Good morning. Thank you for standing by. Welcome to the Helia Group Limited 2025 full year results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today. Please go ahead.
Hello, and welcome to Helia's 2025 full year results conference call and webcast. I'm Paul O'Sullivan, Head of Investor Relations, Capital and Investments. This morning, Helia's Interim CEO, Michael Cant, will start with an overview of the results. Helia's Interim CFO, Craig Ward, will then go into more detail on the FY 2025 financial results. Michael will then wrap up the presentation with an outlook statement and closing comments. At the end of the presentation, we'll pass back to the moderator for a question and answer session with analysts and investors. I'll now hand over to Michael.
Thanks, Paul, and good morning, everybody. Thank you very much for joining us today. Before beginning, I want to acknowledge the Cammeraygal people of the Eora Nation and pay my respects to elders, past and present. Helia is Australia's leading lending mortgage insurance provider. For 60 years, we've helped Australians to achieve homeownership by supporting lending to people with only a small deposit. LMI reduces the time required to save a deposit and provides access to credit, enabling homebuyers to get into the market earlier, upgrade to a larger property, or invest when they are ready. For lenders, LMI supports capital efficiency and risk management, enabling them to lend to a wider market segment. LMI also helps competition in the mortgage market and plays a meaningful role in supporting overall financial system stability. 2025 was a year of material change for both Helia and the LMI industry.
Despite that change, Helia has delivered a strong financial and operational performance. Please turn to slide 5, which summarizes our financial performance. Financial results for 2025 were very strong, with a statutory net profit after tax of AUD 245 million, up 6% on the prior year. On an underlying basis, NPAT was AUD 247 million, up 12%. Earnings per share was AUD 0.899, up 18%, and return on equity was 23.5%. Total dividends declared in respect of the financial year 2025 were AUD 1.26 per share, including a final ordinary dividend of AUD 0.16 per share and a final special dividend of AUD 0.67 per share. Over the last three years, Helia has delivered strong profits and attractive returns on equity.
Dividends paid have been substantial, while at the same time we have maintained a level of net tangible assets plus CSM per share, highlighting the value creation for shareholders. As shown on slide 6, economic conditions during the year were favorable. The labor market was resilient and unemployment remained low. Dwelling values increased nationally and in all states, and after several years of house price growth, the embedded equity in our portfolio remains very strong. The Reserve Bank of Australia reduced the cash rate during the year, with lower mortgage rates providing some relief for borrowers. These economic settings contributed to another year of very low claims and strong profits. The environment going into 2026 continues to be supportive, while acknowledging the prospect of further rate rises will add some pressure to household budgets. Slide 7 summarizes the arrears performance for both the mortgage industry and Helia.
After a period of rising arrears in 2024, industry arrears started to fall in the second half of 2025. Helia experienced a similar trend, with total delinquencies down 15% over the year, and this was due to a combination of lower levels of new delinquencies, as well as stronger cures. Delinquencies continue to be at modest levels, reflecting both the supportive economic environment and good credit standards across the industry. Helia's portfolio has good credit quality, strong embedded equity, and a seasoned risk profile. Combined with prudent reserving and capital strength, this provides resilience should economic conditions deteriorate. The benign credit environment has also created conditions that are challenging for LMI new business, as can be seen on slide 8.
High loan-to-valuation ratio mortgage lending grew strongly during the year. This reflects strong demand, along with the increasingly difficult challenge of saving for a 20% deposit. However, LMI new business growth was much more modest and was impacted by increased levels of lender self-insurance, as well as the government's 5% deposit scheme for first-time buyers. The level of lender self-insurance and LMI waivers has been increasing in recent years, especially amongst the major banks. This is a function of both the benign credit environment and strong price competition in the mortgage market. This is a natural cyclical response that we expect will not be permanent. The government's 5% deposit scheme continues to have a major impact on new business volumes.
