NIB Holdings Aktie

Good morning, everyone, and thank you for joining us for nib's FY '26 Full Year Results. I'm Ed Close, nib Group CEO and Managing Director, and I'm joined here in Newcastle by our Group Chief Financial Officer, Nick Freeman.

Before we begin, I'd like to acknowledge the Awabakal people, the traditional custodians of the land we are joining you from today. I pay my respects to elders past and present. We are pleased to report a solid FY '26 group result with pleasing strategic progress, positive customer outcomes, a strong capital position and a more balanced contribution across our businesses. Our purpose of your better health and well-being continues to shape our strategy and guide our people to deliver sustainable value for our customers, shareholders and the communities we operate within.

nib is now a simpler, more focused and more efficient business with a clear emphasis on private health insurance and related services, supported by leading digital and AI capability, strong customer advocacy, our high-performing people and a disciplined approach to risk and capital management. This morning, I'll cover the highlights, segment performance and strategic progress. Nick will then take you through the financial results in more detail before I return to discuss strategy and outlook. So if we head across to Slide 6, our FY '26 highlights. It was a year of disciplined execution and meaningful strategic progress across the group. Group underlying operating profit increased 9.1% to $260.9 million, supported by strong revenue growth and improved operating efficiency. Net profit after tax was $186.9 million, ahead of expectations.

Our balance sheet and cash generation strengthened and this supported the Board's decision to increase the targeted dividend payout ratio to 65% to 75% and declared a final dividend of $0.21 per share, including a $0.05 special dividend.

A major feature of the year was the conclusion of the strategic review of nib Travel. Both sales transactions are expected to complete in the first half of FY '27, simplifying the portfolio, sharpening our focus and providing further capital management flexibility as sales proceeds are received.

Productivity was another key highlight. Our digital and AI program continues to scale, delivering $61 million of value. In Australian residents, we delivered record sales, strong customer advocacy and the net margin was managed in the 6% to 7% target range, while absorbing elevated risk equalization volatility and higher acquisition offer costs. We are also repositioning policyholder growth towards higher-value, more sustainable segments.

Our related businesses delivered a substantial improvement in strategically important adjacent markets. Underlying operating profit increased by $41.9 million to $86.1 million in these important segments, lifting their contribution from around 1/5 to around 1/3 of total group earnings. The results reflect another strong international performance, a rapid recovery in New Zealand and Health Services reaching profitability for the full year.

If we turn to Slide 7 and the group performance metrics. Top line revenue growth was strong, increasing 6.2% to $3.8 billion. And as the fourth largest health insurer in Australia and the second largest in New Zealand, we now cover more than 1.95 million health insurance lives across our core PHI segments. Pleasingly, the operating expense ratio reduced to 16.6%, down 110 basis points on FY '25. And this is particularly important within the result. It shows that productivity is now structurally embedded and flowing through to the P&L.

Across to Slide 8, to our Australian residents portfolio. The industry remains attractive and continues to grow. Industry hospital coverage increased by around 308,000 lives in the 12 months to March '26, reaching a record 12.8 million Australians. And with more than 15 million Australians holding an extras policy, this demonstrates the strong appeal of maintaining private health cover. Our value proposition continues to attract customers. We achieved more than 147,000 sales, up 4.3% and net switching remained beneficial to nib. Our policyholder growth was 1.9% and is expected to be broadly in line with the industry. We're now deliberately shifting growth towards higher value and more sustainable segments. 85% of net growth came through our target silver category, compared with 46% last year.

Our FY '26 policyholder growth outcomes reflect deliberate choices on pricing, product design and portfolio quality, including exiting uneconomic corporate groups and shifting away from lower-value cohorts. These actions have some impact on short-term lapse and churn, impacting net growth by approximately 60 basis points, but they're the right decisions to support sustainable growth, long-term affordability and margin quality.

We also see increased customer churn through broker channels, elevated by high promotional activity from competitors. Retention and lifetime value in our higher value segments are clear priorities for nib in FY '27. We continue to refine our channel mix, targeting acquisition investment more deliberately and reviewing partner economics alongside investment in the nib brand and direct capability.

Our customer proposition remains strong. Net promoter score was plus 32 and more than 70% of members are now digitally connected. Our First Choice network helped customers save $57 million in out-of-pocket costs. Our hospital payout ratio was almost 89%, well above pre-COVID levels and reflects the support that we continue to provide to members and the private hospital sector.

Disciplined pricing and productivity absorbed claims inflation and mix. Our gross margin is now at a sustainable level and net margins were well managed in the target 6% to 7% range.

I do want to spend a moment on 2 items that impacted the Australian residents margin, higher acquisition offer costs and claims inflation impacts as a result of elevated risk equalization volatility. Firstly, on risk equalization. nib's own claims inflation continued to improve in FY '26, moderating to 4.1%, excluding the New South Wales bed rate changes. Over the long term, our risk equalization outlook remains supported by the same structural drivers that we've spoken about previously. That is a younger membership base at nib progressively aging and deliberate growth in older and higher-value segments. These factors have historically improved nib's relative position in the risk equalization pool and we see no reason to believe that these long-term trends have changed.

However, risk equalization volatility in FY '26 was largely driven by industry claims inflation appearing to have accelerated, potentially reflecting a combination of catch-up activity, hospital contracting cycles and faster claims processing across the sector. And this narrowed nib's historical gap to industry and increased our risk equalization costs by about 10% and was about $10 million above expectations.

While we remain cautious on near-term volatility and have factored this uncertainty into FY '27 planning, the longer-term outlook remains constructive. If higher industry costs persist, then this can, of course, be considered in future pricing submissions, while a higher industry cost environment should enhance nib's overall competitiveness.

On higher offer costs, a material contributor to the increase was the industry clarification on the Australian government rebate treatment, which mean offers can no longer attract the rebate. The other contributors reflected a genuine step-up in promotional intensity across the industry. We saw elevated offer use along with nib's shift to higher premium silver products, particularly late in the year.

Given the environment, we intend to be far more selective in the use of acquisition offers moving forward, taking a more targeted approach, aligning channel investment with retention and lifetime value and building more sustainable partner arrangements. The use of industry offers are driving very high levels of unsustainable churn with often little benefit to consumers. From a distribution perspective, intermediaries and comparison services provide valuable choice, transparency and advice for consumers. Sustainable offers also play a role in this sector.

However, we see opportunity for greater transparency and more sustainable settings across offers, discounts and broker commissions so that the market better balances new customer acquisition with consumer affordability and value towards existing loyal customers. Nick will step you through the margin drivers in a bit more detail shortly and will provide some further perspectives on reform opportunities in the strategy and outlook sections.

So if we head to Slide 9, our related adjacent businesses. It was a strong year for the broader portfolio. Underlying operating profit increased to $86.1 million, up $41.9 million and now represents around 1/3 of group earnings. This gives nib greater earnings depth, diversification and strategic flexibility. International health insurance delivered another strong result with underlying operating profit up 15.1% to $35.1 million and policyholder growth of 4.4%.

New Zealand delivered a decisive turnaround, returning to profitability with underlying operating profit of $27.5 million. Pricing and claims actions restored the business to a sustainable position and the focus is now on maintaining that momentum and rebuilding growth. Pleasingly, Health Services achieved full year profitability. This is an important milestone. It shows the business is moving beyond investment phase and beginning to contribute meaningfully commercially. It also strengthens the broader PHI proposition through health management, care navigation and PHI services.

nib Thrive delivered a positive UOP contribution. And this was a solid result in a period of significant sector reform. The business is investing in service capability, operational excellence and remains well positioned for future claim management reforms that favor scaled, compliant and high-quality providers. And on travel, as mentioned earlier, the strategic review is now concluded. This sharpens our focus and retains the opportunity to support a capital-light, partner-led, nib-branded distribution model across Australia and New Zealand.

So if we head to Slide 10. Productivity is now embedded in how we operate and a material driver of group performance. Our digital, AI and productivity agenda delivered $61 million of value in FY '26, taking cumulative savings since FY '24 to $79 million. More than 86% of Australian residents claims are processed through automation and our service contact center interactions reduced by 6.7%. More than 700 employees are now using nibGPT, our AI frontline tool, which supports around 340,000 queries and our AI-enabled tools saved more than 26,000 hours of manual effort in the Australian contact center last year. Our digital and AI agenda is now scaling quickly, delivering better service, faster decisions and a lower cost to serve.

Our Australian residents nonmarketing expense ratio is now among the lowest in the industry with further opportunity ahead. Lower cost to serve gives us more flexibility to invest in customer value, improve price competitiveness, support service quality and maintain sustainable margins within our target range.

So with that, I'll now hand over to Nick, who will take you through the financial results in more detail.

Thanks, Ed, and good morning to everyone. I'll now take you through the financial results in some more detail before I'll hand back to Ed for the outlook. If we go to Slide 12, thank you. FY '25 was a strong year financially with the group underlying operating profit increasing 9.1% to $260.9 million, which was within our guidance range. The result was supported by continued revenue growth, margins in the target range in our arhi business, strong contributions from our adjacent businesses and ongoing productivity across the group.

Importantly, as Ed just said, the productivity program is continuing to translate into financial outcomes, with group operating expenses reducing by 0.7% despite inflationary pressures and the operating expense ratio improving by a further 110 basis points to 16.6%.

Net profit after tax was $186.9 million, which was a 5.9% decline on last year. And while lower than the prior year, this largely reflects positive impacts in the FY '25 year normalizing. FY '25 was a relatively high investment return year. And additionally, we had a lower effective tax rate due to the recognition of Midnight Health tax losses upon gaining a consolidating interest in the company.

Our balance sheet remains very strong, with gearing reducing to 15% and EBITDA leverage of very low 0.6x. That strength, combined with the expected proceeds from the sale of the travel business, has enabled the company to declare a final year dividend of $0.21 per share, which includes a $0.05 special dividend. Go to the next slide, please.

The nib Group balance sheet did strengthen materially through FY '26. Net tangible assets increased almost 15% to $341 million, while EBITDA leverage reduced to 0.6 and gearing improved by nearly 500 basis points. The improvement was driven by stronger operating cash generation, lower capital expenditure, as well as reduced acquisition activity and capital optimization within the health funds. The health funds PCA ratio finished at 1.65x, above our target range of 1.5 to 1.6x. Given the strength of the capital position and cash generation, the Board has increased the target ordinary dividend payout ratio to 65% to 75% and a $0.165 ordinary dividend has been declared. Additionally, we expect to receive around $97 million in net cash after the sale of the travel business. While these proceeds are yet to be received, all CPs have been fulfilled, and we expect completion in the first half '27.

As such, the Board considered it appropriate to provide a $0.05 special dividend as a result, taking the total final dividend to $0.21 per share with future capital management optionality available. We've outlined an indicative framework for the expected net proceeds from the travel transaction at the table on the bottom left.

Turning to the Australian residents health insurance business. Revenue increased 6.4% to just over $3 billion, reflecting premium increases aligned to claims inflation and policyholder growth of 1.9%. Underlying operating profit was $187.9 million and net margin was 6.2% within the target 6% to 7% range. While policyholder growth moderated from FY '25, it remains within our estimate of system growth. and reflects portfolio repositioning towards higher value segments, as well as heightened competition and aggregator activity.

Claims inflation moderated further to 4.1% or 4.5%, including the New South Wales bed rate changes. A key highlight was productivity, with the non-marketing expense ratio reducing to 5.3%, its lowest level since 2007, and that helped offset elevated risk equalization volatility and higher offer costs. Customer advocacy also remained strong with NPS holding at plus 32.

There's a bit going on in the net margin, so I've got a couple of ways of looking at this. If we have a look at this slide, it just provides a bit of context around the margin performance. So I'll walk you through it. The key message is that our underlying margins have been stable at 6.3% across FY '25 and FY '26.

Beginning from the left-hand side, the reported net margin at 7.3% needs to be reduced by 1% for LIC claims development, and this was highlighted in the FY '25 results presentation. This is mainly due to the LIC at the end of FY '24 being overstated with the benefit of hindsight. The reduction in the FY '24 LIC occurred in the first half of FY '25, elevating reporting margins due to that provision release. So then starting at the 6.3% underlying margin in FY '25, we can see that pricing largely offset the impact of mix and claims inflation, netting out to a small impact of 10 basis points. The 2 major impacts to margin were, first, the risk equalization, and we'll have more on that in the next slide; and secondly, increased offer costs as a result of clarifying the removal of the government rebate on offers and also a general increase in offer intensity during the year.

Our productivity then managed to offset these impacts to allow the underlying net margin to be stable at 6.3% in FY '26. We've also highlighted the first half/second half margin profile in the table at the bottom left. Again, the LIC development is an important factor. While reported margins were 6.8% in first half '26 and 5.5% in second half '26, when we adjust for the LIC development impact and also seasonality, underlying margins remained stable in that 6.3% range. In this case, with the benefit of hindsight claims development, the LIC balance was understated at the end of the first half of '26. As a result, we had to reaccrue in the second half of '26 impacting margins with the effect being magnified because the impact is only across half the full year.

Looking at the gross margin walk. This is effectively the same margin walk, but just looking at the gross margins. Again, we have reported gross margin in FY '25 at 18%, which then needs to be reduced to an underlying margin of 17% after the FY '24 claims development that impacted FY '25. With an underlying gross margin of 17%, we have the same price mix inflation impact and also the impacts from risk equalization and offer costs. However, there's no offset by the productivity, and hence, gross margin underlying declined to 16.2%.

We continue to see opportunities through claims management, portfolio mix optimization and pricing discipline as we manage margins into FY '27. Importantly, across the last 2 slides, our pricing actions accommodated mix and inflationary pressures, increased hospital benefits, while productivity improvement supported net margin resilience.

Into the next slide. Claims inflation continued to improve during FY '26. Underlying claims inflation moderated to 4.1% despite risk equalization contributing about 40 basis points of inflation, which was about 30 basis points in margin. A significant issue this year has been the industry-wide risk equalization volatility. You can see in the bottom 2 graphs -- in the 2 bottom graphs that risk equalization has been the highest relative contributor to nib's inflation in FY '26 with risk equalization growing at 7.1% and our annual risk equalization payment growing at 10% versus a long-term average of closer to 4%.

The table in the top middle part, which is entitled Risk Equalization Impacted by Gross Deficit Inflation explains why. The gross deficit is the amount of claims each submit -- each -- sorry, the gross deficit is the amount of claims each insurer submits into the risk equalization pool that is then risk equalized by other insurers. The more you submit, the more you tend to get back. As you know, nib is by far the single largest contributor at $280 million. To put this in context, the next largest contributor is around $40 million to $60 million.

The reason is largely due to nib's younger age profile. However, this has meant that nib's gross deficit inflation is generally higher than industry. You can see that in the table, our gross deficit inflation has remained largely stable at 6.5% to 7%. However, the industry inflation has shifted from around 5% up to 7.5%.

The normal gap to industry that we would see, which is about that 1.5%, has not been present in FY '26 and that's increased our risk equalization payment above trend. We do not have line of sight as to why the industry gross deficit grew so strongly this year. Reasons could include claims inflation or payment speeds that have accelerated faster in the industry versus nib or the timing of hospital contracting.

While this created a near-term earnings headwind, a sustained increase in claiming by the industry relative to nib, should that continue, will be reflected in relative lower levels of total inflation and we believe could improve our relative competitiveness over time. But there have definitely been some unusual and volatile results in how some health funds have contributed or received this year. And we continue to support reform of the risk equalization system towards a more prospective framework that better rewards prevention, claims management and participation by younger members.

Moving to international, please. International delivered a standout result. Revenue increased 7.4% and underlying operating profit grew 15% to $35.1 million. Policyholder growth accelerated to 4.4%, driven by strong growth across PALM, temporary graduates and skilled workers segments. Margins improved with gross margin up 160 basis points and net margin increasing to 15%. Customer outcomes also remained exceptional, with NPS of plus 62 and approximately 90% of interactions occurring through digital channels. Overall, this business continues to demonstrate the benefits of disciplined growth strategy, strong customer propositions and operational efficiency.

New Zealand. New Zealand delivered a very pleasing outcome for the group this year, with underlying operating profit improving from a loss of $2.9 million in FY '25 to a profit of $27.5 million in FY '26. The turnaround reflects deliberate pricing actions, claims recovery initiatives and disciplined expense management. Gross margin improved by more than 600 basis points and net margin recovered to 6.5%.

Importantly, customer outcomes were also a focus with NPS recovering in the second half. We deliberately prioritized sustainable margin restoration over volume growth in FY '26 and we now believe the business has returned to a stronger footing from which disciplined growth can resume.

We look at the -- the next slide illustrates the mechanics of the recovery in New Zealand. You can see that significant pricing actions restored portfolio economics and enabled revenue growth to outpace claims growth. At the same time, claims recovery initiatives reduced utilization trends and improved claims discipline. With claims inflation now moderating, pricing actions are beginning to normalize. The focus from here shifts from recovery to sustainable growth while maintaining the stronger margin profile achieved over the last year.

nib Health Services achieved full year profitability and continued to build momentum. Underlying operating profit improved from a loss of $5.9 million to a profit of $2.4 million. This reflects growth in Honeysuckle Health, improved operating efficiency and the benefits of full year ownership. Honeysuckle Health continues to demonstrate strong customer outcomes, while ItsMyGroup has become an increasingly valuable strategic asset. ItsMyGroup now supports 18 health insurance brands, powers 20 comparison platforms and facilitates more than 10% of industry sales. And together, these businesses strengthen our relationship across the health insurance ecosystem while creating attractive future growth opportunities.

nib Thrive operating profit was $16.3 million, $600,000 lower than last year and was impacted by the removal of setup fees and lower participant numbers. However, strong productivity outcomes largely offset these impacts. Importantly, we see emerging NDIS reform agenda as a net opportunity. The proposed reforms increase compliance, governance and operational requirements for plan managers. Additionally, there is recognition that plan management is an important part of the NDIS fabric with a clear direction towards a small panel of high-quality plan managers. We believe these changes are likely to favor scaled, well-governed operators such as nib Thrive. Accordingly, our focus remains on efficiency, payment integrity, customer experience and leveraging broader group capability and we are well positioned to meet the commissioning requirements of any future panels.

