Good morning, everyone. Thank you for the opportunity to present to you on the OUTsurance Group Limited audit financial results for the year ending 30 June 2025. As per normal, I'll be taking you through the operational review, and then I'll hand over to Jan for the financial review, and then I'll wrap things up at the end with the outlook and the strategic focus areas. To start with the operational review, the macroeconomic trends, if we look at the CPI per financial year across the three regions where we operate, we can see CPI continued to come down over the last year. Historically, we've indicated that your CPI and claims inflation, and therefore premium inflation, were loosely linked in the past. However, in the more recent history, we've actually seen claims inflation and therefore premium inflation being quite a bit higher than CPI inflation.
The reason for that is just structural changes like climate change and urbanization affecting the claim frequency side. On the claim severity side, we see more expensive technology being fitted to homes and to cars. I think solar panels also affecting the average claim size, and that caused claims inflation and premium inflation to be quite a bit higher than CPI inflation. Over the last year, we have seen claims inflation and therefore premium inflation moderating a bit, and we expect that to continue into financial year 2026 as well. That'll weigh down a little bit on premium growth in the financial year 2026. It's important to point out, though, that long term, we do expect claims inflation and therefore premium inflation to remain above CPI inflation, and that is because of those structural changes which I mentioned: climate change, urbanization, and technology.
Therefore, we do expect short-term insurance's share of GDP to continue to grow into the future. If we were to look at interest rates, we can also see across all three regions, interest rates came down the last year, and we expect that to continue to come down into financial year 2026, although we don't expect it to go down all the way to the just post-COVID levels. Now, that does negatively impact our investment income, but as you'll see later in the presentation, we are quite resilient to that for two reasons: one being investment income being a smaller part of our overall income, and the second one being just that our technical reserves, our premium reserves, and our claims reserves are expected to grow faster than premium income.
In terms of the exchange rates, we can also see against those three major currencies, we can see the rand strengthening over the course of the last year. I think the Australian dollar is the most material one for us, where we saw the rand strengthening by 4.2% against the Australian dollar. That would have caused a headwind in terms of both our premium growth and our profits coming out of Australia because of the strengthening of the rand. We're not currency experts, but we wouldn't expect that to happen in every single year going forward. That's just a bit of context around the macroeconomic trends. If we were then to step into the operational view per country, and we start with South Africa. First of all, OUTsurance Personal. If we look there, premium inflation continued to support growth but moderated over the course of the year.
New business performance was encouraging despite challenging economic conditions. The claims ratio benefited from favorable weather experience and lower working claims. Overall growth for OUTsurance Personal came in at 9.4%. If we were to exclude the FNB Homelines Book, which is in run-off, the growth came in for OUTsurance Personal at 11.1%, which is the strongest in quite a while, and it includes some really nice organic growth. We're very pleased with that result. In terms of profitability, we can see the operating profit for OUTsurance South Africa Personal being up 32.9%. That benefited from the lower claims ratio, but also from an improved cost ratio, which is really important. That cost ratio dipped below 20%, which is a really world-class cost ratio. If we were to look at OUTsurance South Africa Business, the brokers delivered encouraging margins on the back of diligent underwriting and the channel growth.
The direct segment experienced limited new business growth opportunity, but as we've always flagged, that is a bit of a niche market, quite profitable. That's also the reason why we started the OUTsurance brokers, to unlock more runway for OUTsurance Business. Claims performance benefited from benign weather conditions and favorable working claims, similar to Personal Lines. The overall growth in gross written premium was 10.8%, and the profitability was up a very strong 56.6%. That benefited from the lower claims ratio, but also OUTsurance brokers gaining scale, and therefore the cost ratio coming down. If we were then to look at OUTsurance Life, we saw a strong operational focus on growing a simplified business through product pricing and distribution optimization. Growth in value of new business written increased by an impressive 118.2%, and both channels contributed to this.
The VNB margin improved from 12.5% to 19.8%. It is important to note that 19.8% excludes the share-based excess share-based payments. Profitability was up a healthy 65.9% growth in operating profit, and that was also supported by positive yield movements. If we were then to look at Australia, Youi Personal, we saw really encouraging unit growth delivered by the direct channel, but it was also aided by moderating premium inflation, as explained earlier. Pricing action in the BZI broker channel resulted in slower growth. In fact, we saw gross written premium shrinking there, and that was on the back of the poor results in prior years to get that book to profitability. Claims ratio and profitability of all channels benefited from the benign weather in terms of natural perils we saw in the last year.