In the 2024-2025 year, the loans guaranteed by the government scheme were approximately 65% of the new lending insured by the entire mortgage insurance industry. From 1st of October, 2025, the scheme was further expanded with the removal of income tests and an uncapped number of places. Accordingly, we envisage that from 2026, first home buyers will only be a minor part of the private LMI market. There has been extensive media comment about the impact of the government scheme fueling demand in the property market, and in turn, putting further pressure on house prices, making it even harder for first home buyers to get into the market. We share these concerns and continue to advocate for a much more targeted government scheme that operates and complements alongside the private LMI sector. I'd now like to turn to slide 9.
While financial performance was strong for 2025, the year also brought significant challenges, including the loss of our largest customer, Commonwealth Bank. In response to these challenges, the Helia board undertook a comprehensive business review to assess our strategic position, our capital settings, and operating model. That review reaffirmed Helia's commitment to the Australian LMI market, and also reinforced our confidence that Helia was well-placed to succeed. Against that backdrop, we have three clear areas of focus: firstly, we need to rebuild our new business. Beyond the first home buyer segment, there remains a sizable LMI market for upgraders and investors, and these segments have been the majority of Helia's new business in recent years. In response to the market dynamics, we've looked closely at our competitive position and made refinements to our customer offering.
We continue to work closely with lenders, bringing our expertise to help them grow in the high LVR lending. Our technology and processes enable frictionless interface with lenders, which is critical in a market where lenders compete on their ability to get a quick credit approval. We recognize that the market is currently very price competitive and have amended our pricing settings accordingly, while remaining confident we can deliver attractive through the cycle returns. Pleasingly, we've had success in the market, renewing five exclusive contracts during 2025, four of those in the second half of the year. Our second priority is creating a simpler and more efficient business. The reality is that the LMI market today is structurally smaller than it has been in the past, and is likely to remain that way while there is a free government scheme.
Lower industry premium requires a structurally lower cost base, and we are actively taking steps to address this. We continue to redesign operating processes to reduce complexity and increase automation, increasingly, we're doing that through AI. As we've embraced AI across the business, we continue to see the potential for it to support our efficiency agenda. We have a modern, simple technology architecture, this will give us the agility to drive further efficiency benefits. We began our efficiency and simplification work 12 months ago, in 2025, achieved an AUD 15 million reduction in recurring expenditure. That is meaningful progress, not the endpoint, we anticipate further efficiencies in 2026. Thirdly, we will continue to show capital discipline. We have a strong track record of capital to shareholders.
With a PCA ratio above target and strong organic capital generation, we see scope for capital returns to continue. Importantly, we have the flexibility and capacity in our capital base through reinsurance and Tier 2 debt, both of which are deliberately at lower levels than normal. 2025 was undoubtedly a year of change for Helia, with that has brought increased focus and clarity, and the actions we are taking in response are very deliberate. I'd now like to take a closer look at some of these aspects and the progress that we've made in 2025. Slide 10 looks at Helia's gross written premium or GWP. Premium was well up in 2025, significantly outpacing the market, this reflected good growth rates from some of our key lenders. Helia's GWP was the highest in 3 years, nevertheless remains below long-term averages.
The pie chart gives you an overview of the premium mix by lender. Obviously, losing new business from Commonwealth Bank is significant, but it is pleasing that we've recently renewed a number of lenders, including Bank of Queensland and most recently, AMP. Slide 11 shows the progress we've made on costs. Expenditure incurred for 2025 was down by 14% on the prior year. The biggest component of this, of our cost base is employee expenses, and closing FTE was down 17% on the prior year. As new premium falls, there will also be a natural fall in certain customer acquisition expenses. The run rate on expenses incurred is continuing to fall, and this will have a favorable impact on our ex-expenses as we head into 2026.
At year-end, our PCA coverage ratio was 2.03x , well above the target range of 1.4-1.6x . This reflects not just a strong balance sheet, but sustained organic capital generation from the seasoning and runoff of the in-force book. The back book continues to release capital at a rate that exceeds the capital needed to write new business. We have consistently combined strong profitability with disciplined capital returns, including buybacks and special dividends. In 2025, we returned AUD 344 million to shareholders through ordinary and special dividends. Over the last three years, we've returned approximately AUD 1 billion in dividends and share buybacks. Let me briefly summarize my key messages before I hand over to Craig. Firstly, Helia has delivered a strong financial performance in 2025. Returns remain attractive and portfolio quality is robust.
