Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, to Mr. Paul O'Sullivan, Head of Investor Relations. Please go ahead. Hello, and welcome to the AASB 17 pro forma historical financials investor briefing for Helia Group. I'm Paul O'Sullivan, Head of Investor Relations. This morning, we will start with a presentation from our CEO Pauline Blight-Johnston, who'll provide a high-level overview of the AASB 17 transition. Our CFO Michael Cant will then go into more detail on AASB 17, comparing it to AASB 1023, and then providing an overview of the AASB 17 unaudited financial statements. Pauline will then wrap up with a summary of key takeouts at the end of the presentation. At the end of the presentation, we'll pass back to the moderator and take questions from investors and analysts. Please note that we will not be providing any additional information in relation to our 2023 results or trading, other than what has been included in the ASX release and investor presentation today. I will now hand over to Pauline. Thank you, Paul. Good morning, everyone, thanks for joining us. Before I commence, I'd like to acknowledge the Cammeraygal people of the Eora Nation, on whose land we're hosting our meeting today. I pay my respects to the elders past, present, and emerging, to all Aboriginal and Torres Strait Islander people here today and joining us online. Today marks another important step in Helia's adoption of AASB 17, which replaces AASB 1023 changes the way we account for our insurance liabilities, hence the timing of our profit emergence. In December, we walked you through the conceptual differences between AASB 1023 and AASB 17. If you've not had the opportunity, I would encourage you to listen to the replay of that session, as it provides a useful base of knowledge that we will build upon today. This morning, we've released our full year 2022 AASB 17 pro forma historical financials with financial year 2021 comparatives for analysts and investors. These financials have been externally reviewed but are not audited. In today's session, we'll go into more detail to help you understand the new standard and how it will impact our reported financial results. Turning to slide five. The most important takeaway today is to remember that under AASB 17, there are changes in financial reporting, but there is no change to the underlying business economics of Helia. There's no change to policy cash flows, the economic value of the business, or Helia's approach to capital management. The introduction of AASB 17 changes the timing of recognition of the insurance revenue and expenses, hence the timing of profit emergence. In Helia's case, reported profit will be recognized more slowly under AASB 17 than under AASB 1023, resulting in a AUD 215 million reduction in net assets as at the of December 31st 2022. This change to net assets is at the lower end of our previously advised expected range. Lifetime profits for a cohort of business are the same regardless of accounting treatment. Accordingly, the introduction of AASB 17 is not expected to cause a material change in the magnitude of average reported profits. We do, however, expect profits under AASB 17 to be less volatile compared to the previous accounting standard. For the same quantum of profit, the reduction in net assets will translate into a higher ROE. There is no material change to our regulatory capital requirements or the level of surplus capital on transition, nor our approach to capital management, which also remains unchanged. I'll now hand over to Michael to take you through the details of the changes that AASB 17 introduces to our accounts. Thank you, Pauline, and welcome to everybody. I'm very pleased today to present our pro forma 2022 financials prepared in accordance with the new accounting standard AASB 17. The presentation's been structured into three parts. Section 1 will revisit some of the key concepts and principles. The next section will compare the financials under the previous and new accounting standards. Finally, we'll take a deeper look at the makeup of the AASB 17 financial statements for 2022. Slide seven has an overview of the key changes. One of the new concepts under AASB 17 is the Contractual Service Margin or CSM. At the outset of a group of contracts, an amount of CSM is determined, representing the expected present value of profit over the life of the cohort of business. Profit is not recognized at the time of writing the business, but rather a portion of the CSM balance is recognized each period based on the insurance service provided. On the balance sheet, the key change is the replacement of the previous unearned premium reserve with a new Liability for Remaining Coverage. The Liability for Remaining Coverage is a forward-looking view of liabilities based on expected cash flows, plus a risk adjustment, and also includes an explicit allowance for future profits on existing policies, or CSM. On transition to AASB 17, there is an increase in opening insurance contract liabilities. As Pauline has noted, this has resulted in a reduction to the opening net assets