In terms of travel, the strategic review of travel has delivered a successful outcome. Both transactions announced during FY '26 are expected to complete in the first half of FY '27. Upon completion, we expect to receive approximately $97 million of net cash proceeds, providing additional capital flexibility. Importantly, nib will retain a long-term distribution partner with Allianz Partners, allowing us to continue offering travel insurance to customers through a capital-light model while generating future commission income. The transaction simplifies the group and further sharpens our focus on private health insurance and related services.

And finally, turning to cash flow. Operating cash flow was strong, increasing 20.2% to $199 million. The improvement reflects recovery in New Zealand, productivity gains across the group and continued operating discipline. Capital expenditure reduced significantly, contributing to free cash flow, improving from an outflow of $21.7 million to an inflow of $27 million. Strong cash generation also supported a reduction in borrowings, further strengthening the balance sheet. Overall, the combination of earnings growth, strong cash generation and lower leverage positions the nib balance sheet well as we enter into FY '27.

I'll now hand back to Ed to discuss the outlook.

Thanks, Nick. If we jump across to Slide 26. So our strategy has 2 clear priorities. Firstly, growing and strengthening our core private health insurance businesses and secondly, scaling in related health and insurance services. Across core PHI insurance, the focus is on leading customer and digital experiences, stronger loyalty, disciplined distribution and sustainable growth in higher value segments. Our multibrand, multichannel model is a genuine advantage. Alongside the nib brand in direct and intermediate channels as well as GU Health, our flagship corporate offering, we work with leading insurance, banking and loyalty brands as a strategic health insurance partner, extending our reach into trusted customer communities. This approach is differentiated and strategically valuable to target high-value segments. Claims excellence is equally important. Better provider contracting, benefits management, payment integrity and care navigation support affordability, customer value and better health outcomes.

In health and insurance services, we have the opportunity to provide a second source of growth. Honeysuckle Health, ItsMyGroup, nib Thrive and complementary insurance partnerships are capital-light platforms that leverage capabilities close to our core. They strengthen the private health insurance proposition and create further diversified earnings potential in strategically related markets. Our digital and AI advantage supports better experiences and productivity. Disciplined capital and risk management provide flexibility and strengthen customer outcomes and our purpose-led people bring this strategy to life every day.

The FY '26 result gives us confidence that this strategy is working. We've simplified the portfolio, strengthened the balance sheet, improved efficiency and delivered growth in group UOP as well as increasing the contribution from our related adjacent businesses. So if we head across to Slide 27 on focus and outlook.

We expect continued group underlying operating profit growth with guidance of $265 million to $285 million, excluding nib Travel and subject to risk equalization outcomes. In Australian residents, we're targeting sustainable policyholder growth, a broadly stable gross margin subject to risk equalization and an underlying net margin within our 6% to 7% target range. Improving retention in higher value segments is central to this plan. We're strengthening the nib brand and direct channels, targeting acquisition investment more strategically and establishing partner arrangements that place greater value on customer tenure and quality.

We also retain performance improvement levers through pricing and product design, claims management, provider partnerships, payment integrity and productivity. International and New Zealand are expected to continue making strong contributions and health and insurance services are targeting further positive underlying operating profit growth.

At the group level, we expect further productivity gains, continued improvement in the operating expense ratio and significantly lower one-off costs. The completion of the travel transactions and receipt of the sale proceeds are expected to provide further balance sheet flexibility and capital management options.

As mentioned earlier, from both Nick and I, I did want to spend a moment on industry reform opportunities because affordability remains central to participation and the overall sustainability of private health care in Australia. Firstly, on acquisition offers and incentives. Offers can attract customers to private health insurance, but the current settings significantly favor switching over loyalty. New customers can receive an effective first year discount of up to 24% compared with 12% cap benefits for existing members. Better alignment would create a fairer balance and reduce the costs ultimately shared across the broader membership base. The use of offers, gift cards and other inducements create high levels of churn and impact premium affordability over time as these costs get priced in. Offers have also become prevalent across the broker channel and this activity is driving unsustainable consumer and commercial outcomes.

Secondly, on intermediary commissions, brokers and comparison services provide valuable choice, information and transparency for consumers and they have an important role to play across the sector in helping consumers find better value and the most suitable cover for their needs. However, clearer disclosure and sustainable commission guardrails would preserve those benefits, support competition and ensure additional cost is not added to the system and borne by consumers through higher premiums.

Thirdly, on risk equalization. We strongly support community rating and the principle of risk equalization. But the opportunity is to modernize the current retrospective model through a carefully designed prospective approach that preserves fairness while creating stronger incentives for health funds and ultimately consumers to improve member health outcomes, invest in prevention, manage claims effectively and attract younger, healthier lives into the sector. This would support affordability for all consumers, strengthen participation and help ease the demand on the public health system.

Finally, on contemporary models of care. Delivering the right care in the right setting at the right time can improve health outcomes, customer experiences and overall system sustainability. And this includes care at home and in the community settings across areas such as mental health, maternity and hospital substitution. The test should be clear. Care must be safe, high quality, genuinely substitute for hospital treatment and not cost additive and then be appropriately priced, which is fair, transparent and deliver measurable value for consumers. Taken together, these reforms can improve affordability, support participation and strengthen the value and sustainability of private health cover.

We continue to engage actively and constructively with government, regulators and industry partners on these reform priorities. And more broadly, we enter FY '27 with good momentum. Our core health insurance businesses are performing well. Our adjacent businesses are contributing more meaningfully and productivity continues to improve. Supported by a strong balance sheet, a clear strategy, we are confident in the outlook and our ability to deliver sustainable long-term value for customers and shareholders.

So with that, we'll open up the call to questions. Thank you.

[Operator Instructions] First question comes from the line of Julian Braganza from Goldman Sachs.

Just on New Zealand, can you maybe just comment on why your policyholder growth was so weak? Sort of seeing down about 7% annualized over the second half. And can you just maybe comment on what's being done just to address that unit growth?

Julian, thanks for the question. So as we've called out, some disciplined choices had to be made in New Zealand across the portfolio around pricing, product design and competitive positioning to ensure that we could really get back our -- on stable footing around the structural components of the portfolio. And so the choices we've made and we've been quite transparent around the pricing discipline that we've put through that market alongside some of the additional product changes that has come with some higher lapse and also did impact in the short -- first half, in particular, service levels around our ability to support some customers. And so that did come with a short-term impact to lapse and you can see that reflected in the policyholder growth.

We also saw a shift in downgrading as consumers started to look for higher excess tiers and lower levels of cover. One of the things, I guess, is unique about where we moved quite quickly and decisively on some of our choices and that did mean our competitive positioning relative to peers was disadvantaged across the cycle. And so we've now pleasingly started to see that the actions we've taken puts us on strong, sustainable footing and gives us a better comfort around our pricing outlook and ultimately our competitive positioning.

So a few factors there really around ensuring that we could restore margins to a sustainable level and confident in the outlook now that we are in the range that we're in. And our competitors are starting to react with similar and higher both pricing and product design changes, which gives us some confidence around our proposition moving forward.

Okay. And in terms of just the outlook for net margins, the second half was clearly very strong, above your historical target ranges for the business of 8% to 10%. So what's the outlook for margins from here, just given what you're putting through on price and what you're seeing on claims inflation?

Yes. So we talked about sustainable margins. We're not providing any specific outlook on the margin trajectory at this point, Julian, just given some of the movements that we've just touched upon.

One thing that we are certainly committed to, though, is now that we have restored to a sustainable level, is that investment and focus on sustainable policyholder growth. And so the balance for us moving forward is around disciplined investment in those areas, but also ensuring that, that net margin remains stable and improving over time. But Nick, anything you want to add to?

Yes. Julian, one of the reasons that the second half was a bit stronger than everyone expected was that we had 2 months of really very low inflation that the industry is still scratching its head on, be it providers or health insurers. And so we're just -- we're not going to factor that into the inflation into the first half. It looks a bit like an anomaly at this stage. So maybe that might help a little bit.

Okay. Got it. And then maybe just on the resident business. If I look at your market share data, that's reduced now market share to about 9.7% as of March 2026. So it looks like your policyholder growth is now tracking below system. So I just want to get your view here in terms of the outlook, the strategy around how you're thinking about policyholder growth and what initiatives you have in place to improve the trends relative to the system.

Yes. Thanks, Julian. We've certainly signaled a shift in our focus and intent around disciplined policyholder growth in higher value segments and we've called out a couple of factors there. Firstly, the choices we made around pricing and product design as well as the exiting of some uneconomic corporate groups and low-value cohorts has materially impacted policyholder growth in the last 12 months. And they were necessary and deliberate choices that we've made.

And so this focus on high value over high top line growth is an important aspect of our proposition moving forward. I've also talked to some of the unsustainability around the use of offers, ensuring that we are not seeing high levels of churn across some of the intermediated channels are other factors that have now got us thinking around what is a sustainable pathway.

The other piece we just need to remain alert to is that there are some proposed rebate changes coming later in the second half of '27. And so it is difficult for us to, with confidence, predict exactly what that will look like in terms of our book and composition. So I think we're guiding to high-quality sustainable growth moving forward and that should be a hallmark of our proposition moving forward.

Okay. And last question for me in terms of the expense ratio. So you're flagging further benefits that could come through from here. I just want to understand, what is the sort of magnitude of the opportunity that could potentially offset any further risk or downside risk to gross margins? I think you were 9.9% for arhi. How are you thinking about that in terms of flexibility that could come through into next year from your productivity focus?

We're going to see a decent reduction because of the travel business going. So depending on the timing of that, that will assist. And then I think it does depend a bit on how much simpler we can make the business as a result of travel exiting the group. So I think that at this stage, we probably outperformed everyone's expectations this year in terms of productivity. We still think there's more to go, but that'll depend on how much we can leverage the simplification and also the AI opportunities.

Next, we have Siddharth Parameswaran from JPMorgan.

A couple of questions, if I can. Just wanted to ask about claims inflation in the residents division. If I look at Slide 14, the incurred claims cost grew 8.9% and you had policyholder growth of 1.9%. I know there was a lower reserve releases this year than last year, but it still suggests that underlying incurred policy inflation as you see it, per policy, stripping out the claims inflation was roughly 6%. And that seems quite high.

I know that you're flagging underlying inflation as 4%, but you're stripping out the risk equalization impact there. I'm just keen to understand exactly what is driving these numbers. It seems very high, much higher than your revenues per policy.

And I'm just keen to understand whether it's likely to continue into next year. And yes, if you could give us some color around that.

I think, Sid, there's 2 things. The first one is that inflation is on a per customer basis. So there's also that exposure gap between the policyholder growth and the customer growth. And we would include all of that in mix around the net pricing, because pricing is on a per policy basis. And then the second is that the LIC had a big benefit in the prior comparable period.

And Sid just building on Nick's comments, the 4.1% that we referenced there, that includes the risk equalization impacts. So we haven't backed that out, the risk equalization [ opportunities ].

Okay. Well, maybe if you could just help me -- sorry. I was just going to ask then, I mean, maybe if you could just help me. Actually, sorry. Maybe you just finished. But I just can't reconcile the high incurred claims number that we're seeing here. If I take [ out the LIC, I stripped ] that out in the question that I asked, it still seems very, very elevated versus the 4.1%. So you're saying that includes the arhi. But maybe if you could just comment on 8.9% minus the 0.8% you had, which was the LIC development last year. There is not much contribution this year. We're still looking at sort of 8% incurred inflation. You've got roughly 2% policyholder growth. That was the 6% that I was referring to.

Just keen to make sure I understand the gap between the 6% and the 4.5% or the 4.1%, whichever one you're focusing on.

So rough numbers, I think I'm seeing about 8.9% growth in incurred, less 2.2% average policy growth, less about 0.7%, 0.8% of people growth, that's about 1.1% of LIC impact gets me down to about just under 4% -- sorry, just under 5% and I'd have to sort of work through the next 40 basis points to the 4.5%. Sid, maybe we can do that this afternoon.

Okay. Okay, no worries. I'll ask it a different way then. It seems like there is gross margin pressure, which was partly offset by MER savings, which were very substantial. Just keen to make sure I understand your views on trajectory into next year on the MER versus the gross margin trajectory because can you sustain that level of improvement again next year in your view, whether there'll be any stranded costs from the travel sale, which might have to be taken up? And also just whether you think that -- I mean the 4.1% seems very low. I'm just wondering, are you suggesting that, that should be the increase that we should be factoring in for next year?

Sid, we've guided to -- we've given you some guidance around the gross margin in the outlook. We've given you some indication around the net margin target range and we've given you a group UOP guidance range. I guess, there's a number of variables there that we've talked in around risk equalization, volatility in particular. That can be one of the key movements there, but I thought it was important to then introduce that additional outlook statement around broadly stable Australian resident gross margins.

We also feel between pricing, discounting optionality and other levers, you've called out MER as a material one as well, that we've got practical ways that we can manage that margin well in the 6% to 7% target range. So that's the outlook from our perspective and we haven't specifically given claims inflation, but you've touched on some of the key numbers there.

Okay. That's helpful. If I could ask one other, just around international. So I just want to make sure I'm clear on understanding [Audio Gap] competitors said they are now one of the providers on the PALM contract. Maybe if you could just comment on whether that's likely to have any impact on policyholder numbers at all. Yes.

Yes. We're really proud and pleased with the work that we've done in that PALM segment, in particular, Sid. So we've had a longstanding relationship with the industry and government. You're right in that there are -- it's always been a nonexclusive preferred partnership, I should stress that. And those having another competitor on panel presents an opportunity for both players to really deliver great outcomes for that seasonal worker offering in the Pacific Islands. We have really built those relationships through the employers and directly with those end customers.

And so whilst it is important to have preferred provider status, ultimately, our go-to-market proposition and the strength of those relationships directly with the employers and the individuals is what is giving us confidence around continued growth in PALM market share.

And we're really proud of that work that we've done in that space, also aided by some positive signs in skilled workers as well. So yes, it's been a fantastic result more generally in the international visitors segment, supported again through pricing discipline and the productivity piece and being very selective around which segments we play in because we know, particularly in the backdrop of migration settings there not all segments will behave equally. And so we feel well positioned to continue with some ongoing performance in that segment.

Next, we have Andrew Buncombe from Macquarie.

Just 2 from me, please. Apologies if I've missed it, but I seem to remember in February on the group call, you made comments about doing a holistic end-to-end review of benefits across the group, but I can't see it this time around. Maybe just an update on how that is tracking would be great.

Andrew, no, it certainly continues as a key part of our strategy and focus moving forward. I think we call it out explicitly in the strategy slide for our core business. And that extends to both our Australian business. There, you'll see through the bottom section, customer value through claims excellence.

But we do see material opportunity in both Australia and New Zealand around improving and enhancing our proactive claims management. It is multifaceted, everything from partnership contracts with hospital providers through strengthening payment integrity and assurance, particularly with the role of AI and patent recognition giving us further clarity and opportunity and delivering better consumer outcomes through affordability in some of our network strategies. So certainly a fundamental part of our proposition moving forward.

And the progress has been solid in the last 12 months in both businesses and you see how we are containing claims inflation in New Zealand, but equally starting to see some positive moderation in the Australian business as well.

Excellent. And then the other one from me, given some of the scheme reforms that are coming down the pipe for Thrive and NDIS, how should we be thinking about participant growth for yourselves in Thrive in FY '27?

Yes. We remain alert to modest growth in the plan management and NDIS sector more generally in '27. And that's because these reforms are still gaining traction and we're still seeking clarity as to what exactly they look to -- look like. So we -- the pleasing part has been lapse has materially stabilized over the past 12 to 18 months. We did have a significant service disruption about 18 months ago and we're now really improving customer advocacy.

So our proposition has really strengthened over the past 12 months. And we actually remain quite excited about the future potential of plan management more generally.

Despite some of the changes around eligibility and scheme sustainability, which we fully support, we see a really important role for plan managers, particularly those plan managers that are scaled, compliant and acting in the best interest of all participants and we certainly believe that nib Thrive is one of those.

So we anticipate that off the back of these reforms, that we will see further consolidation across the plan management market. We are seeing some indications now that plan managers of varying shapes and sizes are starting to exit the system as the compliance burden is increasing, which we see as an absolutely valuable thing for overall participant outcomes. So we do see some opportunity here around market share growth that we are guiding to in the medium term.

That said, these changes will take some time to bed down and we're not expecting any wholesale change in the next 6 to 12 months. Our priority focus in this business is ensuring that we ready the proposition to be well placed when these reforms take effect.

So on that basis, would you see M&A as an option for your Thrive business in FY '27 then? Or continue to focus on the organic as the sector continues to shake out?

Yes. We're very focused on maximizing the return on those existing investments, Andrew, and we do see some opportunity around organic growth. And as I mentioned, starting to see some players exit the sector. So not at this stage, not anticipating any inorganic growth in this market.

Next, we have Nigel Pittaway from Citi.