Second, we've paid substantial dividends to shareholders. Our strong capital position provides scope for continued capital returns. Finally, while we've had some setbacks during the year, this has sharpened our focus. The business has acted decisively, with good progress in the second half on both cost reduction and rebuilding new business momentum. I'll now hand over to Craig to take you through the financial results in some more detail.
Thank you, Michael. I will now take you through the financial performance for FY 2025, focusing on three key themes. Firstly, the benefit to profitability from continued favorable claims experience. Secondly, disciplined cost management as the portfolio transitions to lower new business volumes. Thirdly, the capital strength and flexibility that continues to underpin shareholder capital returns. Starting with the full year income statement on slide 15, FY 2025 statutory NPAT was AUD 245 million, up 6% on FY 2024, while underlying NPAT increased to AUD 247 million. The growth in underlying earnings and strong profitability benefited from the economic environment. Specifically, the insurance service expense result was a key driver of earnings. Insurance revenue results was in line with market guidance provided. Finally, the result benefited from lower reinsurance and financing costs during the year. Turning to new business written on slide 16.
FY 2025 GWP increased 23% to AUD 240 million. Volume was the primary driver, contributing AUD 33 million, reflecting improved market share and stronger activity in the higher LDR segments. Rate and mix added AUD 13.5 million, influenced by portfolio composition, including a shift towards investor lending during the period. Looking ahead, the impact of the expanded 5% deposit scheme and the loss of CBA will reduce the addressable LMI market and our market share in FY 2026. We expect GWP to reduce accordingly. On slide 17, despite stronger GWP in FY 2025, insurance revenue declined 5% to AUD 372 million. This reflects structurally lower levels of new business in recent years, the increase in the government scheme, which then gradually is reflected in revenue over time.
CSM recognized increased 6% to AUD 160 million during the year from improved profitability from the in-force portfolio. As you can see on slide 18, insurance service expense reduced to AUD 42 million. This reflects a negative total incurred claims of AUD 63 million for the year. Lower current period incurred claims, favorable experience, and reserving basis requirements all contributed to this result. Operating expenses and acquisition amortization reduced during the year, demonstrating continued cost discipline. To understand the claims dynamic further, I will step through the claims metrics on slide 19. Claims paid remained at very low levels. The number of claims paid was 117, which is down 30%, and mortgages in possession reduced 6% to 150. In most instances, delinquent loans are curing through borrower sales without any actual loss being incurred.
Net claims paid were AUD 14.8 million. The average claim size increased modestly, but remained volatile given the low claim count. These trends are consistent with the favorable incurred claims outcome in the income statement. Moving to delinquency metrics on slide 20, new delinquencies declined 14%, supported by strong employment conditions and lower interest rates. Closing delinquencies also reduced, with cures remaining strong. From a state perspective, we saw the Victorian delinquencies remained elevated. However, New South Wales, Queensland, and Western Australia have shown great improvements throughout the year. From this year end, we are reporting delinquency rates on a single policy basis. Previously, additional borrowings or top-ups were counted as separate policies. We note the change increases the reported rate. This change is presentational only and has no impact on the company's results or performance. Overall, cures trends remain benign.
Slide 21, consistent with these trends, and together with ongoing house price strength, total incurred claims were negative AUD 63 million. Favorable experience on prior incurred claims of AUD 71 million and AUD 29 million of basis changes more than offset current period incurred claims, which also trended down. The gross loss ratio remained materially below long-term average and negative for a fifth consecutive year. Here, it continues to remain very attuned to both the longer-term average and shorter-term dynamics in how we manage our business. Turning to costs on slide 22, income statement expenses reduced 8% to AUD 124 million, reflecting deliberate actions to align the business with lower expected revenue over time. Acquisition cost amortization moderates the speed of expense reductions in the income statement. The expenditure incurred figure of AUD 114 million, better reflects the underlying run rate of the business's costs.
