Results presentation for OUTsurance Group for the six months ending 31 December 2022. We'd like to take you through a slide deck. I'm Marthinus Visser, Group CEO, and I've got Jan Hofmeyr, Group CFO with me. Let's kick off, and we'll start with some of the macroeconomic trends and just how these impacted on our operational performance. The first one you can see there is CPI. As you can see, there's been a steep step up over the last two years, and that obviously impacted on claims cost and claims inflation in turn, as well as on premium growth.
We had some tailwinds as a result of the high claims inflation and premium inflation, but we also had some headwinds that we had to navigate in terms of claims cost. If we then consider interest rates, we can see there that the context there is that in the last year, it stepped up significantly. This provided us with a tailwind, especially so in Australia where it came off a very low base. Hopefully it'll settle at a new normal, which is more sustainable and that the era of cheap money has come and gone. Lastly, maybe to just look at the exchange rate there.
We've seen some faster deterioration of the rand relative to the Australian dollar in the last year, that's obviously also provided a bit of a tailwind in terms of the Youi numbers. We'll provide a bit more context around that later in the presentation. To look at the key operational themes, we will start with OUTsurance South Africa, with OUTsurance Personal. The first one there being the escalating premium inflation, in response to the claims cost pressure. I think it's fair to say if you look at our results, they've been quite resilient, I think we probably reacted slightly faster than most of our peers in response to the escalating claims inflation.
In terms of unit growth, I mean, for context, OUTsurance Personal in terms of units, we do now have estimated around 20% market share. As such, you're more reliant on economic growth. If you overlay the pricing action which we've taken, unit growth has slowed down a fair bit. At the moment our growth is more weighted towards premium inflation for OUTsurance Personal as opposed to unit growth. It was pleasing to report that overall growth recovered to close to 8%, which is pretty much in line with where it was pre-COVID. We think in the long run this is a sustainable level.
As we move through the inflation cycle, the mix between unit growth and inflation will probably swing back a bit towards unit growth. In terms of the claims cost, we did note a number of headwinds over and above the claims cost inflation. We saw a fast normalization of vehicle accident claim frequency. In the corresponding period we still had some notable vehicle claims savings on the back of the lockdowns which weren't present in the current reporting period. Other headwinds which still persevered in South Africa was the wet weather, the higher load shedding, higher vehicle theft of expensive vehicles and then also the higher reinsurance cost which contributed to claims cost overall.
Overall, that's the context of the operational themes for OUTsurance Personal. If we were to look at OUTsurance Business, we previously reported our focus on reaching profitability and target margins for OUTsurance Brokers. It's pleasing to report that we made really good progress in this regard with the operating loss of OUTsurance Brokers reducing ZAR 199 million-ZAR 100 million in the reporting period. Premium inflation also played a role here in the OUTsurance Business results. Because of our much lower market share here, we still saw strong unit growth, so we're less reliant on economic growth in this business unit.
For context, we estimate our market share in the commercial market in South Africa around 4%, and as such we still have some very good runway left in this channel. That improvement in the loss was on the back of improved cost ratio as well as an improved claims ratio. OUTsurance Brokers remain on track for our guided monthly break even by middle of calendar 2023. If we were to look at OUTsurance Life, this is the one where the result is not so exciting. We can report that we still saw strong new business growth in the funeral segment, especially in the Shoprite channel. Unfortunately, the volatile yield environment caused a large policyholder liability movement, which negatively affected the income statement result.
We are confident that with IFRS 17, this volatility is likely to be reduced. We also saw some continued investment in funeral and the tied agency, although we do this in a measured and incremental way. Lastly, our VNB margins were negatively impacted by our higher policy acquisition costs. The real reason there is that over the COVID period, we saw elevated demand for life insurance products, which now have sort of normalized. As such, we will have to right-size just the acquisition investment there to make sure we still achieve our VNB margins. That is the key operational themes for OUTsurance South Africa. To look at Youi. First, Youi Direct. We saw significant premium inflation there.
If you remember the inflation slide relative to historical norms in Australia, they've seen a much bigger increase in inflation than what South Africa saw. Apart from general inflation, they also had the high natural peril losses in recent times associated with the wet La Niña cycle, the increase in the cost of reinsurance, higher retention levels. However, in the last six months, weather-related claims was significantly better, and this definitely provided a tailwind in terms of the results for the last six months. That said, we made very good progress in terms of achieving pricing adequacy on the Youi Direct portfolio, especially that home portfolio.
As such, we're also noting their moderated unit growth, which is more weighted towards the home portfolio, where we need to get pricing adequacy in light of the more recent natural peril claims as well as the cost of reinsurance and inflation. Youi BZI. We realized an operating profit for Youi BZI. Again, it must be noted six months is a short period, and it did benefit from the lower weather-related claims. Great progress has been made on Youi BZI also in achieving pricing adequacy. As such, the attritional loss ratio also improved significantly. You can note there the improvements in the overall claims ratio. New business growth moderated slightly as guided before.