Just first of all, coming back to claims inflation in arhi. It seems as if you must be expecting some further modest improvement next year with this flat gross margin guidance. Because obviously, if you take -- even take the 4.1%, add back your sort of revenue mix impact, you are getting a number slightly higher than the price rise you got at 1st of April. So is that a reasonable expectation that claims inflation does continue to moderate a little next year?

Nigel, it's a good question, but we have guided to those broadly stable gross margins. So it's certainly a good guide looking forward. There are some material things. And just on the prior question, I touched on the progress we're making around benefits management and claims management, in particular, product design and making sure that our product design is appropriately fit for purpose in this new environment.

And that includes some fairly significant changes across our dental proposition that we've put through more recently that will take effect from 1 October. And that's a big opportunity for our consumer value proposition around better outcomes where our members choose a First Choice dental provider in network, they will receive enhanced benefits.

And if our customers continue to choose to go out of network, which they are -- which we make available, then they'll see a different benefit construct. So we are pushing through a combination of product design and claims management changes that gives us confidence around that gross margin stability. And of course, as we stressed on the call, we do remain alert to this risk equalization volatility. So if you take a longer-term outlook and based on that pre-COVID and 5-year trend, that gap to industry on gross deficit inflation has consistently been in nib's favor as our younger book ages and we also shift our focus to older consumers that are -- that do benefit from risk equalization. So we were surprised, I think it's fair to say, particularly in Q3 and Q4 around this volatility occurring in risk equalization.

We remain cautious around -- it's prudent to do so in the short term. But those underlying settings around our book aging and also the shift in policyholder mix should bode well around gross deficit inflation moving forward.

And secondly, just on -- obviously, the lapse is at 16.2% and probably above 17% in the second half, probably reflecting the industry conditions to some degree, but it is something that you've sort of identified potentially as an area of focus before moving forward. So presumably so far, none of those initiatives have gone in, but they're still in hand and you expect -- are they still sort of a strong focus for next year in terms of getting that lapse down from the above 17% it reached in the second half?

Retention is certainly a high priority for the business, Nigel. We did signal some deliberate choices that were made around pricing and offboarding some unprofitable cohorts. They were necessary decisions and that did impact net growth by about 60 basis points. So if you normalize for that, net growth for the year would have been more around the 2.5% mark rather than the 1.9% and that directly hit that lapse number.

Those choices are important and I have signaled some other product design changes. So this will come with some short-term lapse volatility. But certainly, we are stepping into this opportunity to drive high-value retention in those priority segments. We've indicated that portfolio repositioning and a shift around channel mix and also being more disciplined around acquisition offer costs, particularly off the back of the rebate clarification.

And just to give you some color around that, effectively, that means the average cost of an offer increased overnight by about 25%. And so we've had to adjust quite quickly in the back half of '26. And looking forward, that will then mean we take a more focused view around quality growth with a bias towards retention and loyalty.

We do have a range of different initiatives, particularly around the way we support members, our longer-tenured members through improved discounts and offers. And so we'll be looking to maximize that total growth investment, which you can see there in the marketing MER to make sure that it has a balanced -- positive balance towards retention as well as acquisition.

Great. That's useful color. And then maybe just finally on New Zealand. I mean -- can you sort of maybe comment on whether the lapses post the change in pricing and contributions were in line with expectations and sort of give us some idea of how that sort of growth -- well, sort of contraction, I should say, was sort of more -- was it more lack of new business growth than it was lapses going higher than expectations, I guess, is the crux of the question.

Yes. So whilst we did experience that 8.3% decline in policyholders, it actually performed ahead of expectation, Nigel, on a total book basis. And we did anticipate that when you're putting through premium increases of the order of magnitude that we have had to, alongside some fairly material changes in the product space, particularly around the introduction of co-pays and us leading the market, that it was always going to come with a material reduction in policyholder growth.

So wasn't a major surprise to us. Nonetheless, now that we are on sustainable footing from a margin profile and we have that stronger base, we can certainly turn our attention now, as the team are, around disciplined policyholder growth. And we think there's a couple of opportunities both in the adviser, the financial adviser market and how we can strengthen relationships in our partnerships with advisers, but also in our direct-to-consumer offering, both through nib and the strategic partnership we have with AA Health in New Zealand, who's one of the leading insurance brands in that market.

So we feel well placed, both through direct adviser and increasingly looking at the corporate group that there are growth avenues available. And as I stressed earlier, because of that price leadership approach and first-mover position, we have now started to see our competitive positioning move much closer to the rest of the market and all of our peers are putting through material price increases and further product changes. So feeling well placed around the outlook.

We do remain cautious that these things don't turn around overnight, given that is a material reduction in policyholder growth. But our proposition does remain compelling and we're starting to see, particularly around customer advocacy, strong improvement in the second half there around NPS.

Next, we have Andrei Stadnik from RBC.

Andrei here from Royal Bank of Canada. Can I ask just one question really around some of the trend and residential margin movements half-on-half and year-on-year? So I appreciate that risk equalization is something that's very difficult to avoid in terms of some of the margin movement noise. But the LIC, the claims development, has also, I think, been featured now 3 times in the last 18 months. So what are some of your thoughts on how you can improve margin stability for the benefit of your shareholders?

I think it's a good question. It's around -- I think if you look at historically our results, we've always had claims development and the under or the over of the LIC or OSC as it was. We've always reported that in terms of our margin walks. This has been a relatively unusual, especially the FY '24 to FY '25. And I think that's more a hangover from COVID, whereupon the LICs were very high.

They then got released. We suggested that we were all done in FY '23, then it wasn't so much in FY '24. But now you can see that the current year is only 10 basis points. In terms of what was happening in the first half and the second half, that's really more like a 0.3% or a 30 basis point impact across the full year because we've got to remember that, that 70 basis points that you're seeing in that table is actually just a half, which is only half a year's claim.

So the margin impact is magnified because the claims base is smaller at about $1.25 billion, whereas it's $2.5 billion over the full year. But the LIC impact is the same no matter what. It just is -- it's a balance sheet amount that just gets accrued or released at the end of each period. So here on trying to see that, I think the half-on-half is hard to avoid because of those impacts. But across the full year, we would like to see a smaller impact going forward.

And Andrei, just to build on that, a couple of things that are happening at the industry level and nib is also experiencing this is that over the last 18 months, as you referenced, there's been quite a significant uplift in processing fees at both the fund level but also the hospital level as well. And so that adoption of automation, straight-through processing and accelerated payment patterns can materially distort particularly our modeling around, well, when is that claim actually being incurred and in which period does that actually relate to.

So there are some unusual circumstances as We've come out of COVID, as Nick stressed, that there was -- some of that base has been distorted. But you'll see on Slide 16 in the pack that we actually step out that continuing acceleration around faster claims processing, which can then have volatility, particularly around which periods that those impacts take place.

We've also called out previously the workday and claim seasonality, which again, has been a little bit more unique in the last 12 months as an increased feature. We're expecting that to sort of start to stabilize a little bit moving forward. And so some of those factors, I guess, are unique in some ways around the last 18 months. But I guess what we haven't stepped away from and what we've been consistent in our messaging to the market has been that underlying stable margin of 6% to 7% is what we've typically targeted. And whilst there is sometimes variation across the cycle, as we've stepped out this morning, that continues to remain in the '27 outlook.

Next, we have Vanessa Thomson from Jefferies.

I just wondered if you could give us a bit more color around the hospital contribution to claims inflation. I see you've got bigger growth from medical this period. I just wanted to understand the hospital claims and the proportion covered by contracts and dynamic indexation therein.

Yes, it's a good question. So you will see in the chart on Slide 17 that the big drivers have been risk equalization and also medical. That medical inflation is primarily driven by our investment in non-GAAP. And so that investment has been really starting to wash through the book now and that's about giving our members better certainty around either no GAAP or known GAAP when they go in for surgery. And so that's why you're seeing that driver particularly more pronounced than others.

We have started to see that hospital inflation stabilize. We've also called out the hospital payout ratio at almost 89%, which, again, around meeting the statement of expectations and industry expectations more generally. We're very proud of the work that we've done around supporting the hospital viability and the broader sector.

And so a combination of those things, we feel that the package that we're delivering now around risk equalization and how we manage that and that gross margin that we've talked about at more stable levels around the 16s is a more sustainable proposition moving forward and it gives us more flexibility when you think about being able to make sure that we're managing all stakeholder expectations through the cycle.

And so if there's a non-GAAP arrangement, the cost of that to you is reflected in medical claims, not hospital claims.

Yes, that's correct because effectively it's the cost of the specialists that we are trying to contain that through dedicated agreements that we hold with those doctors and specialists.

Okay. And then just one more question, just following up on the nib Thrive question. Is the target still for 50,000 participants? I think that was in FY '25, because I just think there's a little bit more of a drift into FY '26 downwards.

Yes. As I touched on earlier, Vanessa, it is more difficult for us to project with confidence, given some of this reform uncertainty around that 50,000 target. And so we do reference on Slide 22 that we do see material market share growth opportunity as these reforms take effect.

But as we're going through this at the NDIS scheme level, that is a broader reset and refocus around, well, what does eligibility mean, what's going to be the adoption of plan management within the scheme moving forward? It's prudent for us to take a more cautious outlook in the short term on participants. But as I mentioned, we remain really encouraged around the opportunity that can present itself with a much smaller cohort of plan managers on a commission panel where they are high quality, scaled and compliant, delivering great participant outcomes.

We're actually very encouraged and buoyed by that trajectory of where the sector is going. But given the near-term uncertainties, we have a bit more of a cautious outlook around participant growth.

And presumably, that plan management panel, I mean you guys would be on that, right? So that's, I guess, October 27. So that's, I guess, the time line we should be thinking about.

Yes. No surprises. We're very motivated to ensure that the business is well positioned to respond to those reforms, Vanessa and place nib Thrive within that panel.

Last question comes from the line of Kieren Chidgey from UBS.

Ed, can I just go back to sort of your commentary on policyholder growth in arhi. You're talking about sort of a shift in strategy. When I have a look at your sales channel data for this period, the use of aggregators has gone up on my math, sort of 12% growth in sales year-on-year through that channel, 8% drop in direct-to-consumer.

So it appears that you've kind of more lent into that aggregator channel where we're seeing more offers and more churn. Is the change in stance you're talking about from FY '27 onwards? And are you signaling sort of a clean or clear desire to pull back in that aggregator channel, which is quite material to your overall sales composition?

Kieren, good call out. So certainly, from '27 onwards, we are looking to optimize that mix of business coming through direct brokers, white label partners and corporate to a more sustainable composition, I guess, in line with where we've been historically. You're right that there is an increasing uptake of -- and this is at an industry level, of the usage of brokers and aggregators across the system and that is being fueled further by offers now becoming very prevalent in the broker space.

We're now of the view that there's certainly a strong role for the brokers and intermediaries to play. But we do want to ensure that those partnership terms that we do sit down and agree with those partners are on sustainable terms that drive retention and lifetime value.

And so you will note that I've guided around this shift towards higher-value policyholder growth and that with the short term is coming with some lapse impacts because that means we need to address uneconomic cohorts within the book as well as think about our go-to-market proposition moving forward. And so we are proactively engaging with all of our partners, both in the corporate space, but also in the broker space and our white label partners, around what are the most prudent, sustainable commercial outcomes that we can deliver, but equally, what is going to drive the best outcome for consumers, given that there are elevated usage of brokers and offers more generally.

And so health funds themselves, ourselves included, need to think deeply around the use of these offers. Sometimes these offers are 12, 14 weeks at a time plus gift cards, plus waivers. Is that a sustainable proposition and -- or is that driving short-term churn? I think that's a good question that all health funds, ourselves included, need to step into.

And Ed, if you don't see enough of behavioral change from your competitors, are you signaling sort of a desire to maximize margin or sustain margin, probably a better way of putting it and forego growth or grow below system, as we move forward?

Yes. Well, I think you'll see that we've quite deliberately signaled that shift, just to stress again, to repositioning to higher value and be very disciplined around our approach moving forward, Kieren.

You'll also no doubt be alert to the fact that our -- in the Australian residents business, if you look at the total MER composition, there is a lot of investment that is flowing through that marketing expense line. And we need to step back and the work that we've done around productivity, digital and AI, giving us material benefits and capacity in the nonmarketing expense and we're proud to now have a nonmarketing expense ratio that is one of the leading health funds in the marketplace. We do need to now step into that other very large bucket of investment, which is our marketing and growth investment and make sure that, that is optimized appropriately for the conditions that we're navigating.

So we think there's some material capacity in that value, given the material spend that we spend on our commissions, offers, intermediated sales and also our direct investment. And so we want to be very prudent around how we lay that investment down.

Right. Second question, just on claims inflation, Nick, I know sort of a lot of noise through last year sort of with risk equalization reserve movements that you've called out. When I have a look at the payment data you guys provide in your appendix, that is up pre-risk equalization. So putting that aside, 5.5% per policy year-on-year.

Now clearly, we saw an improvement in second half on pay given that bring forward you had spoken about previously in first half. But 5.5% does feel like payments across the full year are still tracking comfortably ahead of where net revenue per policy is likely to land next year. So just interested in your views on sort of reconciling that with the stable gross margin outlook.

I think it's the continuation of that payment speed that we've been experiencing back on -- I think it was about Slide 16 or thereabouts that we put that chart in because it has been really quite noticeable. And you've seen that additionally from the start of FY '23. So back to Andrei's question, the FY '24 LIC was so overstated because of this acceleration in payment speed. We've adapted a bit better to that, but it is flowing through from a cash perspective. What I would say is that our operating cash flow continues to strengthen. So I see that as a positive.

And we would look to see the 2 normalize more closely together. But I'd also highlight that looking at the gross deficit anyway and we don't see obviously everything across the industry until sort of November when the annual report comes out from APRA. But looking at the gross deficit, it does look like the gross deficit, which is on a paid basis, has also increased quite a lot across the industry because it was going along that 4%, 5% and now it's 7.5%.

So I think that the industry phenomena is there. It's in our numbers as well and we would look to see it hopefully improve or be more closely aligned into '27 and '28. But at this stage, we are seeing that acceleration occur.

Just one final quick question. Your PCA coverage in the health fund fell quite a bit year-on-year, 1.89 down to 1.65. I think you called out some changes around investments and the like, but is that all complete Nick? Is that all in the base? Or sort of just interested in how you're thinking about that capital coverage moving forward?

No, it's a really good question. So roughly that 30 basis points, you've got about 10 basis points in the increase in the PCA, of which half is just normal growth and half is that change in asset risk charge, which is due to shifting over the bond portfolios to a different investment manager who has more corporate bonds versus sovereign bonds and they attract a higher rate. They should get a higher return, but they attract a higher rate.

And so we'll consider whether we go back to more sovereign bonds. But literally, over the last few months, we've just been changing that across into one of their normal funds. In terms of the capital base, roughly an increase in the DAC. So that was essentially cash coming out of the health fund and into commissions.

And then there was about half of that also in a dividend up to the shareholder or up to the group. So that assisted the gearing. So looking at it, I mean, we'll manage above the 1.5 to 1.6 target range. This time, because of the payment that we made last year in terms of the health fund dividend, it was probably a little bit higher than we were anticipating. We're at 1.65, but we'll continue to manage it above that.

And we'll look at the group balance sheet as well, quite importantly, because that gearing ratio has really come down. That's a good sign of strength and also the leverage ratio is right down. So I think the group is in a really, really strong position. We could send some more money down into the health funds if we had to. And it was just really an alignment of that dividend payment.

Thank you for all the questions. This concludes the Q&A session. I will now pass back to Ed for closing remarks.

Just a big thank you for everybody for joining us. A big thank you to the nib team more broadly for the outstanding work that happened across FY '26 and looking forward to delivering in FY '27. So thank you very much for joining us and we'll leave it there.

Well, good morning, everyone, and thank you for joining us for nib's FY '26 Half Year Results.

I'm Ed Close, nib Group CEO and Managing Director; and I'm joined here in Newcastle by our group Chief Financial Officer, Nick Freeman.

We're pleased to deliver a strong set of results today, reflecting disciplined growth in our core markets improved customer value and significant progress in operational and digital transformation.

Before we begin, I'd like to acknowledge the traditional custodians of the land we're joining you from today, the Awabakal people. and pay my respects to Elders past and present.

This morning, I'll step through our first half performance, the drivers of the result and the strategic progress across our business. Nick will then take us through the financials. And before I close with outlook and open up for questions.

Turning to Slide 5. Our purpose, your better health and well-being continues to guide how we support customers and health care providers. At nib, we remain focused on delivering great value health insurance and support services to our customers, underpinned by high-quality products and improved access and affordability. This ongoing focus continues to translate into sustainable commercial outcomes for our shareholders, while supporting a positive contribution in the communities where we operate.

So if we jump across to Slide 6 and looking at the first half '26 highlights. This was a strong group performance in line with expectations with positive contributions across all business segments, and reflects the disciplined execution of strategic priorities and a continued focus on delivering great customer outcomes.

Pleasingly, group underlying operating profit of $129.1 million was up 22%, and supported by top line revenue growth of 7.7%. In our Australian residents business, we delivered another consistent high-quality result with disciplined policyholder growth and margins maintained in the 6% to 7% target range. Our adjacent businesses delivered their highest first half year since FY '19, contributing $30.4 million, up more than $20 million on the prior corresponding period. International and New Zealand segments achieved particularly strong outcomes. Our productivity and performance agenda continues to gain traction.