Expenditure incurred is expected to decline further, with recurring costs reduced by approximately AUD 15 million during the year. Employee costs form the core of our structural expense base. Although more fixed in nature, we have materially reduced our FTE and FY 2025 through automation and efficiency initiatives. Here, as acquisition costs fits more with business volumes. The loss of our largest customer will support lower costs in the future. On slide 23, net investment revenue was AUD 116 million, delivering a sound 4.4% return for the year. The investment portfolio contracted during the year, contributing to a reduction in the investment income. Mark-to-market losses in the second half from rising bond yields or set gains in the first half, resulting in limited impact on returns across the year.
Importantly, the running yields increased to 4.3% in the second half, reflecting a higher reinvestment rate from increasing bond yields. Slide 24, next, insurance finance expense provides an offset to these unrealized gains or losses in the net investment revenue. The economic matching between technical assets and insurance liabilities remains strong. Moving to the balance sheet on slide 25, net assets were AUD 1.02 billion at year-end, slightly lower year-on-year, following additional capital return. The balance sheet remains very strong, underpinned by a high-quality investment portfolio and a debt-free position. Net tangible asset per share was AUD 3.71, reflecting capital return without a corresponding reduction in share count. Total cash and investments balance on slide 26 was AUD 2.46 billion. The technical fund reduced in line with the decline in liabilities.
During the second half, the portfolio was repositioned towards investment-grade credits to enhance yields while maintaining a conservative risk profile. Duration remains closely aligned to the underlying liabilities. With the shareholders fund, we reduced the externally managed equities allocation as part of a broader portfolio risk management, consistent with the changes made to the technical fund. This change was also beneficial to capital requirements. The portfolio remains high quality, diversified, and aligned with insurance liability risk. Looking into the total insurance liability on slide 27, we can see that they reduced to AUD 1.42 billion at year-end. The LLC declined 3% in the second half, reflecting run-off exceeding new business. Composition of the LLC has shifted towards CSM during the year, with CSM now representing 57% of the LLC balance. Lower future claims and expenditure expectations have driven this change in composition.
The LIC reduced 18%, reflective of ongoing supportive economic conditions. Looking closer at this liability on slide 28, we can see that LIC reduced to AUD 198 million. Compared to the full year of 2024, this represents a 26% reduction. Reserve for delinquencies are through the cycle basis. However, the ongoing strong credit conditions have supported further releases through the year. As we saw earlier in the presentation, reported delinquencies also reduced, further contributing to this outcome. The liability will continue to be impacted by the level of total delinquencies and the ongoing claims experience relative to reserve assumptions. CSM, as shown on slide 29, remains a significant store of future profit at AUD 690 million. New business added AUD 107 million, positive changes in estimates added AUD 82 million, more than offsetting the AUD 160 million recognized in revenue.
Approximately AUD 145 million is expected to emerge over the next 12 months, excluding new business. PCA coverage ratio on slide 30 closed at 2.03 times, which was down from 2.3x at half year-end. The regulatory capital base reduced over the year from the redemption of the Tier 2 instruments and from dividends paid. The prescribed capital amounts remains broadly steady. PML continued to decline by 6% from the first half, reflecting portfolio seasoning and cancellations. Capital requirements stepped down materially after three years and five years, underpinning organic capital generation as books mature, particularly from the larger book years of 2020 to 2022. The balance sheet remains conservatively capitalized, but with ongoing flexibility in our capital mix.
We expect both reinsurance and Tier 2 debt to be part of our future capital composition, and here we'll balance the cost of using these options, the ability to continue to return further capital to shareholders in the future. Lastly, on slide 31, our capital walk demonstrates beneficial impact of run-off and seasoning of our portfolio, where the in-force book impacts materially exceed new business strain. After allowing for year-end dividends, the pro forma PCA ratio is 1.73x . Overall, this walk highlights strong organic capital generation from the in-force book and the impact of considered capital management actions through the year. Thank you, and I'll now hand back to Michael to close the presentation.
Thanks, Craig. I'd like to conclude with some commentary on the outlook and guidance on slide 33. As Craig has noted, gross written premium is expected to fall in 2026, reflecting the loss of new business from CBA and the expanded government scheme. The impact on insurance revenue will be much more gradual. For 2026, insurance revenue is expected to be within a range of AUD 320 million-AUD 370 million. Turning to claims, the economic outlook remains relatively supportive, with a resilient labor market, albeit with cost of living pressures and higher interest rates expected to create some pressure on borrowers. The portfolio quality is sound, underwriting standards are prudent, and the book is well seasoned with strongly embedded equity across the portfolio.
