Insurance Australia : 2020 Directors' report (2.45 MB)

DIRECTORS' REPORT

The Directors present their report together with the consolidated financial report of Insurance Australia Group Limited and its subsidiaries for the financial year ended 30 June 2020 and the Auditor's Report.

The following terminology is used throughout the financial report:

• Company or Parent - Insurance Australia Group Limited; and
• IAG or Group - the consolidated entity consists of Insurance Australia Group Limited and its subsidiaries.

DIRECTORS OF INSURANCE AUSTRALIA GROUP LIMITED

The names and details of the Company's Directors in office at any time during or since the end of the financial year are set out below. Directors were in office for the entire period unless otherwise stated.

CHAIRMAN

ELIZABETH B BRYAN AM

BA (Econ), MA (Econ) - Chairman and Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

Elizabeth Bryan was appointed a Director of IAG on 5 December 2014, and became Chairman on 31 March 2016. She is the Chairman of the Nomination Committee, and attends all other Board committee meetings in an ex-officio capacity. Elizabeth is also the Chairman of Insurance Manufacturers of Australia Pty Limited.

OTHER BUSINESS AND MARKET EXPERIENCE

Elizabeth brings extensive leadership, strategic and financial expertise from a diverse range of industries to her role as Chairman.

She has over 30 years of experience in the financial services industry, government policy and administration, and on the boards of companies and statutory organisations.

Previous roles include Chairmanship of Caltex Australia Limited and UniSuper Limited.

Directorships of other listed companies held in the past three years:

• Virgin Australia Group, since 2015. While Elizabeth remains technically a member of the Board of Virgin Australia Group and its Chairman, the powers and responsibilities of the Board were vested in the Administrator from 20 April 2020; and
• IAG Finance (New Zealand) Limited (a part of the Group), since 2016. This company was delisted from the ASX on 17 December 2019.

MANAGING DIRECTOR

PETER G HARMER

Managing Director and Chief Executive Officer, Executive Director

INSURANCE INDUSTRY EXPERIENCE

Peter Harmer was appointed Managing Director and Chief Executive Officer of IAG on 16 November 2015. He is a member of the Nomination Committee.

Peter joined IAG in 2010 as Chief Executive Officer, CGU Insurance and has held a number of senior roles. Prior to his current role, he was Chief Executive of the IAG Labs division, responsible for driving digital and innovation across IAG and its brands, and creating incubator areas to explore innovative opportunities across the fintech landscape.

Before this, Peter was Chief Executive of IAG's Australian Commercial Insurance division.

Peter was previously Chief Executive Officer of Aon Limited UK and a member of Aon's Global Executive Board, and spent seven years as Chief Executive Officer of Aon's Australian, New Zealand and Pacific operations.

He has over 40 years of experience in the insurance industry, including senior roles in underwriting, reinsurance broking and commercial insurance broking as Managing Director of John C. Lloyd Reinsurance Brokers, Chairman and Chief Executive of Aon Re and Chairman of the London Market Reform Group.

Peter has completed the Harvard Advanced Management Program.

On 8 April 2020, Peter advised the Board of his decision to retire from IAG by the end of calendar year 2020.

Directorships of other listed companies held in the past three years:

• IAG Finance (New Zealand) Limited (a part of the Group), since 2015. This company was delisted from the ASX on 17 December 2019.

1

OTHER DIRECTORS

SIMON C ALLEN

BCom, BSc, CFInstD - Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

Simon Allen was appointed a Director of IAG on 12 November 2019 and is a member of the People and Remuneration Committee, Risk Committee and Nomination Committee.

Simon has been a Non-Executive Director of IAG's wholly-owned subsidiary, IAG New Zealand Limited since September 2015 and was appointed its Chairman in November 2019.

OTHER BUSINESS AND MARKET EXPERIENCE

Simon has over 30 years of commercial experience in the New Zealand and Australian capital markets and was Chief Executive of investment bank BZW/ABN AMRO in New Zealand for 21 years. He is currently Chair of The New Zealand Refining Company Limited and a Trustee of the New Zealand Antarctic Heritage Trust.

He was the inaugural Chair of NZX Limited and of the Financial Markets Authority and Crown Fibre Holdings Limited (renamed Crown Infrastructure Partners Limited).

Directorships of other listed companies held in the past three years:

• The New Zealand Refining Company Limited, since 2015.

DUNCAN M BOYLE

BA (Hons), FCII, FAICD - Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

Duncan Boyle was appointed a Director of IAG on 23 December 2016. He is Chairman of the Risk Committee and a member of the Audit Committee, People and Remuneration Committee and Nomination Committee.

Duncan is Chairman of TAL Dai-ichi Life and a former Non-Executive Director of QBE Insurance Group.

Duncan's executive career included senior roles with a variety of financial and corporate institutions, including Royal and Sun Alliance Insurance. He also held various board roles with the Association of British Insurers, Insurance Council of Australia, Global Aviation Underwriting Managers, AAMI and APIA.

OTHER BUSINESS AND MARKET EXPERIENCE

Duncan is a former Non-Executive Director of Stockland Group and Clayton Utz.

Directorships of other listed companies held in the past three years:

• None.

SHEILA C MCGREGOR

BA (Hons), LLB, AICD Diploma - Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

Sheila McGregor was appointed a Director of IAG on 13 March 2018. She is a member of the Audit Committee, Risk Committee and Nomination Committee.

OTHER BUSINESS AND MARKET EXPERIENCE

Sheila is a Partner at Gilbert + Tobin, advising on business-critical technology, data, privacy and digital issues. Previously, she was a Senior Partner at Herbert Smith Freehills (then Freehills).

Sheila is a Non-Executive Director of Crestone Holdings Limited. She is also a Non-Executive Director of St Vincent's Health Australia, the Sydney Writers' Festival and Board Chair of an independent girls' school in Sydney.

Directorships of other listed companies held in the past three years:

• None.

2 IAG ANNUAL REPORT 2020

JONATHAN (JON) B NICHOLSON

BA - Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

Jon Nicholson was appointed a Director of IAG on 1 September 2015. He is Chairman of the People and Remuneration Committee and a member of the Risk Committee and Nomination Committee.

OTHER BUSINESS AND MARKET EXPERIENCE

Jon is Non-Executive Chairman of Westpac Foundation, a trustee of Westpac Bicentennial Foundation and a Non-Executive Director of Cape York Partnerships and QuintessenceLabs.

He previously spent eight years with Westpac Banking Corporation, first as Chief Strategy Officer and later as Enterprise Executive. He retired from Westpac in 2014.

Jon's executive career included senior roles with a variety of financial and corporate institutions, including the Boston Consulting Group. He also held various roles with the Australian Government, including Senior Private Secretary to the Prime Minister of Australia (Bob Hawke) and senior positions in the Department of the Prime Minister and Cabinet.

Directorships of other listed companies held in the past three years:

• None.

HELEN M NUGENT AO

BA (Hons), PhD, MBA, HonDBus, HonDUniv - Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

Helen Nugent was appointed a Director of IAG on 23 December 2016. She is a member of the Audit Committee, Nomination Committee and Risk Committee.

Previously, Helen was Chairman of Swiss Re (Australia) and Swiss Re (Life and Health) Australia, and a Non-Executive Director of Mercantile Mutual.

OTHER BUSINESS AND MARKET EXPERIENCE

In the financial services sector, Helen was the Chairman of Veda Group and Funds SA (along with Swiss Re), as well as a Non- Executive Director of Macquarie Group for fifteen years and the State Bank of New South Wales. She also served on Westpac Banking Corporation's executive team as Director of Strategy, and prior to that specialised in the financial services sector as a partner at McKinsey & Company.

Her experience as a Non-Executive Director extends to the energy sector. Currently, she is Chairman of Ausgrid, and previously was a Director of Origin Energy. This built on work she undertook in the sector while at McKinsey.

In the arts sector, Helen is the Chairman of the National Portrait Gallery, and previously was Chairman of the National Opera Review, the Major Performing Arts Inquiry, the Major Performing Arts Board of the Australia Council, as well as being Deputy Chairman of the Australia Council and Opera Australia.

Helen has been Chancellor of Bond University and President of Cranbrook School, as well as having been a member of the Bradley Review into tertiary education.

Helen is also currently Chairman of the National Disability Insurance Agency and a member of the Board of the Garvan Institute for Medical Research. Helen was appointed Non-Executive Director on TPG Telecom effective 14 July 2020.

Helen's commitment to business and the community was recognised with her being made an Officer of the Order of Australia (AO), receiving a Centenary Medal, and being awarded Honorary Doctorates from the University of Queensland and Bond University.

Directorships of other listed companies held in the past three years:

• TPG Telecom, since 14 July 2020.

THOMAS (TOM) W POCKETT

CA, BCom - Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

Tom Pockett was appointed a Director of IAG on 1 January 2015. He is Chairman of the Audit Committee and a member of the Risk Committee and Nomination Committee.

OTHER BUSINESS AND MARKET EXPERIENCE

Tom is Chairman and Non-Executive Director of Stockland Group, Chairman and Non-Executive Director of Autosports Group Limited, and Deputy Chair and a Director of Sunnyfield Independence Association and a Director of O'Connell Street Associates. He previously spent over 11 years as Chief Financial Officer and over seven years as Finance Director with Woolworths Limited and retired from these roles in February 2014 and July 2014, respectively. Tom has also held senior finance roles at Commonwealth Bank, Lend Lease Corporation and Deloitte.

Directorships of other listed companies held in the past three years:

• Autosports Group Limited, since 2016; and
• Stockland Group, since 2014.

3

GEORGE SAVVIDES AM

BEng (Hons), MBA, FAICD - Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

George Savvides was appointed a Director of IAG on 12 June 2019 and is a member of the People and Remuneration Committee, Risk Committee and Nomination Committee.

He has extensive executive experience, serving as Chief Executive Officer of leading health insurer Medibank for 14 years (2002- 2016), and CEO of Sigma Company (now Sigma Healthcare) (1996-2001).

OTHER BUSINESS AND MARKET EXPERIENCE

George is a Non-Executive Director of New Zealand's Exchange (NZX) listed entity, Ryman Healthcare since 2013. He is a Non- Executive Chairman of Australian Securities Exchange (ASX) listed biotech company Next Science (since 2018) and Chairman of the Special Broadcasting Service Corporation (SBS) (since July 2020).

He is a former Non-Executive Chairman of Kings Transport and Non-Executive Chairman of Macquarie University Hospital, and served for 18 years on the Board of World Vision Australia, including six years as Chairman, retiring in 2018.

Directorships of other listed companies held in the past three years:

• Ryman Healthcare, since 2013; and
• Next Science, since 2018.

MICHELLE TREDENICK

BSc, FAICD, F Fin - Independent Non-Executive Director

INSURANCE INDUSTRY EXPERIENCE

Michelle Tredenick was appointed a Director of IAG on 13 March 2018 and is a member of the People and Remuneration Committee, Risk Committee and Nomination Committee.

