Good morning, everybody, and welcome to IAG's business update. I'd like to acknowledge that this meeting is being held on the traditional lands of the Gadigal people of the Eora Nation, and I pay my respects to elders past, present, and emerging. I'm excited and proud to bring you this update today, one year into my role as IAG's Chief Executive. Over the past couple of years, as an industry, and particularly as a company, we've had to face some serious challenges. We've appropriately provided for these and restored capital where required to address all the issues from a balance sheet point of view. I've also made some fundamental changes to our strategy and organizational design to ensure these issues are not repeated. We have faced into our problems, and we're now building momentum right across our organization. Today, I wanna leave you with clear messages around five key points.
Firstly, our pace of change is building, and our ability to invest time and effort in delivering on our growth agenda is rapidly improving. We're already seeing a turnaround in our Intermediated business as we work to deliver at least AUD 250 million of insurance profit in that business by FY 2024. Our direct business in Australia has launched its growth plan, taking NRMA national and setting itself up as a serious player in the youth market with ROLL iN'. Our New Zealand business continues to strengthen its foundations and deliver ongoing strong results. Secondly, we will drive enterprise-wide efficiency outcomes by simplifying the processes and technology that supports our business. We are well on the way to establishing an Enterprise Platform that will simplify our back office, improve our risk processes, and importantly, reduce our cost to serve.
This will create opportunities to grow and improve our customer experiences. Thirdly, we are fully focused on where our scale provides us with operating or structural advantages that can differentiate our company, particularly in areas of supply chain, claims handling, and underwriting. For example, claims optimization and supply chain efficiency are common threads across all our three businesses, and given scale, we are driving operational improvements that will deliver real financial benefits. Fourthly, as you know, we're a purpose-led and have a very strong culture here at IAG. I'm determined to build on that, though, and given my natural bias to leverage this to drive strong commercial outcomes across our businesses and improve shareholder returns. Finally, today you're gonna meet members of the team that I've promoted internally or recruited externally to lead our company. I wanna share my confidence in the new leadership team that I've assembled.
I'm already seeing the benefit of having a great balance in the team between new ideas and leadership alongside experience and history. Let me briefly take you through how today's session is going to run. I'm gonna recap on our strategy and targets, then you'll hear from the leaders of our three operating divisions. After that, Michelle will provide an update on financial matters, but I'll share now that we are reaffirming our FY 2022 guidance that we updated in early November of a 10%-12% insurance margin. That's gonna take close to an hour, leaving plenty of time for you to ask questions from a panel that will include all of today's speakers, together with our Chief Operating Officer, Neil Morgan. Let me start by introducing the team that I've assembled to deliver on our growth.
First, the three leaders I've appointed to run our operating divisions. In our direct business, we have needed a more proactive strategy around growth, improving our customer experience, and broadening the demographic of where those customers come from. That's why I've appointed Julie to head up our Australian direct business. Her deep insurance experience and background of leading our strategy and innovation division, as well as previously being IAG's Chief Customer Officer, means she brings to the table the understanding and skill set that is ideally suited to what that business needs now. As you know, our intermediated business has been frustrating in terms of its performance, and in my view, required a fresh approach to turning it around. That's why I've appointed Jarrod Hill to lead this division. Jarrod has extensive industry experience, most recently as Country President of Chubb in Australia and New Zealand.
You'll hear from Jarrod his plans to improve the business and make it a source of growth for IAG rather than the drag on the group's earnings that it has been more recently. Finally, I've appointed Amanda Whiting to lead our New Zealand business, given her significant and deep insurance experience, customer focus, and strong personal leadership skills gained over many years working across a range of different roles. While our New Zealand business enjoys a wonderful leadership position in the market, boasting a strong earnings profile, you're gonna hear from Amanda that she has a plan to not only maintain that strong position but to further extend our leadership by investing in growth initiatives. I'll round out my introductions with the leadership team members who are also participating today. Michelle was named as our Chief Financial Officer in November and is well-known to all of you already.
Neil Morgan took up the expanded role of our Chief Operating Officer in March of this year and leads our technology and operations teams. Those five executives will join me on a panel for Q&A later. Today is designed to let IAG's leaders bring our strategy to life and show you how we are realizing our vision. Just let me briefly set the scene. You'll be familiar with the four pillars of our strategy, which we first shared with you in February this year. As I said before, you know, we wanna be an organization that grows with our customers. We will build better businesses by investing in pricing, underwriting capability, and importantly, driving commercial discipline. We're gonna create value through digital by creating connected experiences that seamlessly assist and reward our customers and unlock the true value of our network.
Lastly, we'll be an organization that actively and capably manages capital and risk. Effective risk management will underpin all that we do here at IAG. These pillars were at the heart of our redesigned operating model and are now embedded in everyday thinking across IAG, providing the right amount of focus and clarity in our organization. When I started as Chief Executive, I was asked what legacy I want to leave for IAG. My answer was to have built a simpler, stronger, and a more resilient company. Of course, to be stronger and more resilient, we need to provide products and services to more people. That's why customer growth is the heart of what I want to achieve for IAG and for our shareholders over the coming years.
I'll share some high-level views on what IAG will be in five years time and how we're gonna define success. Our business will be firmly focused on our two home markets of Australia and New Zealand. We have considerable strength and scale in our three well-defined business units. More than ever before, we'll be delivering on our purpose to make your world a safer place for 30 million Australian and New Zealanders. Our ambition is to add 1 million new customers to the 8.5 million people we already serve across Australia and New Zealand over the next five years, and meet their needs through greater customer experiences and a common strategic policy and claims platform. We will achieve this by targeting new regions and market segments. It's not a price-led strategy. More than 80% of our customers' activity will take place through digital channels.
We will have automated as many processes as we can and embrace AI to improve customer experience and deliver further efficiencies. Our culture will continue to underpin our aspiration to be a top quartile employer of choice. We're embracing this customer growth ambition from a position of considerable strength. After all, we've been doing it for a long time, more than 160 years across Australia and New Zealand. The establishment of our market-focused operating model and my new leadership team has provided greater clarity on the requirements of our customer, brokers, partners, and of course, colleagues. We want, and we need to have, the simplest, strongest, most resilient combination of core insurance processes, skills, and systems in the market. We call this our Enterprise Platform.
It's the enabling infrastructure of our business and our opportunity to create value from the scale of our business and our very unique data assets. Over the last three to five years, we have been committing AUD 150 million-AUD 200 million a year to prioritizing investments to simplify and upgrade our technology platforms, and we plan to continue to invest with a level of acceleration which we can manage within our overall cost profile. We've already made significant progress in building delivery capability. Our common Enterprise Platform is delivering specific outcomes for each business. A simplified core means personal lines policies in Australia and New Zealand are supported by a common policy, pricing, and claims operating platform. Our direct personal lines brand, digitally enabled with a data-driven full-service web and mobile capability in Australia and New Zealand, including an integrated customer loyalty proposition.
Our Australian commercial policies are materially transitioned from today on from being batch platforms supporting a modern broker integration capability that will make us first choice for commercial brokers. Our partner insurance platforms are open and available through APIs, including sophisticated pricing capabilities. Delivering our Enterprise Platform also allows us to embed our risk control and governance processes and adapt to market and regulatory change faster, and importantly, more efficiently. We have a great history and legacy in our brands and our businesses. Highlighting the heritage and history of our brands does not mean that we're ignoring the extraordinary pace of change in technology and our customers' habits. We are continuing to develop and support ancillary businesses that can improve our customer propositions. Repairhub continues to grow and help customers in Australia and New Zealand by improving the consistency and quality of their motor repairs.
In Australia, we complemented our Repairhub network with our acquisition of MotorServe, which enables us to repair and service our customers' cars. We have established Home Trades Hub Australia last year to deliver home services to our customers. We have our IAG Firemark Ventures, which is our corporate venture capital fund, where we recently allocated an additional AUD 75 million in capital to be used over the next five years. Around AUD 58 million of the initial AUD 75 million committed to Firemark Ventures has already been deployed in investments so far. While the fund's performance has been strong, its main purpose is to provide IAG access to new and emerging business models, technologies, and data sets. To date, IAG has embedded 13 new technology or data capabilities through the fund and has commercial agreements in place with nine portfolio companies.
Two of our early successes, Arturo and Digital Agriculture Services, are already improving our ability to assess customers' properties. Investments such as these are providing opportunities to better understand, manage, and reduce risk for our customers, as well as improve our productivity. We know that climate change and perils costs are areas of interest, especially after the recent storm events in October. I'd like to talk briefly about what IAG is doing in this critical area. As an insurer, we see firsthand the impacts of climate change on our customers, and weather-related perils are a large part, of course, of the risks that we insure. Our claims data and research conducted by our specialist natural perils team is used in three key areas. Firstly, we are contributing to the scientific discussion around current and future climate.
Secondly, we use our expertise in helping communities prepare for and adapt to the increasing severity and frequency of extreme weather events. Some examples of the project that IAG is involved in are the Cyclone Testing Station, flood mitigation research, and a bushfire rating system. Thirdly, and importantly, we use our expertise to understand our overall exposure and the integration of our perils allowance with our reinsurance. We will continue to ensure our pricing and economic models reflect our capability in this very critical area. We're also committed to reducing our own emissions to net zero by 2050, and this will be supported by a 50% reduction by 2030. Our plans are set out in our updated three-year Climate & Disaster Resilience Action Plan that we launched last month.
I'd like to finish with our value proposition, and this hasn't changed since we presented it to you in February this year. It's what we are aiming to deliver to you, our shareholders, over the medium term. Creating a stronger, more resilient IAG will deliver a cash ROE of 12%-13%, an insurance margin of 15%-17%, and importantly, a growth profile. We delivered a cash ROE of 12% in FY 2021, an underlying margin of 14.7%, with some assistance, though, from strong investment markets and COVID benefits from lower motor claims. Our aspiration is to deliver these financial goals on a sustainable basis. Michelle will share more on the levers that we're using to deliver on these aspirations. With that, I'll now hand you over to Julie.