Two factors there is really the increased competition in the broker channel, but also the strong pricing discipline to get the right adequacy, and the fact that BZI is quite heavily home insurance-weighted. In terms of Youi CTP, the launch into South Australia contributed to a higher operating loss. We continue to see strong premium growth overall, but the claims experience remains volatile because of a quite a low claim frequency but high claim severity. We specifically had one very large claim in the reporting period which over and above your retentions also feeds into your profit commission on a book like that. Those are the operational themes for Youi.
We can step over to the premium performance. We look at the graph with the green bars on the left. I think first thing to note there is the CAGR, the compound growth rate, over the last 10 years of 13.2%. That is sort of also in line with our guidance of low to mid-teens. As noted, the last year we exceeded that quite a bit with some tailwinds which is quite pleasing, that 17.4% growth for the last year. Yeah, as guided, we think the long run run rate's more likely to be low to mid-teens. Important to also note that the strong growth there sort of from 2012 - 2015 was driven by strong growth at Youi.
Once that growth sort of moderated, we were fairly flat for three years or so, we had to reinvest in our core businesses, but also in our new channels and products. That is really starting to pay dividends and hence the accelerated growth that you can see there. We switch over to the right-hand side, you can see the annualized new business premium that was up 8.6%. I think the bigger context is also important. Over the four years from 2018 - 2022, we literally doubled that. The new channels and products are now in the base and hence the slower growth from this point.
We remain optimistic that we can achieve further growth from that level, especially in OUTsurance Insurance Brokers, where we guided we only have 4% market share of the commercial market. Also at Youi, where we only have 5% market share of the personal and motor market and 4% of the home market. Still lots of runway there, but the current priority, obviously, to get that OUTsurance Broker book first to break even and achieve pricing adequacy in the Youi home books. That gives good context around the premium growth performance. If we then step over to the operating profit for OUTsurance Holdings. First thing to note there is over the 10-year period compound growth of 11.2%, that's slightly short of the premium growth.
Important to note that we still have a few new ventures which are coming through their J-curves, which should boost earnings over the next few years. If you take that into account, I think the gap between operating profit growth and premium growth should narrow. Worth noting here, there's a few long-term trends to understand here. If you look at the period from 2015 - 2017, 2018, you would have remembered there was fairly flat premium growth over that period. That positively impacts your profit though, as you can see here, because you have less first year business, but also we had less J-curves of new ventures.
From 2019 onwards, we had the J-curve of the new ventures, which negatively affected the operating profit, but also more first year business, which also affects your claims ratio. The third important trend to note here is your weather cycles. While you, we know in the Southern Hemisphere, you have El Niño and La Niña cycles. The period sort of from 2015 - 2018 was quite a dry period. That supported the profits. 2019, we had the bushfires and subsequently that we had quite a wet La Niña cycle. In 2019 and 2020, we had still quite good reinsurance protection courtesy of our low retention levels.
2021 with a reset that actually negatively affected us as we had to reset to the new retention levels. That said, with our pricing discipline and our capital planning, we have allowed for that and priced for that, and we think we are in a more resilient position. While the lower weather-related claims certainly boosted profits in Australia, we think even if we had a more normal year, we would have been in a much better position courtesy of our pricing discipline and our capital planning. Going forward, as I said, with the some of the new ventures coming through their J-curves, we also expect stronger growth going forward. That is the operating profit result there. Overall, quite pleasing.
The 65.8% is a bit higher than normal, as you can see, because of the low base we came off the previous year. If we look at the net retained natural peril losses, and you overlay that with the previous slide, you see it's quite closely correlated. Quite high natural perils there with hailstorms, sort of 2013, 2014. Drier patch, and then moving into the La Niña cycle. As I mentioned, 2019 and 2020, still good protection from lower retention levels, which then normalized in 2021. We believe we are in a much better position from a pricing adequacy and capital planning position right now. Maybe also important to note here is just there's a general upward trend here as well.
That is because of climate change. I mean, if you look at South Africa, even the South African one, while it's much lower than Australia, the general trend there is upwards. That is likely to mean more volatile earnings in the long run. We do see it as a positive because it means there's real growth, especially in home insurance, and it will increase the share of GDP for insurance as a whole. If we look at our investment in growth initiatives, we've previously guided that we aim to keep this at sort of 10% inside 10% of operating profit of existing ventures. Last year, it blew out a bit.