Michelle has held a number of senior executive roles in major Australian companies, including National Australia Bank, MLC and Suncorp. She was Chief Information Officer (CIO) for Suncorp, MLC and National Australia Bank, as well as Head of Strategy for MLC and Head of Strategy and Marketing for Suncorp. She was also CEO of MLC's Corporate Superannuation business and Head of their New Zealand Insurance and Wealth Management businesses.

OTHER BUSINESS AND MARKET EXPERIENCE

Michelle is a Non-Executive Director of the Bank of Queensland (since 2011), where she chairs the Information Technology Committee. She was recently appointed as a Non-Executive Director of First Sentier Investors in June 2020. She is a Director of Cricket Australia (since 2015) and Urbis Pty Ltd (since 2016). Michelle is also a member of The Ethics Centre Board and a member of the Senate of The University of Queensland. She is a former Chair of the IAG & NRMA Superannuation Plan (2012-2018).

She was awarded Banking and Finance CIO of the Year in 1998 and again in 2006.

Directorships of other listed companies held in the past three years:

• Bank of Queensland Limited, since 2011.

DIRECTOR WHO CEASED DURING THE FINANCIAL YEAR

Hugh Fletcher was a Director from 1 September 2007 to 25 October 2019.

COMPANY SECRETARIES OF INSURANCE AUSTRALIA GROUP LIMITED

PETER HORTON

BA, LLB

Peter Horton joined IAG as Group General Counsel and Company Secretary in December 2019.

He was previously Executive Manager Legal, Governance and Risk at Transgrid.

Peter's career has included roles as Group General Counsel and Company Secretary for QBE Insurance Group Limited, Group General Counsel and Company Secretary of Woolworths Limited, General Manager Legal and Company Secretary of WMC Resources Limited and a Corporate Lawyer then Principal Solicitor at BHP Petroleum Pty Limited.

He is also a Non-Executive Director of the not-for-profit company Business For Development.

Peter was awarded a Lifetime Achievement Award for service to corporate law and in-house legal by Global Leaders in Law in September 2018. He was the ACLA Australian Corporate Lawyer of the Year in 2002 and his teams were awarded the ACLA Australian Law Award for In-House Legal Department of the Year in 2004 and 2005 (WMC Resources Limited) and 2013 (Woolworths Limited).

4 IAG ANNUAL REPORT 2020

JANE BOWD

FGIA, FCIS, GAICD, GradDip, LLM, LLB, BA

Jane Bowd joined IAG as the Group Company Secretary in June 2020, and leads IAG's Board Services Team.

Jane was previously the Group Company Secretary & Corporate Counsel at Coca-Cola Amatil, and prior to that was the Head of Secretariat of the Global Wealth Division at ANZ Bank. She started her legal and governance career as a private practice lawyer in top tier law firm Clayton Utz, including in Corporate M&A.

Jane holds a Graduate Diploma of Applied Corporate Governance, Master of Laws, Graduate Diploma of Legal Practice, Bachelor of Laws, Bachelor of Arts, and is a graduate of the Royal Military College, Duntroon. Jane brings deep knowledge and expertise in legal and governance matters from her financial services roles and private practice, and membership of the Governance Institute of Australia's Legislative Review Committee.

Jane is an Independent Non-Executive Director of Financial Planning Association of Australia (FPA), and is also a Committee Member on the FPA's Board Audit and Risk Management Committee, and Governance and Remuneration Committee.

SEJIL MISTRY

BProc, LLM, FGIA, FCIS

Sejil joined IAG in September 2002 and has held the role of Company Secretary since September 2015. She holds Master of Laws from the University of New South Wales and bachelor's degree in law from the University of Natal, South Africa. She also holds a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia and is a Fellow of the Governance Institute of Australia. Sejil has over 20 years' experience in the insurance industry and has deep risk and governance experience.

MEETINGS OF DIRECTORS

The number of meetings each Director was eligible to attend and actually attended during the financial year, including those attended in an ex-officio capacity, is summarised below:

					PEOPLE AND
					REMUNERATION	AUDIT		RISK		BOARD SUB	NOMINATION
DIRECTOR		BOARD OF DIRECTORS		COMMITTEE	COMMITTEE	COMMITTEE	COMMITTEE	COMMITTEE
	Scheduled	Unscheduled
Total number of
meetings held(1)		13	4			4	4		5			2		2
	Eligible	Eligible		Eligible		Eligible		Eligible		Eligible		Eligible
	to		to		to		to		to		to		to
	attend Attended	attend Attended	attend Attended	attend Attended	attend Attended	attend Attended	attend Attended
Elizabeth Bryan(1),(4)	13	13	4	4	-	4	-	4	4	5	2	2	2	2
Peter Harmer(4)	13	13	4	4	-	4	-	4	-	5	2	2	1	1
Simon Allen(2),(4)	9	9	3	3	3	3	-	3	4	4	-	-	1	1
Duncan Boyle	13	13	4	4	4	4	4	4	5	5	-	-	2	2
Sheila
McGregor(1),(4)	13	13	4	4	-	4	4	4	4	5	-	-	2	2
Jon Nicholson(4)	13	13	4	4	4	4	-	4	5	5	-	-	2	2
Helen Nugent(4)	13	13	4	4	-	4	4	4	5	5	-	-	2	2
Tom Pockett(4)	13	13	4	4	-	4	4	4	5	5	1	1	2	2
George Savvides(4)	13	13	4	4	4	4	-	3	5	5	-	-	2	2
Michelle
Tredenick(1),(4)	13	12	4	4	4	4	-	4	4	5	-	-	2	2
Hugh Fletcher(3),(4)	4	4	-	-	1	1	-	1	1	1	1	1	1	1

1. Elizabeth Bryan, Sheila McGregor and Michelle Tredenick were appointed to the Risk Committee on 24 October 2019.
2. Simon Allen was appointed to the Board, Nomination Committee and Risk Committee on 12 November 2019. He was appointed to the People and Remuneration Committee on 14 November 2019.
3. Hugh Fletcher was a member of the Board, Risk Committee, People and Remuneration Committee and Nomination Committee until 25 October 2019.
4. Where not eligible to attend as a Committee member, the Director attended the meeting/s in an ex-officio capacity.

5

PRINCIPAL ACTIVITY

The principal continuing activity of IAG is the underwriting of general insurance and related corporate services and investing activities. IAG reports its financial information under the following segments:

DIVISION	OVERVIEW	PRODUCTS
Australia	This segment is a leading provider of general insurance products to both	Short-tail insurance
77% of Group gross	individuals and businesses in Australia. The Australia division benefits from		Motor vehicle
its access to a variety of distribution channels and an array of well-		Home and contents
written premium	established brands, as summarised below.
	Lifestyle and leisure,
(GWP)
The Australian division provides consumer insurance products through		such as boat, veteran
	branches, call centres, the internet and representatives, under the following		and classic car and
	brands:		caravan
	 NRMA Insurance in New South Wales, Australian Capital Territory,		Business packages
		Queensland and Tasmania;		Farm and crop
	 SGIO in Western Australia;		Commercial property
	 SGIC in South Australia;		Construction and
	 RACV in Victoria, via a distribution agreement with RACV;		engineering
	 Coles Insurance nationally, via a distribution agreement with Coles;		Commercial motor and
		WFI nationally; and		fleet motor
	 CGU Insurance nationally through affinity and financial institution	Long-tail insurance
		partnerships and broker and agent channels.
			Compulsory Third Party
	The division also includes travel insurance, life insurance and income		(motor injury liability)
	protection products which are underwritten by third parties.		Workers' compensation
	Business insurance products are sold through a network of around 2,000		Professional indemnity
		Directors' and officers'
	intermediaries, such as brokers, agents and financial institutions and	
	directly through call centre and online channels, under the following brands:		Public and products
		CGU Insurance;		liability
		WFI;
		NRMA Insurance;
		RACV;
		SGIO; and
		SGIC.
New Zealand	The New Zealand business is the leading general insurance provider in the	Short-tail insurance
23% of Group GWP	country in both the direct and broker/agent channels. Insurance products		Motor vehicle
are provided directly to customers, primarily under the State and AMI		Home and contents
	brands, and indirectly through insurance brokers and agents, under the NZI
	and Lumley Insurance brands. General insurance products are also		Commercial property,
		motor and fleet motor
	distributed through agents and under third party brands by corporate
		Construction and
	partners, which include large financial institutions.
		engineering
				Niche insurance, such
				as pleasure craft, boat
				and caravan
				Rural
				Marine
			Long-tail insurance
				Personal liability
				Commercial liability
Corporate and other	Corporate and other comprises other activities, including corporate services,
	capital management activity, shareholders' funds investment activities,

inward reinsurance from associates, investment in associates, and other businesses that offer products and services that are adjacent to IAG's insurance business.

6 IAG ANNUAL REPORT 2020

RECONCILIATION BETWEEN THE STATUTORY RESULTS (IFRS) AND THE MANAGEMENT REPORTED (NON- IFRS) RESULTS

The discussion of operating performance in the operating and financial review section of this report is presented on a management reported basis unless otherwise stated. Management reported results are non-IFRS financial information and are not directly comparable to the statutory results presented in other parts of this financial report. A reconciliation between the two is provided in this section and the guidance provided in Australian Securities and Investments Commission Regulatory Guide 230 'Disclosing non- IFRS financial information' ('RG 230') has been followed when presenting the management reported results. Non-IFRS financial information has not been audited by the external auditor, but has been sourced from the financial reports. IAG's statutory and management reported profit before income tax from continuing operations are the same.

On 24 January 2020, and subsequently on 24 July 2020, IAG advised that its current year results would contain a provision for customer refunds. The provision comprises premium refunds, interest attributable to those refunds and the cost of administering the associated remediation program. This provision relates to multi-yearpricing-related issues identified by IAG where discounts were not always applied in full to premiums for all customers who may have been eligible. This provision is not expected to be a feature of the Group's future sustainable earnings profile. As a result, and to ensure consistency of the reporting of key insurance measures and metrics, this item has been shown below the insurance profit in the management reported view of the current year's results. This view is consistent with the approach adopted in IAG's Investor Report.