Thanks, Nick, and good morning, everybody. Direct Insurance is a business with 100 years of history. It encompasses the insurance brands of NRMA Insurance, SGIO, SGIC, and ROLLiN', and has carriage of the relationship with our exceptional Victorian partner, RACV. Today, we help more than 5 million Australians and underwrite AUD 5.7 billion of premium that protects their personal assets and small businesses. My name is Julie Batch, and I have a deep insurance background. I've spent the last five years as part of IAG's executive team, leading customer labs and our strategy and innovation divisions, focused on deeply understanding our customers and developing the capabilities it takes to win in a digital world. Last year, I worked really closely with Nick to help develop the strategy across our organization that we are executing against today.
It's a great privilege for me to lead the team in direct insurance, recognizing this 100 years of heritage and looking at how we harness those future-focused capabilities to grow over the next 100. This is how we will build a stronger, more resilient IAG. We are delivering four key things. We are focused absolutely on growing NRMA nationally. We are building a digital business for the younger generation. We are leaning in to capture the small business market, and we are creating a claims experience that is fast and effective for our customers and efficiently manages the cost of claims for the organization and our shareholders. These initiatives will grow our customer numbers by 750,000 over the next five years, and through claims effectiveness, deliver AUD 400 million gross of value.
Our sophisticated pricing and underwriting capability means that we will do this profitably. These four areas of focus are specifically shaped to take advantage of the trends that we're observing in our market. Our growth-focused opportunities are based on a population which is contracting now but expected to rebound in 2023. Our small business initiative aims to capture the huge increase in new business registrations, which have doubled over the past year. Our first-class claims operation, which includes our in-house motor repair capability that Nick referred to, is already responding to the supply chain challenges and the claims inflation that we're experiencing. Our business is ready to grow our share of customers across Australia over the next five years and to deliver strong returns to our shareholders. Let me now turn to the detail that underpins this plan.
On the first of November, 2021, we launched NRMA Insurance, one of Australia's most trusted brands nationally. If you are in WA, South Australia, and the Northern Territory, you can now buy an NRMA Insurance policy for your car, your home, your boat, your caravan, and I hope you get to use it, your holiday. NRMA is well-recognized in these states, and we're winning new customers already. On the first of November, we also started to transition HBF customers from our partner channel in Jarrod's business to a direct NRMA Insurance experience. Today, with our partner RACV in Victoria, we now have a direct-to-customer national brand in Australia for the very first time. As well as this national focus, though, in New South Wales and Victoria, where we've already successfully delivered at scale, there are opportunities to grow.
We are actively targeting underrepresented areas using our sophisticated pricing capability and marketing strength to identify and ensure lower volatility segments with strong returns. For example, capturing what we expect to be accelerated immigration as the population rebounds, we're targeting customers with English as a second language through our branches, our call centers, web chat, and new digital innovations. Key to every aspect of growth for us is digital. Progressively over the next nine months, we will be launching new features through the NRMA Insurance app that allow customers to dynamically manage their consent, receive risk-reducing alerts, pay for their products, access our broader network of adjacencies, and be recognized for their loyalty with rewards, offers, and incentives. By growing our share across Australia, we will meet our ambition to connect with 400,000 profitable new customers over the next five years.
That said, we are not attracting as many younger customers as we should, and this is a missed opportunity. It is absolutely critical for our future that we build our customer base now by introducing our brands and creating relationships with Australians at a much earlier age. We are solving this problem by launching a digital business for the younger generation. Again, a busy day, the first of November, we launched our digital business, ROLLiN'. It's available now in most states but is being marketed first in New South Wales and Queensland, where we see great opportunity. ROLLiN' is a subscription-like product with a very different look and feel. ROLLiN' is designed to appeal to customers in their twenties and thirties through a customer-centric, integrated insurance proposition that offers flexibility and control to financially savvy, independent, younger Australians.
Its products are dynamic and include flexible payment options, shorter term contracts, and other engagement points such as pay as you drive. In 2022, we'll expand our offerings under the ROLLiN' brand to include usage-based insurance, single item and renters insurance, as well as cover for other things that matter before you get tied down and look to NRMA Insurance for your home and family products. Now, while ROLLiN' is intentionally cool and attention-seeking, it's not the only way that we will target this younger segment. The NRMA Insurance brand has a key role to play too, with new opportunities served to our loyal customer base. That is parents like you or me who provide brand advice and recommendations to their highly dependent children.
This Pay It Forward program will enable NRMA Insurance customers to sign up their children and pay for insurance, and we'll support them and you with safety activities and advice that give the parents and children both peace of mind. Across NRMA Insurance and ROLLiN', we have an ambition to help 250,000 more customers over the next five years from this age group. Here's a look at ROLLiN' so you get a sense of its vibe.
Over the last year, more than 87,000 new small businesses have started up. That is small businesses with turnover of AUD 5 million or less. This means that small business registrations in Australia grew by 4%. Our small business portfolio is growing at double that rate, and this represents a key opportunity for our company. We know that many Australians are making choices around their future and following their passions and dreams in the small business sector, and we're here to help and support them as they do. We are already delivering a differentiated digital proposition for small businesses. We've identified nine key growth segments that we've seen emerge post-COVID, including property and business services, retail, IT, and communications to name a few. We think these are critical for our future and really well suited to our products.
We are mining our NRMA database to identify our existing customers that are following their small business passions. With a personal customer base of more than 5 million across Australia and a single customer view built by our data team, that is a whole lot of leads. We are accelerating the delivery of digital expert advice to small businesses using data and our internal AI capability, and we are exploring partnerships with other companies to extend our propositions and offers to reach more SMEs. We will help up to 100,000 more small businesses over the next five years. We have identified AUD 400 million of value creation through a faster and more efficient claims experience. This is how we are going to deliver those efficiencies. Our motor repair model is mature, and it's helping us right now respond to inflationary pressures.
You may recall that our adjacency businesses, Repairhub and MotorServe, support our claims operations with the repair of smaller motor claims, those less than about AUD 8,000, and are helping keep our repair costs down. Today, we send 30% of all vehicles that are still drivable through our motor repair model. Over the last few years, we've simplified our claims technology platform. That work is finished, and we are now beginning to leverage this to drive efficiency and improve effectiveness. This includes streamlining and automating our processes and bringing artificial intelligence all the way through the value chain to make faster, better, smarter decisions. Let me give you an example of our claims efficiency in action for total losses.
We now use AI to predict whether a motor vehicle is a total loss after a car accident, and we allow our customers to settle online once that vehicle has been assessed. This digital experience means a customer can settle their own claim in just hours rather than weeks. More than 15,000 customers have now settled their total loss claims online. That's a huge number of customers. The fastest settlement time we've achieved so far is 40 minutes, but I'll only be happy when this is in real time. We've got about 40 minutes of efficiency still to go. If a customer wants to source a new vehicle, Carbar, our motor vehicle subscription business that came with a vehicle trading platform, can acquire it and deliver the vehicle to the customer with early prototypes saving up to AUD 1,500 per vehicle.
I've now green-lit this to scale. Our focus is to deliver better financial outcomes, incredibly effective service, but one that maintains the core experience and NRMA proposition of help. Our ambition is to deliver at least AUD 400 million of value that will be available to contribute to the delivery of group financial targets, address affordability, and drive the customer growth that I've outlined. I wanted you to take away the following key points. We have four key areas of growth. National, younger, small business, and claims effectiveness that will deliver 750 ,000 new customers and at least AUD 400 million of value creation over the next five years. We are doing this right now. This is not a going-to-do plan. We're doing this right now. NRMA Insurance is national. ROLLiN' has been launched. We are growing customer numbers right now.
We are digitizing and rapidly growing small business insurance today, and we have in place a faster, easier claims experience that will deliver increasing value over time. Finally, we have the right people, the energy, and the momentum to deliver at pace. Thank you, everyone, and it's now my pleasure to hand over to Jarrod.
Thank you, Julie. Good morning. I'm Jarrod Hill, Group Executive for our Australian Intermediated Insurance Business. I've worked in insurance for over 30 years, and returning to IAG sees my path come full circle after I began my career with Commercial Union in 1990. I joined IAG to lead the business back to being the market-leading intermediated insurer in Australia. My assessment of the business today is consistent with my expectations coming into the role. We have unacceptable loss ratios in certain portfolios and unsustainable expense ratio across the division, both of which I will address. I've been given a clear remit by Nick and the board to quickly improve margin and ensure Intermediated Australia delivers consistent profitability year on year. The path forward is very clear to me, even at this early stage.
I will leverage my industry and leadership experience, particularly around underwriting, to strengthen our fundamental insurance capabilities and drive a relentless focus on execution so that we 1, consistently deliver on our profit targets, 2, establish a competitive cost base, and 3, position the business to grow. Today, I am reaffirming our insurance profit target of at least AUD 250 million by FY 2024. At the same time, we must also deliver consistent financial performance year-on-year on a path to achieving the group cash ROE target as soon as possible. To do this, I will build a great underwriting business, one capable of managing in a dynamic risk environment and become a growth engine for the group. Over the past 18 months, we have taken steps to improve performance, and the benefits are now beginning to flow through to profitability.
The specific underwriting actions taken include exiting our IAL personal lines business, which will deliver margin improvement by FY 2023, and improving risk selection and pricing across our personal lines and agri portfolios. Work is already underway to consolidate our product set, and we are continuing to improve our pricing and portfolio management capability. I am establishing a dedicated underwriting office for Intermediated Australia, which will drive a step change in our underwriting. I will appoint a senior leader to this role in the very near future. Horizon 1 is about executing on the fundamentals extremely well. I'm now focused on simplification. This will enable a more streamlined operating model and better controls, helping to address expense challenges within a short period. Simplification will also improve scalability and make it easier for customers to do business with us.