That said, it's probably better to measure this over a full year as opposed to a six-month period where volatility can be quite high. That said, it's pleasing to see that we're back inside the 10% and significant progress there with OUTsurance Brokers. As I said, the loss reducing from ZAR 199 million-ZAR 100 million, and the BZI actually turning a profit for the six months. Significant progress that's been made there. I think a key thing to highlight is we're also announcing our intention to expand for our international expansion into the Republic of Ireland. In terms of the investment there, the size of the investment and the burn rate, we plan to stay inside that 10% in appetite inclusive of the Irish investment.
The reason for that is really that the Irish burn rate will only kick up at the moment that most of these current ventures have started to turn a profit. That's important guidance just around the impact of the Irish expansion. Then a last one before I hand over to Jan. It's just the premium revenue and earnings diversification. You can see there that there was quite a strong move in that the Youi share of gross written premium increased from 53% - 56%. As we mentioned, the exchange rate, but also the strong growth of Youi in dollar terms played a role there. Then if we look at the right, the Youi contribution to normalized earnings jumped to 39%, which is significantly stronger.
As we mentioned, the Youi earnings tend to be more volatile. Courtesy of the strong growth at Youi and the turning the new ventures to profitability, we do expect a bigger contribution from Youi going forward. That is the earnings diversification. I'm going to hand over to Jan.
Thank you, Marthinus, and good morning. I'll be taking you through some of the more detailed financial results for the group, as well as the operating entities. Starting off with our consolidated results. We refer to the OHL Group as the OUTsurance Holdings Group, which is unaffected by the listing transition. Then we have OHL Group, which is the old RMI entity, which was subsequently renamed to OUTsurance Group Limited in December. When you look at the graph on the right, this provides us with a movement reconciliation of our earnings, when you compare our interim results in 2021 to the results we are presenting this morning.
As illustrated, the large numbers to reflect on is the big increase in the Youi Group's normalized earnings result of ZAR 523 million being the main catalyst in driving up our group, the OUTsurance Holdings Group's normalized earnings result for the six months. We'll also reflect on the results of OUTsurance Life, which has generated a loss for the six-month period. Also important context to this set of results is that in the comparative period, we still accounted for Hastings, our indirect investment that we had in Hastings at the time, which obviously was disposed of in December 2021, therefore, there's a non-repeat on associate earnings. When you look at the graph on the right, this is a reconciliation of the OUTsurance Holdings Group earnings to the listed company earnings.
As you can see, there is an element of minorities, and this is due to the fact that the OGL Group owns 90% of the OHL Group. Secondly, there is a portfolio of remaining assets which we group together as central and treasury company assets. Those consist of the AlphaCode fintech investments, the RMI Investment Managers investment, as well as investment income being generated on surplus assets. We are seeing a declining profile in our head office cost at OGL Group level, and we will see a further declining outcome in the second six months of the year. The rest of the presentation will focus on the OHL Group's results.
The first slide here just looks at our group KPIs with gross written premium up 17.4% and annualized new business premium up 8.6%. Marthinus did speak to the moderating prospects of new business premium growth and the factors related thereto. Our operating profit was up 665.8%, and with OUTsurance increasing its operating profit by 13%, and Youi's operating profit increasing more than fivefold for the six-month period. The normalized earnings result of 36.3% would've been 45.3% if we exclude the contribution from the Hastings investment from the comparative base.
The group's claims ratio of 55.3% is lower from the 58.1% we had in the comparative period, and that's on account of the improved claims ratio performance at Youi. The insurance cost to income ratio of 29.8% benefited from the strong top-line growth as well as good cost containment across the group. Our combined ratio was 85.5%, which implies an underwriting margin of 14.5% across the group. Our normalized earnings also increased significantly from 23.6% to 29.1%. We'll talk to those dynamics in one of the following slides. The dividend declared by the OUTsurance Holdings Group is up by 3.3%. That is lagging our normalized earnings growth. We'll unpack the reasons for that in a following slide.
Investment income, as Marthinus mentioned, has been a big delta in our performance for the six-month period. In South Africa, we did, however, not realize an increase in investment income when you compare us to the December 2021 period, and that's due to the fact that we had lower unrealized fair value gains in our equity portfolio, which offset the benefit that we saw in interest income generated. A reminder to our audience, we're mostly exposed to variable rate interest bearing instruments in South Africa with around 15% of our investable assets invested in equities. At the Youi Group, we saw a significant change in our investment income profile, where our investment income increased from ZAR 21 million - ZAR 129 million for the six-month period.
The important to note here is that also provides us with a shock absorber on our income statement, you know, if there is weather volatility, and this is due to the fact that investment income generated on our balance sheet is uncorrelated to weather patterns. Therefore, this is a useful change in the dynamic of our earnings mix at Youi. In looking at our normalized earnings reconciliation, that follows a fairly similar pattern that Martinus also highlighted earlier with regards to operating profit. We also, as mentioned, saw the substantial increase in our normalized return on equity, where we realized 29.1% in Group normalized ROE. We also measure operational ROE, and this is the aggregate of the ROE generated by our operating units.