Reconciliation between the statutory results (IFRS) and the management reported (non-IFRS) results is presented below:

	STATUTORY	CUSTOMER MANAGEMENT
	RESULTS	REFUND	RESULTS
	(IFRS)	PROVISION	(NON-IFRS
				PER INVESTOR
					REPORT)
	$m	$m	$m
Gross written premium	11,985		150	12,135
Movement in unearned premium liability	29		-		29
Gross earned premium	12,014		150	12,164
Outwards reinsurance premium expense	(4,776)	(25)	(4,801)
Net earned premium	7,238		125	7,363
Net claims expense	(5,010)	-		(5,010)
Commission expense	(1,009)	-		(1,009)
Underwriting expense	(2,070)	140	(1,930)
Reinsurance commission revenue	1,201		(19)	1,182
Net underwriting expense	(1,878)	121	(1,757)
Underwriting profit	350		246	596
Net investment income on assets backing insurance liabilities	145		-		145
Insurance profit	495		246	741
Net other operating income/(expenses)	40		(246)	(206)
Profit before income tax from continuing operations	535		-		535
Income tax expense	(37)	-		(37)
Profit after income tax from continuing operations
498		-		498
Non-controlling interests	(59)	-		(59)
Profit after income tax and non-controlling interests
439		-		439
Net loss after tax from discontinued operations	(4)	-		(4)
Profit attributable to IAG shareholders
435		-		435

The adjustments summarised above reflect the current year pre-tax earnings impact of the inclusion of the provision for customer refunds. The gross provision for customer refunds, interest attributable to those refunds and the cost of administering the associated remediation program is $290 million (refer to Note 5.3) and after recognition of a $44 million recovery from IAG's whole- of-account quota share arrangements, the current year net pre-tax earnings impact is $246 million. After tax and outside equity interests, the net cost of this provision to IAG is $141 million. This item has been excluded from cash earnings for dividend calculation purposes.

OPERATING AND FINANCIAL REVIEW

OPERATING RESULT FOR THE FINANCIAL YEAR

The reported insurance margin of 10.1% was lower than the prior year (2019: 16.9%). This reflected the combined impact of an unfavourable net natural peril claims cost outcome for the year, a net prior period reserve strengthening, a negative credit spread effect and a modest reduction in the Group's underlying insurance margin.

IAG's underlying insurance margin was 16.0% compared to 16.6% in the prior year. While IAG's underlying operating performance in the first half of the year was strong and broadly in line with expectations, the second half outcome was impacted by increased reinsurance costs as a result of the higher than anticipated natural peril losses, lower investment returns and deterioration in the performance of some Australian long-tail portfolios.

7

Overall GWP growth of 1.1% compared to the prior year was in line with IAG's guidance of 'low single digit' growth. GWP growth in the second half of the year was 0.8% and was reduced by an estimated adverse COVID-19 impact of approximately $80 million, constraining second half growth by over 100 bps.

COVID-19 impacts

The COVID-19 pandemic has had a range of effects on IAG's business and financial performance in the current year. As referenced above, GWP is estimated to have been reduced by approximately $80 million, primarily from lower new business opportunities in the months of March to May. New business volumes have shown a recovery since the end of May and are now tracking close to pre-COVID levels in both Australia and New Zealand. However, there is increased uncertainty surrounding potential impacts associated with the recent declaration of a State of Disaster in Victoria with effect from 2 August 2020. Business retention has held at high levels in all core portfolios. Given that premium is earned over time, the COVID-19-influenced reduction in GWP has had only a minor impact on IAG's insurance profit or net profit in the current year.

In the second half of the year, IAG's underwriting profit has borne three largely offsetting COVID-19 effects (on a post-quota share basis):

• an estimated net benefit of approximately $150 million from reduced claim costs, comprising:
• • a significant benefit from lower motor claims frequency, particularly in the months of April and May. Towards the end of the current financial year a rebound in frequency was experienced as lockdown requirements generally eased, however there was a high degree of variability by state in Australia; and
  • a partial offset from claims incurred in other COVID-19 affected business classes such as landlords' insurance and travel insurance;
• a provision of approximately $100 million for potential COVID-19 claim cost impacts that are highly uncertain, sit within a wide range and have been estimated on a probability-weighted basis. This accords with accounting requirements and spans potential business interruption, landlords' and other insurance class impacts, including the estimated impact an economic downturn will have on the settlement of long-tail claims; and
• increased costs of approximately $50 million flowing from COVID-19-related measures or responses, covering:
• • additional operating expenses of approximately $30 million, mainly from moving employees to a 'working from home' basis; and
  • the decision, accelerated by the impact COVID-19 has had on customer behaviours, to close the AMI branch network in New Zealand, at a cost in excess of $20 million.

The provision for potential COVID-19 claim cost impacts, which has been estimated on a probability-weighted basis, includes an allowance for possible business interruption claim exposure in Australia. For further information refer to Note 1.2.

Separately, the COVID-19 pandemic triggered extreme investment market volatility from late February onwards. This contributed to an adverse mark-to-market credit spread effect in IAG's second half insurance profit of over $50 million and has driven a second half loss of over $230 million from shareholders' funds income, predominantly from equity and alternative asset classes.

Asia

In October 2019, IAG announced an agreed sale of its interest in SBI General Insurance Company Limited (SBI General) in India. This transaction was completed in March 2020 and resulted in a gain on sale of $326 million being reflected in profit after tax for the current year. IAG continues to explore options for its remaining Asian general insurance interests.

Provision for customer refunds

In the first half of the year IAG included a post-tax provision of $82 million for customer refunds, interest attributable to those refunds and the cost of administering the associated remediation program. This related to a specific multi-year pricing issue identified by IAG where discounts were not always applied in full to premiums for all customers who may have been eligible. This has been increased to $141 million post-tax for the full year, to update the initial provision, include further refund programs in respect of similar pricing issues and provide for additional related administration costs. The issues concerned were identified as part of a proactive review of pricing systems and processes, which is ongoing.

Net profit after tax

The Group's profit after tax for the year was $494 million (2019: $1,173 million). After adjusting for non-controlling interests in the

Group result, net profit attributable to the shareholders of the Company was $435 million (2019: $1,076 million) and was 60.0% lower than the prior year. This outcome included:

• an approximately 40% reduction in pre-tax insurance profit to $741 million, primarily owing to a collective adverse movement in prior period reserving, natural peril and credit spread impacts of nearly $500 million;
• an adverse $400 million pre-tax movement in investment income on shareholders' funds, flowing from the volatile investment market conditions experienced in the second half of the year; and
• inclusion of the post-tax provision of $141 million for customer refunds; partially offset by
• a $326 million profit after tax on the sale of the interest in SBI General in India, compared to a $208 million profit on the sale of the Thailand operations recognised in the prior year.

8 IAG ANNUAL REPORT 2020

Gross written premium

Total GWP of $12,135 million (2019: $12,005 million) represented a 1.1% increase compared to the prior year. This encompassed:

• $9,367 million in Australia, representing growth of 0.4% with some improvement evident in the second half of the year, notwithstanding estimated modestly negative COVID-19 influences of approximately $60 million; and
• $2,754 million in New Zealand, translating to reported growth of 3.5% led by commercial line volumes and commercial property and liability rates. COVID-19 is estimated to have had an adverse effect in the second half of the year of approximately $20 million.

Overall GWP growth in the second half of the year was 0.8%, compared to 1.4% in the first half. Allowing for estimated adverse effects from COVID-19, as reflected in lower new business volumes, GWP growth in the second half would have exceeded 2%.

In the current year, GWP growth also absorbed the adverse impact of business exits concluded in the last financial year, principally in the area of commercial underwriting agencies in Australia, and lower Compulsory Third Party (CTP) rates stemming from scheme change.

Insurance margin

IAG's current year reported insurance profit of $741 million (2019: $1,224 million) was 39.5% lower than the prior year. The

reported insurance margin decreased to 10.1% (2019: 16.9%). Contributing to this outcome were:

• an unfavourable net natural peril experience which saw related net claims costs increase by $277 million relative to the prior year;
• a net prior period reserve strengthening of $48 million, compared to net releases of $126 million in the prior year;
• a negative credit spread impact of $46 million in the current year, compared to a minor negative effect of $6 million in the prior year; and
• a modest decline in the Group's underlying margin, as described below.

Underlying margin

IAG defines its underlying margin as the reported insurance margin adjusted for:

• net natural peril claim costs less related allowance for the period;
• reserve releases in excess of 1% of net earned premium (NEP); and
• credit spread movements.

From the 2021 financial year, IAG is including zero allowance for reserve releases in its underlying margin definition based on its view of future reserve movements.

			2020			2019
INSURANCE MARGIN	$m	%	$m	%
Management reported insurance margin*	741	10.1	1,224	16.9
Net natural peril claim costs in excess of allowance	263	3.6	19	0.3
Reserve releases below/(in excess of) 1% of NEP	122	1.7	(54)	(0.7)
Credit spread movements	46	0.6	6	0.1
Underlying insurance margin	1,172		16.0	1,195	16.6

• Management reported insurance margin is the insurance profit as a percentage of NEP as disclosed in the Investor Report. Based on the statutory results, the equivalent statutory insurance margin for the current year is 6.8%.

Similar to the management reported results, the underlying insurance margin is a non-IFRS measure that is designed to present, in the opinion of management, the results from ongoing operating activities in a way that best and most appropriately reflects the Group's underlying performance.

IAG's underlying insurance margin was 16.0% (2019: 16.6%), including a softer second half outcome of 15.1%. The full year underlying margin movement included:

• approximately $50 million of additional regulatory and compliance costs, including increased investment in risk-related resources;
• a greater than 100 bps effect from lower interest rates impacting investment income;
• a broadly neutral effect from COVID-19 influences in the second half of the year; partially offset by
• further net benefits from the group-wide optimisation program which met the targeted run rate reduction of $250 million per annum in the first half of the year.

Key drivers of the lower underlying margin in the second half of the year in comparison to the first half of the year were:

• higher reinsurance costs flowing from increased cover and rates on the calendar 2020 catastrophe renewal, as well as the cost of replacement covers purchased following the peril activity early in calendar 2020;
• lower investment returns from lower interest rates; and
• a deterioration in the performance of some Australian commercial long-tail portfolios.

Tax expense

IAG reported a tax expense of $37 million (2019: $363 million), representing an effective tax rate of 6.9% (2019: 27.3%).

The low headline rate reflects the profit on sale of SBI General representing over half of pre-tax earnings and not being subject to tax in Australia. Adjusting solely for this item produces an effective tax rate closer to 23.9%.

Other contributory elements reconciling the effective tax rate to the prevailing Australian corporate rate of 30% are:

• differences in tax rates applicable to IAG's foreign operations, principally in New Zealand, Singapore and Malaysia; and
• franking credits generated from IAG's investment portfolio.

9

Investment income on shareholders' funds

Net investment income on shareholders' funds was a loss of $181 million (2019: $227 million profit), reflecting the extreme market volatility accompanying the onset of the COVID-19 pandemic. The adverse performance was the result of:

• the impact of volatile equity markets on portfolios in the second half of the year;
• negative mark-to-market impacts in alternative asset classes, comprising higher yielding credit strategies, global convertible bonds and hedge funds; and
• an $11 million write-down of IAG's 16.9% interest in Bohai in China.

DIVISIONAL HIGHLIGHTS

A. AUSTRALIA

Australia accounted for 77% of Group GWP and recorded a lower reported insurance margin of 7.3% (2019: 14.9%) following substantive adverse peril and prior period release movements. Australia's underlying performance of 14.9% was slightly lower than the prior year (2019: 15.5%).