Since FY '24, we've delivered $39 million of cumulative productivity benefits across the group with material reductions in key expense ratios. And we've also continued to simplify the portfolio, announcing the sale of the World Nomads International travel insurance business, sharpening our strategic focus on our core health insurance markets. with the review of the remaining Australian and New Zealand travel business ongoing.

So if you move across to Slide 7, and you can see that our performance is translating across the key group metrics. PHI lives covered rose to 1.95 million, our largest customer base ever with our value proposition continuing to resonate on both sides of the [ Tasman ]. Customer satisfaction remained resilient, with group NPS at plus 33%. There were some temporary impacts in New Zealand as a result of pricing and product changes, which were largely offset by positive experiences across our other business segments.

A key highlight of the result was the significant improvement in the group operating expense ratio, which reduced 100 basis points to 16.5%. And it's a result of our direct focus on productivity, automation and our AI agenda now delivering scalable results.

ROIC increased to 14.7% and reflecting stronger operating performance and disciplined capital deployment. NPAT of $82.9 million was in line with expectations and does reflect the lower investment income relative to a strong comparative period. And the higher one-offs as we previously guided. The Board declared a fully franked interim dividend of $0.13 per share, consistent with the prior year.

So if we jump across to Slide 8, and we'll go a little deeper on the business segments. Australian residents delivered another strong result. Our disciplined focus on policyholder growth across our high-value segments, NPS at plus 35, 89% of interactions now self-serve digitally and the non-marketing expense ratio of 5.8% were all key highlights. nib continues to support the long-term viability of the private hospital sector and our hospital payout ratio is now tracking higher than pre-COVID levels and in line with expectations.

International's positive contribution continued, where we delivered a strong UOP result, up 23% and with stable gross margins and tightly controlled expenses. Policyholder growth was particularly driven by PALM participants, our temporary graduate focus and skilled workers. Customer outcomes remain a key strength in this segment with record NPS of plus 63. And pleasingly, we retained preferred provider status for PALM and have continued to strengthen those relationships in the seasonal worker community.

Over the ditch in New Zealand, the recovery is progressing at pace. We made a strong return to profitability with UOP of $3.9 million, up $14 million, driven by our management action plan and a stabilization in claims inflation. As we saw last year, repricing does bring short-term pressure on policyholder trends but has been necessary to restore the business to sustainability. Claims inflation is moderating, and our focus is now firmly on customer experience and value.

Across the wider non PHI businesses, Health Services achieved profitability for the first time, in line with our expectations. Our investment in ItsMy Group continues to support more than 10% of all private health insurance industry sales. and Thrive delivered UOP growth of 4.8% and returned to positive participant growth in January 2026.

If we have a look at productivity on Slide 9, this highlights how our digital and AI transformation is translating directly into improved customer and commercial value. Our productivity gains are now structurally embedded resulting in the group operating expense ratio reducing by 100 basis points. And this is underpinned by cumulative productivity savings of $39 million since FY '24.

In Australian residents, 94% of claims are now processed within 24 hours and 86% of are processed unassisted using automation. More than 600 of our operational staff are now using internal AI tools, supporting over 250,000 interactions since January 25. These at scale initiatives are enabling further investment in our customer value proposition. Almost 80% of our customers now benefit from no or known gap coverage. And we've expanded no gap Dental optical and our physio networks to more than 2,000 locations. This is saving customers more than $45 million in out-of-pocket costs. And importantly, we continue to secure multiyear agreements with hospital providers with more than 80% of our total benefit outlays now under a partnership model.

More than 11,000 customers were enrolled in health management programs in partnership with our business Honeysuckle Health, and these were delivered through virtual means for 93% of customers, and these are now translating to better health outcomes and experiences for our customers.

So with that, I'll pass to Nick and we can go through the results in a little more detail.

Thanks very much, Ed. If I look at the overall group financial performance, the highlights of this result with a strong UOP growth at 22% higher than last year, managing the arhi result into the target range with reported margins at 6.8% and underlying margins at 6.5%. The rebound of the adjacent businesses, which had their strongest result since pre-COVID, highlighted by the performance of the international business, the recovery in New Zealand and our Health Services segment generating a profit. And the continued progress on the productivity agenda, with the operating expense ratio reducing by 100 basis points to 16.5%.

As we announced on the 19th of December, we did take a noncash impairment in the nib drive segment of a little over $4 million and nonrecurring costs were impacted by a net cash expense before tax of around $8 million in the first half result relating to historical adjustments to the Australian government rebate and to the New South Wales Hospital insurance levy.

Our investment income was down, driven by markets generally and mainly the reduction in cash rates and also our sustainably biased equities portfolio underperformed given the strong performance of the mining sector over the last 6 months.

Turning now to Australian Residents Health Insurance. Our core arhi business continued to deliver in line with expectations with revenue growth of 7% and margins in the target range. The reduction in margin was expected given the elevated margin profile of past periods and growth was a little lower than we would have wanted given competitive market dynamics. We also did have negative product mix impacts on revenue. However, the margin impact relating to that was more limited given the downgrading occurred in the higher claiming tiers.

Claims inflation was 5.3% or 6.1%, including the impact of the New South Wales bed rate and has been offset by pricing and productivity, which will come to in the following slides. Productivity was definitely a highlight with the overall management expense ratio below 10% and our non-marketing expense ratio at 5.8%, which is the lowest since 2017. Looking and just going a little bit more into pricing, margins and inflation. In this slide, we're trying to unpack inflation a little bit more and our pricing and productivity response. I'll just take you through this. It might take a little while, but bear with me.

So starting at the bottom left, you can see that we had very high medical inflation driven by investment in customer benefits, mainly expanding our known GAAP and non-GAAP offerings. Hospital inflation was also elevated given the New South Wales bed rate impact and our support of the private hospital sector. However, the chart at the top left then pulls apart those impacts as a number of those are unlikely to reoccur.

Starting with our claims inflation, excluding the bed rate impact of 5.3%, we then expect the impact of investment in known GAAP and non-GAAP to reduce given it commenced in October '24. We'd then like to highlight what we've termed risk equalization volatility. There's been some market commentary around the increase in hospital claims and payments, especially in the December quarter, and we did see this. The growth in the industry gross deficit was over 4% higher in the first half than in the preceding 12 months, and this was especially notable in the December quarter.

Given that we basically pay the entire net risk equalization transfer in the pool, we did see our inflation increase as a result, and one would assume that they benefited other participants. We're not able to provide an indication as to whether that will reverse as that depends on the behaviors of the other participants in the pool, but we are just highlighting this impact as unusual. If we adjust for those impacts, we come to a base level of inflation of around 4.1%, which does include mix and downgrading effects.

Now let's look at our pricing on which the mix impact was negative 1.3% and which means that we need around 5.4% pricing to cover inflation. And given that our pricing is 5.79 in the March quarter and 5.47% from April 26, we think our settings are in a reasonable range to continue to manage gross margins within the ranges we are targeting. Our hospital benefit ratio is now ahead of pre-COVID levels, and we're focused on continuing to manage claims inflation with an end-to-end strategy having been developed and one which will be executed across the rest of this calendar year. We remain focused on productivity and delivering enhanced value to our members.

Turning now to margins. As we just highlighted, we think the settings are in the right range from margin stability, and there was relatively little impact between our underlying net margin and reported net margin. The margin impact from the chain to the LIC was quite small, highlighting that our provisioning at June '25 has been appropriate. There has, however, been a reduction in the LIC due to faster payment speeds in the first half of '26 which has again been the subject of market and commentary and may be a factor in the risk equalization volatility we've highlighted. Overall, our estimate is that the LIC reduced by $28 million to $29 million due to this factor. And again, the December LIC is so far supporting this conclusion through hindsight analysis.

If we then look at cash claims growth to incurred claims growth, I just let you know that, that's in the second and the slide on Page 32, in which we do provide a breakdown of further incurred claims information. If we adjust this impact for payment speeds and volume impacts, then cash claims and incurred claims growth align. And I'm sure a few of you want to unpick this a little more in our calls this afternoon in discussions this week.

Moving now to the adjacent businesses and given how busy the reporting season is this year, I'll not spend too much time on the other businesses other than to note that their strong performance with a combined up of $30.4 million this year versus 9.9% in the prior comparable period, and this was the best performance since the first half of '19. Our international business delivered a strong performance with UOP growth of 23%. And the New Zealand turnaround was notable with our recovery plan taking effect in a more stable inflation environment, albeit at elevated levels, and our Health Services segment delivered a profit as expected. We sold the international perimeter of our travel business. And given that most of the net assets are intangibles, there will be a high cash realization from the sale of around $20 million.

And with that in mind, if we could now jump to Slide 21 on capital management, our ratios continue to strengthen, and the PCA ratio for the health fund was at 1.91x, which is a similar level to last year and above our target minimum of 1.5 to 1.6. We look at capital management initiatives in the second half as the travel strategic review continues and funds are received.

And finally, on cash flow. Our first half '26 operating cash flow was positive and ahead of the prior comparable period. And the normal seasonal trend is continuing, and we'd expect strong cash generation in the second half given pricing and rate protection factors.

And with that, I'll now hand back to Ed.

Thank you, Nick. So I just wanted to pause and spend a short moment on our strategy. It's fair to say it remains clear and focused across our business.

Firstly, we aim to grow and strengthen our core PHI businesses in Australia and New Zealand. We'll continue to invest in customer propositions, and we'll continue to focus on delivering our above system multi-brand, multichannel growth. Scaling health management and claims optimization programs are also a priority.

Secondly, we continue to scale our adjacent businesses to deliver value back to private health insurance, including our focus on health services, the ItsMy Group platform and our scale-up efforts in the NDIS plan management.

And thirdly, we continue to embed productivity powered by digital and AI. We're simplifying the business model, and we maintain a disciplined capital allocation focus. This strategy is underpinned by our people, who continue to deliver exceptional outcomes for customers and is strengthened by our proactive approach to risk management. We're pleased with the ongoing execution and progress on our key priorities, and this is reflected in our first half performance.

So if we jump across to Slide 25, I also wanted to dive a little bit deeper on our investment thesis. Private health insurance is a core pillar of Australia's health care system. It funds around 40% of hospital episodes and the majority of elective surgeries and continues to ease the pressure on the public system. Participation remains stable and long-term growth of 1.5% to 2% is supported by positive government policy and an aging population. The industry is capital light, cash generative and operates with resilient regulatory settings.

And within this environment, nib is differentiated. We continue to deliver above-industry policy growth, maintain disciplined cost control and leverage our scale, digital data and AI capability. This is alongside our targeted health services strategy, which strengthened outcomes in our core PHI proposition. These things taken together position nib to deliver sustainable growth and long-term value for customers and shareholders.

And lastly, if we jump across to Slide 26, and we'll just step through some of the FY '26 outlook and guidance. FY '26 Group UOP continues to track in line with expectations. We expect FY '26 Group UOP to be in the range of $257 million to $260 million for the full year. Our disciplined productivity program remains a key focus, and we'll continue to support performance with further reductions in the group operating expense ratio expected.

Across the portfolio in Australian residents, we are targeting above system policyholder growth and a stable full year underlying net margin in the 6% to 7% target range. International is expected to continue its strong contribution to group UOP. And New Zealand is recovering strongly with a clear focus on customer experience and value. Health Services profitability is expected to continue for the full year after that important milestone at the half. And in travel, the strategic review is well progressed.

So with that, we'll now open up for questions, and we'll pass to the operator.

[Operator Instructions] First question from Julian Braganza from Goldman Sachs.

Firstly, I just want to be clear on what's happening with claims inflation just on a like-for-like basis. You're saying underlying base inflation, 4.1%, headlines, 6.1%. And I think previously, at the full year result, you flagged 4.9%, including the bed rate impact. So there's a few different definitions here. But I just want to be clear what's happening since FY '25 to first half '26, and what is the outlook for inflation given incremental hospital indexation? And I'm just trying to lead into in the second half '26 and FY '27 to align with the rate that you've got. So any color around that would be great.

I think in FY '25, Julian, it will be the investment in GAAP and non-GAAP that we didn't pull out. So in this case, we're pulling it out because we don't think it will repeat into the future just to give you a bit more guidance, it also gives you a bit more of an indication about where we're seeing that base inflation and then why we've priced where we have.

As to the risks and opportunities into the future, I guess something I can turn to add. But again, that's something that's in the future, and we'll adapt to those as they come up.

Yes, I think just building on that, Julian, I mean, when we think about what we're remaining alert to. You referenced indexation. And certainly, as part of our expectations and commitments to the hospital sector viability, we've been doing our bit. And I think we've talked to some of the key data points around our ongoing support for the hospital sector.

And that also correlates to utilization as well. And so given our strong track record of growth, we are anticipating utilization to continue. And that's another important element of ensuring that there's adequate volume flowing through the hospital sector.

In terms of our actions underway that we can proactively manage that. We referenced that we're embarking on a fairly comprehensive end-to-end review of our hospital contracting and broader benefits management strategy. A couple of things that are interesting that we're working hard on is around average length of stay. That is an opportunity for nib. When we look at benchmarks to peers in the industry, that's something that we are working harder and presents some opportunity moving forward. And equally around the shifting patterns of care, particularly with a focus around short stay, day and community-based care. And again, when we benchmark ourselves to industry, that is also an opportunity for nib.

Okay. Got it. And just to be clear, so if that 4.1% underlying number continues to track higher with headline indexation, how are you thinking about just that product mix impact. Have you factored in any benefits from the downgrading from gold to silver and bronze on the claims side of the equation. But I just want to understand how you're thinking about that downgrading, particularly given you'll be putting that -- the rate increase through in the second half.

The 4.1% includes the downgrading that occurred in the period. And so that's why we've deducted the downgrading from the pricing.

Yes. And sorry, I mean, in terms of an offset, that 4.1% is a 4-point just in terms of the underlying base inflation, if that continues to track higher, what happens, like on the other side of the equation, downgrading, how can that track in the second half and into next year? Can be lower -- can the down going to be lower to offset the inflation base? That's just trying to understand.

It could be lower or higher.

Yes. I think what I would say, Julian, is if you think about some of the pricing decisions that we made in April '25, which were quite strategic in where we applied those that did correlate with downgrading in what we would describe as lower value segments and tiers. And so we'd expect that, that is largely washing through as well. So in terms of your margin impact overall when you look at downgrading and that claims experience, with focused on a fairly neutral impact overall.

Okay. Got it. And just a last question for me on expense ratios. So down to $9.9 million, just how much flexibility just in terms of what you're doing there, how much scope is there to reduce that further from here?

So we've touched on our forward-looking expectation that productivity will continue to deliver benefits. We're really pleased with the progress, and we've highlighted the step change that is now very much structural. What we do want to remain committed to and we talked about the investment in customer benefits, but also our investment into our growth and distribution.

So we remain disciplined around how that productivity will unlock value, but also important to think about where do we redirect some of that value back to customer benefits and also our growth strategy. So we're not putting specifics out there at this point, Julian, but we are expecting that there's still some opportunity ahead.

Next question comes from Siddharth Parameswaran from JPMorgan.

Good morning, gentlemen. Maybe just a question first just on the lapse rate that has been rising for a period of time and seems very, very high by industry standards. I was hoping if you could just provide more detail behind the comments that you've given us as to what's happening? And maybe just some comments on whether you think this is where it will stop or whether it will get worse and related to that, just -- I know you have some assumptions on amortizing your DAC. I just wanted to understand where we are in terms of how close you are to those assumptions?

Yes, I'll provide a few insights on lapse performance. And I'll pass to Nick to put some color around the DAC.

So on the lapse drivers, I mean, yes, it is elevated. It is an opportunity for us, absolutely. That higher lapse rate is predominantly driven by a few key factors. Firstly, our high sales mix, generally, about 1/3 is attributable to that lapse experience as well, particularly around competitive responses to our strong sales performance. And so win back activity is something that is -- we're watching closely as competitors understandably respond to our high sales and distribution focus. And so that is a big driver of what we would call that short-term lapse.

Equally, I touched on the pricing approach that we took over the last 12 months around prioritizing those high-value segments and working out well, where does nib as a business model, want to prioritize. And that has also being reflected in that lapse impact as we have been quite strategic around product design and pricing optimization.

And then the other sort of 1/3, if we think of it in three parts, is absolutely an opportunity for us. And so we've been -- we talked about the government rebate adjustments that we have made, and we're in the process of refreshing our go-to-market strategy with a big focus on the nib brand itself. And so we remain optimistic about the opportunity to really intervene in that lapse and retention space. And we do expect that there should be some moderation moving forward. Do you want to...

Yes. Yes. And in terms of the DAC, we've still got headroom. We amortize over 5 years, and there's still headroom above that in terms of the average life.

Great Okay. Just a second question that I had was just around claims inflation in arhi. Just to I ask if you're benchmarked where your inflation is coming in versus years because it seems -- I mean from taking your numbers today, if I was to adjust for the mix effect, which seems to be benefiting you, it seems like inflation is extremely high. Like headline 6.1%.

I understand there's a reinvestment in customer benefits, but the mix effect effectively more than offsets that. So it seems like underlying inflation is well over 6%. You got a rate increase, which is 5.4%. Just keen to understand exactly Well, firstly, will there be anything which will bring that inflation down perhaps on the hospital side. You touched on a couple of things, but the -- I think the underlying pressures are more the other way that hospitals are asking for more. So I was just hoping you could help us understand some of these numbers on the inflation side?

Yes. I think I'll talk to some of the experience, said. So I can't -- crystal ball where others have been around their hospital partnership arrangements, but we've talked consistently now for or so around the work we've been doing in the hospital sector. And so from a contracting time line and sequencing perspective, we struck several multiyear agreements over the course of the last 18 months. And so we're certainly feeling that indexation impact through those numbers, and that was expected. And I referenced the 80% of benefits outlay that are now under a partnership agreement.