The group ROE does vary because of the fact that we're keeping surplus assets on our balance sheet at a group level, and those surplus assets are earmarked to increase our stake in Youi, as well as to deploy capital to support the expansion into the island venture. Over time, though, we do expect, as the surplus capital converts to actual capital utilization, that the gap between operational ROE and normalized ROE would close. I'm going to move to OUTsurance's results. OUTsurance here represents our short-term insurance business in South Africa. OUTsurance contributes 40.4% to the group's gross written premium and 59.2% to the group's operating profit. Gross written premium for OUTsurance was 8.7%.
As Marthinus mentioned, we did have a big tailwind from inflation playing through into our premium growth, with moderating a new business growth in our personal lines business, albeit that our OUTsurance Business still continued to add healthy policy count. Net and premium was up at 8.6%. Our operating profit was higher by 13.1%. When you look at the operating profit, OUTsurance Personal increased its operating profit by 0.8%. That lower operating growth number is associated with the higher claims performance or higher claims cost that we saw in the six-month period. OUTsurance Business had a big turnaround, increasing its operating profit from ZAR 14 million - ZAR 128 million.
Pleasingly, when one looks through the channel composition of that result, is that OUTsurance, the business broker channel decreased its operating loss from ZAR 199 million-ZAR 100 million for the six-month period. We are on that path towards achieving monthly profitability as we guided towards midyear this year. Our central costs is elevated in absolute levels due to the fact that we did see higher growth in our share-based payments following the stronger share price performance of the OGL group in the six-month period, and therefore that excess growth is allocated to central costs. Investment income was lower by 26.9%, as I mentioned in the previous slide, that is on account of the lower unrealized fair value gains that we saw on the equity portfolio.
Headline earnings result was up by 1.5%. That differential between the headline earnings result and the operating performance is explained by the lower investment income, particularly the investment income achieved on shareholder funds. Our claims ratio was 53.4%. Cost to income ratio, slightly down at 24.8%. The improvement in the cost to income ratio is associated with us achieving more economies of scale in the OUTsurance Business broker channel on account of having a static headcount with regards to the sales force and with our focus on driving that business towards profitability. The combined ratio for OUTsurance is a strong 80%, which implies an underwriting margin of 20% for the six-month period. OUTsurance Personal. We'll focus on these results as being the biggest contributor to the group's earnings.
Here we saw gross written premium growth of 6.6%. If one ignores the first-gen homeowners book, which is in run-off, then the gross written premium grew by 7.9% for OUTsurance Personal, and that's mostly associated with inflationary growth. Our net earned premium was up by 6.2%. Again, if one ignores the homeowners cover book, that result would have been 7.5%. Our claims ratio for OUTsurance Personal, as mentioned before, is up due to the factors of normalizing claims patterns on motor vehicle accidents, the effects of load shedding, as well as increased vehicle theft. Here we saw an increase from 51.6% to 52.4% for the six-month period.
The cost to income ratio for OUTsurance Personal is on a upward trend, and that's increased from 20.1%- 20.8%. The reason for this upward trend in the personalized cost ratio is due to the fact that an increasing mix of new business is being written in the OUTsurance Brokers channel, which has a high inherent acquisition cost ratio compared to the direct channel. The combined ratio for OUTsurance Personal was 75.3%, implying an underwriting margin of north of 25%. Right. We'll move to the Youi results. For Youi contributes 56.2% of our group's gross written premium, and for the six-month period under review, 47% in operating profit. When we look at Youi's gross written premium, in Rand terms, very strong growth of 24.4%.
When we consider that in Australian dollar terms, the growth in gross written premium was 18.4% for the period. Net earned premium, 28.5% up, and here we seeing the strong earn through of the strong growth we had in the previous financial year, as well as reinsurance costs reducing as a percentage of premium, albeit still increasing in absolute terms. The operating profit for Youi Australia was ZAR 887 million, and as illustrated there, the big catalyst is the increase in Youi Direct's operating profit from ZAR 295 million - ZAR 930 million. BZI pleasingly realized a loss, profit of ZAR 37 million compared to the loss of ZAR 96 million in the year before. No doubt assisted by the relatively benign weather claims that we experienced in Youi for the six-month period.
The increase in the loss for, in the CTP book from ZAR 30 million to ZAR 80 million, that's associated with the team at Youi incepting its business, its CTP business in South Australia, as well as a high claim that we saw in New South Wales, which is a tragic event with multiple lives affecting that claim. Investment income generated ZAR 122 million, and as I mentioned before, that's on the back of the significant rise in the market interest rates that we saw over the six-month period. Headline earnings results of ZAR 651 million, also up more than five-fold for Youi in the period. The claims ratio at Youi is the big driver, and that's down from 62% - 55.9%.
