I'd like to hand the conference over to Ms. Nadine Gooderick, Managing Director. Please go ahead, ma'am.
Thank you for joining ClearView's half-year results briefing. I'm here today with Athol Chiert, ClearView's Chief Financial Officer. In a moment, Athol will take you through the results in detail, but first I will provide an overview and business update. There will be an opportunity to ask questions at the end. ClearView achieved a half-year 2025 life insurance underlying NPAT of AUD 15.2 million, down 22%, and a group underlying NPAT of AUD 12.5 million, down 28%. Key items to note are as follows. The half-year result includes a claims loss of AUD 6.2 million in the first quarter that is considered an outlier. The gross claims loss ratio normalized back to trend in the second quarter. Underlying life insurance NPAT margin of 8% was achieved in the half-year, with margin being restored to 11% in the second quarter as claims performance normalized.
Enforced premiums are now AUD 387.2 million, with the market share up to 3.8%. Gross premiums achieved growth of 8%, and the embedded value, excluding franking credits, increased to AUD 525.7 million, or AUD 0.807 per share, up 9.5%. The strategic execution and business simplification remains on track. ClearView achieved new business sales of AUD 16.3 million in the half-year period. New business represents 4.8% of the average advice in-force portfolios. The overall IFA new business market has grown 10% on year to circa AUD 313 million of new sales, with structural tailwinds supported by the stabilization of the adviser channel. At the same time, ClearView's rolling 12-month new business market share in the IFA market has remained broadly stable at between 10-11%. ClearView continues to strengthen distribution relationships, refine the ClearChoice product in line with customer needs, and drive a data analytics focus.
ClearView has a strong presence and reputation in the IFA market. The strong advisor support of the ClearView ClearChoice product means the business is well positioned to achieve its goal of 12-14% market share of new business by FY2026. From a business simplification perspective, the technology and business transformation program is expected to complete in the first half of FY2026, with the efficiencies to flow progressively thereafter. ClearView will have the advantage of having our entire portfolio on a single cloud-based platform and the significant flexibility and efficiency to customize our flagship ClearChoice product offerings at speed and scale in order to meet the evolving needs of our customers and distribution partners. The wealth management exit is in its final stages and should be fully complete by the end of the financial year, including the decommissioning of systems and the removal of the cost base.
The FY26 goals remain on track, and I will provide further details on this as part of the financial outlook later in the call. Before I hand over to Athol, it should also be noted that the board has announced its intention to conduct a share buyback, subject to available surplus capital of up to 10% of the share capital over the next 12 months, given the significant discount of the share price to the embedded value and the company's view of value. This is in lieu of dividends and is considered by the board to be the best use of the surplus capital. I will now hand over to Athol, who will take you through the result in more detail.
Thanks, Nadine. Starting with the overall half-year 2025 results and the first quarter claims impact, the life insurance underlying NPAT decreased by 22% to AUD 15.2 million. The underlying NPAT margin decreased to 8% and includes a claims loss of AUD 6.2 million in the first quarter that is considered to be an outlier. The first quarter's claims loss had a 3.2% negative impact on the margin. In the second quarter, claims normalized from a gross loss ratio of 88% down to 56% and back to trend. The normalized claims performance resulted in the margin being restored to 11% in the second quarter, with an overall margin of 8% in the half-year period. Key points to note are as follows. The first quarter's claims loss was predominantly related to the LifeSolutions portfolio.
In the second quarter, the gross claims loss ratio reduced to 56% of gross premiums and reverted to trend, noting that the long-term average is 53% over the past 14 quarters. The first quarter claims ratio was 66%, higher than the average for the past 14 quarters. The second quarter overall claims experience was broadly in line with expectations. Life insurance claims volatility can occur from time to time. A short period of elevated claims is not necessarily an indication of any longer-term trend. ClearView has continued its investment in claims capability, rehabilitation programs, and other initiatives to support return-to-work outcomes. ClearView continues to monitor the claims experience closely, in particular income protection and TPD experience. Moving to the front end of the business and the top line growth. The front end of the business continues to reflect growth.
Gross premiums increased by 8% to AUD 191.4 million, and in-force premiums also increased 8% to AUD 387.2 million, with new business market share remaining steady at between 10% and 11% within a growing Life Advice new business market. ClearView continues to demonstrate a strong track record of top line growth, with an in-force market share of 3.8% of the advised market being on track to meet the fiscal year 2026 target of circa 4%. Gross premium income broadly represents the average in-force premiums between periods, with its growth of 8% in the half-year period aligned to the growth of the in-force premiums. Enforced premiums remain the key driver of growth. With regards to repricing lapses and retention, gross premium rate increases have been implemented from the 1st of February 2025 on the LifeSolutions portfolio.
The repricing of this portfolio takes place through the general course of business to appropriately price for progressive risk and experience, including claims and reinsurance impacts. These changes do not affect the new ClearChoice product. The actual assumptions on the long-term income protection and TPD claims on the closed life solutions portfolio were further refined in the half-year period over and above those adopted at 30 June 2024. Lapses have continued to be better than industry, but there has been a more recent increased trend in lapse rates given the high interest rate environment and cost of living pressures. Affordability concerns and the repricing of the in-force portfolio resulted in the strengthening of the lapse assumptions at the half-year, with an additional overlay for the price changes and cost of living pressures over the next few years.
