nib holdings limited (NHF) Earnings Call Transcript

Well, good morning and thank you for joining us today for nib's FY '25 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. We're pleased to share a positive set of results today. They reflect our continued focus on sustainable growth in key markets, delivering value for our customers and excelling 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. At nib, our purpose remains clear, your better health and wellbeing. Our vision and mission continue to guide our strategy and our people every day, ensuring we deliver value to our customers, our partners, our communities and our shareholders. So turning to Slide 6 and looking at the FY '25 highlights. In FY '25 we delivered a strong group operating performance in line with guidance with UOP of $239.2 million and NPAT of $198.6 million. Our core arhi business continues to perform, achieving 3.2% net policyholder growth and maintaining stable net margins well within the 6% to 7% target range. Our digital-first customer-led approach supported a group NPS of plus 34 with more than 70% of Australian PHI policies now digitally connected. Long-term hospital partnerships and enhanced provider networks are delivering real value for customers and providers, improving access and affordability to quality health care. Our adjacent businesses are building positive momentum, contributing a solid $45.3 million in UOP to the group result. Notably New Zealand returned to profitability in the second half of '25. Our international students and workers portfolio grew UOP by 23% and Honeysuckle and Midnight Health losses were halved. We also accelerated our productivity agenda, delivering $18 million in savings, with over 50 AI and machine learning initiatives now in production across the group. Our refreshed strategy is delivering results, with a primary focus on our core PHI businesses, whilst also scaling Health Services and in plan management. The nib Travel strategic review is progressing well and remains on track. So if we turn to Slide 7, looking a little deeper at some of our key performance metrics. We delivered strong results in line with guidance, as I mentioned earlier. Looking at group revenue, which rose 7.8% to $3.6 billion, our PHI portfolio now covers nearly 2 million people, up 3.2% on the last 12 months. We're also pleased with our ongoing productivity focus, and this progress is reflected in our group operating expense ratio improving by 50 basis points to 17.7%. Net investment income rose 28.9% to $79 million, and the group maintained a fully franked dividend of $0.29 per share in line with FY '24. So taking a look in Slide 8. In our flagship arhi business, our consistent track record of growing well above system continued where we outpaced the market with 3.2% net policyholder growth and 3.9% growth in combined policies. FY '25 marked our best ever sales year up 13%, driven by a high-performing, multichannel distribution strategy targeted towards high-value segments. We attracted 52,000 new-to-industry customers and remained a net gainer from switching behavior. Net margins remained stable and were guided into our 6% to 7% target range as we expected, supported by disciplined pricing, optimized product design and tight cost control. With 1.4 million Australians now covered and a 9.7% market share in arhi, we see high potential for continued growth in our priority markets with our product, pricing, and value proposition well positioned across our various brands and channels. If we turn to Slide 9, we continue to prioritize value for our customers and providers, supporting a health care system in transition. Innovative care models are reshaping health care delivery in Australia, improving access and making high quality care more affordable for consumers. And in FY '25, nib supported over 121,000 health interactions through wellbeing offerings and telehealth support, and we enrolled more than 22,000 customers in health management programs in partnership with Honeysuckle Health. Our prevention and in-home care initiatives saved more than 24,000 hospital bed days, and we expanded our no gap dental and optical networks to over 500 providers, saving customers $40 million in out-of-pocket costs. Our known gap model now covers more than 40,000 medical specialists across the country and 1 in 4 major joint procedures is now delivered through our no out-of-pocket Clinical Partners program with leading specialists across Australia. We also continue to actively support the wider health care system. We've secured multiyear partnerships with some of Australia's largest hospital groups, and we've provided nearly $28 million in additional private and public hospital funding over the past 2 years, including support for the New South Wales public health system. And importantly, our arhi hospital claims ratio remains in line with historical levels. If we take a look at Slide 10, our adjacent businesses made strong progress in FY '25, contributing $45.3 million to the group UOP result. International saw revenue growth of 14.4% and UOP was up 23% with more than 46,000 PALM lives supported, those direct employer relationships strengthened and new growth opportunities emerging from commission reforms. Across in New Zealand, our recovery plan is gaining positive traction. Price increases are now aligned with inflation, product and network changes are taking effect, and we returned to profitability in the second half of '25 as inflation stabilized. We also welcomed our new New Zealand CEO, Skye Daniels, who arrived in August. Our Health Services strategy is progressing well with Honeysuckle and Midnight Health now fully owned and consolidated, losses halved and we're on track for profitability in FY '26. In Travel, we posted our best monthly sales in 2 years in June, supported by strong distribution and disciplined cost control. The strategic review is well advanced and remains on track. Thrive is now at scale following our inorganic growth strategy. The Instacare acquisition boosted performance across the year, and service levels remained strong, with 96% of claims processed within 1 day and 85% of calls now answered within 90 seconds. UOP of $16.9 million was up 10.5%. So turning to Slide 11. In FY '25, we commenced a multiyear productivity program, and in the last 12 months, as I mentioned, this has delivered $18 million in savings. Our group operating expense ratio reduced by 50 basis points to 17.7%. This was achieved while containing nonmarketing expenses to just 3.4% growth in an inflationary environment. And pleasingly, we saw customers per FTE improve by 7.7%. We're accelerating our digital-first agenda to drive better customer, employee and efficiency outcomes. Over 50 AI initiatives are now in production, including nibGPT, an internal knowledge management tool; our AI summarization strategy, supporting more than 500 contact center agents, which has cut after-call work by 60%; our chatbot, nibby, handled more than 5 million interactions in the last 12 months and helped to streamline customer service and reduce response times; and we're now straight-through processing nearly 1 in 2 Thrive invoices using AI, with a rapid expansion underway to arhi and New Zealand. Finally, we've completed a groupwide simplification across our operations. We've combined Australian PHI operations, we've consolidated Health Services and we're refocusing our New Zealand and Travel businesses to their core markets. These changes have been supported by our new group operating model and capital allocation framework to ensure disciplined focus and execution of our revised strategy. And with that, I'd now like to pass to Nick, who will go through the financial results in a bit more detail. Thanks, Nick.