Positively, the retained loss from ex-tropical cyclone Alfred leveled off at $5.1 million, which was lower than initial expectations. The direct channel experienced a gross written premium growth of 28.5%, which is really strong in Australian dollar terms. If we look at the profitability, we saw 63% growth in operating profit, and that was driven by this strong organic growth, but also the improved claims ratio and some reinsurance cost savings. If we were to look at Youi Business, we saw a slower growth rate there because the BZI broker channel was the more dominant channel in the business segment. Similarly to Personal, the pricing action to move that channel to profitability slowed down the growth. The overall growth in gross written premium came in at 6.5%. Importantly, the direct channel experienced growth of 31.6%. Profitability was up 175%, but that must be noted is off quite a small base.
If we were then to look at UE CTP, we saw strong growth driven by an increasing market share in New South Wales. Gross written premium grew by 73.3%, and net earned premium more than tripled. That was as a result also of the discontinuation of the quota share in New South Wales. As flagged earlier, we also discontinued the quota share that was in place in South Australia from July 1, 2025. That should continue to support net earned premium growth in the channel. If we look at profitability, the operating loss increased for the past year. The main driver there was really the claims frequency, which increased across the industry. For that reason, we did see pricing action and prices rising across the industry from the beginning of calendar year 2025.
While that is something important to sort out in the short term, in the long term, it is positive as it increases the revenue per client. Also weighing down on the profitability is just the new business strain, and that's caused by the fast growth. In your accounts, you have to have risk margins and claims handling expenses, which causes a bit of a drag when you're growing fast. That's the context around UE CTP. If we were then to step over to Ireland, OUTsurance Ireland delivered against the business plan targets for the year. The startup is gaining traction as a new challenger insurance brand. All our assumptions about the market so far have really turned out to be accurate and positive. We're still very comfortable with the choice of market. OUTsurance Ireland recorded $269 million in gross written premium for the first full year.
The operating loss incurred was $448 million. Important to point out, in that $448 million is a $128 million onerous loss reserve, which is just a reserve you have to put up if the combined ratio is over 100%. That causes a sort of a timing difference. We expect that reserve to unwind as we approach break even. That's really inflating that operating loss by $128 million. As flagged previously, we also expect 2025 and 2026 to present the highest point of the J curve for OUTsurance Ireland. Monthly break even is still expected to be achieved in financial year 2029, i.e., five years from launch, as we previously indicated. If we were to look at the property and casualty new business premium performance, we can see there that it was up 17.1% compared to the previous financial year. It's important to note that there were two headwinds affecting this.
The first one is the stronger rand to Australian dollar, the exchange rate, as I flagged earlier, which was stronger by 4.2%. The second one was even more significant, and it's just the BZI broker channel where new business volume slowed down in response to the corrective pricing action taken there. Given that we discontinued this channel, it's probably better as an indicator of our actual run rate if we were to exclude BZI from the numbers. The new business premium growth for the group would have been 28.6%. Youi was the most significant contributor there, but we also saw very encouraging growth, as I highlighted earlier, in South Africa. OUTsurance Ireland will continue to contribute more and more also to this run rate.
If we were to look at the property and casualty insurance gross written premium performance over the last 10 years, it's always good to look at these 10-year pictures as it does tell a story, and it speaks to some of the learnings we've had in the business. If you were to look at those first three years, you can see gross written premiums were really flat. At the time when Youi's growth levelled out sooner than anticipated, it took us a bit of time to reset. From 2019 to 2022, we had a strategy where we were selling a wider set of insurance and even some financial services products through more channels. While this did improve the growth a bit, it didn't always result in the best top line to bottom line conversion.
From 2023 onwards, we really pivoted further to simplify and focus the strategy on our core products and on organic growth. That really revitalized the organic growth in our core businesses, and we see that sharp acceleration there. The positive about that is also that it is a high quality of growth because in those core businesses, we see a really strong top line to bottom line conversion. If we look at it there, the standard number we publish is obviously the 16.8% gross written premium growth. If we were to exclude BZI, that number would have been 19.8%. If we were to calculate it in constant currency terms, that number would be 23%. That 23% is probably a fairer reflection of our ongoing businesses' run rate for the past financial year. Important to note that Youi now represents 64.9% of the group's gross written premium income, quite significant.
If we were to look at the operating profit performance over the last 10 years, first of all, if we look at those first three years, you can see the operating profit getting stronger. That corresponds to the period where our premium was quite stagnant. What happens there is really you don't grow, and as such, you have less first-year business making your loss ratio better. That boosted profitability, but also we didn't invest that much into growth, which also makes your cost ratio a bit lower. Lastly, it was a period of El Niño, quite dry weather, so low natural peril claims, which also boosted profit. If we look at the period from 2019 to 2022, that dry period really came at the end of that dry period.