Obviously, indexation plays an important role there, but it also gives us good predictability around what we're expecting moving forward, given 80% of the benefit outlay is under contract.

If I think about some of the other factors that are playing through. We have a high proportion of our customer base in New South Wales, and that is certainly seeing higher levels of inflation, again exacerbated by the New South Wales bed rate impact. And so our member-based proportion is obviously skewed to that state.

The other thing that we've been spending some time on is looking at our customer proportion that sit on gold relative to peers. And if you think about, again, our strategy over a long period of time, we have a much lower proportion of our base on gold. And so what we're actually seeing is that as the market generally responds to the sustainability or lack thereof, should I say, of the gold proposition that we've been a little bit out on that timing and lag effects that might be starting to play through around gold. So there are some of the factors.

I mean you asked about the management response and I've talked about disciplined pricing. I've talked about the productivity approach, giving us optionality around our expenses. And we've talked about that end-to-end claim strategy with a big opportunity around shifting patterns of care.

And then I think the last point you referenced this was we have been quite deliberate around our investment in customer benefits. And so that medical inflation line that we highlight there is really table stakes for us is we see it as a critically important part of our proposition, and we're committed to making sure that investment resonates.

A couple of comments if I said would be the gold is an important point. We're at about half the industry proportion of gold given our history and that we target a different customer base. So while everyone's reduced -- been reducing on gold, given what Ed just talked about, the relative reduction for the rest of the industry versus nib is different.

But if I go back to sort of industry and so forth, it's hard for us to comment on any single participant. But I think what we often talk about is, we think that the best guide to where people are seeing industry inflation where industry inflation is, is what people put in their pricing. And so an industry of about 4.5% less. But the majors are more like 5% with the exception of 1%, I think gives you an indication about where that is.

Now relatively, if I take 5% for the majors and 1% downgrading that comes to 4% , I could -- we've got us saying at about 4% -- do you know what I mean, like I'm not seeing perhaps as much difference as you are seeing, but happy to talk it through. And I think, yes, that slight elevation for the factors that Ed's talked about.

Next, we have Nigel Pittaway from Citi.

I'd just like to ask a first question on high policyholder growth and really what you're trying to tell us there. I mean I think in the one breath, you're saying you are focused on high-value segments, but then you also said you were quite disappointed with policyholder growth. You've obviously cropped your policyholder growth target for the full year. And an increasing share of your policyholder growth is coming at the moment from aggregators, which I understand have been quite aggressive during the period.

So can you put that all together for us to exactly what you're targeting and how we should think that policyholder growth moving forward?

Yes, thanks for the question. So yes, I think we've been quite clear around our expectations moving forward. We're talking to above system and systems tracking at around 2%. And so we have to be disciplined. I think we've talked about making quite deliberate choices about where we play and how we execute on that, talk to some of the drivers of lapse and I've also been signal that retention is a big opportunity for us.

And so certainly, a core part of our distribution and business model is that consistency around above system policyholder growth. So we're certainly not stepping away from that. We do have some quite innovative initiatives that are coming through over the next 6 to 12 months that gives us confidence.

And you touched on the aggregator channel, which strategically, again, remains important to us and particularly through the partnership with it's my group, but all of our strategic partners in the aggregator sector. And so they support our high-value growth strategy. And yes, we remain alert to some of the factors. I touched on some of the temporary disruption of the government rebate changes and our adjustments to offer and how we flight our go-to-market strategy, and that has had some short-term impact, but that will start to unwind over the months ahead.

Okay. But you have to drop your sort of policyholder growth target before to above this and so that gives a sort of modest temporary. That's fair to say, right?

Couldn't quite get all of that, Nigel, but I think you're referencing back to the step change from 3% to above system.

Yes, absolutely.

Yes. I hope I tried to be clear on the factors around why we stepped away from that in the second half.

Yes. Okay. All right. I'll move on then. I mean, in terms of just the growth then in New Zealand, presumably model those price rises are fully earned through yet. So the growth rate, obviously, you had a pullback in policyholders. But in terms of sort of the earn through those premium rate increases, there's still more of that to come. Would that be fair?

Yes, that's right. On Page 17 of the presentation. We can see that the first quarter and the second quarter, the average is -- price rises going up from 22% to 26%. But we've also got to remember that we've unfortunately had some lapse as a result of the remedial action, and there's been some downgrading.

So Yes, some will go through, but please, let's just -- the lapse in the downgrading has been -- we've had that impact, and we're now really focused on adjusting, I guess, for that impact and having put the business on a more sustainable footing, reverting it back to -- focusing more on customer service and the growth.

Okay. And then just wanted to sort of see what's involved a little more in the capital management review. Obviously, before you sort of indicated that any proceeds you got there was a fair chance that a reasonable amount of those might be distributed? I mean, can you sort of give us a flavor of what exactly you're going to be looking at and the capital management review?

So Nigel, certainly, that remains front and center around returning those proceeds to shareholders. And we're working through those options at the moment. I think it's also fair to say that we're focused on maximizing the return on our existing investments as well and particularly strengthening some of those adjacent businesses. So we'll work through that carefully over the months ahead. But hopefully, that's giving you a signal around our intended direction.

Great. And then maybe just finally, on international, clearly, you're back inside what used to be your margin target of 10% to 15% this half, but typically second half has been stronger. So is it fair to say that overall margin for international is probably a bit better than you used to get when you were targeting 10% to 15% is that a fair comment?

Yes. I mean we were really pleased with the way the international business has gone, especially because it's on that lower gross margin of 39%. And really that the benefit on that has been in the expense ratios. It's hard to really give that target given that it has been quite a volatile segment. But we're pleased with where the -- we're happy with the margin where it is. We're pleased with the expense ratio. I hope that gives you an indication, but I'm just hesitant around those historical targets when they've been quite volatile since we gave them.

Next, we have Freya Kong from Bank of America.

Can I just ask on the updated strategy in New Zealand? Are you going to continue to prioritize profit over growth? Are you going to look to increase retention and growth now? And also what kind of margins are you writing new business at relative to your historic 8% to 9% target?

Thanks for the question. Yes, it's a balance in New Zealand. And so we took some necessary action in that market to ensure that we could get that business back on sustainable footing. And where we're really pleased with the direction it's heading.

And notwithstanding, we acknowledge the customer impacts were felt and you can see that in the NPS and the lapse rate. And so our priority over the next 12 months is making sure that alongside pricing discipline, how do we really proactively manage that claims inflation trajectory. And so consistent with the Australian approach, we'll be looking to really influence that claims trajectory and working closely with our provider community to do so.

We're not guiding to any forward-looking margins in that business at this point. A little bit like the international space, there's still quite a lot of uncertainty there. Macroeconomic conditions are improving, but they also remain somewhat suppressed to where they have been historically. And you did reference our historical margin point, but it is still too early for us to really sort of put that on a forward-looking basis. So we're pleased with the steps that have been taken to date.

You talked about balancing on customer and growth, and that is also a big focus for us. And we're seeing competitive dynamics really stabilize as well. And so I would say that the playing field is certainly more even now. And we're quite buoyed by some of the growth initiatives that we are now turning our attention to, including the revised launch of our life insurance offering over there as a bundled play with health really strengthening our relationships with the financial adviser community, which is an important distribution channel for us in New Zealand and then we'll selectively pursue some of those other adjacencies, including international visitors in New Zealand and also the corporate sector. So there's opportunity there, and there's certainly headroom for growth. We're about 15% of the overall resident at market in New Zealand. So again, consistent with Australia, we see lots of opportunity for growth moving forward.

Okay. And what's the underlying yield that you're getting right now on the defensive portfolio? Were there any negative mark-to-market impacts in the half?

That will be included on the last page of the appendices.

I don't think you split out underlying yields there though, correct me if I'm wrong.

Okay. Maybe this afternoon, you could take me through underlying yield.

Okay. Okay. Great. And then just a final clarification. The group yield of target for the full year, what would that be excluding travel because that's a discontinued operation now?

Again, we've guided to what we've guided to. And I guess we'll keep it where we are in that regard.

Next, we have Andrew Buncombe from Macquarie.

Congratulations on the results. Just two from me, please. How should we think about the product mix impact in the residence business in second half '26? Was there anything unusual in the first half that we need to adjust for?

No, I don't think there's anything too unusual. I think that potentially our relative pricing last year versus the industry and then because our relative pricing this year versus the industry is smaller, maybe that might provide some modest benefit.

Great. And then a couple of questions on travel, please. Would you consider holding the Australian and New Zealand travel business if you can't get appropriate compensation and then also potential stranded costs from travel. If you can just talk to that as well, please?

Andrew, thanks for the question. So Look, that review on to the -- in the Australia and New Zealand perimeter is ongoing as we flagged. I think all options certainly remain possible. If you think about the strategic logic of distributing travel under an nib branded arrangement to our Australian and New Zealand domestic policyholders. There's clearly a tighter alignment than the different brands in those global segments through World Nomad. So if you think about proximity and related as to the core, then clearly that is stronger. But all options, of course, are on the table. And there's certainly plenty of interest that continues to work through.

As it relates then to stranded costs, we're confident that they'll be largely immaterial and that they would be certainly a priority focus for us in the event that the Australian perimeter did exit the portfolio.

Next, we have Kieren Chidgey from UBS.

I just wanted to go back to high claims inflation. The 6.1% underlying claims inflation number you're talking to. Can you give a broad breakdown in terms of what you saw on hospital relative to ancillary and also interested within hospital on the composition between indexation and utilization?

So the hospital versus ancillary is at the bottom left on that Page 13. So 3.6% ancillary ,6.2% hospital, 13.5% Medical is where the 6.1%. In terms of sort of some of the drivers, I think we have commented that we are seeing some relatively high utilization. And again, that will be a focus of the end-to-end management strategy around how we manage that with our hospital partners.

Okay. But I mean, the year-on-year change, just be useful to get some color between the sort of the higher inflation, is that predominantly all coming from that utilization bucket? Or I mean you did talk to hospital indexation being up as well?

I mean I guess sort of the biggest reasons the 6.1% is firstly, the New South Wales bed rate, and secondly, the investment in customer benefits. So -- and then we've got that risk equalization piece. But in terms of breaking down between your price and utilization, it's something we can think about in the future.

And your outlook on risk , you're kind of flagging a fairly stable margin outlook into second half. What are you assuming from a risk equalization basis as we move into second half?

We are assuming that we don't see a second quarter like we saw in the December quarter. So we are assuming that we don't see that again, but we're not necessarily assuming that it reverses.

Okay. Just a second question on Thrive. Just looking at the stat accounts, there's sort of a suggestion there that there's indicators of possible impairment for Thrive even how you haven't taken on this period, but I do note the revenue growth assumptions of almost half on the go-forward in that [ CGU ] impairment testing. Can you just talk to I guess, what you're seeing in that business and how you're thinking about the growth outlook from here?

Yes. Kieren, so with NDIS and Thrive has certainly been a soft growth performance over the past 12 months. And really, this is driven by a couple of factors. There was some internal challenges that we've been quite transparent about dating back about 15 months ago or so now when we integrated several of those businesses under one operating system and one brand, and that did have quite a significant temporary impact on our service levels and broader participant experience. That has largely unwound.

Over the top of that, as you're aware, there's been some regulatory changes that the NDIS scheme is working through. And certainly, Thrive has been within that and planned management has also been within that as well. And so on that forward-looking basis, those revenue projections that you're referring to, we are anticipating modest growth there, and we talked about January being more favorable and back in positive territory. But we are cautious about some of those shifting market conditions. So hence, the revised revenue assumptions.

Next, we have Andrei Stadnik from Morgan Stanley.

I do have you don't know question around claims inflation, apologies about that. But I just wanted to ask in terms of the cash paid claims, it looked like the cash paid claims running at about 6.5% growth a year ago and 2 years ago. But in this half, they stepped up to almost 8%. How should we think about that? Is that just the split-up in the claims process or anything else moving there?

Yes. And I'm happy to go through that. Again, on Page 32. I'd actually say that it was even a little bit higher than that 8%. But then when we back out the increase in processing speeds, and then also adjust for the average volume growth, we do come back to very close to that 6.1% incurred that we've reported. And so comfortable that cash and incurred are aligning. And then from that 6.1%, we've then provided that waterfall down to the 4.1% against which we're pricing on.

And that slide 13, we talk about 4.1% underlying base inflation, has that been adjusted for the $31 million LIC release because that's worth, I think, roughly about 2.5%.

No, that release is -- that $31 million release is $2 million to $3 million of actual release of hindsight release, which is that 20 basis points in the underlying margin waterfall. And then the other $28 million is the -- or $28 million to $29 million is the payment speed processing. So that's why that's reduced. There's only $2 million to $3 million or 20 basis points, that's actually affected margin.

Next question comes Vanessa Thomson from Jefferies.

I just wanted to circle back on the nib thrive. You mentioned that things have turned more positively in January of this year. Is that around participant numbers? You can see it's slipped backwards a little. And I wondered if -- or is it around margin?

Yes, it's -- so we talked about January from a positive growth perspective, and you'll see the overall period-on-period reduction. And I've highlighted some of the drivers of that. And so January, we've certainly seen a positive step-up on volume growth and participants.

The scheme is still growing, and we show you some of the overall scheme growth numbers at the back of the pack. And the planned management penetration or contribution within the scheme is also increasing.

So from a thematic perspective around overall numbers and also the uptake of plan management, those settings are still favorable. In January, we started to see some positive volume growth coming through. What we have been really focused on, you can see that in the numbers is making sure our participant experience and our operating efficiency is improving. And so we're pleased with the work that's happened around our cost base. We now got all of those businesses integrated. We have a dual brand strategy, primarily through Thrive, Instacare that have complemented each other in key markets. And so all of those settings are now more stable. And we I talked about some further regulatory pieces that we need to continue to navigate and we're alert to those. But outside of that, we're feeling confident about where things are heading.

And then -- sorry, the move to Navigator, which I think is -- I know there's very little information, but it's a couple of years away now. Are you positive on the margin consequence of that change. I understand that's a more time-consuming kind of role than plant management?

Yes, you referenced to the lack of information, Vanessa, it is still quite ambiguous. We must say around what the Navigator model could look like, will look like and at what time that would take effect. And so that is really difficult for us to estimate and make assumptions around what that could be. We do have high confidence that the plant management sector has a really important role to play within the scheme ongoing. And so that intermediary layer, whether it's in its current shape within plan management or revised shape.

Certainly, the role of connecting participants with the broader NDIS community is a critical one that intermediaries play. Alongside that, there's an important role for the intermediary layer and plant managers to play around scheme sustainability, and we've talked about how we leverage payment integrity and our compliance frameworks and some of our digitization from our health insurance business across in plan management, and we're keen to work alongside several stakeholders, including the government around making sure that we're eliminating fraud, waste and abuse from the NDIS sector more broadly. And so those settings are attractive for a player like us.

Okay. And then my second question was on hospital contracting. I can see you've renewed your bit since contract. It has a dynamic indexation in year 3. I understand you've done that with others. I just wondered whether you have any contracts that have reached that dynamic indexation phase and how when you're in that phase, you incentivize the hospital?

Yes. Thanks, Vanessa. So some of those multiyear agreements are moving towards those dynamic indexation models. We're comfortable with the driving factors around where indexation is landing, and we've certainly looked to accommodate that around our forward-looking pricing. And so I talked about predictability of having 80% of our total outlays under a partnership model. That's important because it gives us that confidence around where we need to price to make sure that those things are aligned. So I won't go into all the nuts and bolts around the component parts of those partnership agreements.

I did reference length of stay and a shift to day settings and short stay as priority opportunities for nib. We do lag the industry in some of those key metrics, and we touched on that broader benefits management strategy that we've embarked on and our provider partners have an important role to play there as well.

We have a follow-up question from Siddharth Parameswaran from JPMorgan.

Just a very quick one. Just wanted to check on just the seasonality that you're expecting for that second half. I think you made a comment previously about the days effect, and being very strong in New Zealand, in particular and reasonably important for Australia as well. I was just keen to get your perspective on that. I didn't see any specific comments around that.

Expecting some positive benefit from that more in New Zealand than in Australia, but some positive from that in terms of margins.

Meaningful as in the some in like I think you called out quite strongly last...

I guess the puts and takes, Sid, which is one of the reasons why we've provided the guidance that we have. Yes. I mean I know that everyone wants to get as much accuracy in their models as we do. But again, there's always puts and takes on these things.

You could see at the back of the pack, Slide 31, if you wanted to sort of see the half-on-half.

I see no further questions at this time. I will now pass back to Ed for closing remarks.

Well, thanks, everybody, for joining us and really appreciate the conversation this morning, and we look forward to catching up soon. So we'll wrap it up there. Thank you.

Good morning, ladies and gentlemen. My name is David Gordon, and I'm the Chairman of nib Group. I welcome you to Sydney to our 18th Annual General Meeting. I also welcome those who have joined us online and by phone.

Today's meeting is taking place on Gadigal land, where First Nations people have met for thousands of years. Everyone who is born or lives in this country does so today on the land of traditional owners. We acknowledge those people who came before us and their legacy by conducting our current business with respect and understanding.

I would therefore like to recognize the traditional owners of land on which we meet today, the Gadigal people of the Eora nation, and pay respect to elders past and present. And now I'd like to welcome Uncle Allen Madden, who will deliver a welcome to country.

Thank you for that applause. Once again, my name is Allen Madden, Gadigal Elder.