on transition of AUD 215 million. On the income statement, the previously reported earned premium is now replaced by what is termed insurance revenue. Insurance revenue represents the portion of past premiums that are recognized in the period, and includes components for the expected emergence of cash flows, risk adjustments, plus the release of CSM. The income statement under AASB 17 reacts differently to certain key elements of experience than under the previous accounting standard. In particular, the impact of cancellations and interest rates will emerge differently, resulting in a less volatile P&L, and I'll expand on these factors later. Slide eight depicts the profile of revenue recognition for the 2022 cohort of business. The pattern under the current accounting standard, the previous accounting standard I should now say, is driven by the earnings curve and is shown in purple. The pattern under the new standard, AASB 17 is shown in aqua. As you can see, the two profiles are quite similar, but on average, the AASB 17 profile is slightly later and more deferred. For past cohorts, where the earnings curve was shorter in the past, these differences in revenue recognition are likely to have been more pronounced. The differences in past revenue recognition largely explain the higher opening liability under AASB 17. I'd now like to turn and look at a comparison of the 2022 financial statements. First looking at the balance sheet. The asset side of the balance sheet is largely unchanged. Specifically, investment assets are the same. Deferred Acquisition Costs are no longer a separate asset under AASB 17, but instead are an implicit offset within the Liability for Remaining Coverage. On the liability side of the balance sheet, non-insurance liabilities are largely unchanged. The big change in the balance sheet relates to the liabilities for insurance contracts, which can be further broken down into a liability for incurred claims and a Liability for Remaining Coverage. There is a difference in the Deferred Tax Asset representing the tax impact of the other opening balance sheet adjustments. I'd now like to turn to slide 10, which looks at the insurance liabilities in more detail. The liability for incurred claims under AASB 17 is net of recoveries, very similar to the outstanding claims liability previously reported. The big change in the balance sheet is the switch from unearned premium revenue and Deferred Acquisition Costs to a Liability for Remaining Coverage. This change, net of tax, largely explains the opening adjustment to net assets. Slide 11 has a summary of the income statement for 2022. Presentationally, the income statement under the new standard looks very different to what we've previously reported. Earned premium is replaced by a new term insurance revenue. 2022 revenue under AASB 17 is approximately 5% less than previously reported. This is due to the very high cancellations in 2022, which gave a significant one-off bring forward of revenue under the old accounting basis. Under AASB 17, the impact of high cancellations will emerge in revenue over time. Looking at the claims line. In most years, claims incurred will be very similar between the two accounting standards. 2022 is a little different due to the substantial rise in interest rates over that period. The benefit of the rise in interest rates was previously included as part of incurred claims, under AASB 17, it is reported in a separate line as an insurance finance expense. Again, I'll return later and explain that in more detail. The quantum and presentation of expenses under the new standard is also different. AASB 17 splits expenses into insurance-related expenses and other expenses, you can see them as two separate items on the income statement. Other expenses largely represents corporate costs not directly related to insurance contracts, as well as some other one-off project costs. The magnitude of the amortization of Deferred Acquisition Costs has also changed between the standard. This is primarily due to the previously reported DAC write-off in 2020, which has meant the amortization charge in the years following is significantly lower than normal. Investment income is the same under both accounting standards, reflecting a consistent treatment of assets between the two standards. However, AASB 17 introduces an additional item into the income statement, being the insurance finance service or expense or benefit. This incorporates the impact of changes in interest rates on the value of insurance liabilities. For 2022, there was a significant positive net financing benefit due to the significant rise in interest rates and the discount rates used to value liabilities. In totality, the Net Profit After Tax under AASB 17 was 8% higher than previously reported for 2022. While the magnitude of these two numbers is broadly similar for 2022, the composition is quite different. There are two big sources of volatility under the old standard, being cancellations and interest rates, which coincidentally have gone in opposite directions for 2022. Helia will continue to