With enhanced pricing capability backed by better technology and data, we will improve our core underwriting decision-making. This will create a dynamic and forward-looking capability. The continuous portfolio management approach we are building will help us identify and react to changes in risk profile in a more timely manner. Technology, including access to data and insights, is a key foundational step to achieving our Horizon 2 and 3 ambitions. For example, combining digital front-end engagement with real-time data-driven underwriting and claims decisions will reduce frictional costs for our partners and further improve customer experiences. As a direct result of underwriting actions, we are currently receiving retention levels in the low 80s. We are comfortable with this rate of lost business, which is partly driven by actively removing underperforming risks. As we complete the rebalance of our portfolio, we intend to target a through-cycle retention rate of 85%-88%.
We will continually adjust the portfolio through selective removal and addition of risk, with our primary focus to align with group risk appetite. We are operating in a market environment with continued favorable rate movement, and this year rate will be the primary driver of premium growth. We expect these market conditions to continue into FY 2023, and our recent underwriting actions have positioned us to take advantage of this environment. The market continues to see claims cost challenges. You'll be aware of the high number of natural perils events since July 1 this year, especially in late October, elevated inflation from supply chain disruption and some ongoing modest pressure on long tail classes. The most successful insurers will be those that adapt quickly to change in loss cost trends, the evolving regulatory and legal environment, and advances in technology.
Our plan sets us up to be dynamic and agile in the way we work, with the capability to quickly manage shifts in risk exposure and rapidly respond to the changing needs of our customers and partners. Horizon 1 will deliver a number of outcomes, pricing sophistication, product simplification, and enhanced connectivity to partners. Once we have our platform operating effectively, this will enable us to accelerate growth in Horizon 2. My plan is to grow across our three customer segments, and this will be achieved as follows, in intermediated personal lines by simplifying our product set and enhancing delivery capability to our partners, in SME by enhancing our product offering and driving efficiency through digital solutions, and in corporate by deploying capacity in a focused manner in selected lines of business.
We have a portfolio of trusted brands, sound relationships, and one of the largest broker and partner networks in the country to drive growth. Our brokers and partners have told me we need to be easier to deal with. I'm developing a program that will uplift our digital engagement with intermediaries and reduce their cost of trading with us. We are already trialing potential technology solutions. This will free up capacity on their side, so they can focus on business development, leading to mutual growth. Our intermediaries will see a more responsive Intermediated Insurance Australia that offers certainty around the risks we will and will not write. We will also be more consistent around pricing and risk selection so that brokers and partners can confidently promote our products to their customers. To wrap up, I'm very clear on the expected financial outcomes.
This is to, one, consistently deliver on our profit targets. Two, establish a competitive cost base. Three, position the business to grow. I have a strong track record in commercial intermediated insurance, and I'm clear what is needed to deliver on our goals. I am confident we will deliver our targets and support IAG to achieve its strategic growth ambition. I will now hand over to Amanda.
Thank you, Jarrod. [Non-English content] . I'm Amanda Whiting, and I've been leading the New Zealand business since the first of July this year. I've had a long career in the insurance business. I've had many customer-facing roles, and while I've spent time in almost all parts of the insurance business, I pride myself on delivering growth, and I have a real passion for keeping customer top of mind in the business. While this is a really solid business, there are many options to simplify it, to reinvest in growth, and to deliver a higher return from the same level of investment. I'm really keen to share my insights and our plans for New Zealand. As far as my insights go, it's fair to say that IAG New Zealand has an enviable leadership position.
We are the largest general insurer in New Zealand with GWP of NZD 3 billion and just over 2 million customers. That gives us a relationship with one in every two households in New Zealand, and that scale provides us with a sustainable competitive advantage. Our expense ratio is around 500 basis points lower than our competitors. Our capital strength is best in class, and IAG New Zealand will be one of the first insurers to launch climate risk reporting ahead of the mandate by the New Zealand government. Our team works closely across government and regulators so that when key policy issues arise, we have a seat at the table with other stakeholders. My plan will build further on these already great attributes.
I'll transform the customer journey and deliver new propositions to drive growth across the consumer business of 250,000 customers over the next five years. I'll build an even stronger digitally connected broker business, and we'll take costs out through automation and process optimization. In doing all of this, I'll grow GWP and also significantly transform IAG New Zealand's operating efficiency. For over 150 years, our brands have been there for New Zealanders, giving them faith and confidence that we'll be there for the next 150 years. There are two businesses that make up the New Zealand division. The consumer division, which houses our direct brands of AMI and State, and the bank partner relationships. Secondly, our business division under the NZI brand, which is our intermediated service for brokers.
We're the clear market leader in New Zealand with a 50% share in personal lines and 29% share in commercial lines. IAG is also the trusted partner for three of the four largest banks in New Zealand. We underwrite their general insurance products, and we have deep relationships extending over 20 years with each of those partners. Our focus and investment is on strengthening the core brands of AMI, State, and NZI, and we'll invest strategically in the right places to support the growth of these brands. As I look forward, I see an opportunity to consolidate some of our smaller brands. Our strategy will enable us to maintain and extend that position. Despite the COVID-19 lockdown, we're still seeing positive momentum in system growth. There's more residential building.
Consents are up about 25% from same period last year, and we're seeing record levels of new car registrations. The rating environment remains positive and supportive. We experience mid-single-digit rate increases in personal lines and low-to-mid single-digit rate increases across commercial lines, as well as strong sum insured uplift in property classes. There's no doubt that we too are feeling upward inflationary pressure in our claims supply chain, but we do have some insulation from this. 80% of our motor and home repair work goes through contracted suppliers who operate on agreed rates, and we have the opportunity to raise our premiums to cover broader inflationary pressures should we need to. We're also seeing some longer term structural factors. Customer preferences are shifting to utilization of digital channels, and we're moving with them.
We'll deliver a more personalized and streamlined customer experience, and we expect an emerging market around embedded insurance. I believe this opens up a new segment of the market, and IAG will be ready as a partner of choice to operate in that. I've reviewed our strategy and developed a new five-year plan, which is split into two phases. The first is really about strengthening our foundational capabilities with a focus on technology systems, business processes, and our culture. As we move into phase two, we'll accelerate investment in growth opportunities. As far as the foundational capabilities go, my first action is to simplify the business we have today. Decommissioning old legacy technology systems will enable us to reduce complexity, streamline processes, and automate a lot of the manual controls we have across the business, and I'm accelerating this activity. The second area is claims optimization.
There is considerable headroom for us to drive more efficiencies from our claims process and our supply chain. As an example, we recently implemented our first auto verification process for accepting claims. Initiatives like this really allow us to remove steps for the customer and drive efficiency in the business. Third, as we work through these changes, I'm also paying close attention to our culture. We are already a very customer-focused business, but I want us to be truly customer-led and for our people to be empowered to deliver on that. The customer needs to be at the front of every person's mind, no matter where they work in our organization.
For growth, to be clear, while of course we're always looking for growth opportunities in New Zealand, even with the more complex base that we have today, once we have in place the foundational capabilities I've just outlined, we'll generate a much higher return from the same level of investment. It will cost less to implement, and the end result will be substantially better. This allows us to really propel our growth opportunities to drive both GWP and customer numbers. Digital connectivity will support growth in our broker business. New propositions will enable us to grow our consumer business by 250,000 customers, and I intend to build out our adjacency businesses in sectors that we've earned the right to play in and to improve customer experience and therefore retention. Let's just focus now on one of the foundational capabilities.
Our claims experience is undergoing a transformation to improve the customer experience and reduce our cost to serve. There are three key elements to this. First, we're striving to provide customers with a one-touch claims experience, and that means the customer should only really need to contact us once, and we take care of the rest. We're automating processes to achieve that, and we're using AI in selected areas. As I mentioned earlier, we've already begun to auto verify some claims, and we've just switched to automate our supplier payments. There's much more we can do here to drive efficiency. Second, in our supply chain, I want to drive greater cost advantage, so we will consolidate suppliers and we'll deepen those supplier relationships. Third, I'm also evaluating opportunities to extend down into the value chain where appropriate. Repairhub is a fantastic example of this.
Over 50% of IAG New Zealand claims are motor related, and most of those are from collisions. We launched Repairhub in New Zealand two years ago to bring in-house some of those smash repairs. The cost to repair is 20% lower than external market providers, and more importantly, it's delivering a first-class customer experience with the customer NPS scores sitting at +84. There are opportunities for us to do more of this and move into other adjacent services that complement our core. Our business division under the NZI brand serves our broker partners and makes up 44% of our GWP. Over the last five years, we've had a focus on pricing and underwriting discipline, and that's really transformed the business from loss-making in FY 2017 to a healthy return in FY 2021.
NZI's partner advocacy scores are 36 points higher than its key competitors, and that's really due to strong relationships that the team have with the brokers and the high-quality service level that we deliver at sales and claims time. Looking forward, though, I can see customer needs are evolving differently, and we're responding to that. For those customers who have simpler needs, and they choose to use a broker, brokers are looking for straightforward digital connectivity and competitive pricing. B2B connectivity for personal lines has been rolled out to 34 Aon branches, delivering more sophisticated risk-based pricing to them and their customers. We've seen a really strong take-up rate. We'll be rolling this out to a second partner, AUB, from early 2022.
For those SME and corporate accounts with more complex needs, we'll continue to deliver a high-touch service and more customized offerings, including value-added services like our fleet risk management, which helps reduce the likelihood of a claim in the first place and has delivered a 96% retention rate on participating accounts. That's a win-win all round. Our consumer business focuses mainly on direct personal brands and makes up 56% of GWP. Our core focus right now is on strengthening the foundations and accelerating the transformation of the customer journey. This will unlock opportunities for us to launch a range of new customer value propositions to simplify the customer experience, to personalize more effectively, and to price more dynamically. Going forward, I want us to be much more aggressive in our pursuit of growth here, and I believe there are several opportunities for us to implement now.