I. Premiums

Australia reported GWP of $9,367 million (2019: $9,331 million) in the current year, an increase of 0.4%. After a flat performance in the first half of the year, GWP growth in the second half of the year was 0.7%, reflecting diminished adverse effect from lower CTP premiums, reduced commercial volume loss and a small negative from COVID-19 effects. COVID-19 is estimated to have reduced GWP in the second half of the year by approximately $60 million, primarily through reduced new business volumes, especially in the period March to May 2020.

The overall Australian GWP outcome includes:

• largely rate-driven growth of 2% in short tail motor, with some offset from volume;
• home growth of over 5%, which was primarily rate-derived, with some volume growth in Victoria; and
• relatively flat like-for-like commercial lines GWP, after allowance for business exits in the prior financial year, with average rate increases of approximately 5.5% countered by lower volumes; partially offset by
• a 7.5% contraction in CTP, predominantly from scheme change-driven cumulative rate reductions.

II. Insurance profit

Australia reported an insurance profit of $420 million, compared to $842 million in the prior year. This equates to a lower reported insurance margin of 7.3% (2019: 14.9%). The reduction reflects the net effect of:

• a severe shift in prior period reserving, from a favourable impact that equated to 2.0% of NEP in the prior year to a net strengthening equivalent to 1.1% of NEP in the current year;
• a greater than $200 million increase in net natural peril claims cost, compared to the prior year, with an associated reduction in margin of 360bps;
• an adverse movement in credit spread impacts of $40 million; and
• a modest net negative effect from other COVID-19 influences, embracing a moderately positive overall claims impact and higher operating expenses.

III. Underlying margin

Australia's underlying margin of 14.9% was slightly lower than the prior year (2019: 15.5%). This included a weaker second half outcome of 13.9%, which was over 200bps lower than the first half owing to the combination of:

• a small net negative on underwriting profit from COVID-19 effects;
• adverse performance in packaged portfolios mainly due to a small number of larger losses; and
• lower interest rates driving reduced investment income and not fully compensated for in pricing actions.

IV. Fee-based business

Fee-based income in Australia comprises contributions from three main sources:

• IAG's role as an agent under the Victorian workers' compensation scheme, which is underwritten by the state government;
• investment in new businesses focusing on advanced technologies, data asset capabilities, innovation and mobility initiatives; and
• the car servicing aspect of the MotorServe acquisition, which was purchased during the second half of the year.

Total net income from fee-based operations in the current year was a loss of $11 million, compared to a loss of $1 million in the prior year, including a second half loss of $17 million. This included:

• net costs associated with new business initiatives of approximately $19 million, including those arising from the Safer Journeys crash detection and response service;
• an initial loss of approximately $3 million from MotorServe's car servicing activities; and
• a positive contribution of $11 million (2019: $13 million) from the Victorian workers' compensation business. An improved
  underlying performance was achieved after allowing for $5 million of prior period fee income (2019: $10 million), which is typically reported in the opening half of the financial year. The decrease in prior period income was as expected as IAG moves further into its five-year contract and opportunities to generate returns from tail incentive fees and scheme actuarial releases diminish.

B. NEW ZEALAND

New Zealand accounted for 23% of Group GWP and recorded a lower reported insurance margin of 20.2% (2019: 24.7%) following significantly higher net natural perils claim costs and higher large claims experience. New Zealand's underlying insurance margin of 18.6% was also lower than the prior year (2019: 19.5%).

10 IAG ANNUAL REPORT 2020

I. Premiums

New Zealand's current year GWP grew by 3.5% to $2,754 million, compared to prior year GWP of $2,660 million. This increase included a favourable foreign exchange translation effect, with local currency GWP increasing by 2.4%, to NZ$2,904 million (2019: NZ$2,836 million). This result was driven by the combination of:

• strong GWP growth from Business, driven by volume increases across all key commercial line portfolios and higher rates in commercial property and liability; and
• Consumer GWP holding to prior year levels, with growth experienced in the commercial motor and AMI private motor portfolios through increased rates and volume.

II. Insurance profit

The New Zealand business reported an insurance profit of $330 million, compared to $390 million in the prior year. This equates to a reported insurance margin of 20.2% (2019: 24.7%). The reduction reflects the net effect of:

• significantly higher net natural peril claim costs, centred on the Canterbury hailstorm;
• higher large claims experience; and
• lower investment income on technical reserves, reflecting reduced interest rates; partially offset by
• increased net earned premium, driven by solid GWP growth in the Business division; and
• a modest net benefit from COVID-19 effects, with lower motor frequency benefits countered by increased operating costs, including those related to the AMI branch network closure.

Prior period reserve releases of $18 million were slightly higher than those recognised in the prior year (2019: $14 million). The bulk of the releases occurred in the first half of the year and were predominantly sourced from professional indemnity exposures to residual post-Canterbury earthquake risks.

III. Earthquake settlements

Good progress continues to be made with the settlement of claims associated with the legacy Canterbury earthquake events. At 30 June 2020 over NZ$7.2 billion of claim settlements had been completed, with less than 900 claims remaining open out of the more than 90,000 received.

During the second half of the year, IAG increased its gross reserved position on the three major earthquakes in financial year 2011 by NZ$100 million, with all of this covered by reinsurance. Considerable legacy reinsurance protection remains for the September 2010 and June 2011 events, and approximately NZ$480 million of adverse development cover is still available in relation to the February 2011 event.

Outstanding Canterbury earthquake claims include those subject to dispute and litigation, as well as recently-receivedover-cap claims from the Earthquake Commission (EQC). It remains IAG's expectation that finalisation of all residual claims will take several years given associated complexity.

C. CORPORATE AND OTHER

A pre-tax profit of $43 million was reported in this segment, which compares to a profit of $99 million in the prior year. The movement primarily reflects the reduction in net investment income on shareholders' funds of $408 million partially offset by an increase of $333 million in other net operating result. The favourable movement in the other net operating result predominantly reflects the gain on sale of IAG's interest in SBI General in India of $309 million (excluding the favourable taxation effects, included in tax expense).

I. Share of net profit/(loss) of associates

The Group's share of associates was a profit of $57 million (2019: $42 million). This result includes AmGeneral Holdings Berhad (AmGeneral) in Malaysia and SBI General profit for the nine-month period up until the sale in March 2020. As IAG has significantly wound back its activities in the Asia region, related support and development costs have materially reduced.

REVIEW OF FINANCIAL CONDITION

A. FINANCIAL POSITION

The total assets of the Group as at 30 June 2020 were $29,694 million compared to $29,286 million as at 30 June 2019. Movements within the overall net increase of $408 million include:

• a decrease in investments of $584 million associated with the payments of the 2019 final dividend and 2020 interim dividend totalling $693 million and redemption of the reset exchangeable securities (RES) of $550 million. This has been partially offset by the proceeds from the sale of IAG's interest in SBI General and operating earnings for the year;
• a decrease in investment in joint ventures and associates of $193 million, reflecting the derecognition of the investment in SBI General following IAG's sale of its holding in the entity; offset by
• a $531 million increase in right-of-use assets primarily associated with the initial application of the new lease accounting standard (AASB 16 Leases);
• a $290 million increase in reinsurance and other recoveries on outstanding claims primarily associated with the increase in natural peril costs during the financial year and increase in recoveries on long-tail classes due to the downward movement in the yield curve;
• a $249 million increase in trade and other receivables, predominantly relating to an increase in reinsurance recoveries on paid claims in respect of natural peril events during the year; and
• a $122 million increase in deferred tax assets attributable to the increase in provisions and potential COVID-19 claim liabilities recognised during the year.

11

The total liabilities of the Group as at 30 June 2020 were $23,340 million compared to $22,576 million as at 30 June 2019. Movements within the overall net increase of $764 million include:

• a $655 million increase in lease liabilities associated with the initial application of the new lease accounting standard (AASB 16 Leases);
• a $288 million increase in the outstanding claims liability representing the impact of higher reserves for natural perils, COVID- 19 allowances, strengthening across Australian long-tail reserves and yield curve impacts;
• a $250 million increase in provisions predominantly reflecting amounts provided for customer refunds; offset by
• a $554 million reduction in interest-bearing liabilities following the redemption of the RES during the year.

IAG shareholders' equity (excluding non-controlling interests) decreased from $6,404 million as at 30 June 2019 to $6,077 million as at 30 June 2020, reflecting the combined impact of:

• current year net profit attributable to shareholders of $435 million;
• payments totalling $693 million in respect of the 2019 final dividend and 2020 interim dividend; and
• $33 million reduction in opening retained earnings on initial application of AASB 16 Leases.

B. CASH FROM OPERATIONS

The net cash inflows from operating activities for the year ended 30 June 2020 were $381 million compared to net cash inflows of $589 million for the prior year. The movement is mainly attributable to the net effect of:

• an increase in claim costs paid of $736 million offset by an increase in reinsurance and other recoveries received of $728 million largely attributable to the increase in natural peril events compared with the prior year;
• a $151 million increase in outwards reinsurance premiums paid reflecting the timing of the instalments paid on the catastrophe cover compared with the prior year and the additional premiums paid for reinstatement and the buy-down cover on the Group catastrophe programme; and
• an increase in other operating payments of $217 million, predominantly driven by the timing of settlement to creditors.

C. INVESTMENTS

The Group's investments totalled $10,100 million as at 30 June 2020, excluding investments held in joint ventures and associates, with 57% represented by the technical reserves portfolio. The decrease in total investments since 30 June 2019 ($10,684 million) reflects the combined effect of:

• $693 million of dividends paid including the prior year's final dividend and the current year's interim dividend;
• redemption of the $550 million RES in December 2019;
• the impact of falling equity markets in the second half of the year, both domestically and overseas, and negative mark-to- market impacts in alternative asset classes; partially offset by
• net proceeds received following completion of the sale of IAG's operations in India ($579 million) and Indonesia ($14 million); and
• operating earnings during the period.

IAG's overall investment allocation is defensively positioned, with over 89% of total investments in fixed interest and cash as at 30 June 2020. Technical reserves, which back insurance liabilities, are wholly invested in fixed interest and cash. A more diversified approach is taken to shareholders' funds, comprising a mix of fixed interest and cash and growth assets (equities and alternatives). IAG's allocation to growth assets was 25% of shareholders' funds at 30 June 2020, compared to 42% of shareholders' funds at 30 June 2019. The reduction in the allocation to growth assets reflects the combined impact of:

• the net fall in domestic and offshore equity markets;
• mark-to-marketimpacts in alternative asset classes;
• some active reallocation of funds to fixed interest and cash; and
• the investment of nearly $600 million of net proceeds from the sale of SBI General into conservative asset classes.

D. INTEREST-BEARING LIABILITIES

IAG's interest bearing liabilities stood at $1,526 million at 30 June 2020, compared to $2,080 million at 30 June 2019. The net movement in the period largely reflects IAG's redemption of the $550 million RES in December 2019.