report an underlying NPAT measure that seeks to remove volatility due to investment returns. Given the matching between the revaluation of the insurance liabilities and the assets backing them under AASB 17, the adjustment to statutory NPAT will now only reflect unrealized gains or losses on the shareholders' funds. I'd now like to turn to slide 12, which shows a presentation of the regulatory capital. The new accounting standards do not materially change the regulatory capital position. The total regulatory capital base is largely unchanged. The change in the accounting balance sheet does, however, impact the presentational split. Net assets are lower, but technical surplus is correspondingly higher. There are no changes to the requirements for the PCA, and the resulting PCA coverage ratio is much the same as previously reported. Separate to the change in accounting standards, it should be noted that APRA has introduced a new rule relating to the relationship between net assets and PCA. This new rule will not impact Helia on transition. I'd now like to turn to the AASB 17 financial statements in more detail, and in particular, examine the 2022 results and prior year comparatives. Please turn to slide 14, which shows the income statement. The total revenue for 2022 of AUD 466 million represents the share of past written premium that has been recognized in the 2022 financial year. Revenue was flat year-over-year, with some changes in composition, which I will outline later. insurance services expense comprises both claims and expenses. These components are outlined later, but in summary, the insurance service expense is particularly low in both 2021 and 2022 due to a very low level of claims incurred. Investment income was a sizable negative for 2022 due to rising interest rates, which caused mark-to-market losses on the bond portfolio. This, under AASB 17, is offset by a significant positive on the net financial income from insurance contracts. Despite the large movements in individual items, the overall net financial result was relatively stable across the two years. The statutory NPAT for 2022 was AUD 201.2 million and represented a Return on Equity of approximately 16%. Slide 15 contains a more granular breakdown of the revenue. The major components of revenue are the expected insurance service expenses, the risk adjustment, that is recognized in revenue, and the Contractual Service Margin or CSM. Each of these are largely a function of the balances in the opening Liability for Remaining Coverage. Most components of the revenue line should be relatively stable from year to year, unless there are major changes in the actuarial assumptions. The recognition of revenue over the life of a cohort of policies means that insurance revenue in any period is largely driven by volumes from past years. This is a similar dynamic to what was present under the previous accounting standard. Slide 16 contains a further breakdown of the insurance service expenses. Total incurred claims are now presented into two components. A component for incurred claims for the current period, and a component for the changes to liabilities for prior incurred claims. Current year claims incurred were light for both 2021 and 2022, reflecting a low number of new delinquencies in both periods. Both years also had substantial benefit from changes to liabilities for prior incurred claims, reflecting very good experience on cures and aging of delinquencies together with house price appreciation. The presence of loss recognition and reversal in the insurance service expenses line is due to the requirement under AASB 17 to check for recoverability at an individual cohort level. Where a cohort has no remaining CSM or future profits, the cohort is deemed onerous and a loss is taken in that year. Any subsequent changes to the estimates of future claims for that cohort are then reflected in as an additional loss or reversal. The onerous contract reversals that have been shown for the last two periods relate to cohorts of business written pre 2014. The balances on those cohorts that are onerous are a quite small proportion of the overall liability. Consequently, the size of this line for loss recognition or reversals should only be material where we have very sizable revisions to the outlook for remaining claims on these old cohorts of business. Slide 17 shows that the insurance services result can be presented in a different way, and this looks at the drivers of profit rather than a traditional revenue and expenses view. Each year, there is a certain amount of profit that is expected to emerge if experience exactly matches the actuarial assumptions. This is represented in the table by the CSM recognized, plus the release of risk adjustment for the year. This expected amount for 2022 was AUD 216 million, less a reinsurance cost of AUD 60 million. The experience variations represent the difference between actual and expected for the period. The largest of these would typically be claims. In the last two years, we have had a significant positive experience variation for claims