The cost-to-income ratio of 31.1% benefited from the improved top-line growth and higher premium inflation over the course of the last year. The combined ratio for Youi was 86.6%, implying a 13.7% underwriting margin for the period. OUTsurance Life's results were challenging for the six-month period. That's on account of the fact that we had a big change in the long-term yield movements in the six-month period which affected our operating results negatively, and particularly so in the underwritten life book. OUTsurance Life does have a relatively immature book compared to our peers, and therefore that business is more susceptible on the longer duration changes in the yield environment.
As Marthinus mentioned, we do expect a lower earnings volatility in terms of how IFRS 17 deals with changing yields and how that plays through on our income statement. As a policy, we do hedge the interest rate risk in our portfolio. We measure that on an economic basis with a high degree of effectiveness required. Unfortunately, in the accounting results, that flow through from economic effectiveness versus reporting effectiveness is not always clear and somewhat uncorrelated. Therefore, we have seen some of a somewhat of a big change in our investment income or a change in our policyholder liability for the six-month period. Our operating loss position was ZAR 100 million, and that compares to ZAR 51 million in 2021.
In that comparative period, we also had the effects of COVID and the Delta wave playing through in our financial results. The funeral business is profitable overall when one considers the Shoprite book together with the Funeral Direct book. The Funeral Direct book is still loss generating, and we are planning to move that business towards monthly profitability over the course of the next 12 months. The unwritten life business, as mentioned, mostly impacted by the yields, generated a loss of ZAR 102 million. Included in this loss is also our strain from starting the tied agency force, and therefore a loss of ZAR 57 million was generated in the six months under review. The headline earnings result for our OUTsurance Life was ZAR 68 million for the year or six months, compared to ZAR 20 million, ZAR 1 million in the period before.
The embedded value result for OUTsurance Life was up 4.6%. Here the yield environment also weighed on the adjusted net worth component of the OUTsurance Life embedded value, whilst we are still seeing good positive growth in our value in force. That's on account of the strong premium growth that we are seeing and strong policyholder account growth that we are seeing in the funeral business, where particularly the expansion of the Shoprite channel has provided pleasing new business volumes in this six-month period.
The VNB margin for OUTsurance Life, we have a mixed target of 10% for OUTsurance Life on VNB margins and higher per policy acquisition costs due to a slowdown in new business sales across the unwritten life as well as the Funeral Direct business did weigh on the VNB margin in this six months compared to the comparative period, which was much higher than our 10% mark. When we then move to capital and balance sheet, pleasingly, all our entities as well as the group is trading well above its target multiples, and these multiples are presented before the interim dividend payment. There are big capital commitments for the group, and as a result, we are keeping a surplus of ZAR 1.7 billion for two main drivers.
The one is a planned acquisition of a further 5.3% stake in Youi from a founder shareholder, and we expect this transaction to be completed by October 2023. We currently do have optionality to acquire that interest, and that is being executed on. We also then have set aside a substantial amount of capital for our entry into the OUTsurance Ireland market. This capital provides a good support for the initial capital requirement, but this business will be further incrementally funded in the group. We're following the principle in terms of funding the island venture that to the extent that we build up a J-curve, as well as the capital required for OUTsurance Ireland will be funded from retained earnings over time.
There is somewhat of a mismatch in terms of the upfront support that's required for a licensing application and how capital is actually consumed in the Irish venture over the course of the next five to six years. Therefore, the funding differential, the funding mismatch, will be funded through temporary debt on the balance sheet. We have stated before that we don't believe permanent debt on our balance sheet makes sense due to the fact that we are a high ROE generative business, and our earnings are well correlated to cash earnings. Therefore, but we do have appetite to have temporary debt on our balance sheet to fund the mismatch between the funding profile and the capital consumption profile of the Irish startup.
That also explains these factors, why we are holding back some of our interim dividend and why the interim dividend is growing slower compared to our earnings growth, is a pattern of earnings retention required to support this business. We also saw that from retaining our surplus capital initially, that the exchange rates have deteriorated markedly in terms of also pushing up the rand requirement for our two commitments in Youi and OUTsurance Ireland. The two graphs here illustrate the interim dividend for the OGL Group, the listed entity. Here, due to the structural changes related to the listing transition, the interim dividend for OGL is increasing by 66.7% to ZAR 0.568 per OGL ordinary share. We look at the graph on the right, which is the OHL interim dividend.