Board, members, distinguished guests, ladies and gentlemen. For my first song...no. Born and bred in Redfern, the capital of Sydney. [indiscernible]. Married man, 10 children, 26 grandchildren, 17, great great. Yes, we did have TV. I just couldn't afford the [ bloody ] electricity. Aboriginal black [ Redfern ] [indiscernible]. No football fans here neither [indiscernible]. Welcome the country's always an honor and pleasure. Just to give you a bit of an insight of where you are and who we are. Welcome to Gadigal land. Welcome to Gadigal country.

As we've all welcomed, firstly, I'd like to acknowledge our First Nations and traditional owners of the lands that you may have come from or work upon, and pay my respects. To all our aboriginal elders, all elders, past and present, also I pay my respects. To all our aboriginal and [indiscernible] the brothers and sisters. From whatever every general island nation you may have come from, welcome to Gadigal. And all our nonindigenous brothers and sisters here today, a very warm and sincere welcome to you to Gadigal. No matter where you've come from, whether it be across the seas, across the state or across town, once again, a very warm and sincere welcome to you to Gadigal. And as I've mentioned many times before, was, is and always will be our aboriginal land. Only [indiscernible] insured and that coming taxation and going. It's an honor and pleasure to be here today to welcome one and all to Gadigal.

Gadigal is 1 of 29 clans of the Eora nation. The Eora nation is bounded by nature's own: the Hawkesbury River to the north, Nepean to the west, and Georges River to the south. And then between those 3 [indiscernible] is the Eora nation. And in that nation, [indiscernible] 29 clans. And the clans [indiscernible] today is Gadigal.

On behalf of members of the Metropolitan Local Aboriginal Land Council and of the Gadigal Mob, once again, a very warm and sincere welcome you to Gadigal. There's an all aboriginal saying out there. My [indiscernible] is very appropriate for you [indiscernible] today. I say where as I will, there's a relative. And as you travel across these traditional lands and borders, may the spirits of our ancestors guide, look over you, and keep you safe. So once again, on behalf of the Land Council and of the Gadigal Mob, welcome, welcome, welcome. Thank you.

Thank you very much. Thank you, Uncle Allen.

It has now gone past 11 a.m. here in Sydney, and the Company Secretary has advised me that a quorum is present, and as such, I formally declare the meeting open.

Before we start our official proceedings, I'd like to ask that all mobile phones be turned off or turned to silent so as not to interfere with the proceedings. If you wish to use your phone, please do so outside the room if you're present.

I'd now like to introduce the nib representatives who are joining me here today. First, my fellow nonexecutive directors, Jacqueline Chow, Anne Loveridge, and Jill Watts, Peter Harmer, Donal O'Dwyer and Brad Welch. And joining me from nib's senior executive team, our Chief Executive Officer and Managing Director, Ed Close; Group Executive, Legal Chief Risk Officer, General Counsel and Company Secretary, Roslyn Toms; and Group Chief Financial Officer, Nick Freeman. Also joining us today are members of nib's executive team, representatives from nib's external lawyers, [ Ash Hirst ]; our share registry, Computershare; and our auditors, PricewaterhouseCoopers. We also welcome Chair of the nib Foundation, Vanessa Wells.

Many of you will know that our Chief Executive Officer and Managing Director, Ed Close, was appointed on December 1 last year. Prior to that appointment, Ed was Chief Executive of nib's Australian Residents Health Insurance. Ed will address you shortly, providing an overview of FY '25 and a summary of nib's key strategic objectives for the year ahead. Following his presentation, I will lead us through the items of business for this meeting.

Turning now to my report on nib's performance for the 2025 financial year. During the year, greater certainty returned to our economy. Australia stock market was buoyant. Growth in the economy was positive, albeit modest, and interest rates began to ease. At nib, the '25 financial year made a stronger focus on what we do best, private health insurance in Australia and New Zealand, and a disciplined approach to our business, its value to our customers and returns to our shareholders. Across Australia and New Zealand, nib now covers almost 2 million private health insurance customers.

I'm pleased to report that during FY '25, we continued to grow our core business in a very competitive market. In our Australian Residents Health Insurance business, nib achieved policyholder growth of 3.2%, again, exceeding the industry average of 2.2%. Our Net Promoter Score, which tells us how well we are performing for our customers, was at 34. Our new customers include more than 52,000 people who are new to private health insurance, more than 22,000 nib customers were enrolled in health management programs. And in Australia, we supported 390,000 hospital admissions, up 5% on the prior year, and 4,300,000 visits to ancillary health care providers, like dentists and optometrists. And through our planned management business, nib Thrive, we supported more than 43,000 NDIS participants. nib Thrive is now processing 96% of participants' claims within a day of receipt. In our Health Services business, Honeysuckle Health, we ensure access and value for our customers, and achieve this through our product range, competitive pricing and excellent customer service.

In FY '25, the public and private health sectors recorded another year of high costs and claims inflation in Australia and especially in New Zealand, where double digit price increases were felt across the health economy. nib incurred $2.7 billion in private health insurance claims in FY '25, continuing and increasing our substantial support for both the public and private health sectors. nib group has a sharp focus on the ways in which we can drive down costs in its -- in our own business and more broadly in the sector.

We alone cannot change the economics of health, but we have invested heavily in key measures in FY '25. One such measure is our new partnership agreements with some of Australia's largest private hospital groups. I want to take a moment to talk about those key agreements and the importance of good contracting. Private health insurers contract with hospitals to provide certainty of access for customers to contain prices and to ensure best outcomes for our members. Those agreements are structured as partnership models for better outcomes, and nib now has a multiyear agreements in place with several of Australia's large hospital groups, among others.

Together, we agree on appropriate price for an overnight stay in a hospital bed or a specialist service at that hospital. Agreements also cover the cost of medical prosthesis, which can include everything from sutures to pacemakers. We want members covered for their treatment for their stay in a hospital with no or limited out-of-pocket costs. This is one of the benefits of having private health insurance, access to great places for care and value. These agreements are complex, and they are hotly negotiated by private hospitals and private health insurers. The sustainability of the private health care system relies on both sides having robust discussions.

We recently announced a new deal with St Vincent's Health Australia. St Vincent is Australia's largest not-for-profit provider of health and aged care services, operating 10 private hospitals across New South Wales, Queensland and Victoria, and rehabilitation and psychiatric services. nib and St Vincent signed a 3-year agreement that better reflects the shift in modern patient care, including the need for shorter hospital stays and sometimes care at home, all at the direction of the treating specialist. The agreement between the 2 parties innovates through dynamic indexation, which means both parties share the risk if health sector prices rise during the terms of the contract. Both parties also have reciprocal rights to improve efficiency, from legal obligations to operational matters, and we have agreed to establish a joint committee to work together on shared value initiatives during the life of the contract.

We know the federal government is very focused on the sustainability of the private hospital sector and is pointed to the need for better outcomes. The private health care system can only endure if both private hospitals and private health insurers can operate sustainably. That requires all of us to run our businesses efficiently, transparently and with a focus on productivity and better outcomes.

About 55% of the Australian population has private health insurance. Private health insurance pays out for around 2 of every 3 elective surgeries. And data from the Australian Prudential Regulation Authority shows health funds paid a total of $12.4 billion to private hospitals in the last financial year, an increase of 6.4%. In that time, nib paid over $1 billion to hospitals directly and contributed more than $240 million to industry claims through risk equalization. We've been able to do this and ensure appropriate returns to shareholders through prudent management.

nib is playing its part in targeting and delivering first-class health services along with delivering efficiencies, which ensure prices remain affordable and customers see value. But private health insurance alone cannot drive solutions or sector-wide reform. We operate in a highly regulated environment as a listed entity, governed by the Australian Stock Exchange listing rules, and we're also governed by the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.

We don't shy away from oversight and regulation, but we welcome greater transparency over the cost of care for all parties. We look forward to greater clarity in claims, bill processing and hospital costs as part of that process. After all, consumer demand for change has never been stronger. Challenges to the health system, to the health system status quo are not new. We know these are challenges that private health insurers and health providers must meet. At nib, we innovate and better serve those in need.

Another way that nib delivers value to the sector is by allocating funding to programs designed to help members get well and stay well. nib's health management programs, our health check for members and screening programs, are designed to help reduce the burden on our health system and improve health outcomes for people with a specific disease, injury or condition. This is a significant saving for members who may avoid unplanned hospital visits or readmissions, for the community and for the entire health sector.

Turning to the nib group and our purpose, which is the better health and well-being of our customers. Nib reported a $198.6 million net profit tax for the last financial year, an increase of 9.4% over the previous year. The Board declared a final dividend of $0.16 per share, bringing the full year dividend to $0.29 per share fully franked. The full year dividend represents a payout ratio of 7.6%.

At a glance, nib is Australia's fourth largest private health insurer. We're the second largest private health insurance provider in New Zealand. Through our international inbound students and workers business, nib supports 46,500 people who come to Australia as part of the Pacific Australia Labor Mobility scheme, known as PALM, and our nib Thrive NDIS business has about a 10% market share in plan management. We also offer travel insurance through 3 brands.

Our operational highlights include, in our Australian private health insurance business, which is the engine room for our growth, nib reported its highest ever sales in FY '25. In our international inbound students and workers' health insurance business, we continue to focus on disciplined growth and margin improvement. Changes to immigration policy made the returns in this business more pleasing, and we remain optimistic about the future.

Our business in New Zealand continued to navigate a very challenging market, including softer economy and sector-wide health claims inflation. Pleasingly, claims inflation appears to be reducing in New Zealand. Strong management remediation during the year and price increases, along with a renewed focus on operating costs, resulted in a better second half. The private health insurance market in New Zealand is very different to Australia's market. Premium prices rise when a customer's policy reaches its anniversary, and price changes flow gradually through the customer base.

And in nib Thrive, we continue to build our business, which serves participants in Australia's National Disability Insurance game. nib is committed to better participant experiences, supporting the government around payment integrity and fraud detection to ensure a more sustainable scheme for all of those who need support. The sector is maturing and reforming, and nib Thrive is well placed for further organic growth.

During the year, we announced a strategic review of our travel insurance business, which includes nib Travel, Travel Insurance Direct and World Nomads global brands. That review is currently underway.

FY '25 was also a year of prodigious change in technology. Already in nib, artificial intelligence is germane to the whole of group productivity. We are constantly reviewing where AI is applicable to our business model, the gains it can deliver and how we can implement AI to provide deeper customer insights and better customer outcomes.

nib is strongly focused on its own costs, and is delivering productivity gains that result in better value and experiences for customers as well as market growth. Productivity measures during the year included an increase in group-wide tech-driven solutions. We refreshed our corporate strategy with a keen focus on driving growth into private health insurance from our adjacent businesses. And we implemented structural changes with our -- with the establishment of our Health Services division, means we are better placed to scale up our services. We combined our international inbound students and workers with our Australian residents health insurance to form a single division.

All of nib's achievements over the year come from the sustained effort and consistently high standards that nib people apply to their work. Your management team and Board strongly believe in the importance of high ethical standards, good governance and strong risk management. Our senior leaders are high performers who drive exploration, innovation and strong growth. We recognize that nib's ongoing track record of value creation depends on a strong risk governance framework and risk culture. Our approach involves business level ownership of risk, clear and consistent engagement with key regulators and ongoing investment in our risk management teams and their capabilities.

nib's risk framework sits alongside our strategic plan and our sustainability pillars, and it underpins our commitment to deliver for our customers and stakeholders and supports our purpose and commercial strategy. It enables nib to strive for and deliver consistently for our customers, their families and communities.

Turning to sustainability and nib in the community. We support the better health and well-being of our customers, employees, their families and our communities. For almost 75 years, from its inception as a BHP workers cooperative, nib group is focused on customers' better health outcomes. It's also a key part of our sustainability agenda. Our focus is on understanding the risks to our customers, mitigating those risks where we can, and managing or helping the -- helping treat them when they occur.

We know that many factors determine a customer's good health: access and equity and care, housing, connections to community and the natural environment. We can't solve every issue, but we aim to effect change where we can have the greatest impact. Our 5 sustainability pillars are population health, the natural environment, leadership and governance, community spirit and cohesion, and people, culture and employment. We set and exceeded targets for health management programs, health assessments and in our nib Foundation, the number of people reached through our prevention partnerships. Further, we launched our second Innovate Reconciliation Action Plan, launched an inaugural Disability Inclusion Action Plan, and about 20% of sponsorship funding was invested in diversity and inclusion initiatives.

Through the nib foundation established 17 years ago, we have funded more than 200 community health and well-being initiatives worth $34.2 million. In 2025, nib Foundation welcomed 2 partners in Australia's disability sector, Down Syndrome Australia and People with Disability Australia. We continued our funding program to the Hunter Medical Research Institute to help better understand chronic disease prevention and to the birth pathways program.

Our Independent Nonexecutive Director, Donal O'Dwyer retires from your Board at the conclusion of this meeting. Donal was appointed in 2016 and has served a full term on the nib Board. He's been a truly outstanding member of the Audit Committee, the People and Remuneration Committee and the Nomination Committee, and has made a very significant contribution to the nib business over almost a decade. Donal's insights, guidance and contribution have been highly valued, along with the warmth, good humor and generosity of spirit that he has brought to all of his dealings on the nib Board. On behalf of the Board and all shareholders, I thank Donal, and we -- for his commitment, and we wish him all the best for the future.

I'd also like to welcome our New Zealand -- welcome to our New Zealand Board, Andrew Blair, who joined as a nonexecutive director this year and was appointed Chair on the retirement of [ Hannah James ] on the 1st of November. [ Hannah ] has served on the Board since 2016 and was appointed Chair at the start of 2024. We thank [ Hannah ] for her dedication to nib and wish her well, and we also welcome Andrew, and look forward to working with him.

Together with the nib Board, I look forward to the challenges the year ahead will bring. Thanks to my fellow Board members, nib's executive management team and the wider nib group for their hard work and dedication throughout the year.

And now I'd like to hand over to Managing Director and Chief Executive Officer, Ed Close.

Thank you, David, and good morning, everybody, and thanks for joining us. It looks like we've got a great turnout here in Sydney. And for those of you that can take the time, we encourage you to stay for some refreshments at the conclusion of the meeting.

I'm Ed Close, nib's group Managing Director and Chief Executive Officer. And throughout the year, nib has continued to support our customers, our shareholders and our communities.

Our purpose, as David mentioned, is your better health and well-being. We protect customers by ensuring health care is accessible and affordable. We connect them to trusted providers and partners, and we provide insights and tools to empower individuals, their families and the communities to manage their health.

David has already provided a bit of an overview on our business and the broader industry landscape over the past year. But before I talk to our financial results, I'd like to share some numbers that demonstrate nib's commitment to the better health and well being of our customers.

At nib, we are providing value and access so that customers can look after the health and well-being, whether that's through access to private hospitals and ancillary care, health care at home programs or virtual care. We're doing more to help our almost 2 million customers in private health in Australia and New Zealand.

In FY '25, we funded almost 400,000 hospital admissions and incurred $2.7 billion in private health insurance claims. nib supported 4.3 million customer visits to dentists, optometrists and other ancillary health service providers across Australia, up by 5% on the previous year. nib's preventative dental and optical networks expanded to more than 500 providers, saving customers over $40 million in out-of-pocket costs in FY '25. Our network grew to more than 40,000 medical specialists, who offer nib customers a known gap in cost for medical treatment to reduce medical out-of-pocket costs and provide greater certainty for customers.

One in 4 major joint procedures for nib customers is now delivered through our no out-of-pocket clinical partners program, which can also reduce the length of hospital stay and improve accessibility for our customers. Our finder provider tool has helped up to 50,000 customers a month find a specialist for treatment. And now more than 70% of our nib customers use our mobile app and digital tools.

As David highlighted, we're also investing in digital and AI to make experiences easier and more personal. We now have a number of AI initiatives in production, including nib GPT and AI summarization that has cut after core work by 60%, enabling our staff to focus more of their time on supporting our customers. And we're constantly improving service experience while protecting our customers' data and privacy.

We continue to expand our health services offering. In the last 12 months, nib enrolled more than 22,000 people in health management programs to help them manage a chronic disease. Health information we know is deeply personal. We continue to strengthen safeguards across our platforms and partner networks, so members can manage their health with trust and confidence, from secure digital claims to verified provider connections and non-gap arrangements. These initiatives demonstrate nib's ability to deliver value and convenience for customers, supporting our strong above-[indiscernible] growth across our Australian Residents business.

Now I'd like to turn to our group financials. Positive momentum continues across FY '25. Group revenue rose 7.8% to $3.6 billion, supported by continued expansion of our private health insurance portfolio. As we mentioned, now covers nearly 2 million people across Australia and New Zealand. This scale means we fund significant parts of the health system, and play a critical role in connecting our customers with trusted partners to help them get well or stay well. With the $2.7 billion in incurred claims, we are very motivated to deliver value and better health outcomes for our customers.

In FY '25, we delivered a solid group operating result, with an underlying operating profit of $239.2 million and net profit after tax of $198.6 million. We're proud of our digital-first customer-led approach, which helped us achieve a group Net Promoter Score of plus 34. And as I mentioned, we now enjoy more than 70% of our Australian PHI policies being digitally connected, making interactions for those customers simpler, faster and easier. And we're also seeing the benefits of our productivity focus. Our group operating expense ratio improved by 50 basis points to 17.7%. We maintained a fully franked dividend of $0.29 per share, consistent with FY '24.

