what does it mean for how competitive you're being versus peers here on pricing? And then what is the strategy? And what makes you think you'll be successful in growing this part of the market?
Steve Johnston: Sorry, you might have to repeat, Julian. Which portfolio are you talking about?
Julian Braganza: So just in our Home portfolio, you mentioned growing in low-risk properties. There's an opportunity for growth. Just want to understand what gives you confidence that you'll be able to achieve that growth, just in terms of pricing and how competitive you will be versus peers? And will that be a drag on your GWP going forward as well?
Steve Johnston: Low-risk portfolio, in Home. Yes. Look, I think -- I mean the first point I'd make is that this doesn't happen overnight. And you can see, I think, from a period of time where we started to reset ourselves around the apportionment of growth between low, medium and high from 2021 to 2026. First half '26, it's about 4% in aggregate. So this doesn't happen immediately. The 3 -- the composition of it all and go to the margin drag story is -- the components of it are to better risk select, better focus on that low and medium natural hazard area, but most importantly, to price at the technical level, close to the technical level for high and extreme. And so when we talk about that in its totality, yes, we're improving the quality of the book, but we're also focused on making sure that the cross subsidy that potentially set in those 3 categories historically has being unwound, and we're getting closer at an aggregate home portfolio level to pricing actual and technical at the same rate. And so that has an impact on the distribution of risk between the 3 areas, but also improves the margin. And when we talk about remediation of the home book, remediation is probably not the right word, but you can see 2 things. One is we're now growing at system or ahead of system. We're growing in a better quality way with a focus on low and medium. But importantly, we've also got the margin back to the top end of the range or slightly above the top end of the range. And so that's the way we think about it. Again, it's more about making sure that the cross subsidy that might have sat there previously is adjusted to reflect the fact that we need to price closer to technical because as you know, if we are providing any cross subsidy there of any significant magnitude than others in the market who don't focus on those higher end risk areas will target only the higher risk parts of the portfolio -- the lower risk parts of the portfolio.
Julian Braganza: Okay. Got it. Now that's clear. And just the last question in terms of your AI transformation agenda. Can you just comment on some of the risks you see more broadly just around pricing competition and disruption to some of the risk that we have had in that area. You've talked a lot about [indiscernible].
Steve Johnston: Yes. So I think if I heard correctly, it's AI and the risks of AI, particularly around various other domains. Yes. Look, I think one of the key elements that everyone is looking at, at the moment is the risk profile of AI relative to where you sit in the adoption curve. Now you can quite easily sit sort of in the fast follower or follow a territory and sort of watch others make mistakes and potentially benefit from that, or you can be more at the leading end. So our risk settings are very much approximate to the position and the leading position that we seek to take in AI. So we're very conscious of making sure that when we implement AI initiatives right across the value chain, but particularly in the customer area that we're focused on and making sure that we don't disrupt the customer experience. And you saw a bit of that when digital started to flow through insurance and particularly banking and other industries. Those that adopted it early, obviously, made some mistakes in the early adoption of it. We're going to adjust our risk settings to make sure we can reduce or have a risk appetite to reduce those errors, but also to make sure that we're not falling behind the market. So that's the sort of aggregate risk view. Clearly, we also need to make sure that as we go through this evolution like all major corporate players that we're investing in our people to reskill and retrain them and set them up for that AI world. So yes, the risk profile. We're doing a lot of work on risk profile at the moment to make sure that when we implement the programs of work we do, that we're not disrupting the customer experience, that we're continuing to deliver what customers expect us to deliver, but we can do it in a more efficient way.
Jeremy Robson: And Steve, just to add that net-net, we see AI as an opportunity. I mean, yes, there a risk around it, but we see it as a net opportunity, an opportunity in terms of within the business and how we run the business, how we can run it more efficiently, more effectively, better client experiences, et cetera. Insurance is readymade for that sort of opportunity. And then from an outside-in perspective, there's been market chatter around how AI may impact on distribution. Again, we feel well positioned around that from a consumer perspective, from a commercial perspective, with our brand portfolio and our expertise in how we, over a long period of time have dealt with that distribution channel.
Steve Johnston: And I mean, obviously, there's distribution potential benefits for us if we're early adopters, and we focus on it. But at the end of the day, you have to manufacture a product and manufacturing a product in insurance is about pricing and risk selection, and it's about claims management. And that's where we see material benefits as a manufacturer of insurance products to make our products better, more personalized to make our claims processes better and to continue to improve the quality of our risk selection and underwriting. If you've got all of those things working, you're going to drive material benefits for customers and for shareholders. If you just sit there, think it's a distribution opportunity and you don't focus on risk selection, pricing and claims management, then you're going to end up with a book that's skewed to areas that you might not want it to be skewed to.
Operator: The next question on the phone is from Siddharth Parameswaran with JPMorgan.
Siddharth Parameswaran: A few questions, if I can. Firstly, just Queensland CTP. Steve, it has been a drag on your margins. I think 6 months or 12 months ago, quite a sharp drag from where we were with commercial margins previously. With the price increases that you're pushing through, does that get CTP back to target and where are you at with your discussions with the regulators on change particularly in Queensland CTP?