As I mentioned, this dividend is illustrated here in absolute terms. This dividend is increasing by 3.3% with a reduction in the dividend payout ratio from 85.1% - 64.5%. When we consider the dividend payout ratio, the factors that I mentioned in terms of how we'll be funding the Ireland venture through, ultimately through capital retention, has an impact on this dividend payout ratio. We do believe that the dividend payout ratio can be sustained at least 60% over the course of funding the Irish entity. We're also managing the Youi balance sheet with a high degree of prudence at this point in time.
As we are entering the mid-year reinsurance renewal for Youi, we are cautious, given the observed hardening reinsurance markets and how that may impact Youi's catastrophe retention level in that business. Right. I'm gonna hand over back to Marthinus, who'll talk around the ambitions to expand into Ireland.
Thank you, Jan. Yes. I mean, as a group, when thinking about our sustained growth in the long run, from time to time, I mean, you have to ask yourself, do we believe we need to stick to our knitting and focus on short-term insurance, or do we also wanna become like a platform player and do banking and health and all the other financial services? We have clearly decided that we need to stick to our knitting, and that was also the intention behind the wider set of products and channels that we started to activate sort of four years ago. This expansion into the Republic of Ireland is then just an extension of this process of seeking out markets where we can apply our core skills and therefore stick to our knitting.
When it comes to our core skills, nothing is probably closer to that than personal lines short-term insurance. That's why one of the reasons why the Republic of Ireland was identified. A key part of the objective is also just when looking at our current runway. We do believe we still have strong runway in our insurance business, as well as at QE over the next five years. This expansion is really more to drive the growth and diversification over the five to 10 year period, where we want to sustain that low to mid-teen growth rate. Important, as I mentioned, the diversification also, with Ireland being Northern Hemisphere, less correlated to your normal weather cycles that affect both South Africa and Australia.
Looking at the sort of the reasons why Ireland. I mean, through our previous international expansion learnings, we've developed quite a good set of criteria for international expansion. We literally looked at all the potential markets, Ireland really stood out as ticking all the boxes that we deemed to be important. Some of the key attributes to consider is firstly the market size. We believe the market is big enough to move the dial relative to our existing operations. Maybe just for a bit of further context, the Republic of Ireland has 5.1 million people. When you compare that to say South Africa, it's important to note that, I mean, our product is really a middle-class product.
As such, in terms of a more apples for apples comparison, our middle class is probably around 7 million people. Another factor to take into consideration is that bodily injury is covered by the private sector, so that's part of your standard motor comprehensive premium. That makes the average premium in Ireland a fair bit higher than, for example, South Africa, where bodily injury is covered by the Road Accident Fund. A further bit of context is just that the largest competitor in Ireland has a larger motor book than OUTsurance in South Africa. That gives you a bit of context about the size of the opportunity. Obviously, it's also not so big that we would be betting the farm.
As we guided previously, we aim to stay inside that 10% of operating profit being invested into our aggregate losses in new ventures. That's good context around the market size. Also, important for us is the direct channel is well established. That's sort of where our core distribution skills lie. Certainly, the intermediated market presents a longer-term opportunity. Importantly, the Irish market also has a good record of shopping behavior, because if you aim to grow organically like we do, it is important that clients have to have a behavior of shopping around for their insurance. Also, the market has a history of profitability, I think that is key.
I mean, if everyone else in the market are making losses, it would be arrogant to think that we can go in there and make profits. A critical factor is also the success of foreign entrants in that market. In some markets, you see no successful foreign entrants, and even if it's not legislated, that might point to structural limitations. We have verified this in Ireland, and as such, the success of foreign entrants there is a key factor for us. Also to note is Ireland's economy is growing well, and there's definitely prospects for real growth with Ireland as the sort of the English entry point into the E.U. now. It's certainly well-positioned going forward. A key factor for us is also a stable and familiar regulatory environment.
You don't want to go to a country, make a major investment, and then once you start to have success, the rules of the game change. That's why the stable regulatory environment is such a key consideration for us. As I mentioned previously, the size of the financial commitment, we won't be betting the farm, and it's well within the group's appetite for growth. Certainly our previous success in Australia played a key role here, and that's why we believe it presents a real opportunity to group to apply our key skills in terms of pricing and distribution in that market. An insurance license sync process is underway, and we are planning for a market entry in the first quarter of 2024.
That is the details on the planned international expansion. To briefly look at the operational outlook for the remainder of financial year 2023. We certainly expect the global economic uncertainty and challenging conditions to prevail. That obviously provides a headwind in terms of unit growth, especially for OUTsurance Personal, where we have such large market share. As mentioned, courtesy of some of our new channels and products where we have low market share, we remain optimistic for growth even in these challenging economic environments. Inflation, we also expect to persist and not blow over quickly. As such, key to that is pricing discipline to ensure ongoing rate adequacy.