incurred. The premium experience variation item relates to refunds and premium credits. In particular, when top-ups are different to what we have assumed at the start of the year, the level of premium credits that we give to policyholders is either greater or less than what has been allowed for in the valuation of liabilities. This emerges as an experience variation. The final component of experience variations is the changes in loss recognition or reversal, as previously described. Slide 18 shows the composition of the net financial result. AASB 17 has a new item referred to as the insurance financing benefit or expense. The first component of this insurance finance expense represents the interest accretion on the opening liability, effectively the unwinding of the discount rate on the net present value of the future cash flows. The second component relates to the changes in interest rates over the period. Under AASB 17, the value of the liabilities is determined using the then prevailing interest rates. The movement in the value of insurance liabilities from a change in discount rates is taken through the income statement via this insurance finance expense or benefit. To protect against changes in interest rates, Helia's investment portfolio is closely matched to our liabilities. We should expect to see offsets between the investment income and the insurance finance expense or benefit. The end result will be a reduced volatility in the income statement. Slide 19 presents the balance sheet. The asset side of the balance sheet should look familiar and is predominantly represented by investment assets. You will note that there is a significant Deferred Tax Asset, this represents the difference in the liabilities used for tax purposes and the liabilities for AASB 17 accounting purposes. Treasury has flagged their intent to align the two bases, we expect this DTA asset will reduce over time. On the liability side of the balance sheet, the major item is the insurance contract liabilities, these are examined in more detail on the next slide. The biggest part of the insurance liabilities is the Liability for Remaining Coverage, or LRC, which has three components. The first, representing the present value of future cash flows, forecast on the existing business, which represents a combination of expected future claims, expected future expenses to administer the policies, and expected level of refunds or premium credits arising from top-ups. The second component is the allowance for risk adjustment on the cash flows. The third component is the Contractual Service Margin, which, as I said before, is the expected profit on existing policies that will emerge in future years. The LRC has reduced over 2022, primarily due to a combination of a higher discount rate and lower volumes of insurance in force. The lower volumes in force reflect both high cancellations and low levels of new business written in 2022. The other part of insurance contract liabilities is the liability for incurred claims, which is determined in much the same way as the outstanding claims liability we've previously reported. It continues to have three separately calculated elements for liability for the reported delinquencies, the liability for re-delinquencies, and a liability for incurred but not reported claims. The total liability for incurred claims over 2022 have declined due to a combination of reduction in the number of delinquencies and a higher discount rate. On slide 21, I've presented a walk of the CSM balance. You can see that the CSM added by new business in 2022 was less than what was recognized in the year, primarily due to the low levels of new insurance written for 2022. There are also movements in the CSM balance due to assumption changes which had a corresponding offset in the Liability for Remaining Coverage. At December 31 2022, the total CSM balance was $666 million and represented 42% of the Liability for Remaining Coverage. On slide 22, we've provided a summary of the key metrics that we envisage reporting on an ongoing basis. While the calculations of some metrics are a little different, given the nature of the standard, most are conceptually similar to what we have reported in the past. We'll report on these metrics from the half year 2023 onwards. I hope I've been able to give you a good understanding of the new accounting standard and how it impacts the Helia financial statements. It is a complex area, and I'm sure there will be plenty of questions, not only today, but in subsequent meetings and conversations. With that, I'd now hand back to Pauline for some closing comments before a Q&A session. Thank you, Michael. Thanks for doing most of the work in this call. To summarize, with the introduction of a new accounting standard for insurance liabilities, the timing of revenue recognition is different. As we've said repeatedly, accounting is merely telling the story of the business, not actually the business. The business economics and lifetime profits of the business remain unchanged. Helia's full year 2023 opening net assets have reduced by AUD 250 