E. CAPITAL MIX

IAG measures its capital mix on a net tangible equity basis, i.e. after deduction of goodwill and intangibles, giving it strong alignment with regulatory and rating agency models. IAG targets the following ranges:

• ordinary equity (net of goodwill and intangibles) 60-70%; and
• debt and hybrids 30-40%.

At 30 June 2020, debt and hybrids represented 32.2% (2019: 36.5%) of total tangible capitalisation, towards the lower end of IAG's targeted debt range. The decrease since the prior year largely reflects the impact of the RES redemption.

Subject to market conditions, IAG may seek to issue a new Tier 2 subordinated instrument next year to provide additional liquidity.

12 IAG ANNUAL REPORT 2020

F. CAPITAL POSITION

Under the Australian Prudential Regulatory Authority's (APRA) Prudential Standards, IAG's Common Equity Tier 1 (CET1) capital was $2,567 million (2019: $3,082 million) and regulatory capital of $4,098 million (2019: $4,981 million) at 30 June 2020. IAG has set the following related targeted benchmarks:

• a CET1 target range of 0.9 to 1.1 times the Prescribed Capital Amount (PCA), compared to a regulatory requirement of a minimum of 0.6 times; and
• a total capital position equivalent to 1.6 to 1.8 times the PCA, compared to a regulatory requirement of a minimum of 1.0 times.

At 30 June 2020, IAG had a CET1 multiple of 1.23 (2019: 1.31) and a PCA multiple of 1.97 (2019: 2.12).

IAG has increased its targeted PCA multiple range from 1.4 to 1.6 times to 1.6 to 1.8 times. This reflects reduced reliance on inter- company loans from Australian insurance subsidiaries to IAG's non-operating holding company, as required by APRA following the licence consolidation completed in 2017.

Further capital management details are set out in Note 3.1 within the financial statements.

STRATEGY AND RISK MANAGEMENT

A. STRATEGY

MAKING CUSTOMERS FEEL SAFER ON THE ROAD, IN THEIR HOMES AND AT WORK

IAG's purpose means that whether you are a customer, partner, employee, shareholder or part of the communities IAG serves, IAG exists to 'make your world a safer place'. IAG believes its purpose will enable it to meet the changing needs of its customers, become a more sustainable business over the long term and deliver stronger and more consistent returns for its shareholders.

Over the last four years, IAG has focused on three key areas:

• Gaining a deeper and better understanding of its customers;
• Delivering a simpler more streamlined operating platform; and
• Developing an agile, adaptable workforce.

With simplification continuing, IAG has increased its focus on customer engagement and longer-term growth. This includes:

• Delivering better insurance experiences to customers through enhanced capabilities in data, digital, analytics and artificial intelligence, brand and innovation;
• Extending its strategic partnerships to offer products and services that are adjacent to its insurance business, enabling IAG to make its customers and the community feel safer on the road, in their homes and at work; and
• Leveraging its assets - including data, customer reach and brands - to launch new businesses that complement these adjacent products and services.

IAG's objective is to grow the number of customers in its network of brands.

The progress IAG has made in the delivery of its strategy has positioned it to be well placed to respond to the disrupted and uncertain operating environment that will be shaped by the COVID-19 pandemic, with strong momentum occurring across the initiatives that underpin its three key strategic priorities:

I. Customer - World-leading customer experiences

• Create a delivery platform that transforms customer experiences;
• Better connect customers and automate processes, enabling IAG to reach more customers in a timely manner;
• Develop an innovation approach which provides the ability to think differently and deliver quickly;
• Embed cognitive capabilities and artificial intelligence that anticipate customers' needs; and
• Use data to power decision-making, allowing IAG to better understand its customers.

II. Simplification - Simplified, modular and lower cost operating model

• Reduce organisational complexity by consolidating technology platforms, harmonising products, simplifying processes and systems, and executing the technology strategy;
• Leverage operational partners to optimise the operating model and drive scale economies across the value chain; and
• Improve allocation and maximise utilisation of the preferred repairer network to reduce average claim size.

III. Agility - An agile organisation distinguished by innovation, speed and execution skills

• Create a disciplined approach to IAG's management and leadership, including building stronger role clarity and introducing agile ways of working;
• Build a talent pipeline based on the skills required to deliver IAG's strategy and help IAG people transition to the future of work; and
• Be recognised as a purpose-led organisation that shapes its internal and external environment.

13

B. BUSINESS RISK AND RISK MANAGEMENT

IAG acknowledges that it has to take risk in an informed manner in pursuit of its strategic objectives and to meet customer, stakeholder, industry and regulatory expectations. IAG articulates the levels, boundaries and nature of risk it is willing to accept, actively manage or avoid in pursuit of the Group's strategic objectives.

IAG uses an enterprise-wide approach to risk management and its Risk Management Framework (RMF) is a core part of the governance structure, which includes internal policies, key management processes and culture. The Group Risk Management Strategy (RMS) articulates the strategy to manage risks at IAG and describes the key elements of the RMF to implement this strategy. The RMS is reviewed annually, or more frequently as required, by the Risk Committee before being recommended for approval by the Board. IAG's Group Risk function provides regular reports to the Risk Committee on the operation of, and any changes to, IAG's Risk Management Framework, the status of material risks, risk and compliance incidents, risk trends and IAG's risk profile. IAG's Group Internal Audit function provides reports to the Audit Committee on significant audit findings and other audit related matters.

Roles and responsibilities of the Board and its standing committees, the Audit Committee, the Risk Committee, the People and Remuneration Committee and the Nomination Committee, are set out in the Corporate Governance section of the IAG website.

IAG is exposed to multiple risks relating to its businesses and pursuit of its strategic objectives. The risks noted below are not exhaustive, but outline the material risks faced by the Group as identified in the RMS:

• strategic risk - the risk that internal or external factors compromise our ability to execute our strategic objectives or our strategy;
• customer risk - the risk of failing to meet customer expectations leading to lower customer satisfaction, retention rates or new business opportunities;
• insurance risk - includes the risk of loss as a result of:
• • inadequate or inappropriate underwriting or product pricing;
  • unforeseen, unknown or unintended liabilities that may eventuate;
  • inadequate or inappropriate claims management including reserving; and
  • insurance concentration risk (i.e. by locality, segment factor, or distribution);
• reinsurance risk - includes the risk of:
• • lack of capacity in the reinsurance market;
  • insufficient or inappropriate reinsurance coverage;
  • inadequate underwriting and/or pricing of reinsurance exposures retained by IAG's reinsurance captives;
  • inadequate or inappropriate reinsurance recovery management;
  • reinsurance arrangements not legally binding; and
  • reinsurance concentration;
• market risk - the risk of adverse movements in market prices (equities, derivatives, interest rates, foreign exchange, etc) or inappropriate concentration within the investment funds;
• credit risk - the risk arising from a counterparty's failure to meet its obligations in accordance with the agreed terms. This includes investment and derivative counterparties, reinsurers and premium debtors;
• liquidity risk - arises where liabilities cannot be met as they fall due as a result of insufficient funds and/or illiquid asset portfolios;
• capital risk - the risk that capital is insufficient or not of the best form (the mix of debt, equity and reinsurance is inappropriate) given the nature, strategies and objectives of the Group;
• operational risk - the risk of loss resulting from the actions or behaviours of people, inadequate or failed processes or systems, or from external events;
• regulatory and compliance risk - the risk of legal, regulatory or reputational impacts arising from failure to manage compliance obligations, or failure to anticipate and prepare for changes in the regulatory environment; and
• culture and conduct risk - the risk that employee behaviours are contrary to our Purpose, our Spirit or our Code of Ethics and Conduct or do not otherwise meet reasonable community expectations.

IAG actively considers the importance of risk management and believes this approach provides the greatest long-term likelihood of being able to meet the objectives of all stakeholders.

Detail of IAG's overall risk management framework, which is outlined in the RMS, is set out in Note 3.1 within the financial statements and in the Corporate Governance Statement, which is available at www.iag.com.au/about-us/corporate-governance.

C. ECONOMIC, ENVIRONMENTAL AND SOCIAL SUSTAINABILITY RISK

Aligned to stakeholder expectations, this report provides a comprehensive overview of IAG's focus on economic, environmental and social sustainability risks that are identified and managed as part of its enterprise-wide risk management framework. Through risk profiling and ongoing trend analysis, information on these risks is collected and reported to the Group Leadership Team (GLT) and Board and used to update IAG's strategy at appropriate intervals. This is supported by IAG's annual materiality process and engagement with IAG's Safer Communities Steering Committee to identify and develop mitigation approaches to these risks.

IAG's exposure to economic, environmental and social sustainability risks and opportunities is managed by relevant parts of the business and supported by IAG's Safer Communities team, a team of shared value and sustainability subject matter experts. Sustainability performance is formally reported to the Board annually, with ad hoc updates as required.

14 IAG ANNUAL REPORT 2020

The Consumer Advisory Board and Ethics Committee include external stakeholders, such as consumer groups, and provide an important external input into the understanding and management of economic, environmental and social sustainability risk. The Safer Communities Steering Committee is an internal governance body that supports the Group Executive, People, Performance and Reputation to shape IAG's response to risks through its approach to shared value, sustainability and broader community activity. The Safer Communities Steering Committee fulfils the role of a sustainability committee for IAG. It meets at least quarterly, is chaired by the Group Executive, People, Performance and Reputation, and comprises senior leaders from across the business, including the Chief Strategy and Innovation Officer.

Each year a materiality assessment is undertaken to help guide IAG's shared value and sustainability approach and ensure its reporting addresses risks and opportunities with the greatest importance to IAG's stakeholders and business. An extensive assessment and stakeholder engagement process supports IAG in the finalisation of the material issues, which are signed off by the Group Executive, People, Performance and Reputation and included in the IAG Annual Review and Safer Communities Report.

IAG has a safer communities business plan that guides decision-making and ensures value is being created for both the community and IAG. This IAG-wide business plan defines focus areas and outcomes that support IAG's commitment to help communities and people to be more resilient and increasingly feel they are ready for anything. IAG's sustainability performance is managed within this business plan and supported by a number of policies and position statements including IAG's Public Policy Position on Climate Change, Customer Equity Framework and the Social and Environmental Policy.

IAG is a signatory to several voluntary principles-based frameworks which guide the integration of environmental, social and governance (ESG) considerations into its business practices. These include the United Nations Environmental Program Finance Initiative's Principles for Sustainable Insurance and the Principles for Responsible Investment. IAG is a signatory to the Geneva Association's Climate Risk Statement and a founding member of the Australian Sustainable Finance Initiative, which is a cross- industry collaboration established to enable the financial services sector to contribute more systematically to the transition to a more resilient and sustainable economy, consistent with global goals such as the United Nations Sustainable Development Goals, the Sendai Framework for Disaster Risk Reduction and the Paris Agreement on climate change.