We saw those significant bushfires in Australia, and it was followed by a La Niña period with lots of wet weather and storms and floods. That peaked in 2022 with the extreme floods in KZN, but also in Queensland. That La Niña weighed down on the operating performance, but it's also fair to say that some of those business ventures that were further from our core also negatively contributed to the operating performance. As such, at the end of 2022, we pivoted and we simplified the strategy. We discontinued and sold some of the non-performing and non-core products and channels, and we moved over to this focus strategy to focus on our core. That, as I said, really revitalized the organic growth, but also led to the vastly improved top line to bottom line conversion you see there.
If we were to look at the current financial year or 2025, you can see a jump in operating profit to 28.3%. Yes, that did benefit from tailwinds, and as we highlighted earlier, the tailwinds that benefited us there were the favorable claims environment, both in Australia and in South Africa, but also the elevated investment income. That said, I think two things specific to OUTsurance, two headwinds which we had, were the stronger real share-based payments, which we had in South Africa, which depressed the OUTsurance operating profit in South Africa. Neither of those do we expect to continue into the future.
Because of that, we're quite optimistic that FY25 doesn't represent a high point for us, and there's good prospects to continue the strong earnings trajectory, especially considering our strong organic growth, which we see in the business, and the fact that our underlying cost ratios are also showing positive trends. That fills us with optimism around the execution on this trajectory. I've already spoken to the onerous loss for OUTsurance Ireland and explained that that's just a provision which will unwind. There's the full $448 million, of which $128 million was explained by that onerous loss reserve. If we were to step over to the natural perils exposure, you can see, as I explained earlier, 2022, which was quite a peak for us in terms of those natural perils.
If you look at the last year, you can see the positive natural perils, both for OUTsurance South Africa and Youi, and naturally the group. Specifically, OUTsurance South Africa was quite low if you compare that to the 10-year history. If you look at the chart on the right, you can see OUTsurance South Africa's working claims ratio coming down quite materially. That was on the back of good execution, but also the normal industry tailwinds in terms of claims experience, which I explained earlier. What's also positive on the chart on the right is Youi experienced a positive prior year claims run-off again, which speaks to the reserving strength there.
In the long run, if you look at that volatility, especially what we saw in 2022 with the high natural perils and the reset of the reinsurance attachment points, we do expect that volatility to be lower than typically what we saw in 2022 for a few reasons. The first being improved reinsurance terms. We now add the third year into the third year with the same attachment points. If you consider our fast growth, it actually means our attachment points are coming down in real terms, which will reduce volatility, all other things being equal. We also do ongoing refinement of our underwriting, especially with regards to flood. Every time there's a big natural perils event, we compare our own losses of that event as a portion of the market losses relative to our market share in those areas. We generally tend to compare quite favorably around that.
That's a key focus area for us. The last one is just geographical diversification, especially in Australia. That is improving, whereas previously we were more concentrated in Queensland. We see now better growth on a national basis. The last slide of the operational update is just to look at the earnings profile and the impact of our new ventures on our overall earnings profile. We've said previously we have appetite for the new venture losses up to 10% of the full year operating profit of our business. You can see there in 2021 and 2022, we were outside of that. Part of it was the depressed earnings because of the weather, but part of it was also those ventures, non-core ventures, which didn't perform as we wanted, and hence we discontinued those. From 2023 onwards, you can see us being inside that 10% guidance.
We are confident that we can remain inside that 10% as we flagged. Going forward, OUTsurance Ireland is expected to be the main contributor there, with a peak of the J curve expected in FY2025 and FY2026. The black part of that last bar is represented by UE CTP, and we also expect that to turn over time. Positively, we can see here OUTsurance brokers, which we were able to bring through the J curve, and that is now sustainably profitable. That also contributed to us staying inside that 10% for the last three years. That is the operational update. I'm going to hand over to Jan for the financial update. Thank you.
Thank you, Marthinus, and good morning to everyone. I'll start just to recap on the major themes which have impacted the group's financial results, already mentioned by Marthinus. From a premium growth perspective, we've seen the good organic growth momentum across the group and also the higher for longer premium inflation outcome. From a claims perspective, we spoke about the favorable natural perils experience, as well as the improvement in Youi's prior year reserve run-off, which has now returned to expected levels. From a reinsurance perspective, we've seen lower reinsurance expenses for the year and generally improved terms. Investment income, we've seen sustained higher interest rates, which were higher than expected for the year, and also the impact of favorable equity markets and the strong liability growth, given the organic growth experienced across the group. There were two major factors on the expense side.