One example of that is the SME sector. 97% of New Zealand businesses are small businesses, and we want to be there to help those New Zealand businesses wherever they are in their journey. We've developed bundled trade propositions, which are seeing some really strong take-up, and we'll extend that over the next 12 months. In addition, we've identified opportunities around landlords and young drivers, and we'll launch propositions to attract those segments in the near term. While we're investing heavily in our foundations, we'll still look to deliver growth from now. In conclusion, IAG has a unique leadership position in New Zealand. The business continues to perform with solid GWP growth and strong margins, and we have the numerous advantages that our scale brings.
I'm going to deliver a transformation of the customer journey, new propositions to drive growth across the consumer business with a target of 250,000 customers, an even stronger digitally connected broker business, and cost out through automation and process optimization. We have a well-defined strategy. Together with the leadership team, I'm really excited to execute and deliver on these outcomes, and I look forward to providing you with further updates in the future. Thank you. I'll now hand to Michelle.
Thanks, Amanda, and good morning, everyone. While the primary goal of today is to introduce our new divisional heads and hear them outline their plans, I thought it would be useful to provide more color on the financial implications of our strategy. My intent today is to reaffirm our FY 2022 guidance last updated on second of November, take you through a closer look at perils costs following the numerous weather events over the current half to date, to communicate that we plan to hold our expenses at broadly flat, reflecting the combination of the benefits of operational efficiencies being in part utilized to underpin delivery of our strategy to meet our stated targets. To share our plans in respect of our capital platform and our confidence in the upcoming renewals of our whole- of-a ccount quota share.
I will also touch on some of the legacy issues and how these might affect capital into the future. Building from the divisional presentations, I would like to reaffirm our guidance for the current year. Today, we are reiterating the guidance that was updated on 2 November. Low single-digit GWP growth and a reported insurance margin of 10%-12%. It would be remiss of me not to comment here on some of the inflationary pressures that we are observing. At our AGM in October, we noted reduced motor claims frequency experienced through the lockdowns and acknowledged a likely benefit. However, as an offset, we continue to observe elevated inflationary pressure on claims costs in our motor and home portfolios, along with some minor further deterioration in long tail portfolios.
Our COVID-19 experience from the past two financial years has enabled us to develop a fuller understanding of the lag effect between favorable short-term motor frequency benefits and the flow on impact to heightened levels of inflation. As we may see a similar dynamic in the current financial year due to broader supply chain and labor market disruption, we have maintained a conservative approach to reserving. While it is too early to accurately quantify the net COVID-19 benefit, we believe this will still flow through as margin positive in FY 2022. We will provide a fuller update at our half year results in February. I would now like to address natural perils costs. The storms in late October have heightened interest in this topic after we updated our expected FY 2022 perils costs.
Nick spoke earlier about how IAG is approaching climate risk and highlighted the importance of our natural perils expertise that has been built up over many years. While this expertise allows us to contribute in many areas, we have a clear objective to understand and quantify perils risk and price our products appropriately so we can deliver acceptable returns to our shareholders. One of the many tools we use to understand perils is catastrophe modeling. These internally developed models, along with externally licensed models, simulate the full range of potential peril events to measure the financial consequences. Our natural perils team ensures they are calibrated to IAG's portfolio in both current and future climate scenarios. Catastrophe models are complex, and we are continually improving the way we pass all the granular risk signals through into pricing.
As you can see, we continue to invest in having leading capability in this area and are working constantly to refine our approach. Understanding and pricing for natural perils is clearly a significant area of focus at IAG, and a lot of work goes into this P&L driver to optimize our forecasting. As is evident from our recent announcement, we are currently anticipating that we will exceed our perils allowance in FY 2022, which saw us reduce our FY 2022 reported margin guidance by 350 basis points. On average, IAG has exceeded its perils allowance by 0.8% of net earned premium over the past decade. In response to experience, we have made significant increases in the perils allowance in recent years relative to NEP.
The perils allowance of AUD 765 million for FY 2022 represents approximately 10% of NEP, well up on recent years. It is too early to provide guidance on the perils allowance for FY 2023. However, we are factoring further increases over future years into our planning and most importantly into our pricing. We regularly assess the economics of our aggregate and volatility cover reinsurance arrangements to assist in managing volatility. As Julie, Jarrod, and Amanda highlighted earlier, we're confident about our underwriting and pricing capabilities that mitigate the risk. We've achieved mid-single digit rate increases across short tail personal lines in Australia and New Zealand in the first quarter of FY 2022. We continue to raise home and property rates to cover underlying claims inflation, as well as other rising costs associated with natural perils.
Given the importance of expenses in achieving our medium-term financial objectives, this slide is designed to share more detail on how we think about and manage our expenses. My intent is to share this type of analysis as part of each half year reporting to provide transparency on the progress we are making. In targeting a broadly flat expense base and declining expense ratios, we adopt a dynamic approach that considers a range of important trade-offs. We've provided some granularity behind these trade-offs on the slide. These trade-offs may lead to some volatility between our six monthly reporting dates. However, over the next couple of years, we have a clear plan and expect our total expense base of around AUD 2.5 billion to be flat to slightly down. Within that, expenses to maintain IAG's operating capacity are being managed tightly with a focus on automation, efficiency, and effectiveness.
At the same time, we have chosen to increase investment in a number of areas that will transform IAG to meet the needs of customers and drive operational excellence. These transform investments are largely technology investments, but also include some specific investment related to risk and regulatory functions, simplification and efficiency initiatives for our intermediated operations in Australia, and also growth in our direct Australian franchise. The profile shown for transform reflects the P&L impact, taking into consideration capitalization and amortization of some of the expenditure. The Enterprise Platform Nick outlined earlier will facilitate increased deployment of automation and artificial intelligence across IAG to improve customer experience and unlock efficiencies central to reducing expenses.
Our approach to automation is multifaceted and employs tools to streamline processes, enhance service delivery, and digitize customer interactions. As evidenced from Julie, Jarrod, and Amanda's presentations, there's close collaboration with our Chief Operating Officer, Neil, and his team in driving these improvements through technology and operations. Neil will join us on our panel later to answer any questions you may have in this area. Moving to our capital platform. This has three distinct elements that most on the call are familiar with: equity, debt and hybrids, and reinsurance, including the whole-of-account quota shares. We view the quota shares as an important and sustainable part of the platform and don't expect any significant changes to the high level structure and overall quantum in the near future. The quota shares provide capital diversification and reduced P&L volatility.
For the reinsurers, they offer diversification to uncorrelated risks relative to other peak catastrophe zones. In short, we view these as win-win commercial arrangements for the long term. As we look to renew these structures as maturity dates draw closer, our reinsurance partners have indicated ongoing interest. The term structure has always been an important factor and will be taken into account in the upcoming renewals. To our current level of capital, a few comments on core equity, our primary lens for capital adequacy. You will recall that we reported a CET1 ratio of 1.06x at 30 June this year. We also advised that that would reduce to around 1x PCA after payment of the final dividend, combined with an allowance for the AUD 150 million anticipated benefit from the proposed sale of our Malaysian business.
The most significant development for our CET1 over the medium term will be the court's finalization of the second test case for business interruption. A positive outcome would clearly have implications for IAG's core equity. You will remember that establishing the provision saw us have a drag of around 50 points on our CET1 ratio. Claims lodged for BI remain low at less than 1,000 claims so far. As you are aware, our current level of provisioning for BI assumes an influx of claims once there is clear resolution from the courts. We will, of course, provide an update on BI as soon as it's practical to do so. Combined with the unwind of tax losses in both Australia and New Zealand, it is fair to say that a positive BI outcome could see us in a position where we have considerable surplus CET1 capital.
Our track record demonstrates that we have been active and prudent in our overall approach to capital and managing our CET1 around the upper end of our target range. Once there is clarity on BI, we will look to outline firmer capital management plans, with timing likely to be in the first half of calendar 2022. A few final comments on IAG's three to five -year medium-term targets of reported margin of 15%-17% and cash ROE of 12%-13%, which align to the financial period from FY 2023 to FY 2025. Our confidence in achieving and sustaining this level of profitability reflects a number of important influences. First, the strong rate environment, particularly for our intermediated business.
Average rate increases across this business were 8% in FY 2021, and as flagged by Jarrod, these have averaged 9% in the first quarter of FY 2022. This is now flowing through to margins. We remain confident of delivering the initial AUD 250 million target in our intermediated business by FY 2024. We also continue to believe that the new operating model has brought greater accountability and a focus on the delivery of financial goals that support delivery of the medium-term targets. I trust that the additional information we have provided on expenses today helps you understand the dynamic approach we adopt to influence the outcomes. Finally, we believe we can manage the risk presented around perils cost increases. In combination with improved profitability from investing in our growth, prudent management of our capital platform and targets, we will cont...
These things will continue to underpin delivery of our cash ROE target. With that, I'll now hand you back to Nick.
Thanks, Michelle. I'm now joined by all our four executives who presented this morning for a Q&A panel. Neil Morgan, our Chief Operating Officer, has also joined us, and we welcome any questions. I think we'll start with the phone.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Andrew Buncombe of Macquarie. Andrew, please go ahead.
Hi, everyone. Thanks for taking my questions. The first question is either for Nick or Michelle. Just on slide 40, it makes a comment about a AUD 2.5 billion gross expense base. Apologies if I'm missing something obvious here, but is there an easy way to reconcile that to the FY 2021 disclosures? Thanks.
Hi, Andrew, it's Nick. I mean, I'll let Michelle sort of step through that. I mean, that's roughly the run rate of the company right now. Michelle, I don't know if you wanna just provide some an easy way to reconcile that.
I can try. Thanks, Andrew. Lovely to hear from you. What we're trying to do is provide great transparency of our overall cost base, so it reflects the 16.50 gross underwriting expenses that you would see disclosed in our FY 2021 accounts, plus our claims handling expenses, which you don't see separately, and also our expenses included within fee-based businesses. We're looking to provide greater transparency of the overall cost base that we're managing as we move forward to achieving our targets.