Climate change has been identified as a key enterprise risk and work has been done on implementation and monitoring of business controls and their effectiveness overseen by the Climate Risks and Opportunities Steering Committee (see Climate Risk section for more details).

Respect for human rights underpins IAG's purpose and its conduct as an ethical and responsible business. IAG's approach is informed by international human rights standards, including the UN Guiding Principles on Business and Human Rights, the International Bill of Human Rights and the International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work.

IAG is addressing Human Rights and Modern Slavery legislative requirements across its business, including in its procurement, asset management and human resources business units. IAG's Procurement Policy and Supplier Code of Conduct, which was launched this year, addresses Human Rights and Modern Slavery, and supports practical management of these important issues across IAG's business. IAG's first Modern Slavery Statement will be published during the 2021 financial year, in line with relevant regulatory frameworks, and will show progress toward compliance with these recent legislative requirements.

Details of IAG's material issues, how IAG manages related risks and opportunities and details of other shared value and sustainability activities can be found in the 2020 Annual Review and Safer Communities Report, which is available at www.iag.com.au/safer-communities/esg-commitments-and-performance. IAG's management of economic, environmental and social sustainability risk is outlined in detail in Principle 7.4 of the Corporate Governance Statement, which is available at www.iag.com.au/about-us/corporate-governance.

D. CLIMATE RISK

This climate-related disclosure is aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and addresses how IAG is managing climate risks and opportunities through governance, strategy, risk management, and metrics and targets.

It demonstrates:

• the work IAG has done to understand which climate risks could have a material impact on its business through both the physical and transitional risk pathways;
• the need for strong governance;
• risk management and strategic integration of climate considerations into its core operations; and
• the partnerships, activities and programs it is involved in to mitigate climate risks and innovate opportunities.

IAG's purpose is to make your world a safer place. To deliver this purpose, IAG works to mitigate risks the communities, businesses and individuals it insures are exposed to. IAG acknowledges its unique ability to help communities prepare for and manage climate impacts, while realising the business opportunities of a safer world. Consistent with the latest climate science, IAG's research, climate scenarios, claims and industry data indicate that climate change will increase the social and financial impacts to communities in Australia and New Zealand and is a key risk to its insurance business.

15

According to the Australian Bureau of Meteorology, the 2019 calendar year was the hottest and driest on record for Australia, which included one of the worst bushfire seasons on record, followed by severe hail and flood events. This extreme weather has contributed to a significant increase in the current financial year's net claim costs from natural perils, compared to the prior financial year. Such impacts emphasise a greater urgency for businesses, governments and communities to understand and mitigate the short, medium and long-term causes and impacts of climate change. For IAG, this requires continued integration of the management of climate-related risks and opportunities into strategic planning to ensure it can remain a sustainable business.

IAG has made important contributions to climate change discussions and supported action for almost two decades. In November 2019, IAG released a joint scientific report with the United States National Center for Atmospheric Research (NCAR), "Severe Weather in a Changing Climate", that condensed the latest global scientific knowledge on how weather events will change under future climate scenarios. This was a landmark report, with IAG sharing detailed information on physical risks, with intent to create a shared central source of information for the broader insurance industry and scientific community to build on.

Governance

IAG's Board Charter includes oversight of safer communities, sustainability and climate change, which now includes the activities outlined below:

• approve the IAG Social and Environmental Framework;
• receive six-monthly reporting on safer communities and sustainability; and
• consider and approve the external reporting on safer communities and sustainability strategies and initiatives (including climate change), within the Annual Report and the Annual Review.

In accordance with the IAG Board Charter, the Board delegates overall management and profit performance of the Group to the Chief Executive Officer. The Group Executive, People, Performance and Reputation has accountability for IAG's Safer Communities function, including oversight of the Safer Communities Plan, climate change activities and the Climate Action Plan. Accountabilities for key objectives and programs outlined in the Climate Action Plan are owned by relevant GLT members. Progress against IAG's Climate Action Plan is reported to the GLT every six months, and the accountabilities held by relevant members of the Executive team are listed under the specific Climate Action Plan objectives.

Further details on IAG's climate change governance are provided in the Climate-related disclosure 2020 which can be found in the Safer communities section of IAG's website (www.iag.com.au).

Strategy

Integration of climate change within IAG's corporate strategy

IAG recognises climate change is a key consideration to ensure the sustainable growth of its business. In setting its strategy, IAG identified climate change as a key trend that directly influences the stability and growth of its businesses. Climate change continues to be a trend that the organisation monitors and discusses at GLT and Board sessions.

IAG has developed a strong understanding of climate change trends via research on natural perils and climate modelling as well as through collaboration with other organisations. This knowledge informs understanding and management of the increasing risk of extreme weather events on the business in the short, medium and long term.

IAG's plan to manage climate risks and opportunities

IAG is committed to 'make your world a safer place' and its approach to creating safer communities is informed by the United Nations Sustainable Development Goals, the 2015 Paris Climate Agreement, Sendai Framework for Disaster Risk Reduction, issues material to IAG's business and IAG's unique resources, capabilities and assets.

IAG's Safer Communities Plan includes a focus on disaster risk reduction and climate change - enabling communities in Australia and New Zealand to better prepare for, and respond to, natural perils and climate change. Key objectives to address disaster risk reduction and climate change are included and disclosed in its Climate Action Plan and Scorecard, which can be found in the Safer communities section of IAG's website (www.iag.com.au).

The five areas of focus in its Climate Action Plan are:

• think big - to ensure IAG leads on climate change issues and builds relationships to achieve its ambitions;
• prepare our people - to apply the depth of experience from the business, and build the capacity of IAG's people to enable embedding of climate change considerations into its culture;
• reduce our emissions - to lead by example and commit to science-based emissions reduction for IAG's own operations;
• invest responsibly - to ensure IAG's investment activities are aligned to our purpose; and
• rethink risk - ensuring climate change considerations are integrated into the core of IAG's insurance business to allow innovation of products, systems and partnerships to enable customers, business and communities to adapt to a low-carbon future and changing climate.

Leadership and collaboration for disaster risk reduction and climate change

Mitigating the impacts of climate change to IAG's business, customers and communities requires a collaborative, multi-stakeholder approach. To address this, IAG demonstrates leadership in disaster risk reduction and climate change and works with, and influences other companies, organisations and governments to address climate-related issues. This includes contributing valuable knowledge, insights and capability towards understanding how climate risks and opportunities impact the sustainability of financial systems.

16 IAG ANNUAL REPORT 2020

Alongside other global insurers, IAG is currently contributing to the United Nations Environmental Program Finance Initiative's Principles for Sustainable Insurance TCFD pilot to enable industry benchmarking and standardisation of disclosure, which will inform IAG's ongoing approach to strategic integration of climate risks into its core business, risk assessments, scenario analysis and climate modelling.

IAG also contributes knowledge, insights and capability towards developing sector-wide approaches to the availability and affordability of insurance products and addressing sustainability issues which are affecting financial systems. IAG plays an active role as Co-Chair of the Australian Sustainable Finance Initiative (ASFI), which is working to set a roadmap for realigning the finance sector to support enhanced social, environmental and economic outcomes. IAG also plays a key role in New Zealand's Sustainable Finance Forum, an initiative of The Aotearoa Circle, which is a partnership of public and private sector leaders committed to sustainable prosperity and the conservation of natural resources across the country.

As a founding member of the Australian Business Roundtable for Disaster Resilience and Safer Communities, IAG works collaboratively with governments to effect change in public policy, increase investment aimed at building safer and more resilient communities and working to improve the capacity of people and businesses to better withstand future natural disasters. IAG has also been invited by the governments in Australia and New Zealand to play a role in climate change management, including active engagement and contribution to the National Resilience Taskforce in Australia. In New Zealand, IAG is working through the Climate Leaders Coalition to ensure businesses are actively adapting and building resilience to climate impacts. As a key member of the Insurance Council of Australia, the representative body of the general insurance industry in Australia, IAG plays an active role in the Council's Climate Change Action Committee and Data and Knowledge Sub-Committee.

IAG also works in collaboration with communities and partners to build community connection and resilience to climate change that also support business outcomes. This includes strategic partnerships working with the Australian and New Zealand Red Cross and the State Emergency Service in New South Wales to improve individual and community disaster preparedness.

Consideration of climate change in underwriting

Further to IAG's commitment to the cessation of insuring entities predominantly in the business of extracting fossil fuels and power generation using fossil fuels by 2023, IAG is assessing and considering other ESG aspects of its underwriting processes to drive behaviour change across its value chain.

IAG's underwriting approach incorporates ESG considerations and extensions for its insurance products. These are included in the IAG Group Product Governance Framework which aligns the product development process with IAG's purpose to 'make your world a safer place'.

Consideration of climate change in investments

"Invest responsibly" is a focus area in IAG's Climate Action Plan. It commits IAG to:

• shift investments to companies that have a lower exposure to climate-related risks or a have a strategy to manage these risks;
• actively support action on climate change and a net zero future; and
• measure carbon intensity and include climate-related risks in the ESG risk management of investments.

IAG, and many of the investment managers through which it invests, are signatories to the United Nations Principles for Responsible Investment that encourages signatories to advocate that companies and countries in which they are investing integrate ESG factors into their investment processes and practices.

IAG utilises external ESG research and the capabilities of its investment managers to review its climate-related investment exposures, assess the carbon footprint and exposure to higher risk investments, and to inform portfolio management. Investment due diligence considers investment managers' capabilities to incorporate ESG issues where appropriate. An outline of IAG's approach and current performance is included in the metrics and targets section of this disclosure.

IAG 2030 +2°C climate scenarios supporting strategy and decisions

IAG has developed four plausible scenarios to better understand the most significant likely impacts of climate change and related physical, transition and litigation risks and opportunities for IAG's Australian business by 2030. These "2030 +2°C climate scenarios" utilised IAG's own climate physical modelling and were developed through a series of cross-functional workshops. These involved IAG leaders and external stakeholders and focused on determining the most significant political, economic, social, technological, environmental and legal factors impacted by a +2°C temperature increase by 2030.

Risk

IAG regularly profiles and assesses risks to the successful execution of its enterprise strategy. Climate change is identified as a key risk in the 2020 Enterprise Risk Profile. IAG's integrated approach to climate risk management is evidenced by its Climate Action Plan 'rethink risk' focus area and the Climate Risks and Opportunities Program.

17

Managing climate risks and opportunities

The Climate Risks and Opportunities Program is a key input into the Safer Communities Steering Committee, and fulfils key components of the Climate Action Plan to:

• better understand the short, medium and long-term risks and opportunities of climate change to IAG;
• integrate strategic risks and opportunities resulting from the Climate Risks and Opportunities Program into IAG's business; and
• support investor and market confidence through meaningful climate-related financial disclosure.

The Climate Risks and Opportunities Program was created to ensure the sustainability of IAG's business in the near and long term by identifying how to mitigate and adapt to the impacts of climate change. This leverages the understanding and research of the specific physical, transition and litigation risks IAG is exposed to, and how they will impact IAG's business.