I'd now like to take a time to look a little bit deeper at the nib segment performance. In FY '25, our Australian Residents Health Insurance business had another standout year. nib has reported above sector growth for more than 20 years. And in FY '25, nib outpaced the market again, with 3.2% net policyholder growth compared with the average industry growth at 2.2%. Net margins remained stable and were guided towards our 6% to 7% target range, supported by disciplined pricing product design and tight expense control.

FY '25, as David mentioned, was our best ever sales year, up 13%, thanks to our strong multichannel distribution strategy, including 52,000 people who are new to PHI, highlighting how nib is continuing to support increased participation in the private health insurance sector. As more people buy private health insurance because they see value in the cover that nib provides, the burden on the public health sector eases. And in FY '25, our prevention and in-home care initiatives saved over 24,000 hospital bed days and saw meaningful improvements in health outcomes for customers.

We've also strengthened our support for the broader health care system. As David highlighted, we've secured major multiyear partnerships with the large hospital groups across the country. We see high potential for continued growth in our priority health insurance markets. And our product, pricing and improving customer value proposition position us strongly across all our brands and channels.

Turning now to our adjacent businesses, which contributed $45.3 million to group underlying operating profit. International students and workers who come to Australia must hold private health insurance as part of their visa requirement. Our international visitors business recorded 14.4% revenue growth and 23% growth in underlying operating profit, with more than 46,500 of our customers part of the Pacific Australian Labor Mobility scheme, or PALM. Our direct relationships with employers are stronger than ever, and we're seeing new opportunities emerge in these markets as international student commission payments undergo further reform.

Across the [indiscernible] in New Zealand, our recovery plan is well underway. Price increases are now aligned with inflation, product changes have been announced and are taking effect, and we returned to profitability in the second half of the year. We also welcomed our new Chief Executive for the nib New Zealand business, Skye Daniels. Skye joined nib in August. She has deep industry experience as Chief Financial Officer, and has worked in aviation, media and the wider health care sectors. I also wanted to take this opportunity to thank former nib New Zealand Chief Executive Officer, [ Rob Hannon ], for his fantastic contribution over the last 12 years. We wish [ Rob ] all the best for the future.

Our health services strategy is progressing positively. Honeysuckle and Midnight Health are now fully and wholly consolidated within nib's Health Services division. We are aiming for profitability in FY '26 as the businesses gain scale and market traction. nib's Health Service division is central to nib's growth strategy. Honeysuckle helps nib's private health insurance customers better manage health conditions and risks through its health management programs. These programs reflect nib's drive to deliver better value for customers and importantly, better health and well-being, especially for those customers that are managing a chronic disease.

Honeysuckle Health also run support programs to help people return to work after an injury and is actively working with several insurers and corporate groups across Australia to improve broader health and well-being outcomes. During FY '25, nib completed more than 121,000 general health interactions via our health and well-being programs and telehealth consultations. As part of nib's broader digital consumer health offering, Honeysuckle's Hub health brand focuses on delivering convenience, access and discretion through virtual health care delivery. As part of this experience, both nib and non-nib customers can consult with the clinician at a time and in place that suits them. Many of these customers are young parents and professionals juggling work and family obligations. They live right across Australia, including in regional and remote locations where access to GP can be difficult. And we know that health care in the home is transforming patient care. With guidance from a treating specialist, customers can now receive high-quality and affordable treatment outside a hospital setting.

For some time now, advancements in health care delivery have resulted in improved patient recovery times, leading to shorter hospital stays. A patient might once have spent a week in hospital following a knee or hip replacement, where now, prehab and often rehab can be done in the comfort of their own home, can often mean a much shorter hospital stay while delivering quality patient outcomes and experiences. This positive shift benefits patients, families and communities and unlock significant efficiencies across the broader health system.

It is a major change. And while it brings advantages, it can also create challenges, such as pressure on hospital budgets, operating models and as this transition accelerates. But importantly, this is not a move away from quality care. It is a move towards achieving the best possible outcomes for patients, and ensures that we focus on the right care, in the right setting, at the right time, the right price for our customers.

Across in the disability sector, we continue to strengthen nib Thrive, which serves participants across Australia's NDIS. In FY '25, nib Thrive delivered a $16.9 million underlying operating profit, up 10.5% on prior year. As David highlighted, Thrive supports around 43,000 NDIS participants, mostly providing plan management services and essential role in ensuring that providers are paid promptly, and participants receive a high-quality participant experience. We have focused significant amounts of energy on our service level improvements, and this now means that around 96% of claims are often processed within a single day, and 85% of our calls are answered within 90 seconds for our participants and providers.

As a relatively new entrant to the disability sector, we are committed to listening to participants, carriers and providers to drive continuous improvement. This engagement is critical as the NDIS undergoes significant reform, including changes to eligibility, fee structures and intermediaries as the government focuses on securing the long-term sustainability of the scheme. Thrive continues to actively contribute to these reforms, ensuring we are ready to adapt as changes are implemented. And our goal is clear: to help shape a sustainable NDIS, while delivering exceptional service for participants and providers, and we look forward to working closely with the disability community and the government in the year ahead.

Earlier in the year, we announced nib Travel would undergo a strategic review. The review is well advanced, and we will provide a further update to the market in due course. Our Travel brands include Travel Insurance Direct, nib Travel and World Nomads.

During FY '25, gross written premium for our Travel segment continued to improve. The business focused on cost discipline, delivering a 6.7% decrease in operating expenses year-on-year. New products were launched in the United States and the United Kingdom, supporting our growth momentum in Global Markets. All 3 Australian and New Zealand brands won a 2025 WeMoney Award, with nib and World Nomads taking our back-to-back wins.

Finally, during the year, nib kicked off a multiyear productivity program, which has delivered pleasing results to date. We unlocked $80 million in benefits, reduced our group operating expense ratio and kept nonmarketing expense growth to just 3.4% in an inflationary environment. We're also using AI to process nearly 1 and 2 Thrive invoices straight through, and we continue to expand our capability into our Australian health insurance business and New Zealand operations.

I'd now like to spend some time on our strategic direction. As we look to the future, nib Group's refreshed strategy is focused on 4 core priorities, each designed to drive sustainable growth, operational excellence and long-term value for our customers, our partners and our shareholders. Our top priority is to accelerate growth in our core PHI business in Australia and New Zealand. We continue to target above system growth and sustainable earnings through a multi-brand, multichannel approach, disciplined pricing and ongoing innovation to enhance the customer experience and value proposition in our key markets.

Our partnership with Honeysuckle Health is scaling up, and it helps us deliver better health outcomes for our customers, improve access to affordable care and optimize our claims performance in our PHI business. We're expanding our health services and partnerships with insurers and corporate groups. Our partnership with ItsMyGroup is helping us extend our distribution and deliver greater value to both PHI and non-PHI brands across Australia. And we are strengthening our leadership in NDIS plan management. We will pursue a multi-brand strategy, and we will continue to work hard to improve experiences for participants and providers.

And finally, as I mentioned, we're unlocking group productivity through digital data and AI. We're embedding AI and digital-first capabilities and simplifying our business model to drive efficiency, but most importantly, to improve the customer and employee experience.

Our disciplined approach to capital allocation ensures we're investing for long-term value and sustainable returns. And looking ahead towards the outlook, we continue to see a positive uplift in [ group ] underlying operating profit, supported by continued strength in our Australian PHI business, and expected return to full year profitability in New Zealand and solid momentum across our adjacent businesses.

FY '25 was a year of disciplined and strong momentum across our core and adjacent businesses. We're focused on sustainable growth, operational excellence and delivering seamless experiences for our customers. nib Group remains well positioned to deliver consistently strong outcomes for all of our stakeholders in FY '26 and beyond.

Before I hand back to David, I did want to take the opportunity to thank the nib team for its positive contribution over the past 12 months. It's greatly appreciated. Thank you all. And I'd also like to take this opportunity to thank our customers, and of course, our shareholders for their ongoing support. It's very much valued and appreciated, and we very much look forward to the year ahead.

And with that, I'll hand back to David. Thank you.

Okay. We'll now proceed with the formal business of the meeting. I propose to take the notice convening the meeting as read. And please note that matters not pertaining to the meeting won't be covered today.

Shareholders will be given the opportunity to ask questions in relation to any aspect of nib's operations. And personally, I think that's the most interesting part of the meeting. Responses to questions or general matters of business will take place under the first item of business. For subsequent agenda items, I'll only allow questions and comments specific to those items.

Let me first address questions from the floor, and I'll ask shareholders to stand up at the microphone in the aisle. If you're unable to do that, you can raise your hand and a microphone will be brought to you. For shareholders joining us online to ask a question from the online platform, please follow the instructions shown on your screen. You must be logged in as a shareholder to do this. The question function on the online platform is now open. For shareholders on the telephone line, [Operator Instructions]. If we receive similar questions regarding the same topic, we'll respond to those questions collectively. Any shareholder who has submitted a written question prior to today will receive a written response from nib.

We recognize that a significant number of our shareholders are also nib members. If you have a question relating to your nib health insurance cover, please visit our member consultants in the pre-function area. Alternatively, you can contact nib via phone on [ 13 16 42 ] or by visiting our website at nib.com.au or by using the nib app on your phone.

I now put before the meeting nib's 2025 financial report, directors' report and independent auditor's report. There's no vote on this item, and as such, voting is not yet open. But this is the only item on today's agenda where you have a formal opportunity to ask questions or make comments generally about the performance of nib and its management.

Our auditor, [ Caroline Mara ], partner of PricewaterhouseCoopers, is here today and available to respond to questions in relation to the conduct of the audit, the content and preparation of the audit report, the accounting policies adopted by the company in relation to the preparation of the financial statements and the independence of the auditor in relation to the conduct of the audit.

Any questions in relation to these reports or any aspect of nib's operations or its management generally will be addressed now. If you have a question about a subsequent item of business, please wait until I address that item of business on the agenda. So if there's a shareholder in the room who'd like to ask a question, please move to the microphone and -- with your attendance card and raise your hand. Wonderful.

Chairman may introduce William Printess.

Welcome, William, thank you very much for coming.

Thank you for inviting me. It's very nice for you, and I enjoyed your address. But was it AI written your address?

It was not. No. Hard slog. No AI. Although we do use AI and lots of things to improve them, but that was not one of them.

Okay, just inquiring. I just wanted to -- I think it was sort of raised by you or maybe by Ed about health care inflation, which is greatly above the CPI. So can I just ask, what are your assumptions going forward in the next year or 2 in relation to the inflation that's going to be in health care as it pays to the CPI? Because I should imagine that will have -- both have sort of an impact on increases in premiums. Anyway, that's my first question. So I was [indiscernible] that. Can I ask another one?

Yes, go ahead.

Okay. I didn't want to hog it.

No, I'm sure [indiscernible].

The company sort of operates in a very regulated environment, which you said. And also one department you didn't mention was the Department of Health. And the government, being as they are politically -- you're in a politically sensitive area, that if your profits go up, everyone jumps up and down. Well, not everyone, but the politicians do.

Well, they jump up and down for different reasons, yes.

And I'm just wondering, because they set your premium increases as well. So just wondering if you could comment on that regulatory environment that basically, in a way, limits your profitability -- ability to do things.

Okay. Well, that's 2 excellent questions.

And can I ask you a third one?

If I can remember it, then go ahead, yes.

The third one is a very simple one, maybe. But when I put the TV on -- and there's another health fund, which I won't name, but you'll know anyway. And they say we're not for profit, come to us. The other ones, and I presume they're referring to nib, have greedy shareholders there that need money and so forth. I'm just wondering how you counteract that type of argument? And anyway, that's it. That's enough.

Thank you. That's 3 excellent questions. Let me see if -- I might just do the last one first, then we'll come back to the other 2.

So the concept of not-for-profit is -- it's an interesting one because every business requires capital in order to function. And that capital can either be capital retained on its balance sheet, that has ultimately come from either contribution from people in the past or from ongoing profits, or it can come from new capital issued and taken up by shareholders such as yourselves. And one of the great benefits that we have as a listed business is that we have the ability, where we need it, to add to our capital reserves by raising capital in the markets. And in a market and in an industry which is changing so much, that's huge flexibility.

As far as not-for-profits versus those that make profit, I think it's a little misleading because every business should make a profit. It's a question of what you then do with it. Some of that profit gets reinvested into expansion or into existing businesses. Some of that profit needs to go to compensate the source of the capital. Now in the case of nib, the source of that capital is you, our shareholders, and that's why we pay dividends. And the discipline of paying dividends is, in my opinion, a very good one. It means that we focus even more on the efficiency and productivity of our business to make sure that we can generate a profit to pay shareholders for the use of their capital.

Now in nib's case, you made the point that our pricing is set by the government, and it's true. Every year, every health fund in Australia seeks to -- seeks the approval of the government for a price increase and -- including ourselves. And the guidance that we give about our profitability and the guidance that we give to the government in terms of our price increases is very simple. We continue and have for a long time, look to achieve an underlying profit ratio of between 6% to 7%. And that is a target which we are very keen to continue to follow.

Now with health inflation that you mentioned in your first question, that becomes more challenging. And there are 2 components to health inflation. There's the actual cost of a particular procedure or a prosthetic, and those costs are going up. The wage costs of -- in hospitals are going up as is the cost of products, whether it be sutures or pacemakers in the example that I gave in my address. And both components of that go to increase the costs of the health system, the costs that we pay out to hospitals for the procedures that our members get done.

And so when you look at health inflation, the cost that we need to cover is a cost to ensure that we can continue to meet the obligations that our members incur when they have health procedures in hospitals as those costs go up, and the number of claims that they make if the number of people who need procedures increases. And both components of health inflation have increased in recent times.

COVID was a bit of a complicating factor in all of that because during COVID, many people who needed procedures put them off or couldn't have them done because there were other things being done within our health care system. And one of the challenges is trying to work out what sort of additional demand there may be on our hospital system post-COVID as some of those procedures flow through the system. At the same time, as prices have increased, it's a bit of a double whammy. And that's what's going on at the moment.

How do we factor that into our planning? It's a very good question, and it requires us to be highly focused on trends that are taking place, not just in aggregate, but in every type of procedure across public and private hospitals. And to ensure that we are tracking the claims by our members in those areas and what's going on with health care costs, the cost of going to a doctor, the cost of needing a particular piece of equipment in an operation.

And that's why I said earlier in my address that the challenges that are being faced by the health care system are not challenges that we alone can solve. They need to be done in the private sector in partnership between private health insurers and private hospitals. It's one of the reasons why we are very keen for there to be greater transparency in how hospital costs are being incurred. We are completely transparent in the way in which we operate. We're a listed business. We publish our accounts every year. Our accounts are audited by a highly reputable organization. And every dollar that we spend is allocated and checked, and we publicize how we spend everything we do.

We ask for the same level of transparency from the private hospital sector because we want to ensure there is productivity gains across the system in order to be able to cater for the growth that's taking place, in the number of procedures that people are asking for, in the increased cost of those procedures. So that we can moderate the increases that we pass on to our members and at the same time, adequately compensate the capital that's involved in our business, and ensure the ongoing sustainability and viability of the private health insurance sector.

And that's a challenge, which I referred to in my address in terms of the hotly contested agreements that we enter into with private hospitals because part of those agreements are to address exactly the thing that you raised. We formed these -- we enter into these contracts for periods of time, 2, 3 years. And hospital costs go up, the number of claims go up, we need to factor all of those things in. So we've taken a shared partnership approach with private hospitals to how those things are managed.

So we all have the same outcome in mind, that we want our private health care system and our public health care system to be as efficient as possible, to be as productive as possible so that we can pass on the smallest possible increases to our members, but ensure that their health care is well catered for in terms of access to health care and in terms of equality for health care and the cost of health care. And that's a challenge which the management team is faced with day in, day out, and has been for years and done a great job. So I hope that, that answers the 3 questions that you asked of me.

Please go ahead. Go from there. I can hear you. We've got a microphone actually, we might pass it to you and.

You don't have to answer this question, but...

You ask it, I'll answer it.

Sorry. Well, that's okay. Thanks for that explanation. I thought it was excellent. The -- going forward with health care inflation, I presume you have a set of assumptions on what you expect that inflation to be.

And secondly, with premium increases, I guess there's politics involved in there. And can you sort of give an idea of what you think may be politically okay for the increases coming up? That's why I said you don't have to answer this question.

I'm not sure that the question is capable of being answered accurately because I can't predict the future. What I can say is that the entire health care system works with the government to ensure the sustainability of the system. It's one of the fundamental elements of our society, that we can look after our sick and those in need. And we are an important part of that process.

No one part, ourselves included, can control the outcomes, but we can all work together to try and get the best outcome possible. Inflation is a fact. The CPI inflation, I mean, general inflation. The inflation taking place within the health care system is a fact. And the fact of the matter is that both across the public sector and the private sector, we need to be able to provide high-quality and enduring health care.

We take that role very seriously. And so yes, we have -- we do estimate what sort of increases in inflation rate and in participation rate, the number of claims that people are going to make, and we monitor that in order to ensure that we're covering things. And we wish to make the smallest increases possible in private health insurance costs so that we can make our insurance and indeed the sector's insurance, as affordable for the population as possible. And it's an ongoing challenge, but it's a challenge which we enter into arm-in-arm with private hospital operators and with the government.

And is there anything you'd like to add to that?

Thanks, David. Thanks William for the question. Well, let's come on. A couple of quick additional points on inflation. So you'll recall in the investor results presentation, we talked about our 12 months rolling inflation, which sits around 4.9%. And so I think you can get a good guide around our projections moving forward. Long-term inflation is, for health care generally, trends at around CPI plus 2%, with a combination of aging and technology investment driving that above CPI piece. And so I think if you look at history as a guide, is always a general way to take a look at that.