Firstly, we've seen good structural improvement in cost efficiencies across the segments of the group, notwithstanding the investment that's being made to stimulate organic growth in our core operations. We've also then seen the higher share-based payments expense, which I'll unpack in a following slide. Marthinus also mentioned the impact of the stronger rand in how Youi's earnings and financial volumetric numbers are translating into the group results. The rand was 4.2% stronger against the Aussie dollar for the year. I'm going to next look at the group results, looking at OUTsurance Group Limited, which I remind our viewers is the listed company, and OUTsurance Holdings being the 92.8% held subsidiary of OUTsurance Group Limited. The first slide here illustrates the significant gain in the group's market capitalisation over the last year, where we've seen a 69% increase in the share price.
This has translated into a R1.3 billion expense on the employee share option scheme, which is the legacy scheme which finally closes out at the end of September this year. The purpose of this slide is to illustrate to our viewers that if the ESOP was already translated back into the CSP, which is the replacement scheme, then our expense base would have been just over R1 billion less, assuming the same market conditions for the year. We want to guide shareholders here that there is a big base effect on the expense that's going to play through from the 2026 financial year. Looking then at the consolidated numbers for OUTsurance Group Limited, the listed entity, we've seen 33.7% growth in normalised earnings to R4.728 billion.
The normalised ROE improved from 26.2% to 33% on the back of the strong earnings performance, but also more capital efficiency coming through following special dividend payments in the previous financial year. The normalised earnings per share was up 32.8% to R3.062 a share. We are paying a 36.2% higher ordinary dividend for the full financial year at R2.376 a share, with a final dividend of R1.49 a share. It is good to note that the dividend growth is slightly higher compared to the growth in normalised earnings, and this is also due to a strong dividend performance of a portfolio entity held in the RMI Treasury Company, which is Polar Star, which delivered an exceptionally strong earnings performance for the year.
We remind shareholders that our strategy with regards to ordinary and special dividends is that ordinary dividends will follow the earnings profile and the volatility profile of our earnings over time, with a fairly range-bound dividend payout ratio. Special dividends are funded from the impact of asset monetisations or any once-off adjustments to our capital base across the group. This year, we are paying a special dividend of R0.331 a share, and that R0.331 a share is made up by the net capital surplus that arose from our disposal of BZI on the 30th of June this year, as well as surplus capital which arose from asset monetisations in the RMI Treasury Company. Looking at the second half of the table, from an OUTsurance Holdings perspective, we've seen 29.6% growth in normalised earnings.
Pleasingly, the minority interest, which is only up by 10.5%, and here we remind shareholders that OUTsurance Group Limited took up a 2.3% additional stake in OUTsurance Holdings in the first quarter of the last financial year following the closure of OUTsurance Holdings' share trust. The Treasury Company delivered R156 million in earnings, and as noted, that's due to a strong performance by Polar Star. Looking then at the slide with our normalised earnings history, in here we provide a five-year history of the group's normalised earnings, which still includes the earnings generated from our historic investment in Hastings, which was sold in December 2021. Looking at the ROE, the ROE of OUTsurance Holdings has improved substantially from 30.7% to 36.4% on the back of the stronger earnings result.
With the strategic simplification that Marthinus mentioned, we are also changing our ROE range from 25% to 35% to 30% to 35%, and that's due to the fact that we also have our new investments that's emerging out of their J curves and starting to make positive contributions to the earnings profile of the group. Looking at the investment income performance, we have seen in absolute terms that our investment income that's been generated in the group has increased, and that's owing to the strong growth that we've seen in liabilities, as well as the sustained higher interest rates. In the back of the presentation, we do provide a breakdown of the full investment income that includes our investment income on capital and the float for those who are interested to understand the full picture. This slide only shows us the investment income component that rolls into our operating profit.
Notwithstanding the increase in the absolute size of investment income generated, we have seen its contribution to operating profit reduce in this financial year, particularly at Youi, where we've seen the strong underwriting component of operating profit increase to 83.9%. Moving then to the OUTsurance South Africa results, this is the short-term insurance operation in South Africa. First of all, we look at OUTsurance South Africa Personal. Here we've seen strong gross written premium growth of 9.4%, and if we exclude the HOC book, the partnership with FirstRand, which is running off, gross written premium grew by 11.1%, given the elevated premium inflation, but also good organic growth coming through both the direct and broker channels. Operating profit increased by a strong 32.9%, owing to the reduction in the claims ratio from 49% to 44% this year.