As Jan also mentioned before, the higher interest rate environment is positive for our Group's earnings base, and it provides us with earnings that's not correlated to natural peril claims. Pricing discipline remains key, and I think we've demonstrated it well with the resilient performance of our core businesses in light of the headwinds, but also the progress being made in bringing our new ventures to profitability. We will continue to drive for scale and profitability in those. As we come through those J-curves, it should definitely allow the earnings base to grow faster than premium. A key watch item as Jan flagged is the hardening reinsurance market.
While we already taken our round of medicine at the previous renewal, market conditions still seem very hard because of some international considerations over and above even our fairly good claims experience on our catastrophe treaties. That's a key watch item, and that's a key reason for the prudent management of the balance sheet. We'll continue to focus on matters inside our control. While as we said, it's a difficult operating environment, we'll continue to focus on delivering better on price, service, and trust, 'cause ultimately, that's what our clients and prospective clients expect of us. Lastly, I think we've demonstrated good capital discipline and simplification in our structures. In the reporting period, we managed to dispose off OUTsurance in Namibia, as well as Coreshares.
Our long-term view is certainly to prevent a very simple structure with our operating entities in South Africa, Australia and Ireland. Simple businesses with strong cash generation, and strong growth prospects. That's the group outlook in a nutshell. I think we can move on to questions then.
Thank you. We'll take questions from the audience first, and then we'll move to submitted questions. Just reminding the audience that you can also submit questions for us to view on this side. Thank you. Let's open for questions. Any questions on that?
Thank you. Okay. At this stage, we have no questions on the line.
Thank you very much. We will then move to submitted questions. The first question by Warwick: To what extent has the hardening reinsurance market affected these results in both South Africa and Australia? And how material do you expect the reinsurance rate increases to be in the next financial year?
I think Warwick, in terms of guiding on the impact that the hardening markets had on our results, so first of all, pricing for higher reinsurance cost is a part, a big part of the inflationary story. More so at Youi in terms of needing to pass on higher reinsurance costs onto our premium line. We did not see any major natural perils events. The reinsurance markets present itself, the hardening market, in two forms. The one is higher expenses in terms of premium, and the second is higher retention if there are catastrophes. In this six months, we did not have any large catastrophe events, and therefore that higher retention was not realized in either South Africa or Australia.
In South Africa, we did see that our reinsurance cost as a percentage of premium has increased by around 0.5%, that is one of the net impacts of the hardening reinsurance market on the [Archerson's] South Africa result. I would say in short, it has been fairly muted due to the fact that we did not have any major catastrophes. When you look at, as Marthinus just mentioned, we do expect the reinsurance markets to continue to be quite hard if we observe the global challenges currently and also where the 1st of January renewals came out globally and as well as in Australia. We don't know yet. We are going through that process. We're not quite sure yet in terms of where exactly our reinsurance program and rates will land, for this next renewal.
If I can just add to what Jan said. In Australia, we've seen that material increase in our retention from sort of a ZAR 10 million level - ZAR35 million dollar level. That mitigated the actual rate increase. As Jan implied, I mean, you retain so much more of the risk yourself. What the reinsurance market is really telling the direct market out there is that they want us to retain a much larger portion of the natural peril losses, and they'll only be there for the really big events. That's why it's so important to take this into account in your capital planning and your pricing.
Right. We have a second question around the Shoprite partnership in terms of what the expectations of future growth in that channel. Warwick, we do part of the success in terms of achieving higher premium growth in that channel is having more in-store sales agents. We still see opportunity to ramp up our footprint of the number of in-store sale agents over the next while. We do still expect strong growth coming through on the Shoprite channel. There's then a question from Zaheem in terms of how many tied agents do we have currently, and how do we expect to forecast those. Essentially, we've kept the number of sale agents and the [Archerson's] broker unchanged, Zaheem, that is in line with our focus to bring the business to scale and profitability.
Expanding that, the size of that agency force is very much dependent on incremental justification to do so and ensuring that we can expand profits profitably going forward. we certainly have an appetite to grow that channel and reinvest profitability into growth going forward.
Currently, that channel is around 600 agents. Yeah, once we reached breakeven, we'll obviously assess the ongoing prospects, and we certainly believe there's prospects to increase that further. It was important for us to achieve that breakeven point as guided.
There's a question from Warren Riley on the expected earnings trend from our entry into the Irish market, and what this looks like in the next couple of years. He recalls that Youi took three years to reach after-tax profitability.
Yes. Warren, I mean, as we guided there, we'll aim to keep, and that's certainly the plan, inside that 10% of operating profit of the group for as those losses ramp up. I think a key part also is to give assurance that, in line with our culture of pricing discipline. I mean, we won't go into the market and start a price war. We'll try and price as accurately as possible to price for the right risk. Subject to that, we need to have successful distribution. If we are gonna fail, we're gonna fail because we don't get scale. There won't be a massive blowout of writing unprofitable business. That's certainly not how we approach our startups.