Got it. That makes sense. Thanks, Michelle. My other couple of questions are actually for Jarrod. Welcome aboard, Jarrod. The first question is in relation to just some color on what you're changing in the long tail claims handling processes, and also if you can give us some color on the caseload trends for long tail in the last couple of months, that would be great as well, please. Thank you.
Okay. In regards to the case handling of long tail business, initially, there's no major shift in the way we're looking to handle caseloads in long tail. What we are doing in the claims space is looking to maximize the benefit of the systems implementation that we've made in the core operating claim system to create efficiency at the front end there. That's the first aspect. In regards to caseloads, we haven't seen a significant shift in caseload recently in the long tail classes. Does that answer your question?
Yes, it does. Thanks. The second one is again for you, Jarrod. Does it make sense for IAG to be white labeling personal lines for so many partners while not leveraging the core knowledge and data in the blue brands? Just some color around your thoughts on that would be interesting. Thanks.
Yes. We're looking at the partner business, and we're gonna be very purposeful in what we do with partners and the selected partners. With our largest partner, we are utilizing the rating and the pricing engine that we do across our broader business. That would be the perspective of how we step forward with our partner business, that we do utilize the broader group capability and knowledge in personal lines.
Andrew, if I can just add to that. I mean, I see a role with partners within our personal lines business across Australia and New Zealand, and we have some wonderful relationships with some of our bank partners in New Zealand and within Jarrod's business as well. I think what you're just gonna see from us is that we're careful about that. I mean, we've exited a reasonably material one over the last 12 months, so we are gonna be focused on ensuring that it makes sense for IAG and recognizing that we also have these direct businesses. I think there's a role there. I think we're just gonna be careful and selective about that, about how that those partner relationships are part of the overall strategy.
Yeah. That makes sense. Just the final one for Jarrod, please. IAG is once again flagging its intention to ramp up the sale of SME policies in the direct channel. How does IAG plan to address the concerns of insurance brokers about moving their business away from them? Thanks.
In my view, customers will make a decision where they purchase their insurance from. Remember, as Julie pointed out, these are for very small, simple businesses. As they get more complex and businesses need advice from insurance brokers, we believe businesses will seek the advice of professional insurance brokers. There is a capability to deploy capacity and service the needs of Australian SMEs through both channels, and we're comfortable with that. It's important for us to make sure that we're delivering the best service and the best product for our broking customers through Intermediated.
Perfect. That's it from me. Thank you.
Thanks, Andrew.
Thank you. Your next question comes from Kieren Chidgey of Jarden. Kieren, please go ahead.
Morning, guys. I've got a number of questions. Maybe just first starting back on expenses. Michelle, appreciate the clarity around sort of the definition of the AUD 2.5 billion. Given we can't easily track that at the moment, is your intention to start disclosing the building blocks of that moving forward?
Definitely. It's one of the things that we think is really important as we move forward so that you can track our progress in terms of delivery against the targets that we've set out.
Okay. Related to that, given sort of that AUD 2.5 billion cost base includes claims handling expense, is there any overlap sort of in that target with the AUD 400 million gross claims saving target within direct?
Within the targets that both Julie and Jarrod have particularly called out in their businesses, there are cost elements to those. Part of what we've tried to do is demonstrate the total size of the cost base that will be holding flat to slightly down. But there are elements within delivery of AUD 250 million and AUD 400 million that will come through the cost base.
All right. Just also related to expenses, perhaps a question for Julie. I'm just wondering if you can unpack some more of the drivers within the AUD 400 million target. Just to clarify whether or not it sounds like that will largely be reinvested into growth and pricing rather than margins across Direct Insurance Australia.
Sure. Maybe just to touch a little bit on the AUD 400, we've got our motor repair model as we've talked through, that is growing and has more to go in terms of reaching scale. That's delivering us with benefits right now, that we will make the choices around where we invest, going forward to help us achieve those growth targets. We've also, as I mentioned, we've just deployed our technology stack right the way through our claims business. That's live and active, and I think we can be much more aggressive now on rethinking our processes, revising our approaches, bringing automation and AI through to create more efficiency in the claims handling and the expense spaces. Yes, some of it will be reinvested. At the end of the day, all of it will go to shareholders.
That's, you know, that's sort of why we've put that target out there, and it's reflected in the numbers that Michelle just talked you through.
Thanks. Just a second sort of area of questions. A number of the presentations touched on inflationary pressures across both short tail and long tail. I'm just wondering if we could get some sense of numbers in terms of the level of inflation you're seeing across, say, home, motor, and commercial. Also just a clarification around some of the deterioration you're talking in long tail, whether or not you are flagging prior year reserve top-ups as a result of that.
Yeah, Kieren, I mean, at a high level, you know, what we're doing is where those any sort of inflation that we're seeing across the various classes, we're reflecting within pricing. It might make sense actually to ask Amanda, Julie, and Jarrod just to make comment on what they're seeing in different parts of the business, because it's sometimes hard to generalize. Maybe I'll start with you, Amanda, in New Zealand, and then Julie, and then Jarrod. Then as part of that also, just comment on what we're seeing around those long tail.
Yeah. In New Zealand, as far as we can see, there's not a lot of impact on motor. That's mainly at this stage because of the age of the fleet in New Zealand. The average motor vehicle is about 14 years old. We're not seeing a lot of sort of new parts entering the market for car repairs, and we're continuing to monitor that. The other thing is, of course, we have rolled out our third Repair hub, so we're looking to drive efficiencies through both the use of that and our supplier relationships. As far as home goes, again, very minimal at this stage, but we're monitoring it, and we do believe that we can manage that with that supplier arrangement and any rate increases if they're needed.
Julie in Direct Insurance.
Sure. A little bit different in Australia. We see two quite different trends in property and in motor. Property has been impacted in a couple of ways. Interestingly, we're feeling the effects of the bushfires from a couple of years ago now impacting our ability to source wood as an example. It's an onshore challenge, a local challenge, and one that will alleviate quickly through the portfolio. That is causing us, however, to go offshore to purchase more materials, and we've seen an increase in the cost to repair as a result of more dependency than we would normally do on a global supply chain in property. We've seen a bit of an uptick there. In terms of motor in Australia, it has been a bit more challenging than New Zealand.
We've obviously had the benefits in a way of frequency, but that's flowed through very differently in terms of inflation costs. We're really grateful that we've had our in-house motor repair model that's helped us manage those claims and manage the cost of repairs. While we expect to see an uptick in terms of motor repair costs, we think we're really well positioned to put that through prices going forward and this year, well protected in terms of some conservative positions we've adopted on reserving.
Jarrod, maybe just on commercial property and then just a comment on long term.
Yeah. On commercial property, it's not as clear as what we see in personal lines in Australia. There is inflation, but there has been for, you know, we continue to manage that. But there's not the uplift that we potentially see in personal lines. On long tail, similarly, I mean, long tail, we're seeing claims inflation coming through long tail for a number of years. So it's always something we keep a very close eye on. We're confident in how we're pricing our business moving forward. It's obviously something we look at very closely as we go through the reserve review process, you know, honestly, you know, on a regular basis.
It's hard to, Kieren. I mean, sort of the rolled up version of that is we're definitely seeing some inflation through the book. Probably a slight sense that it might, you know, in motor, we've seen a little bit, particularly in Australia, that might slow down a little bit, I think. Property classes, you know, there's a number of supply issues that might make that sort of stay around for a bit longer, and particularly any sort of post perils inflation that we might have across particularly Australia. On the long tail, you know, we're seeing a little bit, but as we mentioned in the presentations, you know, only modest.
Okay. Just one final point of clarification on the 22 margin guidance.
Yeah.
Michelle, on slide 37, you've now added this box with a positive contribution from net COVID benefits. Just to be clear, is that something that is required to get you into the range, or is it something that influences. Where you land in that range.
Thanks, Kieren. As I called out, it's too early to have a firm position on the full year net COVID impact, and it's quite modest at the moment as we look at the combination of the frequency benefits from motor, but offset by some conservative assumptions around how we think the inflation will flow through, and Julie referenced that a little while ago. The 10%-12% doesn't have a material impact associated with that at this point in time. We'll see how the inflation plays out over the remainder of the year.
All right. Thank you.
Thank you. Your next question comes from Matt Dunger of BofA Merrill Lynch. Matt, please go ahead.
Yeah. Thank you for taking my questions, guys. First question, if I could please, for Julie Batch. I'm just wondering how you rate IAG direct offering versus some of the peers and where you're at the moment on that 80% target for digital uptake. Wondering if you could give us a bit more detail there.
Sure. If we look at our digital uptake at the moment, it's probably slightly below that in terms of sales. We're at the moment in the process of reviewing all of those channels, and in particular, as we grow out into the West, our new technology stack is actually already deployed there, and so that's a really good opportunity for us to accelerate it. We're actually aiming for not just initiated but closed in digital channels. We wanna complete that transaction, making sure we still bring that core value of help. That's really important to us. On claims, we've seen and we've done a lot of work in the digital claims space over the last few years. We see claims really elevating.
In times of events, I think consistent with peers, in fact, we're getting sort of 50%-60% of lodgments coming through digital channels now, which is really pleasing because that's often the moment when customers need the help. I would say the competitive landscape right now depends on three things. It's your ability to access a customer, market to them, reach them, personalize their experience. It's delivering great digital outcomes, and it's doing that at a price point that is appropriate for the proposition that you're putting out there. That's really our focus right now and making that absolutely best in class.
Great. Thank you. A follow-up, please, Julie. On the risks, you know, what risks are you looking to underwrite with that 250,000 younger customer target, and how can you drive growth, when you're getting an increased cat load by the sounds of things? How can you know, with prices increasing, how can you drive growth through your portfolio?