Further details on IAG's research into climate-related impacts and associated risks and opportunities are provided in the Climate- related disclosure 2020 which can be found in the Safer communities section of IAG's website (www.iag.com.au).

Research on physical risks

Since publishing "The Impact of Climate Change on Insurance against Catastrophes" in 2002, IAG emphasised the need to invest in climate science to understand, mitigate and adapt to the impact climate change will have on severe weather and IAG's business. IAG also works collaboratively on research and sharing intellectual property to drive behavioural change across the insurance industry and its value chain. This helps to gain a strategic advantage in accessing up-to-date knowledge and points of influence.

On 1 November 2019, IAG released "Severe Weather in a Changing Climate", a scientific report co-authored with NCAR. The report includes the latest scientific knowledge on how climate change could impact future extreme weather events - like tropical cyclones, hailstorms, bushfires and rainfall - based on a range of warming global temperature scenarios, as well as insights on natural peril impacts from IAG's proprietary models. Of key concern is the increased likelihood of tropical cyclones impacting populated areas of Southeast Queensland and Northern New South Wales. Without commensurate risk reduction, this is identified as having a potential material long-term impact on the availability and affordability of (re)insurance.

Such findings highlight the need for a collaborative approach to scale up resilience and mitigation planning by individuals, communities, businesses and governments to adapt to the changing physical impacts brought about by climate change, and adjacent impacts of underinsurance and financial inclusion.

IAG is using this research to continue informing its strategy. The research also helps IAG lead engagement across the insurance and academic sectors to improve the quality of insights around climate modelling and inform the wider community of the severe weather challenges that are likely to be exacerbated by climate change.

Examples of how IAG currently manages the impacts of physical risks to its business include:

• modelling the potential changes to severe weather and the impact on property risk such as the IAG physical risk scenarios and the "Severe Weather in a Changing Climate" report;
• identifying risk reduction opportunities through changes to the built environment including land planning controls;
• a comprehensive, and diverse, range of reinsurance protection (for more information on IAG's reinsurance program, please see the "Reinsurance" section of the 2020 IAG Investor Report);
• investing in community connection and resilience partnerships that proactively prepare for climate-related risks to reduce the social and financial costs of disaster recovery; and
• influencing land planning and building codes - especially in demonstrating leadership on coastal planning and erosion.

Research on transition risks

IAG commissioned EY and Climate Works Australia to undertake a climate transition impact analysis to understand implications for its business associated with societal transitioning to climate change. This assessment utilised three scenarios for IAG's Australian business and two scenarios for its New Zealand business that were consistent with projections for limiting long-term global warming, in alignment with the Paris Agreement, by 2030 and 2050. The analysis focused on transition impacts to:

• IAG premiums from underwriting commercial risks;
• technologies associated with IAG's home and motor portfolio; and
• regional supply chain implications from anticipated regulation of carbon.

The findings have identified that, while there are some risks to smaller portfolios (such as agriculture) in the medium-term, the risk to supply chain costs through carbon pricing are relatively immaterial with the uplift in costs estimated to be in the range of 0.03- 0.05% by 2030 and 0.00-0.03% by 2050. Additionally, there are also growth opportunities to be considered across expanding sectors and technologies.

Impact of climate risks and opportunities

IAG's research on physical and transition climate risks has confirmed that the physical impacts of climate change present the most material short, medium and long-term risk to IAG's business. Transition impacts are less material with manageable medium-term risks and emerging opportunities to IAG's product, customer and investment portfolios. A preliminary analysis of the climate risks and opportunities that will impact key areas of IAG's business value chain, as well as activities IAG will take to address these impacts, is outlined below.

18 IAG ANNUAL REPORT 2020

Reinsurance and capital

• Risks from increased severity and frequency of extreme weather events, without risk reduction initiatives, could impact the cost and availability of global reinsurance capacity.
• In a local context, over the short term, changes to events such as hailstorms and bushfires will need to be reflected in technical pricing assumptions. In the medium term, cyclones are expected to extend southward to more populated parts of Australia, potentially adversely impacting assets and infrastructure that were not built to withstand such events.
• Opportunities include further improvements in modelling and forecasting peril impacts to continue to inform the design of IAG's capital platform.
• As a mitigant to these impacts, IAG will improve quality of insights from climate modelling through engagement across insurance and academic sectors to inform the wider community of evolving climate change risks.

Product and service pricing

• Risks from increased natural peril costs impacting the long-term affordability of insurance, especially in high-risk areas.
• Opportunities exist for IAG to reduce risks by advocating for, and providing technical input on, improved building codes, land planning and risk mitigation for physical infrastructure. This can be achieved by scaling up collaboration with programs that offset and reduce future risks (such as the Queensland Government's Housing Resilience Program). This can also be supported by further innovation around insurance products that incentivise improved resilience to risks, and development of products such as low carbon home and mobility solutions.
• To address these issues, IAG will continue to integrate its technical peril pricing engine into its wider pricing engine algorithm, while expanding research on key features of resilient and vulnerable properties to support more accurate pricing and target risk reduction opportunities.

Customer segments and affordability

• Risks include the ongoing accessibility and affordability of insurance products which can be impacted if the insurance industry appropriately adjusts risk-based pricing to account for changes in the severity and frequency of natural perils. Inadequate land planning and building codes will further exacerbate affordability of insurance. In the medium term, IAG could face a shrinking market and reputational risk as assets with high exposure to physical risks become more expensive or unaffordable to insure.
• Opportunities include greater alignment of land planning and building codes to future severe weather events, which can reduce climate risks for customers.
• IAG will continue to engage customers to understand appropriate and relevant approaches to managing climate-related risk through existing insurance products and services, in alignment with appropriate customer segment strategies. This includes further work with stakeholders to enable climate resilient rebuilding to reduce risks for customers exposed to climate-related perils.

Claims and insurance supply chain

• Risks of growing numbers of natural perils related claims was demonstrated by the bushfire, hail and storm events this financial year. This presents a short-term risk to operational claims handling capacity. In the medium term, supply and demand imbalances have the potential to impact claims inflation. Underlying supply chain costs could be impacted by limited availability of raw materials and potential carbon regulation but, as noted above, this is expected to be relatively immaterial.
• Opportunities from new products, materials and operating models (such as vertically integrating supply chains) may become more prevalent and encourage repair or replacement of insured assets to increase risk resilience and environmental sustainability.
• To help to mitigate these risks, IAG is looking to use the transition risk analysis to assess how its motor repair model can improve supply chain security and is continuing to understand how a climate resilient rebuild claims model supports reductions in future claims frequency and severity.

Investments

• Risks from climate change transitions will have a varied impact on investments, with some assets anticipated to yield decreasing returns, while others increase.
• Opportunities for IAG include influencing and encouraging responsible investment by directing investments to projects aligned to its purpose and risk appetite.
• To address these effects, IAG will look to continue considering the implications of potentially stranded assets, carbon-intensive industries and evolving opportunities in determining its investment strategy and portfolio allocations.

19

Metrics and Targets

IAG has set targets on managing its climate risks that include reducing emissions from its own operations and reducing climate risk exposure through its underwriting and investment portfolios.

METRIC	TARGET	PROGRESS
Managing IAG's	Using the 2018 financial year as its baseline, IAG	In the current financial year IAG reduced Scope 1
greenhouse gas emissions	set science-based absolute emission reduction	and 2 greenhouse gas emissions to 21,278
with science-based targets	targets for its Group Scope 1 and 2 emissions to	tonnes of CO2 equivalent, achieving its current
Climate Action Plan:	meet the Paris Agreement commitments to keep	financial year science-based emission reduction
climate change below 2°C. These absolute	target.
reduce our emissions	targets for Scope 1 and 2 emissions include a	While a reduction in emissions from operational
	20% reduction by 2020, 43% reduction by 2025,
	71% reduction by 2030 and a 95% reduction by	energy and transport-related activities can be
	2050. IAG is committed to "reduce its	attributed to COVID-19 restrictions, IAG's
	emissions" as a key focus in IAG's Climate Action	activities in consolidation of its property
	Plan and Scorecard.	portfolio, transitioning key offices to activity-
		based working, implementation of energy
		efficiency activities and the increasing fuel
		efficiency of fleet vehicles continued to drive
		down Scope 1 and 2 emissions.
		In the next financial year IAG sees further
		opportunity to reduce its Scope 2 emissions in
		Australia through a phased approach to procure
		more electricity from renewable energy sources.
IAG's underwriting portfolio	IAG will cease underwriting entities mainly in the	As at 30 June 2020, the current GWP written
Climate Action Plan:	business of extracting fossil fuels and power	relating to all fossil fuel mining, and fossil fuel
generation from fossil fuels by 2023.	power generation, is less than $1 million which
rethink risk
IAG's key parameters for defining this exposure	equates to less than 0.005% of the total GWP
	written by the Group in the current financial year.
	include:
	 fossil fuel extraction, including the mining of
	any hydrocarbon fuels, where extraction
	makes up over 30% of all the entity's
	activities; and
	 power generation using fossil fuels, where
	thermal coal makes up over 30% of the
	electricity generated.

Excluding:

• small and medium enterprises with turnover less than $100 million, where the primary industry classification of the business is not related to any mining or power generation but may have greater than 30% of turnover through engagement in these industries; and
• legacy portfolios in run-off for businesses that IAG has divested, including accident and health insurance, surety bonds and trade credit insurance where the liability for future claims against some of the policies will exist until expiry of the policy.

20 IAG ANNUAL REPORT 2020

METRIC	TARGET	PROGRESS
IAG's investment	As per the IAG Climate Action Plan focus area of	IAG's Capital Markets team measures the carbon
portfolio(1)	"invest responsibly", IAG is implementing the	intensity of investments of its Australian and
Climate Action Plan: invest	following investment activities to shift	international listed equities. Through a shift in
investments to reduce exposure to climate-	investments to companies that have a lower
responsibly
related risks and support climate action:	exposure to climate-related risks or a strategy to
	 continue to implement climate-related risk	manage these risks, IAG has achieved a
	management measures through portfolio	reduction in the normalised carbon footprint of
	management as part of broader ESG risk	its equity portfolio from 218.7 tonnes of CO2
	management;	emissions per million USD invested in 30 June
	 continue to invest in reputable green bonds;	2017 to 81.0 tonnes of CO2 emissions per
	 leverage investments to support climate-	million USD invested as at 30 June 2020.
	resilient infrastructure and emission	IAG's Capital Markets team also monitors IAG's
	reduction; and
	 measure ESG and carbon risk exposures in	investment portfolio exposure to "higher risk
	companies" as identified using MSCI's Low
	the portfolio.
	Carbon Reduction criteria. This identifies
		companies with the largest contributions to
		climate change as:
		 largest owners of fossil fuel reserves (more
		than 1% of remaining global carbon budget);
		 those with the largest carbon footprint
		(carbon footprint greater than 0.33% of the
		annual world carbon emissions); and
		 those with the highest carbon intensity
		(carbon intensity that exceeds 3,000 tonnes
		of carbon dioxide per million USD invested).
		IAG has reduced its exposure to higher risk
		companies through its approach to invest
		responsibly, with overall portfolio shift from
		0.43% in 30 June 2017 to 0.01% in 30 June
		2020.