That's why we're confident that we can keep it inside that sort of appetite. If I recall correctly, I think Youi was closer to five years since launch before we had that consistent profitability. That said, the average premium in Ireland is a bit bigger, which do provide you with a bit of help in that you need fewer clients to reach breakeven because of the higher per client revenue. I think that 10% is probably the best guidance we can give you.
There's a question from Roger Williams. In the life business, you have been operating for over a decade, still seem subscale and profits are patchy. Is this line worth continuing? What are the ambitions for this segment?
Roger, yes, I mean, we are a business that's subscale in our life insurance business. In 2018, we did express the appetite to grow into market segments which we could not access through the direct model. Those is the funeral segment, where we are seeing good success in. Also into tied agency distribution, also ultimately IFA distribution. The biggest segment of the underwritten life market, we cannot access economically through the direct model. We think the direct model has got limitations in terms of its growth profile. That was the initial first seven or eight years focus for OUTsurance Life was focusing on the direct channel.
We do believe that, to play effectively in this market, we do need to expand our face-to-face distribution capabilities, as well as play into the funeral segment, where we do see higher inherent profitability. Those two strategic catalysts will hopefully drive better economies of scale in OUTsurance Life over the next couple of years. These are significant investments being made. As with any insurance line, there is a J-curve period that we need to step through to ultimately achieve that scale.
If I can add to that. I mean, as we mentioned, the impact of the yield movements, we are optimistic that patchiness will hopefully reduce in terms of the profitability if you get more stable accounting. Also, I mean, if you look at the more recent premium growth, as a result of ventures like our Shoprite channel, I mean, it has been quite a bit stronger. We certainly don't have any ambitions to roll out life insurance in the likes of Australia or Ireland. I think the funeral market in South Africa presents a specific opportunity, provided you have the right, low-cost distribution. We'll remain disciplined and make sure that we achieve the required returns in that, in that segment.
Roger, you are asking around the outlook for the sales of the holding company investments, other than RMI Investment Managers. I think that we have given ourselves a three-year period to look at monetization opportunities in that portfolio. There's no rush to sell any of those assets. We'll look at those, each disposal on its merits and ensuring that good IRR hurdles are achieved, given the investments that have been made into those areas. We do expect roughly a three-year window of monetization around those assets. On RMI Investment Managers, there we are progressing with negotiations with Momentum Metropolitan team, and those negotiations are progressing well. There's a question from Barron around what is our underwriting margin target, and can we shed some color on the performance of OUTvest investment platform?
In terms of the underwriting margins, that varies by product, because it also depends on the price elasticity and the market and the cost of distribution. There's a number of factors playing into that. We've previously guided that in CTP in Australia, we aim to achieve an 8% underwriting margin. In Blue Zebra, we aim for a 10% underwriting margin, and in Youi Direct for a 13% underwriting margin. In OUTsurance on the brokers, we aim for a 15% underwriting margin. If you put all of those together, you would have seen we had a combined ratio of 85.5%. At a group level, 14.5%.
I think our long-term target is, will gradually shift as we grow faster in some of the segments with slightly lower margins than OUTsurance Personal. I do think we prefer to rather provide those individual underwriting margins as opposed to a composite one, because the composite one is subject to the change in the weightings. Overall, I think the important point to note is our 20% return on capital hurdle for individual investments in rand terms. In hard currency that total is 17.5%. When we look at our underwriting margins, they derived to make sure that they at least achieve those hurdle rates for our business. I think that's some key guidance around that.
OUTvest remains a subscale business. We have seen an accelerating path of asset generation in OUTvest over the last six months. The fortunes of OUTvest in terms of achieving that scale is tied very much to our build-out of tied agency distribution as well as IFA distribution in the life insurance business. Therefore, we still believe that we need to access the right client segments for OUTvest through those distribution initiatives. We do expect that as those distribution initiatives ramp up, that OUTvest will also see further growth in its AUM or asset gathering profile. There's a question from Jared. Does the lower dividend payout guidance include Holdco disposal plans? Jared, no. As mentioned, we do expect that the OUTsurance Holdings dividend will flow through the OGL structure going forward.
To the extent that there are disposals at an OUTsurance Group Limited level, we will, in all likelihood, distribute those profits as special dividends, given that it's related to the ring-fenced legacy portfolio of assets within the previous structure. We would like to keep our ordinary dividends closely aligned to our operating performance in the group. Right. I think we have run through the questions. I will just check if there are any other questions on the call. Thank you. At this stage, no further questions on the lines. Thank you. All right. Well, thank you very much. I think we can then wrap up. Thanks for joining us this morning.
Thanks, everyone.