As Marthinus mentioned, that's due to the favorable weather, but also good experience on the working claims ratio. The expense ratio, pleasingly, has decreased from 20.4% to 18.8%, and that's on account of very good cost discipline across the South Africa Personal Lines business that's opened up better economies of scale in this business segment. Looking at OUTsurance South Africa business, a key component of our growth strategy is the OUTsurance Brokers channel, which contributes 58% to the gross written premium in OUTsurance business segment overall. Here we've seen gross written premium increase by 10.8% for the year, operating profit increasing by 56.6%. As Marthinus also mentioned, OUTsurance Business Brokers is now sustainably profitable, and that's been a key component of driving the operating profit higher by 56.6% this year.
The combined ratio improved from 85% to 78.5%, and that's on the back of a substantial improvement in the claims ratio to 46.7%, but also the cost-to-income ratio reflecting the improved economies of scale in OUTsurance Brokers, decreasing to 31.8% this year. Moving to the UE group results, this slide is also a slide that we noted in the interim results presentation, illustrating the contribution that BZI has made to UE's gross written premium, as well as operating profit position over the last two financial years. As illustrated, BZI's contribution to gross written premium has decreased from 18% in 2024 to 14% in 2025. We are calling out to shareholders that this book is now running off, and that run-off process will be substantially complete by the end of the 2026 financial year.
Therefore, considering UE's growth from the 2027 financial year onwards, it should be reflective purely of the performance of the direct channel. In this year, BZI contributed 7% to the operating profit of UE versus a loss of 13% in the previous year. Looking at UE's group results, and this cuts across all products and all channels, we've seen in rand terms 19.7% growth in gross written premium to R25.16 billion. If we measure that in Australian dollars, then the gross and net earned premiums grew by 25.1% and 29.5% respectively. If we exclude the BZI book, then the direct channel across the personal and business products grew by 31% in Australian dollars.
Operating profit was up a strong 52.1%, aided by the favorable weather outcome, also the improved reserve run-off, and the fact that BZI improved from a loss position to a profit position in this financial year after taking price action to improve margins in that business. The combined ratio delivered was 88.4%, with a 29.9% cost ratio. If we adjust for a reclassification that we have made from claims fulfillment expenses to management expenses this year, then the core cost ratio actually improved from 30.6% to 29.9%. We have seen structural improvement in UE's cost base, notwithstanding the investment made in the organic growth of the business. High investment income and lower reinsurance premiums also contributed to the strong operating profit result. Moving to OUTsurance Life. For OUTsurance Life, we've seen a very strong organic performance.
OUTsurance Life delivered an operating profit of R438 million, with the largest improvement in the operating profit position being driven by the Life Direct segment, which is direct sales of underwritten life as well as funeral products. The yields for the year were a tailwind experienced by OUTsurance Life, and if one considers the overall impact of yields, it lifted the operating profit result by R160 million for the year. Notwithstanding that tailwind, we've seen very good organic growth in terms of new business premium written, as well as a significant adjustment to the expenses in this business following strong cost discipline and simplification of the exit of the face-to-face channel in the 2023 and 2024 financial years. The Life Direct business grew operating profit to R546 million. The funeral partnership, which is still seeing good organic growth, delivered an operating profit of R52 million for the year.
This business is also impacted by the strong share-based payments expense, which is captured in the central segment of R160 million loss for the financial year. The normalised earnings result was up 66.2% to just under R350 million. From a metrics perspective, a value metrics perspective, we've seen strong growth in the contractual service margin, as well as the embedded value, and as mentioned earlier, a very strong VNB margin coming through due to the positive mix effect of funeral business in OUTsurance Life in aggregate, but also a good pricing discipline that's been executed on over the last two years. Moving to dividends in the capital position, all the group's entities are in very strong capital positions. Here we illustrate the SCR ratio on a pre-dividend basis, and as shown, the group's SCR ratio is 2.3 times against a target of 1.5 times.
During the course of the year, we settled the revolving credit facility that was used to fund the original LAMPE capital requirement for OUTsurance Ireland. The remaining capital contributions, which are more incremental in nature, will be funded through earnings retention, and that will be done over the course of the next five years. This year, as illustrated earlier, we're paying a special dividend in OUTsurance Holdings, as well as OUTsurance Group Limited that relates to the monetisation of the non-core assets. The dividend payout ratio for OUTsurance Holdings was 76.7%, which is in line with the prior year, and for OUTsurance Group Limited, we've seen a marginal increase in the dividend payout ratio to 77.6%, owing to the dividend that's been received through RMI Treasury Company. I'll now hand back to Marthinus to give us the outlook and strategic focus areas overview.