Against that backdrop, we expect total incurred claims for 2026 to again be well below our through-the-cycle average. We are mindful of the importance of sustainability for the longer-term performance of the business, as shown on slide 34. The demand for high LVR lending is only going to increase given population growth and the increasingly difficult challenge of saving a 20% deposit. While LMI is sometimes represented as a cost to be avoided, we can be proud of the role that we play in facilitating homeownership. In 2025, Helia supported over 36,000 Australians into homeownership. As a business, we are attuned to the risks from climate change and also the importance of playing our part in driving lower emissions.
We continue to improve and refine our modeling of the risks associated with climate change on a mortgage portfolio. We've integrated climate considerations into our risk appetite. Finally, on the topic of ESG, I also wanted to acknowledge the governance enhancements that were implemented during the year following the independent review of employee share trading. While no breach of law or policy was identified, the board did take the opportunity to strengthen controls, tighten trading window protocols, and reinforce governance oversight. Those changes are now embedded and we believe have further strengthened governance and accountability across the organization. In closing, I'd like to recap on Helia's long-term track record for shareholders. As you can see on slide 35, Helia has delivered strong returns to shareholders over time, significantly outperforming the broader market across both the short, medium, and longer term.
That track record reflects disciplined underwriting, active capital management, and consistent execution through the cycle. We enter the next phase from a position of strength, underpinned by financial discipline, strategic clarity, and with a demonstrated ability to deliver attractive returns over the long term. I'd now like to open the line to questions.
Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment. Our first question will come from the line of Jason Shao with Macquarie. Your line is open. Please go ahead.
Hi, guys. Thanks for taking my question. Two from me, if I may. At the back of your pack, you mentioned that one of your economic assumptions is the cash rate being held at 3.85% by the end of this year, but it does seem like we'll probably get at least one more, or maybe even two, for the rest of the year. Is that 3.85% the current assumption you've used on the reserving in your current portfolio? How do you think your portfolio will be impacted, if we do get another rate rise or two, from the one we've already gotten?
Jason, I'll make a high-level comment, and if you want further detail, Craig can expand. Obviously, at the time of doing our year-end, that was the cash rate, and that's the setting. But as Craig said, we do set the reserves more on a sort of a through-the-cycle sort of approach. They're not super sensitive to near-term, you know, 25 or 50 point increases. You know, I don't think the, you know, the recent change and in both the cash rate and the potential rise would materially change the setting of the reserves. Equally, we remain mindful that interest rates are one of the economic variables that does impact the claims environment.
I echo that. I don't see small changes in interest rates having a material impact on our reserving, given that we take a longer-term through-the-cycle view. I do think slide 42 is also just useful, as a sensitivity analysis, claim sensitivity, and that might be a useful additional reference point.
Great, thanks. On your PCA ratio target, I mean, you've removed the explicit disclosure around the 1.4-1.6x . I do note that you sort of partially spoke to it just before in your opening remarks. Is that still an internal target to get to that PCA level, or you suggesting that it could be running at a higher sort of ratio?
No, that remains the same target. We just haven't sort of included that detail in the presentation because it's been the same for the last several years.
As I referred to in the script, that remains an unchanged target.
Great, thanks so much.
Thank you. This will conclude today's question and answer session, and I would like to turn the conference back over to Michael Cant for closing remarks.
Thank you. Thanks everybody for joining us again. I appreciate your time and ongoing interest in Helia. As I hope you've gleaned from the presentation today, we are very proud of the results that we've delivered in 2025. Notwithstanding, there were some challenges in the year. We're also very excited and positive about the opportunities ahead. I did wanna take the opportunity at this time to thank all our staff for their passion, hard work, and commitment to our business and our customers. I also wanted to thank our lender customers, who we work very closely with. Finally, to our shareholders, a number of whom are on the call today, thank you very much for your continued support.
Thank you.