Thanks, Ed. And as Ed has pointed out, group UOP landed at $239.2 million, which was within our guidance range of $235 million to $250 million. It was driven by continued top line growth with arhi growing once again above system and expense management was a highlight with our operating expense ratio reducing from 18.2% to 17.7%. Arhi claims inflation continues to moderate during the year on a like-for-like basis, and New Zealand was ahead of expectations, recording a profit during the second half. We'll talk a bit about those businesses more in a moment. A few other things worth noticing. Strong performance in our international students and workers business, with UOP growing 23%, the Health Services losses halved and Honeysuckle Health did achieve its first breakeven month in the fourth quarter as expected. Investment income was strong and in line with market performance. And I think as some of you already noted, we did have a low effective tax rate, as $13 million in Midnight Health historical tax losses were recognized after we moved to 100% ownership. Turning now to arhi. We've already talked about the growth, and we'll talk a bit more about claims inflation on the following slides. Net margin was 7.3% with an underlying margin at 6.5% being managed back into our target range. Gross margins reduced and are now back in line with historical margins down from the elevated post-COVID levels. The groupwide expense efficiencies flowed into reduced operating expense ratios in arhi and allowed further investment into our no gap and known gap offerings. Downgrading increased from 0.3% to 1%, which is in line with historical averages. And there was limited gross margin impact as the downgrading tended to occur in the lower-margin segments as we actively managed the pricing and product design. Okay. Have a look -- a bit of a look at deeper dive into inflation and margins. In this slide, the key highlights are that nib continues to have an industry-leading margin position and, similar to industry, is seeing margins come back to pre-COVID levels. Inflation has continued to moderate, reducing from 5.9% to 4.5% on a like-for-like basis. Actual inflation was 4.9%, including the New South Wales hospital bed rate changes. Our pricing averaged 4.52% during FY '25 against an average inflation of 5.4, so it's not surprising that gross margin declined. But with current pricing at 5.79%, settings are once again realigned to promote margin stability. And you can see in the bottom-left chart that most of the -- bottom right chart, I should say, that most of the inflation has been driven by increased hospital indexation and to some degree, medical inflation, which is in the hospital other. Utilization, length of stay and extras inflation have been settling at expected levels. Turning now to margins. We reported a net margin of 7.3% and an underlying margin of 6.5% and the only significant factor in the difference were claims development and LIC movements. There were 2 impacts in this regard. Firstly, we did reduce the probability of sufficiency in the risk margin from 98% to 95% in the first half, as the claims inflation started to stabilize. I would highlight that 95% is still a very confidence level with the APRA minimum for capital being 75%. Secondly, we saw significantly faster claims processing speeds, which reduced by about 5 days. And in the bottom-left-hand box, we show the average payment percentage relating to the current month. In the bottom right, we outline the gap between the claims inflation and also where our pricing is. And as we continue -- as I continue to mention, the accommodations or the settings are a little more stable right now with 5.79% pricing against the 4.9% inflation. There'll be further continued net margin stability through targeted pricing and product design, the network controls and also the ongoing focus reducing the MER. Worth noting that our LIC provisioning and risk margins are now in line with pre-COVID levels, aided again by the moderating inflation and more stable claims processing. If we now move to Slide 17, and I'll try and run through some of these segments a little more quickly so we can run through to Ed and some questions. As I mentioned before, international students and workers performed very well with the UOP growing at 23%. We'll go to New Zealand, where I might linger a little bit longer. New Zealand has experienced challenging circumstances, making a loss in the first half. And while we made a profit in the second half, it was still a loss for the full year. Claims inflation reached unprecedented levels, especially in early Q3. And while it's still high, we are seeing some moderation in the inflation. As claims have developed, we're seeing inflation now around 21%. And of this 21%, 6% is service cost, which has reduced. However, the utilization remains high at 15%. The reduction in inflation in New Zealand allowed it to return to a reasonable profit level in the second half. However, I just want to caution at the moment around the working days impact, which we still expect to be present in the first half of '26 and also the challenging conditions continued with that utilization. Having said that, our claims inflation recovery program is still well progressed and will continue into FY '26. Turning now to Slide 19. And this slide just provides a little more insight into -- on pricing and aligning with inflation trends. So on the left-hand side, what we can see is that -- I don't know what to call it, salmony pink, I'll go, salmony pink line is the applied increase at renewal. And as that runs through the book, as it progresses through the book every month, the average renewal increase, which is the dark green line, has been trending up. We can now see that, that's starting to intersect with the inflation line, which is the lighter green line. On the right-hand side, I should also highlight that there were 9 fewer working days in the second half of '25, and that obviously helped the profitability. And that impact continues -- the first half, second half impact continues in FY '26, and we've provided some more details of that in the appendices. Okay. Zipping through the other segments. Let's go to Slide 20, Travel. The other thing I'd just highlight is the second half being a good -- much stronger than the first half of $4.8 million. GWP up 6.7%. That's probably about all on that. I'll go to Thrive. Thrive grew its UOP by 10.5%, and that was mainly driven by the successful acquisition of Instacare in December 2024. And then Health Services, I might just linger a little bit on this. So Health Services, you can see that the profitability trend continues to trend towards breakeven, which we expect in the full year. Honeysuckle Health had its first breakeven month in Q4. And I'd also highlight that we did make some further investments in the Health Services segment as we moved to 100% ownership of Honeysuckle Health, 100% ownership of Midnight Health, as well as an investment in ItsMy Group, which is a market-leading private health insurance sales and service and technology company, powering more than 20 Australian health insurance brands. Turning now to capital management and cash flow. Our balance sheet remains strong with group gearing and leverage remaining stable and at low levels despite our debt increasing modestly as we invested in the purchase of Instacare and in the Health Services segment. In terms of cash flow on the next page, cash flow -- it was pleasing to see the expected bounce back in second half cash flow occur with cash flow 19% higher than the prior corresponding period and operating cash inflow growth exceeding operating cash outflow growth in that half. I think the more stable margin environment in both New Zealand and Australia, along with stable claims processing speed, should be positive for cash flows moving forward. I'll now hand back to Ed.