Retention strategies are in place, including the ability to transition to the ClearChoice product, which may be a more affordable option for some customers. Furthermore, ClearView's target market and funding of premiums from superannuation are risk-mitigant to the increased trend, with affordability continuing to be closely monitored in the current economic environment. The above-mentioned changes to assumptions and increased reinsurance costs on the closed LifeSolutions portfolio have been allowed for in the current repricing cycle and the FY26 target margin range of 11-13% that remains unchanged. The FY26 gross premium target has been updated to AUD 440 million from AUD 400 million to reflect the net impact of new business momentum, repricing activities, and retention management. Lastly, I'd like to touch on capital and embedded value.
ClearView has net assets of AUD 362.7 million, or AUD 0.551 per share, and a surplus capital position of AUD 7.1 million post the capital release from the wealth management business. The life insurance half-year 2025 capital generation was adversely impacted by the first quarter claims loss that, as noted earlier, is considered to be an outlier. An industry-recognized measure of value of a life insurance business is the embedded value calculations, or EV, which represents the discounted value of projected future cash flows and capital requirements of the in-force book of the business at a point in time. EV calculations are based on the long-term view of the business, including claims and lapse assumptions that are consistent with those adopted in valuing the policy liability in the half-year accounts. No account is also taken of any new business.
ClearView has an embedded value of just under AUD 0.81 per share, excluding franking credits, or AUD 0.94 per share, including franking credits, as of 31 December 2024. Lastly, given the favorable market pricing, a new tier two issuance is under consideration, subject to regulatory approvals and market conditions. I'll now hand back to Nadine to wrap up before opening up for questions.
Thank you, Athol. My final call-out is on the key future focus areas for ClearView in FY25, FY26, and our financial outlook. Completion of our business simplification and technology transformation continues to be key strategic priorities for the year ahead as we seek to fully realize the benefits of this work and amplify our differentiation as a dynamic challenger. We continue to strengthen our risk management through CPS 230 and FAR compliance to uplift the capability of our people and to simplify the way we do things, which will drive higher customer engagement, retention, and satisfaction. As we execute the final phase of our strategic transformation, we are working to double down on growth, and we have started to look at future opportunities.
Our ambition is to be the best at life insurance, leveraging our dynamic challenger ethos together with our simplified technological architecture and smaller, more agile company size to meet the targeted needs of our customers and advisers in faster, better, and smarter ways. From a financial outlook perspective, we note our FY2025 guidance of gross premiums in the range of AUD 395 million-AUD 400 million and life insurance underlying NPAT margin of between 9% and 10%. The FY2026 goals remain on track. Gross premiums target have been updated to AUD 444 million, up from the previous target of AUD 400 million. Life insurance underlying NPAT margin of 11%-13% remains unchanged, as does the new business market share of 12%-14% and advice in-force premium market share of 4%.
As noted earlier, it is the intention of the board to conduct a share buyback of up to 10% of the share capital over the next 12 months in lieu of dividends, given the significant discount of the share price to embedded value and the company's view of value. This is considered by the board to be the best use of the surplus capital. Any buyback is subject to the availability of surplus capital. Lastly, it has been a difficult six months, but we have come out stronger, and I am immensely proud of what the team has achieved. I'm excited about the future of ClearView as we continue to deliver on our strategy and think about the next horizon. I will now hand over to the operator to open up for questions. Thank you.
Thank you. If you wish to ask a question, please press star, then one on your telephone, and wait for your name to be announced. If you wish to cancel your request, please press star, then two. If you're using a speakerphone, please pick up the handset to ask your question. Our first question will come from Glen Wilhelm with T.I.M. Capital. Please go ahead.
Yeah, good day. Well done on the results. Just a couple of questions, if I may. First one, just wondering, will all the costs associated with the wealth management business be done and dusted by financial year 2025 close? Or will it be ongoing costs?
No, it'll be done and dusted by 30 June 2025, including the decommissioning of systems.
Excellent. Just a slight decrease in new business volumes in the half, just a bit more color around that. Is that due to competition?
Yeah, Glen. I think it's really about us maintaining our discipline, actually, at the front end of the business and just really focused on high quality within the segment that we like, sustainability. We've seen a little bit of market behavior around some upfront discounting and some lowering of standards on underwriting. In the first half, we haven't participated in any of that, and we've just really held our ground for the first half. It is our intention to really focus on those key accounts in the second half and really drive that new business very hard in the second half and then into 2026 once we get to the other side of our strategic imperatives, the big one being the migration, which will be done this calendar year.
Excellent. Thanks for that. Just one final question, more of a strategic question, I suppose. You've got over 5,000 advisors selling ClearView product at the moment. There's probably about 15,000 advisors out there. How will you increase that number? Are you sort of happy around that level, around the quality of advisors that you have currently? What's the sort of broader contribution to that market?