Steve Johnston: Yes. Thanks, Sid. I think it's well known that sort of 12 to 18 months ago, we had a very challenging CTP portfolio, very much reflective of, what we believe it wasn't a sustainable scheme going into the future. You saw the exit of RACQ and bringing it back to 3 insurers with us holding around 60% market share. The discussions with the Queensland government and the regulator have been very constructive. We've had, I think, 4 consecutive premium increases in that portfolio of different magnitudes. From the start of the journey, we would have said those 4 in the quantum that's included in them would probably be sufficient, but there has been some deterioration in the scheme. So we still believe there's more pricing that needs to go through the scheme, but it is on a trajectory to return to the target margin 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 the premium equalization mechanism. We think that's supported by the government, supported by the regulator, but now in a process of having it legislated and system changes and all those sort of things. So that doesn't happen overnight, but we think that there's support for it. And the wheels of government are stepping in that direction. So we think that's occurring. And there is new scheme -- a new scheme regulator, not yet appointed but the old scheme regulator has moved on, and there's a new scheme regulator coming in, and we think that, that's -- we're having some constructive discussions around that at the moment. Sid?
Siddharth Parameswaran: Thank you for that color. Just the second question, just on the difference between underlying and reported margin. I just wanted to check on 2 components. So the ongoing reserve release assumption of 0.3% of NEP that you expect. Is there any thought about changing that going forward? I know there was a favorable release this period, but you had previously indicated that, that might start to drift towards 0. So just on that -- just that question. And the second question was just around the risk margin strain. I think there's a risk margin strain of $35 million in the half. And I think that should be an ongoing component of the difference between reported and underlying. I just want to confirm that, that would be a consistent difference between the 2 per half.
Jeremy Robson: Yes. So the reserve releases, what we've said with those is that we expected 30 basis points this year. And as I said before, that's around the CTP portfolios. The others will move a little bit, but we sort of expect those to be net-net. What we've said is that, that was 150 basis points a few years ago. It's now 30 basis points. I expect over time, it may come down to a lower number. But what we have committed to reasonably clearly and demonstrated delivery on, I think, is that -- to the extent that comes down, we will manage our underlying ITR still within the guidance ranges that we're giving. So I think it's come down to a small number. It may come down to a smaller number. It's becoming less significant, and we will manage that within the within the underlying ITR. And then the risk margin question, the elevation in risk margin adjustment that we saw this half was really off the back of the natural hazards. And so yes, to some extent, that's really part of that natural hazards adjustment because obviously, with the experience we got, we get the claims on it, we put more risk margin on. So I don't know that we would ordinarily expect a risk margin of that same quantum because it was connected to that event pattern we had in the first half.
Siddharth Parameswaran: But there should be something in there, I presume, some...
Jeremy Robson: There will be something. Yes, there will always be something there, yes.
Siddharth Parameswaran: Okay. Great. Okay. Just a final question for me just on the -- you do have some drop-down covers, you would have done some modeling on the expectation of reinsurance recoveries and maybe things which may help your allowance in the second half versus what you're allowed for. Just wondering if you could help us understand if you are expecting anything at all given the quantum of the claims that you had in the first half, what should we expect as a possible set of recoveries in the second half?
Jeremy Robson: Yes. So I mean, it is fair that on most of those drop-downs that the deductible erodables, erosions have pretty much been taken care of in the first half. So they are now, as I said, enlivened, give or take a couple of million dollars. They're now pretty much enlivened. And as I referenced, technically, we have done the modeling it, technically, when you model that through the allowance you get a slightly lower allowance in the second half than the budget, the original budget for the second half, but it's not material, but it is -- you're correct, it's a little bit lower than the budget allowance because there is expectation now of recovery against those programs.
Operator: There are no further questions on the phones at this time. I'll now hand the conference back over.
Steve Johnston: Okay. Anything more in the room here in Sydney? Nothing more. One more question over here.
Freya Kong: Just a quick question on the Vero Specialty Line launches. How much of these new products compete with global Capital? And are the launches dependent on what happens with the cycle more broadly?
Steve Johnston: Michael?
Michael J. Miller: I think there's 2 parts to answer that. So firstly, strategically, VSL is around getting product breadth. We're a big believer in specialization. And so when you do these smaller products, you do them very, very well. You get the right underwriters in there. You can make some really good margin to support your brokers and your clients. And they're also not by themselves. I think it just -- when you have the breadth, you can use the specialty products and the more general products together and in multiline opportunities. So that's the reason why we do them. We look for premium pools where there is opportunity, where there is a size and where we can get the talent to do it. And the second part of that question is how we tactically actually funded. Look, we do use global reinsurers. We look at our own capital, we look at overseas as well. And if we can find the capital that is cost effective to us and they want to back us, then we will use quota shares and the like. So that's quite fluid though. We don't have to. But quite frankly, if it makes sense economically to use that capital, we will. So that's sort of the thought process there.
Jeremy Robson: And just to add, Michael, I think some of the specialization that sits in there, through the underwriting, through the broker relationships, through the industry relationships, some of that helps immunize some of that global capital pressure.
Steve Johnston: Okay, 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 of weeks.