Thanks, Nick. So turning to our strategy. Our refreshed strategy focuses on 4 core areas. Our highest priority focus is to drive above-system growth and consistent sustainable earnings across our core PHI businesses in Australia and New Zealand through our multi-brand, multichannel approach, disciplined pricing and innovation across products and provider networks. Our health management strategy, in partnership with Honeysuckle, will continue to scale up with the aim of improving health outcomes and access to affordable care for customers, alongside optimizing our claims performance. Secondly, we're expanding Health Services and our insurance partnerships to deliver greater value to our PHI businesses and our strategic B2B clients. With Honeysuckle and Midnight now consolidated, we're positioned to drive operating leverage as they transition towards profitability, and we'll focus on scaling our offerings in health management, corporate and virtual health and injury support. We continue to expand our relationships with PHI and non-PHI brands across Australia in partnership with ItsMy Group, a market-leading PHI technology and services business. Thirdly, in NDIS plan management, we will strengthen our growth profile through a multi-brand strategy targeting key geographies and distribution channels. A big focus is around enhancing participant and provider experience and capturing efficiencies through the integration of private health insurance and digital infrastructure across the operating model. And underpinning those 3 pillars, we're unlocking group productivity through AI and digital-first capabilities, a big focus on simplification of our business model. This growth strategy is underpinned by disciplined capital allocation to support long-term value creation and returns for shareholders. So turning to the all-important FY '26 outlook slide. Looking ahead, we expect a positive uplift in group UOP, driven by continued strength in Australian PHI and expected return to full year profitability in New Zealand and solid momentum across our other adjacent businesses. In arhi, we're targeting above-system policyholder growth of around 3% and maintaining stable margins in the 6% to 7% range. International students and workers will continue to contribute strongly, and our New Zealand recovery plan is progressing well. In non-PHI, nib Health Services, as we mentioned, is on track for full year profitability. Thrive remains focused on organic growth and further efficiency gains following the removal of setup fees by the NDIA more recently. Our multiyear productivity program will continue to underpin our group performance with further ongoing reductions in our group operating expense ratio and capital expenditure and one-off costs also expected to reduce materially over the next 12 months. So FY '25 marked a year of disciplined strategy execution with positive momentum across our core PHI and adjacent businesses. We have a clear focus on sustainable growth, on operational excellence and digital-first customer experiences. We are well positioned to deliver consistently strong outcomes in FY '26 and beyond. And with that, I'd like to now open up for Q&A.