Thank you, Jan. Yes, to look at the outlook and strategic focus areas, first of all, the OUTsurance Group is well positioned for sustained premium growth. As we said, despite the lower premium inflation, we have still large runway for organic growth in our core markets, courtesy of our low market share and growth momentum. To give you a good example, the APRA stats in Australia came out just the other day, and in a period of less than two years, our market share of motor insurance there went from below 5% to 6.5%. Clearly, there's still significant runway for growth, and we have excellent momentum. Also, while we do expect premium inflation to moderate, I previously indicated also because of those structural changes like climate change, we do expect premium inflation to remain higher than CPI inflation.
The next focus area and theme there is really strong top line to bottom line conversion, and this is enabled by our strategy to focus on our core products and channels, as well as organic growth. An ongoing focus area for us is really cost efficiency. It is key for us to preserve margin, but still while making premiums as competitive as possible. We know affordability everywhere is a key concern, and that's why efficiency in terms of our cost ratios is so critical. Delivering on the OUTsurance Ireland business plan, we noted that OUTsurance Ireland is an important long-term growth and diversification catalyst for the group, and we aim to achieve break even in the next four years, i.e., five years from launch as originally indicated.
In terms of the OUTsurance broker channel in South Africa, that is now sustainably profitable, and there's large runway for us given our low market share in the face-to-face channel in South Africa. You can see in all three countries, we're not that reliant on economic growth because we're growing off low basis with lots of momentum. If we were to look at interest rates, we do expect them to moderate further, and that has a negative impact on investment income. As Jan also illustrated, the investment income in comparative terms is not such a large part of our overall income, and we also expect those insurance liabilities to grow faster than our premium income. We explained previously in South Africa, 99% of premiums are paid monthly, and as such, you have quite small reserves, whereas in Australia it's 50/50.
In Ireland, only 20% is monthly, 80% is annual, allowing larger premium reserves on which you can earn investment income. Similarly, on the claims reserve side, writing more long-tail bodily injury business in Australia and in Ireland also causes the reserves to grow faster at a group level than our premium. System modernisation is a key focus area for us. We're in a multi-year project to roll out our in-house developed core system called Stratos. The positive side is Ireland is running 100% on the new platform. When it comes to our core systems, we are definitely a build shop rather than a buy shop. As we flagged previously, we think for us there's some key advantages. One is that we're able to customize much more our product and processes than what would be possible with off-the-shelf systems.
We also believe we're getting better management information, which is a key driver in our superior execution. What our own core system also allows us is to automate more, and that is a key driver of efficiencies. Lastly, we also see that overall the cost profile of that system is just lower than off-the-shelf systems. Another focus area is the reduced earnings volatility, as we showed with those retained natural perils. Through our unchanged reinsurance attachment points, our improved underwriting, and our geographical diversification, we believe we can reduce the volatility compared to what it was in 2022. The last one there is the group structure simplification, as Jan highlighted. We want to complete the non-core monetisation transactions, and as a last step, execute the roll-up of the OUTsurance Holdings minorities.
That should be welcomed by all shareholders, a simpler structure as we always guided on, and also getting perfect alignment between senior management and shareholders. That's the wrap of the group outlook and strategic focus areas. We're very happy to move over to the question section now.
Thank you, Marthinus. Let's first go to the call to see if there are any questions online.
We have a question in the queue on the conference call. The first question we have is from Michael Crusellis of UBS Investment Bank. Please go ahead.
Hi guys, thanks very much for the time. You've previously guided to 15% top line growth over the next five years. I'm just wondering if that's still relevant, and if it is, should we assume that Australia is roughly a 15% growth rate while Ireland effectively makes up for the fact that South Africa will be sub-10%? Is that fair?
Yes, just to give a full context, previously up to about a year ago, we guided low to mid-teens as our normal growth rate, assuming a normal premium inflation cycle. Last year, we upgraded it to say over the next five years, we're comfortable with mid-teens. We're absolutely still comfortable with the mid-teens. Obviously, in that calculation, we don't want to give per country. A key part of our success is pricing discipline. We don't want to paint ourselves into a corner. However, given the runway we've created, we're quite comfortable with the mid-teen guidance. Obviously, in that calculation, you also need to take account how big Australia is, so it does pull up the overall run rate more. Overall, very comfortable with that mid-teens, assuming a more normalised premium inflation environment, courtesy of our strong organic growth.