million on transition. This reduction in opening net assets is caused by higher opening liabilities, reflecting the later recognition of revenue that we've discussed today. All else being equal, reduced net assets should lead to a higher Return on Equity than under the previous accounting standard. Finally, as we've said a number of times, there's minimal change to current regulatory capital requirements or the level of surplus capital, and therefore we intend to continue with our previously stated approach to capital management. They're the key messages for today. There is a lot of detail, Michael and I are here supported by the team if required to answer any questions. We'll open up now to any questions. Thank you. As a reminder to ask questions, you will need to press the star key followed by one on your telephone keypad. Please stand by while we compile the Q&A roster. Thank you. Our first question is from Andrew Lyons from Goldman Sachs. Please go ahead. Thanks, team, and good morning. Thanks for the opportunity to ask some questions. I've just got two. Pauline, you mentioned that the reduction in your net assets at the starting point will drive a higher ROE. Can I just ask, you know, to the extent that the change in net assets is a function of historic accounting, when we're thinking about the forward ROE of policies to the extent that you're not expecting, I guess, lifetime profit to particularly change, is it fair to say that you don't particularly think that the forward ROE policies will change as well, or am I thinking about that incorrectly? ROA. That's a good question, Andrew. ROA, we use in some ways colloquially to mean two different things from time to time. When we price a product, the ROE is effectively the IRR. We price it as an IRR, Internal Rate of Return, to work out how much we need to charge for the product. That's based on the cash flows of the product, not the accounting treatment, including the capital. The capital comes into that, of course. That doesn't change at all. If you think about from an IRR perspective, the business is as profitable under a new accounting standard as it was under the old accounting standard. Yeah. We also use the word ROE to refer to reported profit divided by net assets. That's the one that will look different, and that's just because because of the slower emergence of profit. We're rebasing. There's about AUD 200 million of profit that's gonna come out in the future that hasn't come out, that previously would have come out under the old accounting standard, now will come out in the future under the new accounting standard. That'll make its way into the numerator, and it will come out of the denominator. It's simple math. Yeah. Yeah, got it. Let's just theoretically say I move forward 11 years after all the policies have run off. Will there be no difference then? Like, is the reset purely just an accounting reset? Yes. Do you understand? Yes. Do you see what I mean? Yes. In the long run, it will all trend to the IRR. Okay. That's helpful. Thank you. Just a second question. You've noted that the new accounting standard, and you've shown it, you're expecting less volatility within your statutory profits. To the extent that the volatility in your statutory profits contributed to how you would, I guess, change the way that you describe your expectations around dividend from period to period, are you thinking about moving back to a payout ratio on the dividend policy, or is your expectation that it'll just remain entirely unchanged in relation to the sort of the per half base rate dividend? Yeah, we've got, at this point in time, no intention to change our dividend policy as a result. We deliberately moved to communicating it in an intent for a stable-ish dividend because that's what we intend to do. Over time, don't forget, we still gotta also learn how these results work and move over time. In a couple of years' time, if we've seen that they are very much more stable, then we may consider at that point in time, but for now, what we've got works for us. Andrew, just to pick up on something there, more on the volatility to make sure that people understand. While some sources of volatility in the income statement have been reduced, most notably the impact of interest rates, I also called out cancellations. Yeah. The claims line itself will continue to be quite volatile as it was before, and that's just the nature of the business that we're in. That line will still give a degree of volatility in the P&L. But the other two items won't be nearly as apparent in their year-to-year movements. You won't see that accounting mismatch that we had on the assets. Yeah. Yeah. The other thing that will be different will be the way loss recognition comes through, which will be at a much smaller level more regularly. It'll be smaller cohorts we're looking at. Yeah. A couple of years ago, we wrote off the DAC. Under the old accounting system, it was like this big all or nothing loss recognition event. Under the new accounting standard, that happens in smaller cohorts. Depending on what's going on in the