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

Just a first question on the New Zealand business. You're putting through price increases in the order of 15% to 20%, but the revenue growth that's coming through is mid-to-high single-digit, around 8%. I just want to be clear what the difference is there. What's happening with volumes? What's happening with downgrading? and what's the expectation for revenue growth into '26 as well, given the rate increases that you're pushing through?

Thanks, Julian. I'll kick off with some high-level remarks and then pass to Nick. So there's definitely a timing element to what you're seeing there come through in the FY '25 revenue uplift of circa 8%. We guided you to the 12 months portfolio pricing as they're coming through on a quarterly basis. What I would say is that -- and we talked to this, is that our pricing is now matching inflation, but that will take some time to wash through the portfolio, as I'm sure you can appreciate. We've got different channels and different cohorts that have their different renewal periods and those anniversary dates are still playing through. But I guess we have high confidence when you think about that pricing matching inflation piece that we're now on top of that previously significant challenge. So really, when you think about the FY '26 piece, I think you can have high confidence that our ability to match the inflation is good. And I guess you're seeing that timing aspect that's flowing through the '25 result versus our expectation moving forward. Nick?

No, I think that that's right. And we did see our residents book decline a little bit in FY '25, but we'd expect the pricing to compensate that into FY '26.

Yes. And maybe a final comment just on the growth outlook. So you mentioned volume, Julian. We are seeing strong resilience from that portfolio around the ability to absorb those significant premium increases. There are several factors that are quite different in the New Zealand market to Australia around switching and portability of policies between funds. I guess the other piece is that given this is an industry-wide challenge that insurers are facing, that we are seeing competitors also consistently lift premiums as well. So competitive positioning remains strong.

Okay, great. And just a second question on the arhi net margins into FY '26. It looks like you're guiding to about stable margins, underlying margins, 6.5% call it, from '25 into '26 with, I guess, second half '25 probably around 6.3%, a touch softer. Maybe if you can just talk a little bit about the moving parts into next year. And I know from a rate inflation perspective, you're saying that should be more aligned. But just in terms of downgrading, given how material that was in the second half from what I can calculate and also just in terms of expenses, just those 2 key features in particular, how should we be thinking about that into next year?

Yes. So as we've stated, we're guiding to underlying margins in that 6% to 7% range across the full year. The components, you're breaking that down a little bit. You're obviously aware of the premium increase that was announced in April, and that's largely the benefit of that will flow into the '26 period. So that's something that you can look to. We've also shared the claims inflation per customer per workday at 4.9%, including the New South Wales bed rate impact. We've also showed you what that looks like when we back that out. So I think you can take that as another data point. Industry claims is tracking around circa 5%. So you can triangulate those pieces there as well. And then we've talked about ongoing opportunity from a productivity perspective as well. And so if you think of the components around the confidence that we have around the underlying net margins being within that 6% to 7% range, I think you can triangulate those data points as a good guide. We talked previously around 4% to 6% as an inflation assumption that we think about at nib moving forward, and there's nothing that suggests that we're moving away from that broader range as well. Anything that you'd like to add there, Nick?