Thanks, Glen. Look, we're pretty happy with the mix that we have. For us, it's all around being targeted and focusing in the right segments. We have the data and analytics capability to do that really well now. It's about increasing the share within those key advisor groups, particularly in the tier 1 and tier 2. Looking at working with the same advisor groups that we have very strong relationships, and it's more about increasing share.
Of course, we're always looking for new advisors to work with, and we are seeing some different advisor groups come in that have got a little bit more diversity, younger, very much on the digital side of things. We're working to support some of those groups at the same time. I think for us, we remain targeted. We remain focused on increasing share in those tier one and tier two relationships through our data and our targeting.
Great. Thanks for that. And well done again on the results.
Thanks, Glen. Appreciate it.
The next question will come from Scott Hudson with MST. Please go ahead.
Yeah, good morning. First question, just on the strategy technology transformation, does that slip slightly into the first half of FY2026?
No, no. That's always been the plan, Scott. I would say we're well on track with that. It's going very well for where we're at. We're into the kind of the detailed testing around migration. For us, we're just looking at what we've got on in the business for the remainder of the year and the best time to actually go live. We're very much in the testing phase and getting prepared for the kind of big dress rehearsals that we have as part of that. It was always the intention that it would be this calendar year.
That's an early first half 2026 go live event. First half 2026.
First half.
Yeah, yeah. That's what I said, didn't I?
Yeah.
First half of FY26, yeah.
Just on the, I guess, the negative impact from adverse claims in the first quarter, how do we or how do you mitigate those types of impacts going forward?
I think what we've tried to highlight is that claims and volatility is part of our business. What we also tried to reflect was the average claims loss ratio going back 14 quarters. Over a period of time, it averaged at 53% and seeing the trend line in and around that average and the abnormality of that first quarter relative to experience going back to FY2022. In terms of going forward, you can see the history and the track record relative to looking forward.
That's helpful. Thank you. Just on the, I guess, medium-term strategy, have you given any more thought as to, I know your focus is focused on the technology transformation right now, but have you given any thoughts as to additional product areas or market segments that you would consider into Morgans Financial or beyond?
Yes, Scott, thanks. That's a good question. Look, to be perfectly honest, we've been heavily, heavily focused on the business. Obviously, looking across in terms of claims management, we've been through repricing. We're looking at retention. There is a little bit of work going on in terms of the what next. I don't have anything I can say on that today. We certainly are thinking about it. We can see that we're going to get to that point later this year and early into next year. Right now, we're just heavily focused on the second half of the year, making sure we get that right, really focused on the mechanics of the business and driving that new business share, making sure that we're very, very disciplined over the next few months and we have a really strong second half of the year.
Helpful. Thank you very much.
The next question will come from Richard Coles with Morgans Financial. Please go ahead.
Thanks, Glen. Just sort of wondering if you go into sort of how much do you think the turnaround in Q2 is just a natural sort of writing of the book? Or how much do you think of it has come down to remediation work that you've put into the business? Sort of maybe you can, I mean, did you find more challenges when you started to look into the detail of claims? Or maybe you can just talk to sort of the righting of the ship?
Yeah. Look, I think I've said previously, I feel like we're very strong on claims. On claims management, we've invested heavily in our data and analytics and heavily in claims management as part of our transformation over the last couple of years. So very, very confident there. We have had an independent review come in and have a look at our claims processes, particularly on the TPD, and that's all very smooth as expected. I think it's really clear, and you can kind of see it in the investor pack on that page five. It really is an outlier. When you actually look across from 2022 to 2025, you can see those 14 quarters. You can see that average claims, the gross claims loss ratio is around that 53%. You can see that that quarter in particular, that Q1 was at 88%. You can just see the spike.
It is very clear. I mean, these things do happen in life insurance. It is very hard to see it coming to that extent. It really is a one-off, and we obviously do not want to see that again for some time. It is really how you then react to it and at the speed at which you get on top of it. I have been immensely proud of the team in terms of what we have achieved and how we have come out the other side of that and now able to look at that back half of the year.
Okay. And just maybe on the buyback, you've obviously talked to sort of AUD 7 million of net surplus capital. I mean, maybe talk to what you see as a reasonable level of surplus capital and how we sort of think about the buyback in the context of that surplus.
I think we've tried to articulate that it's subject to available surplus capital, which is surplus capital which is above your target. I think through the half in generation over the 12-month period, the way that viewed is that the board feels that the best use of that surplus capital is a buyback given the return that a shareholder will get out of it.
Okay. Okay. You basically see the $7 million as money to play with. It's the $7 million above that that is the surplus, is what you see as available for potential capital returns in your view. Is that how to think of it?
That's the starting position, but you generate capital over the half. You generate capital over a period of time, and it's over a 12-month period relative to that capital generation and the starting position and the overall capital outlook of the business.
Yeah. Fair enough. Thanks very much, guys. Appreciate it. Congrats on the result.
Thanks, Richard.
There are no further questions at this time. I would now like to hand the call back over to Ms. Nadine Gooderick for any closing remarks. Please go ahead.
Thank you. I'd just like to thank everyone for joining us today, and we'll see some of you very soon. Thank you very much. Appreciate it.
That concludes our conference for today. Thank you for your participation. You may now disconnect.