book, that may bring some smaller level of volatility through year-on-year. Yeah. shouldn't be those big events. Again, all of this, You know, it's brand new. We're gonna have to, I guess, see how it behaves going forward. That's great. Thanks. Appreciate that. Thank you. Once again, if you wish to ask a question, please press dial one on your telephone and wait for your name to be announced. Your next question comes from Simon Fitzgerald from J efferies. Please go ahead. Hi there. Thanks for taking my calls. A question, sorry. Just with the change in the earnings curve, which now tracks over 15 years as opposed to 12, can you sort of talk to us about whether there's been any change in your thoughts about how your claims profile tracks over time? Or whether this is just purely the application of the change in the accounting standards? I just wouldn't have thought that the accounting standard would change the profile of your claims, which that's supposed to represent. Yeah, Simon, that's a very good question. I think the 15 years is more a function of us now recognizing that there's a small tail that goes beyond 12 years. You see that in the referred to some of those onerous contracts in pre-2014, and some of them are in that sort of period from 12 to 15. Experience is showing us we've still got some liabilities, albeit quite small, out in those last couple of years. The new revenue recognition profile is designed to reflect that. Okay. Then the second question, I guess just given the longer, you know, profile of the revenue recognition policy or the earnings curve, just for a given year of losses, then we should see, you know, a higher loss rate, should we not? Would that be the case? I wouldn't necessarily extrapolate that the longer earnings, or claims come out necessarily means, higher, losses. I think it's more a timing issue of. Higher loss rate. Higher loss rate Higher loss rate as opposed to claims. Um- Yeah. Theoretically, if it's divided by your earned effects for your claims by your earned premium, if your earned premium is slower, I think it'll be at the margin. Michael, what do you think? You got to remember the revenue that we're reporting in a year is a slice of every one of the last 15 years. It's a little bit of a, sort of an average of, you know, a little bit of slice of each cohort. I think in some years the revenue, insurance revenue will be a little bit higher than what earned premium would have been. In other years, it could be a little bit lower. I don't think the denominator is going to change dramatically. The reported loss ratios, and we sort of talked about is sort of 30% or 35% as an indicative sort of guidance as to claims in the long run. I think that ratio as a percentage of insurance revenue will be fairly similar. Okay. Just a final question, just on the net claims in FY 2022 under AASB 17. I think the biggest change is the biggest impact is the change in the discount rate. I mean, going forward, if we assume that, you know, we're gonna have flat risk-free rates, should we expect a similar level of net claims than what we had previously forecast in that now? look, I don't wanna make a statement about what level of claims you could expect because it's. Yeah. It's pretty difficult. What I would say is the incurred claims line shouldn't be very different between the old and the new accounting standards. Whatever basis you have used to forecast that. Yeah. I'm not expecting the accounting standard to change that. Yeah, that's perfect. Thank you. No more questions. Thank you. There are no further questions at this time. I'll now like to turn the conference back to Ms. Pauline Blight-Johnston for closing remarks. Please go ahead. Thank you. Thank you very much. Thanks everyone for joining us today and your interest in Helia. We appreciate there's a large volume of new information for you to go through, and we expect that many questions will come out over the coming weeks and months. Our investor relations team is available to answer questions that you may have in relation to any of this. As we said repeatedly, AASB 17 will change the recognition, measurement, and presentation of our financial results, and very significantly does change the disclosure and the terminology. However, the fundamentals of the business are unchanged. We look forward to providing an update on our financial and strategic progress when we release our 2023 half year results in August. No doubt we'll have some more time to go through how these results look different from what we're used to in the past. At Helia, we're really proud of the role we play as a business and the value our LMI solutions provide in accelerating financial wellbeing to home ownership for Australians. We have a proud history of getting Australians into homes and also delivering strong shareholder returns. I thank you, our shareholders, for your support. We look forward to continuing to reward that support into the future. I'll now hand back to the moderator to end the call. This concludes today's conference call. Thank you for participating. You may now disconnect.