Yes. I think, also, when the hindsight flows through, Julian, the second half margins are probably a little more positive than 6.3% as well.

Okay. And just on downgrading and expenses, just expectations into next year, given what we have experienced over the second half?

Yes. So with the downgrading, Julian, we talk about 1% being more in line with historical levels. Certainly, we saw elevated downgrading and also some lapse impact coming through from absorbing that premium increase. We took the opportunity to deliberately make sure that the portfolio was optimized in those higher-value segments. So some of that downgrading, we're seeing minimal-to-immaterial gross margin impact as a result of that revenue downgrading as we tilted our portfolio to those higher-value segments. So we're actually quite comfortable with that level of downgrading that's playing through at the moment. The piece on lapse, we do have a large proportion of our cohort on lower-value policies, which means whilst the downgrading would be occurring at the top end, obviously, there's not that alternative available to those individuals that reside on the basic and bronze level covers. So again, there are some factors around that. Pleasingly, and we obviously talked to the full year 3.2% on the policyholder growth, but we saw really positive momentum in the last quarter as we made those pricing and product changes and the progress year-to-date is also pleasing.

Next question comes from Andrei Stadnik from Morgan Stanley.

Can I ask my first question around lapse rates? It looks like lapse rates went up and might have hit an all-time high at almost 15%. But looking into next year, do you think that can improve? And what have you baked into that 3% net policyholder growth plan?

Yes, Andrei, we haven't guided to any explicit composition around sales lapse scenario for '26, but we have obviously talked to the around 3% ongoing target. And a big part of our business model, as everyone is well aware, is that continued ability to outpace market growth. And so we have high confidence around that ongoing. There's a couple of elements I should point out on lapse. Certainly, that higher sales rate, and we talked to record sales in '25, does drive some increased churn as a result of that. And so roughly 1/3 of some of those -- that lapse increase would be attributable to the higher sales period, and it does come with the business model that we've always had that longstanding ability to unlock. The second piece I talked about was that proportion of cohort on those lower-tier products, and again, not unsurprising to us. And if you look back to historical levels, you will see that lapse is generally something that does come with policyholder distribution strategy that we go after. That said, and you've touched on this, retention is a big priority for us in the arhi business moving forward. And so the investments that we've made in our no gap and known gap network enhancements, the investments that we've made more generally around programs like Clinical Partners, the work we're doing with Honeysuckle Health and several other loyalty and retention initiatives are in full flight. And so we are deliberately focused on improving that lapse rate moving forward.

Look, and for my second question, can I ask you to expand a little bit on what happened in Thrive during the year? Because I think it was subject to a compliance [ notice ] for a period of time that might have slowed some of the growth there. So how do you view your aspirations going forward in terms of what might be possible in terms of supporting what the government wants to do with NDIS and how confident are you that you've got a tight grip on operational issues?

Yes. So touching on the last 12 months in Thrive, yes, we did encounter some temporary service disruption as a result of the integration of 5 of our plan management businesses back in November. So those businesses came in under the nib Thrive umbrella, and that did cause some short-term delays in processing and service levels across our participant and provider community, and we were disappointed with that outcome. And certainly, the team have worked very hard to get back on track in terms of our operational excellence there, and we talk about some of the service levels that 96% of claims now being processed same day, 85% of calls being answered within 90 seconds. And so we aspire to a best-in-class participant and provider experience, and we were disappointed that temporary reduction in those service levels, but we're pleased with the progress that's been made over the past 6 to 9 months and certainly are comfortable with the servicing levels. That did also, and you would see this in the numbers that, that did impact our participant growth for a period of time. But again, we've worked hard. And with the addition of Instacare, we've got that breadth of brand distribution and geographic stretch now to give us confidence around our growth projections moving forward. And I guess we remain actively engaged in constructive dialog with industry partners around future navigator models and the important role that the intermediary sector, that plan management role, as well as support coordination, play in driving participant experience, but also scheme sustainability. So we're quite buoyed about the projections there in Thrive.

Next we have Nigel Pittaway from Citi.

Just, first of all, I think at the half year, you said central estimate was around about [ 10%-ish issued ] claims. Presumably, that's a bit lower now. So can you give us just a feel for whereabouts that currently sits?