Great, thank you.
Thank you. We received some submitted questions, which we'll talk through. The first one is from Radebe Sipamla. Can you please share the strategy to replace the GWP that came from the BZI broker channel going forward, given the meaningful contribution to GWP it made, despite being a lower margin business?
Yes, I mean, we've never been about top line only. It's about the bottom line and making our ROE hurdles. I mean, we learned some lessons through that process with the BZI broker channel. You have weaker pricing power in that channel, so to grow profitably is much harder. Also, when you have inflationary spikes, it's much harder to pass them on. As our corrective action proved, the volumes really came down, which is an illustration of the low pricing power compared to our direct channel or our OUTsurance agents. That premium in rand terms, roughly about R3 billion per annum. If you look at the current growth run rate in the group, and especially at Youi, we'll quickly replace that.
Yes, FY2026 growth will be a bit lower as that is in run-off, but given the current run rate, Youi is not expected to have negative premium growth despite removing that. I think the most important part is we're replacing it with a higher quality growth there. Overall, no, we're not too concerned around that R3 billion premium. We'll make it up quickly.
We have three questions from James Stark. The first is with regards to the Youi business. Showing impressive premium growth, can you sustain the current premium growth momentum, and what factors sustain such a growth tempo?
Yes, just to James's question there, it must be noted that Youi's direct commercial offering is not as mature as the South African one. It's growing off a lower base. It's still got much more runway for growth, but high % growth will be possible, just courtesy of growing off such a low base and benefiting from the overall momentum of the Youi brand, which is provided by the Personal Lines, as well as the CTP segments. We've also seen that direct channel growing in the business segment in Australia over the past few years.
The broker channel in South Africa, please comment on what you think the market share is here and where you think it can get to in the medium term.
Yeah, the market share is interesting how you define it. It depends on your target market. What we've really learned is that as you go up into the bigger corporate business, the margins get thinner and thinner, and it's more the broker and the reinsurer that's retaining the bulk of the margin. We're really not targeting the very large corporate business, more SME and more the S and M parts of or S part of SME. Overall, we don't have a specific market share target there. We validate it incrementally, scale up the agency force, and see then at our target margins and target ROE, how big we can get that. That channel is well received. We're underrepresented, and I think a key point to make is also that it's not just commercial. It's definitely personalized as well because face-to-face is still strong in personalized in South Africa.
There's a fair portion of the market that's not willing to deal through the digital or call center channels, especially once their needs get a bit more complex, maybe two or three cars, two properties, then they prefer face-to-face. That's also what the OUTsurance brokers are providing us with, and that's why it's also supporting our organic growth in South Africa.
There's a question related to the impact of the 3% inflation target on the South African business in terms of its outlook for premium growth, claims costs, as well as customer affordability and persistency.
Yeah, I mean, as flagged earlier, there's a loose link between CPI inflation and claims inflation because that's not really going to change some of the structural drivers like climate change, urbanization, expensive technology being fitted to cars and houses. However, if CPI overall comes down, it should be positive for consumers. It should lower the overall levels of some of the input components of premium inflation. Yes, I think it'll bring premium inflation down a little, but one must understand those structural drivers which will keep it above CPI in the long run.
There's a question from Roger Williams in terms of what is left in the non-core asset portfolio. Roger, what we have in that portfolio is an investment in Intersect. We do disclose in our detailed disclosures that we have reached terms to dispose of Intersect, and we expect that disposal to be completed by the end of this calendar year. That is a material driver that sets the scene for the roll-up of the minority shareholders in OUTsurance Holdings level to an OUTsurance Group Limited level, and we'll make further announcements to the market in this regard. We will then retain after the roll-up, we will retain the stake in Polar Star, and then there's small investments which are linked to the earnout of the disposal of RMI Investment Managers and also the expected proceeds on closing out the Merchant Capital disposal that we sold in December 2024.
There is also a pool of financial assets in that portfolio, which currently plays the role of making a market in OUTsurance Holdings shares for any participants in the minority pool who wishes to dispose of some of the OUTsurance Holdings shares. There is a component of financial assets also still remaining in the makeup of the overall portfolio. There are a few questions with regards to OUTsurance Life, which I'll combine in an answer with regards to, first of all, the VNB margins being achieved in OUTsurance Life. I think important context is that the expense discipline that's been applied in OUTsurance Life has been a material contributor to the improving VNB margins, but also the mix effect of more funeral business and simpler life insurance products sold indirect that's driving up the VNB margin.