Sure. I mean, when we look at the customer proposition, the younger customer proposition, it's really focused on motor actually in the beginning because, you know, like sadly, home affordability is getting more difficult. It's later in time, we're really trying to position this younger group around products that younger customers are attracted to, as I said before, they become, you know, an NRMA customer of the future. It's really motor, low cat loads on motor, as you would know. We're trying to find low cat intensive products and really reach that group with different experiences. I think cat loads are important that we understand. We've got amazing in-house natural perils capability that's been in our organization for more than 20 years.
They're flowing through now, you know, very sophisticated pricing techniques into our original rating, and we're able to risk select in a very different way than we have ever done before. I'm excited about what that actually brings to our business as we continue to leverage that while we grow across Australia.
Great. Thank you very much. Then just a final question, if I may, for Jarrod Hill on the Intermediated lines. I think you mentioned an 85%-88% retention target. What was the timeframe for this, and are you flagging some moderation in pricing to keep those retentions up there?
I wouldn't be flagging a moderation in pricing as the driver to get retention. I mentioned we've been taking a number of corrective actions on our portfolio over the past 18 months, and that's driven retention ratios towards the low 80s%. There's that. As we move through the progression of finalizing those actions, that will automatically elevate our retention rate without any shift in our pricing appetite. I also mentioned we've got IAL, our personal lines runoff. That will commence or that's commenced at the beginning of this month. That will flow into next year. We'll still see retention rates at the lower end of the range leading through next year. It'll be the full year following, the full year 2024.
We'll start seeing retention rates in that range as we complete the rectification, if you like, actions of portfolios.
Thank you very much.
Thank you. Your next question is from Siddharth Parameswaran of J.P. Morgan. Siddharth, please go ahead.
Good morning. A few questions on my part as well, if I can. Maybe if I could start with Michelle, just and also Nick actually, just a question on the targets that are backing this strategy. Nick, maybe if you could just talk about you know whether some of these targets, you know, the 1 million customers, the AUD 10 million or AUD 15 million which is improvement in intermediated insurance profits. Just are they actually embedded in management targets? And if so, how
Hi, Siddharth. Sort of yes, they are. I mean, we've been pretty clear that we're very focused on our businesses here in Australia and New Zealand. You know, we've sort of been very clear on sort of the four parts to the strategy around the four pillars of sort of growing, building better businesses, digitally enabled, managing our risks. I've then put in place a pretty clear operating model where, you know, we've been very focused on accountabilities within that. I hope you've heard that today from each of the team around really being crisp on what sort of my expectations are from each of the executives of you know, of the broader executives, but you've heard from a subset today.
Then within that, plans being developed within each of the businesses and within Neil's team as you. Around how we're gonna deliver that over the next three to five years. You know, the-- there's obviously a rolled up financial outcome, and so Michelle and I are confident on the 15%-17% insurance margin. You know, we're confident, you know, delivering on that 12%-13% and really ensuring that we have multiple initiatives around growth, which is what you've heard from the teams today. Of course, no doubt they'll be supplemented by additional initiatives over the next couple of years as we continue to build this out. The organization really creates that growth mindset and growth outcomes that we've been missing a little bit over the last number of years.
Siddharth, sort of coming back to your question, yes. I mean, we are. This is just not at a high level. We are, the way we're running the company, it's very clear on accountabilities, and within that, the plans and processes in place to deliver against that, which then gives us the rolled up outcomes that we've talked about today.
Yeah. Sorry, but just on the growth, I mean, it sounds like you're very confident on the margin targets, but on the growth, is that million customers aspirational, or is that actually sort of, I mean, is that a clear target that is the check between how people view it?
I mean, maybe I'll make that simpler, Siddharth. We want our business to grow by 1 million customers over the next five years, sort of aspirational target. I mean, that's sort of their their sort of slightly different words, aren't they? You know, I wanna be judged on the success of our company over that time by growing the number of customers we have as an organization. What you're seeing from each of the plans, this is just not an idea, that we've actually, we're in play now. You know, we've launched NRMA nationally already. We've got ROLLiN'. You know, we've got a different focus within our Australian Intermediated, which you can see there's potential growth coming out of that, which we haven't highlighted, we haven't talked about too much today over the next couple of years.
Amanda's, you know, working through the opportunities that we have within New Zealand to build out 250,000 new relationships from that business. This is not just an idea, this is what we're gonna deliver, over the next, you know, three to five years. We're gonna start, you know, we've already started on this.
Okay. Thank you. Can we just move, actually just another high level question just around business interruption. Just, I mean, some of the observations that you might have seen as to exactly, you know, why that occurred and the steps that you've taken to ensure that won't happen again. Also related to that, whether there's been any discussion with APRA, because it seems like, I mean, I don't know if it's. You obviously made the largest provision in the industry. I don't know if that's because you're being much more conservative or if it is actually that there were more issues that were found in your book. If you could just comment on, you know, what steps you're taking to ensure, you know, issues like this don't happen again.
Also just your discussions with APRA on it.
Sure. I mean, Siddharth, maybe I'll make comment on what we've done to strengthen the organization. I'll ask Michelle to just come in on the balance sheet provision. I mean, we've gone to a lot of trouble over the last year or two to significantly change the way we run the company, and the way we've changed the operating model, the way we've been crystal clear on accountabilities and the capability that's been deployed within each of the businesses to ensure that we are operating within our chosen risk profile. The example that you provided around business interruption, I think was partly driven by lack of some of that accountability and some of the complexity in actually how we were set up as a company.
You know, added to by complexity of the systems and processes that are behind that. We have strengthened that, and to be fair, not just in the last 12 months, we've been working on that for a little while with a program of work which we've called RQ. You know that if I look at IAG today versus three or four years ago, there's been a material shift in the risk environment, risk culture within our organization. We talk about that pretty much every day, and we understand the importance to have some of those basics right within our company. We're confident on the settings we now have on that to ensure that things like the issues around business interruption do not happen again. On the sort of specifics then on...
Sorry, Siddharth, I just didn't quite hear the question of APRA.
Just whether there has been discussion with APRA about the impact on IAG, at least the provision that you took, seems to be so much larger than everyone else. APRA has, you know, signaled that there are, I suppose they're concerned about this as an industry-wide issue. I'm just wondering, you know, what they've specifically said.
Yeah.
In terms of, you know, the fact that you've taken a large provision. Is that out of line with, you know, what others have seen? Maybe if you just give us some comment on-
Sure. I mean, I'll make comment on that.
How we think about this issue.
I'll hand to Michelle on the actual provision. I mean, yes, we've obviously been communicating with APRA all throughout this, along this and all any challenges or issues we have. I'm not aware of any particular IAG issues around this topic. You know what we've been, we've just been making sure we're communicating with APRA on exactly where we are, the provisions we've taken. As you know, we've taken a conservative view on this, and addressed it straight away. You know, there's. I'm not, you know, I'm not aware of anything that indicates that that's not the position that we still don't have today, which is a conservative view in relation to this issue around wordings for coverage of business interruption.
Michelle, maybe I'll just bring you in as well now on, just on comments on the balance sheet provision now.
Yes. I mean, to just add a little bit to what Nick said, I think the key focus that we drew out very, very clearly back in November 2020 was that we assume zero probability of success in any of the legal cases. Following the findings from the New South Wales Court of Appeal that were unexpected, we felt that it was important based upon our best available knowledge at that point in time to say, assuming nothing goes our way, this would be the provision. As I touched on in the presentation, we've had less than 1,000 claims to date. The provision appears to be conservative depending upon how the outcome of the second test case goes. We have to wait and see whether we get the influx of claims.
Right now I think what's important is we use the best available information that we had, and we assume zero probability of legal success.
Okay, great. Just maybe one quick question for Julie and for Jarrod. Julie, just your diagnosis of why you've been losing share in personal lines over the years, could you just give us an idea of that and how that is shaping your strategy? Related to that, I mean, it seems like a big part of your growth strategy is about NRMA expanding it nationally. Maybe you could just give us some thoughts on how, you know, what's your experience of expanding NRMA into Queensland? How long did it take to get some growth in market share, and how profitable was that? Just those two questions on-
Yeah. No, good question.
personal lines.
I think the answer to your question actually is in our strategy. If you have a look at our book, NRMA Insurance in New South Wales, ACT and a small representation in Queensland. That's sort of been holding over a period of time, not really growing, not really shrinking, super high retention, lots of challenge around attracting new business. Victoria has been growing through our RACV brand over a long period of time, and if we look to the west, South Australia, Northern Territory and WA, they've actually been shrinking in terms of market share. A big part of our strategy with those economies that are really burgeoning is around leaning into that and leveraging the presence that we've already got.
We've already got great people in those states and really starting to drive the growth back through there. When you look at our total numbers, a lot of that comes through perhaps less focus on that part of Australia than perhaps we should have been paying. That's really key to the younger strategy, again, home ownership's later, multiple asset ownership even later than that. We've got a super loyal customer base. We absolutely have to build strong connections with the younger customer group earlier, and we're underrepresented for market share in that segment. It's often fairly price focused. We're looking very much at that, and that's sort of key to our strategy. Queensland as a market is a super interesting market to me.
If we have a look at how it's been positioned over the last few years, pre-COVID, it was the fastest growing population in Australia. I know there's lots of people waiting to get back in there next week, so we see that as a really big opportunity. There's some shifts around the way capital might be deployed in Queensland through the work that the Australian government is doing, trying to improve affordability. That's potentially an option for us. There are other product lines where we've got a great deal of experience, where we see that at the right time there might be something else for us to add in that state. That's kind of how we're thinking about the growth equation.
Okay, thanks. Maybe one final one just for Jarrod. Just quickly, just the AUD 250 million, how should we think about that in terms of whether it's linear backended and, just the steps that you've taken to date, are we already seeing signs of those initial steps that were taken last year? Are they already helping profitability?