I think, Nigel, I'm just trying to get to the slide. We have that on Slide 32 of...

Oh, there it is.

Yes.

All right. It's always in those backslides that I never quite get to in time, but all right, 32 is it? Okay, very good. All right, well I'll take that for the moment. All right. Just in terms of -- obviously, you're reiterating your 3% policyholder growth for next year. Are you expecting system to grow at similar rates? Or are you expecting any downward pressure on the rate of growth of system in setting that guidance?

So industry was tracking at about 2.3% for the 12 months to March based on the APRA data, Nigel. We're anticipating similar levels. We are seeing, obviously, with easing cost of living pressures as rate reductions start to flow through, that's one indicator of ongoing support for participation and the relevance of private health insurance. Also, notwithstanding ongoing public pressure around wait times, gives us confidence that industry will remain at similar levels, maybe modestly lower than that 2.3% mark. And as I mentioned, we've tilted product pricing and our distribution certainly in the back half of '26 and gives us high confidence that around that 3% mark is achievable.

Okay. Fair enough. And then just maybe a bit more on the inflation components. Again, I think when you previously were saying that things like rehab and gyno were quite elevated within hospital. Is that still the case? Or have other modalities come to the fore? Can you just give us a bit of a flavor of what's happening there?

On a modality basis, Nigel, fairly broad-based, it would be our view now within that hospital and medical categories. So nothing that's jumping out that has caused us any surprised or questioning as to why there's been a significant uplift. I know coming out of the temporarily benign COVID period, we did see certain modalities jump around a little bit. But largely for us, we're seeing pretty consistent growth and stabilization across those hospital categories.

I think probably the big callout would be more on the hospital indexation side, the impact of that and also the medical inflation as well. They'd be the 2 main drivers.

Yes. Okay. And do you think we've reached peak indexation now or...?

I won't try and crystal ball how all of that plays out, Nigel. What I would say for nib is that -- and we've been quite transparent around this, that securing those multiyear agreements with all the major hospital groups gives us confidence and clarity around our forward-looking indexation levels into '26 and beyond. And so with that, we're guiding back to those 6% to 7% margins as really the best indicator around our projections around that. And certainly -- and we've talked about the arhi hospital payout ratio being in line with historical levels, we're feeling that, that's going to be well supported as we move into the next premium round.

Next question comes from Andrew Buncombe from Macquarie.

Just the first one would be interesting to get some insight into what is happening with the PALM contract going forward.

Andrew, I can't say too much on PALM at this point, given conversations are still commercial in confidence and that process is still playing out. What I would say, though, is that nib has had a long-standing track record of delivering exceptional outcomes for those PALM participants and the employers that are directly engaged in supporting that seasonal worker program. So we've strengthened our relationships over the last few months. We remain very positive about the outlook of that PALM offering. And those direct agreements that we have struck with those approved employers, remembering that this is a nonexclusive arrangement that nib has and there are other insurers that actively play in that space, but we've been able to forge a dominant market share through the conviction that we have working really closely with those employers and participants. So outlook, I would say, is positive. What I can't say is anything that's commercial in confidence at this stage, sorry, Andrew.

That's okay. The next one, sticking with international. It sounds like there's [ portfolio ] in that market currently up for sale. Given how NHF has had mixed success in Travel, NDIS and currently in New Zealand, how would you convince investors that nib are the best stewards of reinvesting that excess capital to double down on that market?

Yes, I'm not fully aware of inorganic growth opportunities in the international segment, Andrew. It's not the highest priority on our radar at this point. So probably all I'd say on that one at this point.

Yes. No, that's good. And then the final question from me. It looks like your risk equalization contribution in the second half of '25 was very low this period. Just any color around whether you think that's the go-forward rate would be helpful.

I'll jump in there. Probably payment speed related, given it's on a cash basis, I think that there were some interesting ins and outs in the second half in terms of the cash and which players paid more cash versus less cash. So I'd like to see that play out a little bit, Andrew, before we'd have any comment.

Next we have Siddharth Parameswaran from JP Morgan.

Couple of questions, if I can. Firstly, just on the arhi division, I just wanted to just check firstly on the inflation numbers you've given us, 4.5% FY '25 on an incurred basis and 4.9% including New South Wales bed rate changes. I just want to make sure or clarify what it is on a paid basis, because I think the number suggests it's reasonably higher. I was wondering if you could just help us understand that and which one we should be using because does that 4.5% include any changes in reserving assumptions?