And then as it relates to the premium round, again, if you look at history, then ensuring that there's that sustainable sector profile around the ability to price in that inflation, history would generally support that ability to price in inflation.

Great. Thanks for the questions. Does anyone else on the floor have a question? We love questions. Please.

I would like to. My name is [ Peter Castein ].

Sorry, your name is?

[ Peter Castein ].

Peter, welcome.

The question I have is a general question, which is sometimes raised by a lot of the members that are involved in taking out health insurance. And that is that they -- every year, we get these costs increasing. Obviously, the government has a lot to say in that, and inflation is also incurred.

But in the last 4 or 5 years, I noticed our returns or our benefits haven't increased. And I often wonder while profits are increasing, and obviously, the company is extending its range of businesses. I often wonder, it's going to continue, because there is a -- the gap between benefits and premiums, it seems to be shortening. And a lot of people in health insurance are often talking about whether the benefits are justified. And I would imagine that a lot of it would be wanting to keep out of health insurance, private health insurance, because there seems to be a very strong swing towards public hospitals and the excellent service they provide. So when it comes to future involvement in the premiums that we have to pay, I'm just wondering whether people are starting to realize that maybe private health insurance is not -- is rewarding as perhaps it's presented.

Thank you. Well, I'm going to hand to Ed in relation to some of the specifics of the question that you mentioned, but let me speak generally about a few things. First of all, Australia is blessed with a wonderful health care system by international standards, as you know. The quality of health care in this country is well above most of our Western comparable nations. And that's a wonderful thing.

Coming with that, high quality does come cost, and it occurs across the public system and the private system. And ultimately, it gets funded either by the government in relation to the private system, or subsidized by the government and funded by individuals, if they like to take out private health insurance.

We have a very strong public health system in this country in the form of Medicare, as you mentioned. But the reality is that under Medicare, with the increasing number and cost of services that are sought and provided, there are waiting times, and some of those waiting times are increasing. Equally, you can't choose your own doctor. And so many people, indeed, as I mentioned in my address, more than half the population in this country has private health insurance for that, amongst other reasons.

And the challenge is, as you put it, to ensure that we are providing value to those members, and doing that in a high inflation environment is a challenge. It is difficult. But equally, we have been expanding the range of products and services that we cover under our insurance policies, and I'll get Ed to speak to some of those in more detail, for many years now.

And whilst it may appear as though that gap that you spoke of may be changing, the fact of the matter is that more and more Australians are seeking out the cover of private health insurance for the reasons that I mentioned. And the challenge that, that places and the strain that, that places on the system is ensuring that there are enough facilities at the right price to provide those services. And equally, that the private health system can operate sustainably, so as not to overload the public system and make it even longer for people to get procedures and even longer to be waiting in emergency departments.

And so the interaction between the public and the private system in this country is a very delicate one, and it's a challenge which we are -- which we engage in every day. And ultimately, the reality of inflation, whether it's buying a leader of milk or a slab of butter or your health insurance, is that those things are subject to inflation. And also, as I mentioned, in relation to health insurance or health inflation, affected by the number of people who are also making claims. And in times when those -- when that goes up, it compounds the issue in relation to the insurance -- the inflation in underlying costs as well.

So is there anything you'd like to add to that in relation to our policies?

Yes. Thanks, David, and thanks for the question, Peter. A couple of additional points. From a benefits per member perspective, we actually have seen positive increases around increasing benefits per customer on average. So I think that's something that we should continue to work hard on, absolutely.

Participation rate, as David alluded to around private health insurance, is at record levels, and we've seen record numbers of individuals across Australia now taking up health insurance. And an element of why they are looking to private health insurance is because of that alternative access to the public system, and they see the value in having choice, control and access through the type of proposition that we offer. And we talked about 52,000 new members joining nib in the last 12 months who are new to category. And so those are individuals that are now turning to health insurance as the value proposition improves.

If you compare and contrast, it's always dangerous territory. When you look at health insurance payout ratios and contributions back to members, health insurance as a category always sits at the top or very -- we're very close to the top around benefits that are delivered back to members compared to other insurance categories. And in terms of affordability on premiums, we continue to work hard, both as an industry and at nib to deliver a lower premium as possible. And so particularly in the COVID period where we were delivering record low increases of 2% to 3%. Coming back to the claims inflation conversation earlier, though, that it is important that we get those balance right from time to time. So we are now moving out of what was that artificially low COVID period where we saw -- we did see some lower claims, and we are returning to normal. So hopefully, that's helpful.

The other thing I'll add is that in addition to funding and providing financial support for claims made in relation to health insurance, one of the other benefits of private health insurers and certainly in relation to nib is the investment that we make in providing services to assist people to stay healthy and remain well. And if you look at things like as our health checker, which is provided to our members in order to assist in ways that are well beyond simply paying for health claims. And equally, when people get ill, our health management programs that are designed to try and minimize their stay in public -- in private hospitals and to get them back on their feet as quickly as possible. So there are things that we're doing at both ends of that spectrum that are also intended to improve the health care of our members and to see them being well rather than being ill where at all possible.

One final point there, David, because I forgot to mention. nib has worked hard, and we talked about the expansion of our gap arrangements and so trying to give more of our members certainty around reducing that out-of-pocket burden, which I think you're alluding to, Peter. And so it wasn't that long ago that we had less than 20 no gap dental centers across the country, and we now support more than 500. And so investments like that, to support our member value proposition are an important part of giving our members certainty at that claim period. And now we've turned our attention into the medical community working closely with doctors and specialists around how do we expand our no gap and known gap offerings there. Again, to alleviate that out-of-pocket risk for customers as they move through a hospital episode of care.

Thanks, Peter. Are there any other questions from the floor?

Hello. My name is [ Richard Grant ].

Richard, welcome.

You mentioned the 2 aspects of health inflation, but there is really a third one, which is the development of new medical technologies. And a lot of the medical technologies that are being developed are hugely expensive. How does nib deal with this?

Well, first of all, we're not a provider of health services. We don't own and operate hospitals. Those procedures and that technology would typically be invested by providers of health care, like private hospitals. But ultimately, the cost gets passed on to the system and we're part of the system. So I understand your question.

I think the challenge, in relation to technology, is to ensure that it's actually providing effective outcomes at better cost to society than the previous method. And the advances in technology, not just in health care but across all sectors, having the main been great drivers of efficiency and greater effectiveness and productivity for nations.

Our ability to influence the extent to which hospitals invest in those things ultimately comes through the negotiation we have with hospitals because if they're going to buy a large piece of equipment and intend to provide a new service and charge for it, they will inevitably ask us, whether or not it's a sort of thing that we would like to include in our policies, whether it's a sort of thing that we think our members are going to get value for. And so there's a lot -- pardon me, there's a lot of discussion about returns and investment by those hospitals.

We would hope that there was more discussion so that we can actively get involved in the allocation of capital, in the same way as I mentioned that we'd like to see greater transparency in relation to where costs are incurred. So it's an ongoing challenge. But overall, we are very much in favor of the use of new technology if it can improve the outcomes for members in relation to health care, and/or reduce costs in doing so.

Okay. Anyone else have a question? These are great questions. If there are no more questions from the floor, I'll check if there are any questions online or via telephone.

Yes, Chair. We do have 2 questions online. I'll start with one that's linked to our recent discussion. It's from [ Mr. Andrew Keller ]. Some have seen extraordinarily high prices for procedures in comparison between private and public hospitals. Private hospitals costs being seemingly higher in cases for the same procedure. Is this being monitored in any way? Surely, it adds to health insurance premiums in a negative way.

So do you want to?

Thanks, Andrew, for the question. So it comes back to the conversation we're having earlier, and I talked about this concept of right care at the right price, the right time and the right setting. And a big part of our strategy moving forward is working with our provider partners, public and private, day surgeries, short-stay hospitals, our high acuity overnight facilities across the full spectrum of the provider network to ensure that we put the consumer first around what is the most appropriate care delivery method in partnership with the clinician at the most efficient price.

And so it's really around balancing this access and affordability, and we certainly recognize that there is opportunity, and I talk to this transition that is underway around how do we work with our providers to accelerate that transition so that we can alleviate the cost burden that is still being incurred in some of these settings. So to give you an example around some of these elective surgeries that still continue to take place in high-cost overnight facilities. There are good reasons around why that does take place, but we also recognize that there are these emerging care delivery models, virtual care, care in the home. I talked about rehabilitation in the home earlier, and day facilities where it is highly appropriate that we work with our members and their doctor to guide them into that care pathway.

And so of course, every patient will have its own unique journey, and so it needs to be treated on its merits. But it is an opportunity. It is about then putting the consumer at the center of that conversation and saying, well, what is the most -- the best way we can deliver the optimum health outcomes at the right price. But this will take time. And we -- and I talked about some of the challenges around this transition. So this is going to be multifaceted and multiyear to work on this transition. And they are important partners in that ecosystem and that we need to support with that transition. So it is a balance. Prosthesis is a topic that often comes up around the distortion between public and private pricing there. And again, we work in collaboration with the government and the stakeholders that I've talked to earlier around what is a sustainable and sensible way that we can get better consistency and parity on our prosthesis pricing.

Thanks, Ed. Ross, [indiscernible] questions?

I guess one final question online. [ Mr. Henry Kay ] has asked, has nib considered linking with the Virgin Australia Frequent Flyer program?

That one I'm going to pass to you, Ed.

I'll tackle that one. Thank you for the question, Henry. Of course, from time to time, we explore all different partnership options, but I'm sure it goes without saying that we have a fantastic, trusted long-standing relationship with Qantas as a key distribution and brand loyalty partner of nib. They're an important part of our Australian residents health insurance growth strategy. They've been a fantastic partner for many years. And at this stage, we have a very -- enjoying that long-standing relationship. And so I don't see an urgent need to be considering other opportunities.

Of course, if we step back and say, well, what's -- whenever we look at these different partnerships, and it came up on an earlier slide, if you look at the breadth of the brands that we work with, we will continually look into the market for unique propositions, highly engaged brands, trusted brands with large loyal customer bases and where we can work together and bring the best elements of nib and that partner brand. Of course, we remain open to those different distribution strategies. So hopefully, that is the helpful around the conviction we have around the Qantas arrangement, but also then remaining open to have a distribution, including several large insurers and banks that we work with today.

And there are no questions on the telephone line.

All right, lovely. All right. Well, now that we've considered the reports, we'll deal in turn with each of the items set out in the notice of meeting. I declare that voting on a poll for all resolutions is now open. Votes may be changed up to the time voting is closed at the conclusion of the meeting.

For those of you in the room who are eligible to vote, scan the QR code on your attendance card with your smartphone or other device, and this will take you to an online voting page. To vote, select one of the voting options. A tick will appear to confirm receipt of your vote. To change your vote, select click here to change your vote, what a surprise, and select a different option to override. Alternatively, if you are not able to vote using the QR code, you can vote by following the instructions at the back of the poll card. Participants who have logged into the online platform as a shareholder or proxy will be able to vote by following the instructions on their screen.

Now Item 2 on the agenda relates to the remuneration report contained in the 2025 director's report. In accordance with the Corporations Act, this vote is advisory only, and the outcome is not binding on the Board. nib's approach to remuneration is simple and underpinned by a strong governance framework. Consistent with our approach in previous years, we are actively engaged with and seek regular feedback on our remuneration framework from key interest groups, including shareholders, proxy advisers and other shareholder representative groups, including the Australian Shareholders' Association. The directors unanimously recommend that shareholders vote in favor of adopting the remuneration report of nib for the financial year ended 30 June 2025, as set out in the directors' report.

And I'll now take questions on this item of business. If a shareholder in the room would like to ask a question, please make your way to the microphone or raise your hand, and we'll bring a microphone to you. Has anyone got any questions on the remuneration report? No questions. All right. What about questions online or by phone, Ross?

No, there are no questions.

No questions. All right. There being no questions, I will reveal the proxy votes received prior to the meeting in relation to this resolution. As the Chairman of the meeting, I have been appointed proxy by some shareholders to vote on this resolution, and I intend to vote undirected proxies, which are able to be voted on this resolution, in favor of Item 2. There are voting exclusions applicable to this resolution, which are outlined in detail on Page 8 of the notice of meeting.

I now put to a poll the resolution that the remuneration report of the company for the financial year ended 30 June 2025, as set out in the director's report, is adopted. To vote, click one of the voting options shown on the screen or on the back of -- the instructions on the back of your card.

Now item 3 on the agenda is my reelection as a Non-Executive Director of nib. And for the purpose of this item, I'm going to hand over the meeting to Anne Loveridge, a Non-Executive Director and Chair of nib's Audit Committee. After the poll on this resolution, I'll resume the role of Chairman of the meeting.

Thank you, David. David was appointed to the Board of nib Holdings Limited in May 2020 and has been Chair since July 2021. In accordance with the ASX listing rules and nib's constitution, David retires, and being eligible, offers himself for reelection as an Independent Non-Executive Director. I now invite David to address the meeting regarding his reelection.

Okay. Well, good afternoon, shareholders, colleagues and guests here in Sydney and those joining online. It's been a privilege to serve on the nib Board, and I'm honored to be standing for reelection as a director. I joined nib, as Anne said, as a non-Executive Director in May 2020, and was appointed Chair in July 2021. I remain as passionate about the business today as I was when I was first appointed, and I remain committed to supporting nib's senior management team.

I came to nib with broad experience as a director of public and private companies and incorporated advisory roles into Australian and international organizations. I've got extensive knowledge of strategy development, mergers and acquisitions and capital raisings and a strong track record in business growth, including the accelerated adoption of technology to grow market share.

As Chair, I take great care to maintain my independence and due diligence and act with fairness guiding nib's purpose. As we look ahead, I remain committed to ensuring nib continues to deliver value for shareholders, for customers and for the broader health system. I am very proud of nib's governance standards and the strategic direction we set. I respectfully seek your support for my reelection, and I thank you for your continued trust in my leadership.

Thank you, David. The directors, with Mr. Gordon abstaining, recommend that you vote in favor of the reelection of Mr. Gordon as a Non-Executive Director of nib.

I'll now take questions on this item of business. If a shareholder in the room would like to ask a question, please stand at the microphone in the aisle or raise your hand and someone will bring a microphone to you. To ask a question online or via telephone, please follow the prompts. Any questions in the room? Ross, are there any questions online or via telephone?

No questions online or via telephone.

Okay. There being no further discussion, I'll now reveal the proxy votes received prior to the meeting in relation to this resolution.

As the Chair of the meeting for this part of the meeting, I have been appointed by proxy by some of the shareholders to vote on this resolution. I intend to vote in favor of the resolution detailed in Item 3 for the proxies open at the chair's discretion. I now put to a poll the resolution that Mr. David Gordon be reelected as Non-Executive Director of the company. To vote, click on one of the voting options shown on the screen or fill in the card in your hand.

I will now hand back to David to chair the remainder of the meeting.

Thank you, Anne. Item 4 on the agenda seeks shareholder approval for Mr. Edward Close, Managing Director and CEO, to participate in the long-term incentive plan via a grant of performance rights for the financial year commencing on the 1st of July 2025, with a 4-year vesting period. The plan forms part of nib's remuneration strategy, and it's designed to align the interests of executives and shareholders to assist nib in the attraction, motivation and retention of executives. In particular, the plan provides executives with an incentive for future performance, thereby encouraging those executives to remain with and contribute to the future performance of nib. A summary of the planned rules is set out in the schedule to the explanatory notes in the notice of meeting.

The Board, with Mr. Close abstaining, recommends that shareholders vote in favor of the ordinary resolution in Item 4. And I'll now take questions on this item of business. If there's a shareholder in the room who'd like to ask a question, please make your way to the microphone. And if you'd like to ask a question online or via telephone, please follow the prompts. Is there anyone in the audience here today in the room that would like to ask a question about this resolution? So we do this every year. It's an ASX requirement for the participation of the Chief Executive that shareholders get an opportunity to both ask questions and vote. If there's no one in the room who'd like to ask a question. Are there any questions online or via telephone?

There are no questions.

Okay. As there's no discussion, I'll now reveal the proxy votes received prior to the meeting in relation to this resolution. Here we go. As Chairman of the meeting, I've been appointed proxy by some shareholders to vote on this resolution, and I intend to vote undirected proxies which are able to be voted on this resolution in favor of Item 4. There are voting exclusions applicable to this resolution, which are outlined in detail on Page 8 of the Notice of Meeting.

And I now put to a poll the resolution, which is displayed on the screen. I'm certainly not going to read it. There being no further discussion, I'll now pause to allow shareholders time to finalize their votes. For shareholders present in the room with a green paper voting card, please hold these up for Computershare staff to collect. I'll now give everybody time to complete their votes or to complete their votes online.

If you have a green card, please hold it up. If it hasn't already been collected and someone will come past and collect your vote. Yes. We got there someone in the front here. Here we go. Did you have a vote you wanted to hand in? I'm sorry. Anyone else in the room who has a voting card that they'd like to hand in, please raise your hand, and we'll make sure your vote is counted. Is there anyone else who hasn't yet voted and would like to? It doesn't look like it. All right.

[Voting]

I'll now declare the poll on all resolutions -- almost. I will now declare the poll on all resolutions closed. The results of the poll on all resolutions determined -- sorry. The results of the poll on all resolutions determined by a full poll result will be lodged with the Australian Stock Exchange and made available on our shareholder website later today. A recording of today's meeting will be available shortly on the shareholder website. Shareholders and guests, that being the end of all business, I would like to wish you continued good health and well-being and declare the meeting closed. Thank you for your attendance today.