Yeah, Siddharth, we are. We're starting to see the rate we're taking through the business flow through to margin. Also the corrective action in portfolios, we'll see that flow through. I mentioned IAL. Overall, that's around AUD 170 million of premium that was loss-making for us. Taking that decision to step away from that large personal lines portfolio, that will start delivering margin in FY 2023. We've taken some really good steps to deliver margin. Now it's about proactively reshaping and shaping our portfolio to ensure that we deliver the margins we hit. Yes, we'll start seeing that now, and we'll accelerate that towards the FY 2024 as we have, you know, we implement our pricing actions, we start seeing growth in the segments and sectors we want at the prices we want.
The linearity, is it linear that we suggest that addition?
It will be. We'll start seeing the benefit of rate come through. How that is it direct linear? I won't predict that, Siddharth, but we will accelerate the growth of the business and the action and the underwriting actions to bring that margin as forward as quick as possible.
Thanks very much. Thanks.
Thank you. Your next question comes from Nigel Pittaway of Citi. Nigel, please go ahead.
Good morning. Thanks for taking my questions. Just first of all, this comment that you feel that you're now appropriately provided for the recent challenges that you've been facing. Does that comment include things such as workers' comp, professional risk, general liability issues, or is that still sort of some uncertainty surrounding those?
I mean, Nigel, maybe I'll make some high level comments, and Michelle, you come in. I mean, some of those challenges, we're not aware of any further issues within those that would cause us to reflect on the appropriateness of our balance sheet provisions or anything. I think we heard you had a conversation around business interruption where, you know, our view is we've got a pretty conservative provision set up there. I think in relation to them, you know, our day-to-day business and the examples you provided around workers' comp, liability, PI, D&O. I mean, Jarrod made a comment that we are seeing, you know, we have seen, continue to see some claims inflation there. Never say never.
I think your question, Nigel, was around, you know, is there any risk of any sort of reserve strengthening around that? I mean, there's some still there, I think. We see that as quite modest, that sort of risk at the moment. I'd almost put that in a separate bucket than those large provisions that are the ones that have really caused us those problems, as I said, I'm not aware of any further issues there. I mean, Michelle, you wanna add to that?
I think you've covered it nicely.
I mean, that's where we sit on that.
Okay. Just while we're sort of on those sort of areas, I mean, wage inflation didn't really get much coverage in that sort of, as you ran through those inflationary impacts. Is there any sort of concern there about wage inflation and workers' comp, et cetera, or?
I think across the whole company, I mean, obviously a lot of our repair costs are. We talk about parts and Julie mentioned timber, but wages are part of that too. We're seeing that flow through on claims costs. We're seeing that flow through in the running of our company, and we're seeing that flow through to your example on workers. I think that's. We're seeing that in many parts of our organization, and we're needing to reflect that in pricing. That's what we're doing now. I wouldn't just sort of say it's within workers. I'd say it's actually pretty much everywhere we're seeing it, which I know we're not the only company to have that challenge as well.
That's just another input into how we're thinking around pricing and running of the company going forward.
Okay, thanks for that. Just quickly on, you obviously mentioned about the quota share reinsurers, but the CTP one is due up June 2022. You got any sort of insight as to how you're thinking about that renewal at this point in time?
Michelle, you might make comment on the portfolio.
Yeah. I mean, as flagged, we've talked largely about the whole of account quota shares, but we're comfortable with the role quota shares play in our capital platform. We engage with our reinsurance partners regularly. You know, we're still assessing the overall form of what that looks like. You know, nothing to suggest that you'd expect any change that would have a material impact.
I mean, can I just make an overall comment here? When we put in place the CTP quota share before we put the whole of account, in a way, that was sort of learning from any discussions I've had with any of our partners, everybody wants to continue to participate. I sort of hear that there is some concern around that topic. I mean, that's not what I'm hearing in any of the discussions I've had with any of our partners. If we, you know, in the CTP example, you know, if we wanted to continue with that, there's plenty of appetite to. For us, it's really thinking through the overall capital strategy and how the various elements come together on that. I mean, as Michelle indicated, I
You know, we're not seeing any material change that's being planned around how we fund our company going forward.
Okay. Thank you for that. Maybe a couple of questions for Jarrod. I mean, just first of all, I mean, Jarrod, what's your insight as to why sort of the affinity in financial partnership business has been so unprofitable over recent times?
Look, there were certainly some pricing issues in that partner business. That's largely been corrected now, and we're moving forward. That's why you would have seen a shrinking of that business. It's a combination of pricing and also expense. We've got to create some efficiencies in that partner business to reduce the expense load on that business. Both those plans are underway. The pricing portfolio shaping is a significant way through completion. On some of our largest partners, we have completed that.
Now it's about to step into how to create efficiency in that business, particularly around the digital connectivity with our partners, so that we're moving from a number of sort of human interventions through the process to get these policies booked and completed, as well as on the claim side, to get that to really efficient, and we can reduce the expense. We've got a really value proposition to take forward.
Okay. Maybe just finally also on the sort of intermediated business, I mean, you've talked about that being a growth engine moving forward and sort of targeting stability and results. I mean, how do you think of the sort of cycle on that sort of in that sort of context? Are you basically saying that with the mix of business, the cycle will be less important? Or, you know, sort of how are you gonna sort of address, you know, you've obviously commented that the rate environment's pretty supportive at this point in time, but obviously that won't always be the case. Can you make some comments on how we should think about that?
Yeah. I mean, you know, traditionally we look, we see the favorable pricing cycle continuing in the short term, and then potentially a period of stability. That's where we really build out that capability and discipline around portfolio optimization and be very clear about what price is driving margin in business on every policy that sits within our portfolio. We're very clear about what's the segments that are driving margin and those that aren't, and we take corrective action on those that aren't and grow the areas that are driving margin in business, building a lot of detail and getting very granular on our pricing, building out the use of third-party data on how we price, so we can outprice the competition.
We're very selective and very clear about price we want for risk we accept into our portfolio. That's why it's about building into a growth edge, and we'll build those capabilities, you know, as quick as possible and we're looking to do that in that Horizon 1 I indicated. We look to confidently grow the business and deliver margin off that growth.
Nigel, I mean, we're gonna be super careful here. You can tell by the way Jarrod just talked us through, we're very focused on capability uplift, making sure we've really got our arms around this business, significantly improving the return profile of it, which in a way gives us optionality, I think, that we don't currently have. We're gonna be very careful about this, I think to the point you're raising around, you know, being, you know, growth for growth's sake. That's what we're gonna step through over the next couple of years as we sort of reposition this part of our company to be a much stronger part of IAG.
Okay. That's great. Thank you very much.
Thank you. Your next question comes from Evan Johnson of Wafra. Evan, please go ahead.
Yeah. Hi, thank you everyone for the time. Just referring to slide 39 and the perils overruns in recent years. How should investors be thinking about, you know, kind of medium-term perils allowance, when you talk about that, you know, 15%-17% in insurance margin? You know, it appears that you should probably see a rate increase ahead of inflation in the near term to really kind of make up for this, you know, catastrophic perils that you're seeing in, you know, FY 2022, but, you know, what you've seen over, you know, routinely over the last 10 years. Any comments on that?
Michelle, I might just direct that to you around how we sort of see without giving specifics on outlook, just, you know, how we're most likely gonna see higher perils, you know, as part of our pricing going forward, right? I think that's, you know, the environment that we're seeing, that's likely to be the outcome. But do you wanna comment?
Yeah. Yes. I mean, as I tried to touch on during the presentation, thanks for the question, Evan, we are factoring in some further increases. We did make a recent step change giving the combination of expectation around experience and, we had some benefit from our reinsurance program in FY 2021, that saw the step up to our allowance of 765 in FY 2022. It's one of the reasons we invest so heavily in this area in terms of skill and capability. You know, forecasting is not a perfect science, but applying, and Julie touched on this earlier, the deep skill and expertise that we have, layering in the granularity into our models and forecasts allow us to make sure that Julie, Jarrod, and Amanda have the right signals in terms of the pricing decisions.
We're confident that we can price for that appropriately and deliver the margin that we've talked about. It's also one of the reasons why we work with key stakeholders, government, communities, et cetera, to build disaster resilience in the face of climate change. It's not just an experience that we have. Obviously it's an issue facing global reinsurers. You know, I can't give you exact numbers for what they look like at the moment. It would be too early for me to do that. We're confident in the targets that we've set for reported margin and the three- to five-year horizon that we can manage that through the combination of high quality forecasting and appropriate pricing in that environment.
Okay. Thank you very much.
Thanks, Evan.
Thank you. Your next question comes from Andrei Stadnik of Morgan Stanley. Andrei, please go ahead.
Good morning. I wanted to ask three questions if that's okay. Firstly, in terms of the balance of the portfolio, so the portfolio has tilted over the last decade towards short tail lines.
About 85% of the gross written premium. The shorter lines do tend to be more catastrophically exposed. Are you happy with the balance of the portfolio? Could you see a scenario where you could benefit from having more long tail, and more reserve and optionality?
Andrei, I mean, I'll sort of at a high level. I mean, there's been some factors that have contributed to that as well. We've seen, you know, We've exited CTP in Queensland. We've exited, or not exited. The scheme has changed within New South Wales, as you're aware, that sort of the premium pool there has come down as we've changed the arrangements around how claims work in that scheme. So I think that mix is sort of where it has been caused by that. I mean, it's a. At the moment, we are comfortable with sort of that overall blend. I mean, I think it's a challenge and potentially an opportunity within Jarrod's business.
As you're aware, our New Zealand business has no long tail, so it's really a question for Australia. Within that, I think it's really within Jarrod and what we might see as opportunities there. At the moment, we're comfortable. I don't know if you wanna make comment about sort of long tail and opportunities, you know, looking out sort of not next 12 months, but sort of three to five years.
I think in the three to five years, we do see options to grow our long tail business. The reality is, it's not gonna be a significant shift in the overall portfolio balance of the group, when you consider the size of our personal lines business. Yes, we do see opportunity, how big an impact and, you know, how much that will move from the 85-15 now, it's not gonna be a significant shift in that balance with commercial lines, long tail only.