In particular, the ShopRite channel is a very important component for the long-term growth story of OUTsurance Life, and there we do see low acquisition costs whilst offering very affordable customer premiums being a key component to achieving high VNB margins in that funeral segment. Baron has asked in terms of the pattern of CSM release that we can expect in the life insurance business. Baron, on page 130 of the annual financial results that you'll see on the website, there is a table that shows the pattern of CSM release, and a rough guide would be that we expect about 17% of the CSM balance to unwind every year in terms of in-force business. There's a question from Tapelo on share-based payments. Would you say the cost would be $1 billion lower next year, all else being equal as you transition to the CSP? Yes, that's correct, Tapelo.
On that slide that we spoke to earlier, we give that indication that had we already been converted under similar market conditions, the expense would be R1 billion less. Naturally, that's not giving you a number for next year, but it's purely indicative to illustrate the base effect change that viewers can expect under similar conditions. There's a question from Roger with regards to why did the SA commercial broker channel slow down so much, and what is the outlook there?
Yes, as we flagged there, the key for us is that incremental validation, and we first wanted to bring that channel to profitability. As such, we kept the broker headcount fairly stable. Now that we're into constant profitability or sustained profitability, we started to gradually ramp up the headcount in that broker channel again. A bigger base effect and focus on first getting the bottom line and the loss ratio on target.
Fazan Lakhani has asked what is your outlook on investment income and our reinvestment yield, as well as the duration? Fazan, when we look at the assets that back the insurance liabilities, those assets are generally exposed to the money markets in South Africa. As well as in Australia, we utilize term deposits, and those durations are matched to the duration of the underlying liabilities. Marthinus mentioned earlier that we do expect obviously the longer-tailed element of our liabilities to grow more as we take on more CTP risk and bodily injury risk in Ireland. Those longer durations will be specifically matched with longer duration assets. Essentially, the yields that we are achieving are very much tied to the money market yields that's observed in the market, as well as the term deposit rates in Australia, where we don't often go beyond a 12-month period in terms of rates exposure.
We expect essentially our yield pattern to follow monetary policy in both Australia and in South Africa. There's a question around the break-even GWP for Ireland asked by Latabu. Latabu, we don't disclose the break-even policyholders or break-even GWP specifically for OUTsurance Ireland, but we do guide obviously that we expect monthly break-even to be achieved by the 2029 financial year. I think that completes the questions that we have seen. I'll just go back to the call to see whether operative, there are any further questions online.
We do have a question. The question is from Francois Dutoy of Anchor Stock Brokers. Please go ahead.
Hi guys, can you hear me?
Yep.
Thanks, Jan. The gross written premium growth at the interim stage from broker channels in South Africa was very strong. I think you gave us the exact numbers and you quantified it. I think it was 17.5%. Can you give us the number for the full year as well, please? That's the first question. A second discussion maybe from your side a bit in terms of that mix of personalized business in Youi. Just trying to get a sense of the runway you still have. My sense is that you're very big, or most of your business is in the motor insurance space, but how much scope do you have to grow into homeowner insurance specifically as well? You've started off into CTP, but maybe the opportunity in homeowners, how big is that still for you?
We don't get a line of business indication from you, but maybe just a discussion around that.
Thank you, Francois. I'll answer the first part of your question and then hand to Marthinus. The broker channel for the year grew just over 18% from a GWP perspective.
Yes, stepping over to the question relating to Youi, the biggest opportunity there is Personal Lines, and car is significant, but home is also very significant, especially considering the very large average premiums of home insurance in Australia compared to other regions. I indicated that based on the APRA stats, our market share for car in terms of gross written premium is around 6.5% now. Home is just about 4%. There's still significant runway in that channel as well. We do see the direct channel getting stronger and stronger in home as well. The reason is just because of the absolute size of those premiums, shopping behavior is rewarded. It's good for clients to shop around, as opposed to maybe 20 years ago, when most of the insurance would sit with a bank, the premiums were much, much lower.
This process of climate change and urbanization really ensured that home insurance became a much more significant part of people's monthly expenditure, and hence the stronger shopping behavior in that space. We definitely also see that as an opportunity for us.
Thank you, operator. Any further questions online?
We have no one else in the question queue.
Thank you. I think that's a wrap, Marthinus.
Thank you, Jan. Thanks, everyone. Thanks for your time. Much appreciated. Just over one hour. I think we did well, and we'll catch up again. Thank you.
Thank you, everyone.