Thank you. I wanted to ask about the capital management. You flagged that, you know, if there is clarity on business interruption, you know, you will look to review the capital position in the June half of calendar 2022. Then in that slide you mentioned that some of the other considerations we will be managing rental claims. Can you talk about some of the other considerations you will take into account when thinking about capital management? Because there is a class action at the moment, and APRA is reviewing risk management across the industry. What are some of the other considerations you'll take into account?
Michelle, I might ask you to make comment.
Yeah. Andrei, thanks for the question. We work really hard to ensure that we have target capital ranges for our CET1. You know that it's 0.9-1.1. That takes into consideration a risk appetite, which is a holistic view of all of that. So you've touched on a few matters that have, you know, we have talked about a little bit of some of our legacy issues. We've talked earlier around BI and potential element of conservatism depending upon the final outcomes of the second test case. You know, we've taken APRA on the whole journey with us there when we talked about the legacy pricing issues and the provisioning for that.
What we indicated as part of our full year results announcement is that we had included an allowance of about AUD 100 million for uncertainty as we look to finalize that program. We'd completed the find phase and investigate phase, and we remain appropriately provided in that environment. It's inappropriate for me to make comments around the ASIC proceeding other than to note that it's related to a small component of the overall program. I think that reflects the ongoing work that we've done to take our regulators on the journey with us. You touched on the insurance self-assessment, so a number of insurers are doing. We've completed that process, and all of those things factor into our thinking around risk appetite.
I'm not sure that I can add too much more at the moment, but we're comfortable as we look at how we set risk appetite, set our capital targets, manage our balance sheet against that.
Thank you. Can I ask around Consumer Data Right, and how IAG's you know, is gonna be using consumer data, right? Because from the outside, it looks like it's an opportunity in the sense that you can now get your hands on, you know, banking transactional data and understand and engage your customers much better. But on the flip side, also, it seems that, you know, something like a price comparison website or things that are trying to do the same, something similar could be in a position to streamline price comparison going forward. How are you thinking about, you know, the consumer data rights and journey?
Yeah, sure. I mean, maybe I'll divide that into two. I'll just ask Julie to make comment on the competitive landscape, which I think is one of the questions. Neil, I might ask you to come in also on just the asset that we have within our organization around data and some of the value that we see around that. Julie, maybe-
Sure. I mean, we've been looking at the Consumer Data Right for a number of years now. Through our NRMA app that I referred to in my presentation, we've got the ability now to dynamically manage consent, identify a customer, allow them to, you know, to change their preferences, and that's a big part of positioning us well for the Consumer Data Right when it comes in. We've been working really closely, actually, with some of the advisors that have advised the banks on how to establish and set up these processes and practices. We feel we're really well positioned.
I don't really see it so much as a threat, as a really big opportunity for our business to bring another cohort of customers to us with better insight than we've already got, and combine that with what I think are pretty world-class insights that already exist within our company that, you know, much of Neil's team has helped us unlock over the last couple of years. Neil, do you wanna add to that?
Yeah. Thanks, Julie. I think we've invested heavily over the last many years to establish the data asset for the company. As you heard from Julie and Amanda in particular, the breadth of the relationships we have with customers in both Australia and New Zealand is we have some really interesting and quite unique insight. The plan really from here is that the Enterprise Platform work we're doing is to ensure that we can expose that data to our internal customers and directly to our external customers in an appropriate way with the right governance mechanisms and the right level of control. That's some of the capability that Julie described in terms of the loyalty platform, our consent capability to make sure we do that in an appropriate way. I agree with Julie.
This is an opportunity space for us and we need to make sure that we use the governance and controls we've got in the company to do that appropriately.
Thank you.
Thank you. There are no further telephone questions at this time.
Okay. We have two questions on the web from Dougal. "Thanks, Michelle, on the reassuring words regarding various quota shares given some recent debate. Can you please remind me on the status of the Berkshire Hathaway standstill agreement? Will the new quota share also include a standstill?" Michelle.
It wouldn't be appropriate for me to talk about go-forward terms, but I think what I would call out is we don't envisage any material change to the terms of the quota share agreements that need to be renewed over the period. The standstill remains in place, but I can't talk to the specifics. I don't think, Nick. I'm not sure if we publicly disc-
I think, yeah, I think we have.
Okay.
I think, Dougal, the question's around the original deal in 2015, part of that arrangement was there was a cap in relation to ownership, capped at 14.9%. Actually, Berkshire's ownership has only moved a little bit since 2015, which was during the capital raising in November. You know, whether or not we, well, I mean, we haven't sort of started working through how that works with any sort of renewal, but I think you can assume it would be the same, would be the logic. The second question from Dougal is around various quota shares need to be renewed over the period of your margin guidance.
What assumptions have you made in your margin guidance? I mean, I'll answer that quickly that we've just assumed, as I think we've talked about today, that those quota shares are just part of our capital platform. They're part of our company going forward. The economics are part of that 15%-78%, so essentially unchanged and like for like with how we're funding the company today. I think I've got no more questions online, but I've got two more questions on phone. Is that right?
Thank you. Your next question comes from Kieren Chidgey of Jarden. Kieren, please go ahead.
Thanks. Just had a follow-up question for Julie in regards to the new ROLLiN' brand. We last saw IAG introduce an online brand a bit over 10 years ago in Buzz Insurance, and that business was closed down, I think, at the end of FY 2012. Just wondering what's gonna be different in this, and what lessons were learned across the organization last time that enable this uptake to be more successful in your mind?
Sure. I mean, I actually had a lot of involvement in Buzz Insurance in the early days, and I think there's a lot of capability in that business that you see spread actually around our organization today, in particular, some of the digital assets that were built and some of the way that the product was constructed. ROLLiN' is a little bit different, so we're really positioning ROLLiN' in a very different digital world at a digitally astute customer base being the younger generation. So we're really targeting a very specific demographic. We're also not trying to build a completely independent business here. It's very important that ROLLiN' works with NRMA. We're not trying to build a competitor to ourselves.
We're trying to build a complementary business so that we can take a ROLLiN' motor customer and introduce them to an NRMA home product at an appropriate time. What we're doing is leveraging all the smarts and capabilities of the IAG Group. We're using the, you know, the claims technology that Neil's team has built over the last numerous years. We're using our in-house technology. It would be crazy for us not to leverage that, what we think are better, more sustainable repair costs, and where we're really focusing our energy, and I hope you can see that in some of the branding, is on that experience in capturing the attention with subscription-like products that we know younger people love.
We see it as a really different proposition, you know, and the learnings from Buzz Insurance are how we've actually taken that across the company.
All right. Thank you.
Thank you. Your next question comes from Siddharth Parameswaran of J.P. Morgan. Siddharth, please go ahead.
Siddharth, am I there?
Hello, can you hear me?
Are we-
Sorry.
Hi.
Sorry. Can you hear me?
Yeah.
Yes.
Siddharth, we can hear you now.
Yeah. Hi. Sorry. Apologies. Just two quick questions. Just, cyclone reinsurance program, if you could just comment on what that might mean for your business and your strategy over the next couple of years.
Yeah, sure. I mean, I'll make some comments and maybe ask Julie as well. I mean, what the government is doing is introducing some sort of a funding mechanism for the reinsurance aspect of cyclone risk across Australia. You know, we're still going through the detail of the design of that, and how that's really gonna play out in premiums. The aim is that for domestic property and for small business, that there is the element of reinsurance that we buy at the moment externally comes from the Australian government, and that the theory being that that would be at a more affordable price to IAG than what we can purchase reinsurance externally from the global markets.
Therefore, we reflect that reduction in cost of reinsurance into our pricing for cyclone-affected risk in across Australia, but there are certain regions obviously that are higher than others. In relation to, I think, Sid, your question around market disruption, is that advantage, disadvantage? What does it mean for IAG? Julie, jump in normally in your business.
Sure. I mean, just to probably build a couple of extra comments. I think if you look at the cost of the way that we end up having to price cyclone insurance across Australia, a lot of it of that is predicated on the cost of capital. They're input costs, not necessarily perils costs to start with, and they're quite volatile. They tend to be quite reactive post-event. Fortunately, we haven't had one for a while, but they tend to be quite reactive post-event because that business is being ceded through reinsurance all around the world. A big part of what the government is looking to achieve here are longer-term stable prices that allow the market to be more competitive. If the market's more competitive, so will we be.
We see that as an opportunity to potentially bring our brands to regions that we haven't been as highly represented in the past.
Okay, great. Okay, thank you. Just one final question, just on New Zealand. Just, Amanda, just the adjacencies that you're considering, what are they? Are they related to GI?
Yes. Yes, Siddharth, definitely. We're looking at mainly how do we actually help manage our repair costs, but also how do we continue to build relationships with customers and retain them as loyal customers for us. They're the kind of two key areas we're looking at. At this point, our Repairhub is the key one, and we've just finalized the third opening of our Repairhub site. That's going well.
Thanks so much.
Thank you. There are no further questions.
Okay. Thank you. Thank you, everyone who's joined us on the call this morning. Before we conclude, I'd just like to make some closing remarks. What you've heard from Jarrod on how we're gonna achieve AUD 250 million upside within our Intermediated business here in Australia. You know that now within our direct business here in Australia has launched its growth plans. We're taking NRMA Insurance national and launching ROLLiN', you know, to become a serious player in that youth market. What Amanda's done is reminded us about the quality and stability of our New Zealand business and the opportunities that we have here. Our Enterprise Platform simplification is progressing, and with results already achieved in channel shift, automation, and digital, and there's more to come.
You know, we know that claims optimization and supply chain efficiency are a common thread across all our businesses, and you heard from everyone talk about that today. We have the scale to use these to bring around some real financial benefits for IAG. I'm super proud of the team that I've assembled to make all of this happen, of which you've seen some of them today. The whole team I'm proud of, and of course, we're I look forward to sharing more of our progress with you when we bring our results to the market in February. Thanks again, everyone, for your time today.