1. Although IAG's information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the "ESG Parties"), obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein. None of the ESG Parties makes any express or implied warranties of any kind, and the ESG Parties hereby expressly disclaim all warranties of merchantability and fitness for a particular purpose, with respect to any data herein. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein. Further, without limiting any of the foregoing, in no event shall any of the ESG Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
   Certain information ©2020 MSCI ESG Research LLC. Reproduced by permission.

More information on IAG's performance against its metrics and targets can be found in the full Climate-related disclosure 2020 which can be found in the Safer communities section of IAG's website (www.iag.com.au).

CORPORATE GOVERNANCE

IAG believes good governance is essential to delivering its purpose and strategy, including delivering world-leading customer experiences. At IAG, good governance is the culmination of a number of elements, including ethics, culture, leadership (including Board and senior management), and policies and procedures (including remuneration and risk management frameworks).

Aiming for the highest standards across all elements of corporate governance enables IAG to focus more effectively on delivering superior customer outcomes and supporting communities.

During the year, IAG strengthened its approach to governance and culture, responding to the changing regulatory environment. For the financial year ended 30 June 2020, IAG complied with the Australian Securities Exchange Corporate Governance Council Principles and Recommendations (3rd edition). Details of this compliance are set out in IAG's 2020 Corporate Governance Statement and in Appendix 4G. This Corporate Governance Statement is current as at 7 August 2020 and has been approved by the Board. While IAG reported against the 3rd edition, many practices align with the 4th Edition of the Principles and Recommendations which come into force for financial years commencing on or after 1 January 2020. IAG expects to fully comply with the 4th edition by then.

IAG's 2020 Corporate Governance Statement is available at www.iag.com.au/about-us/corporate-governance, along with the policies and procedures that guide all employees' behaviour.

21

OUTLOOK

There is considerable uncertainty attached to IAG's financial outlook for the 2021 financial year, stemming from specific ongoing business impacts associated with the COVID-19 pandemic and from broader economic repercussions.

As a result, IAG has determined not to provide guidance for the 2021 financial year. This decision will be reviewed periodically.

DIVIDENDS

Details of dividends paid or determined to be paid by the Company and the dividend policy employed by the Group are set out in Note 4.4.

Cash earnings are used for the purposes of targeted return on equity (ROE) and dividend payout policy and are defined as:

• net profit after tax attributable to shareholders of the Parent;
• plus amortisation and impairment of acquired identifiable intangibles; and
• excluding any unusual items (non-recurring in nature).

		2020		2019
CASH EARNINGS	$m		$m
Net profit after tax	435		1,076
Acquired intangible amortisation and impairment (post-tax)	30			57
Non-recurring items:	465			1,133
Corporate expenses
− Gain on sale of SBI General	(309)	-
−	Customer refund provision	246		-
−	Other	2		4
Tax effect on corporate expenses(1)	(94)	(1)
Gain on sale of Thailand	-		(208)
Loss of diversification benefit on sale of Thailand	-		3
Non-controlling interest in corporate expenses	(31)	-
Cash earnings(2)	279			931
Interim dividend	231		277
Final dividend	-			462
Dividend payable	231			739
Cash payout ratio(2)	82.8%	79.4%

1. Includes Australian income tax effects in relation to the corporate expense items listed above, principally income tax benefits on the recognition of the customer refund provision and hedging costs incurred in respect of the SBI General disposal.
2. Cash earnings and cash payout ratio represent non-IFRS financial information.

IAG's dividend policy is to pay out 60-80% of cash earnings in any full financial year. Based on cash earnings of $279 million, the interim dividend of 10 cents per share paid on 25 March 2020 represents over 80% of full year cash earnings. As a result, the Board has determined not to pay a final dividend for the 2020 financial year.

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

During the financial year the following changes became effective:

• On 16 December 2019, IAG Finance (New Zealand) Limited, a wholly-owned subsidiary of the Company redeemed all outstanding reset exchangeable securities at their face value of $550 million.
• On 30 March 2020, IAG announced the completion of the disposal of its 26% interest in its joint venture with the State Bank of India, SBI General Insurance Company Limited, following completion of all the requisite regulatory processes and approvals.
• On 8 April 2020, the Chairman announced that IAG Managing Director and Chief Executive Officer, Peter Harmer, had advised the Board of his intention to retire by the end of 2020. A flexible nine-month period of transition has been agreed with Mr Harmer to ensure a smooth changeover. The Board has appointed IAG Chief Financial Officer (CFO) Nicholas Hawkins as Deputy CEO with accountability for the management and performance of IAG's day-to-day operations during the transition period. Peter Harmer will remain responsible for the overall strategic direction and performance of the Group during the transition period and will directly lead the company's response to the COVID-19 emergency. Michelle McPherson, CFO Australia, has been appointed acting Group CFO.

22 IAG ANNUAL REPORT 2020

EVENTS SUBSEQUENT TO REPORTING DATE

Details of matters subsequent to the end of the financial year are set out below and in Note 7.2 within the financial statements. These include:

• On 24 July 2020, IAG provided an update on its preliminary results for the year ended 30 June 2020. This announcement confirmed that the Group was expecting gross written premium (GWP) growth of around 1%, consistent with the 'low single digit' guidance maintained throughout the 2020 financial year and an insurance margin of approximately 10% (on a management reported basis), with the shortfall against prior guidance of 12.5-14.5% largely driven by adverse natural perils, prior period reserving and credit spread factors. These financial statements are consistent with the preliminary financial results reported.
• On 7 August 2020, the Board determined not to pay a final dividend.

In a COVID-19 context, IAG notes the recent developments in Victoria, including the declaration of a State of Disaster with effect from 2 August 2020, where the related business effects remain highly uncertain.

NON-AUDIT SERVICES

During the financial year, KPMG performed certain other services for IAG in addition to its statutory duties.

The Directors have considered the non-audit services provided during the financial year by KPMG and, in accordance with written advice provided by resolution of the Audit Committee, are satisfied that the provision of those non-audit services by IAG's auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit assignments were approved in accordance with the process set out in the IAG framework for engaging auditors for non-audit services; and
• the non-audit services provided did not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants of the Chartered Accountants Australia and New Zealand and CPA Australia, as they did not involve reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.

The level of fees for total non-audit services amounted to approximately $1,632,000 (refer to Note 8.3 for further details of costs incurred on individual non-audit assignments).

LEAD AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

The lead auditor's independence declaration is set out on page 47 and forms part of the Directors' Report for the year ended 30 June 2020.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

The Company's constitution contains an indemnity in favour of every person who is or has been:

• a Director of the Company or a subsidiary of the Company; or
• a Secretary of the Company or of a subsidiary of the Company; or
• a person making or participating in making decisions that affect the whole or a substantial part of the business of the Company or of a subsidiary of the Company; or
• a person having the capacity to affect significantly the financial standing of the Company or of a subsidiary of the Company.

The indemnity applies to liabilities incurred by the person in the relevant capacity (except a liability for legal costs). That indemnity also applies to legal costs incurred in defending or resisting certain legal proceedings. The indemnity does not apply where the Company is forbidden by statute or, if given, would be made void by statute.

In addition, the Company has granted deeds of indemnity to certain current and former Directors and Secretaries and members of senior management of the Company and its subsidiaries and associated companies. Under these deeds, the Company:

• indemnifies, to the maximum extent permitted by law, the former or current Directors or Secretaries or members of senior management against liabilities incurred by the person in the relevant capacity. The indemnity does not apply where the liability is owed to the Company or any of its subsidiaries or associated companies, or (in general terms) where the liability arises out of a lack of good faith, wilful misconduct, gross negligence, reckless misbehaviour or fraud; and
• is also required to maintain and pay the premiums on a contract of insurance covering the current or former Directors or members of senior management against liabilities incurred in respect of the relevant office except as precluded by law. The insurance must be maintained until the seventh anniversary after the date when the relevant person ceases to hold office. Disclosure of the insurance premiums and the nature of liabilities covered by such insurance is prohibited by the relevant contract of insurance.

23

REMUNERATION REPORT

LETTER FROM THE CHAIRMAN OF THE PEOPLE AND REMUNERATION COMMITTEE

Dear Shareholder,

The 2020 financial year has seen unprecedented economic and environmental challenges across Australia and New Zealand: bushfires of exceptional ferocity, floods and major hailstorms, all followed by the global COVID-19 pandemic.

Throughout the year our employees have worked tirelessly to meet these challenges, to serve customers, protect colleagues and preserve shareholder returns.

Despite these efforts however, shareholder returns for the 2020 financial year have declined materially.

Our current financial year cash earnings result of $279 million is 70% lower than the prior financial year, primarily due to a combination of higher-than-anticipated natural perils (which had a negative impact on the current financial year cash earnings of around $195 million), and investment income losses as a result of COVID-19-related financial market volatility (contributing more than $315 million to our cash earnings shortfall). In addition, the remediation of longstanding risk matters has also had a financial impact. The 2020 financial year cash earnings result has meant that, in accordance with our 60-80% of cash earnings dividend policy, there will be no final 2020 financial year dividend for our shareholders.

Remuneration outcomes reflect our business results and risk performance

In response to these results, and considering the current economic circumstances and uncertainty, the Board has decided the following remuneration outcomes for Executives and employees:

Fixed pay

• no increases to the 2021 financial year fixed pay for senior management including Executives.
• no increase to the 2021 financial year fees for Directors.
• a flat 1% increase for eligible employees below the level of Executive Manager.

Short-term incentives (STI)

• no STI payments will be made for the 2020 financial year.

Long-term incentives (LTI)

• The 2017/2018 LTI awards with the ROE performance measure reached the end of their three-year performance period on 30 June 2020. Having regard to the Group performance over the period, the Board has determined the award will vest at 82%. This outcome will be included in detail in next year's Remuneration Report. The 2016/2017 LTI awards which vested at 100% on 12 August 2019 are disclosed in detail in this Report.
• During the 2020 financial year, the four-year performance period for the relative total shareholder return (TSR) portion of the 2015/2016 LTI award concluded on 30 September 2019. IAG's TSR was ranked at the 75th percentile of its peer group resulting in full vesting of this award on 15 October 2019. The TSR component of the 2016/2017 LTI will reach the end of its performance period on 30 September 2020, and has not yet been finally considered by the Board. The vesting results for this tranche will be disclosed in next year's Remuneration Report.

In addition, the Board made a number of downward risk-related adjustments to deferred awards of senior leaders in relation to risk failures identified and assessed during the year. Adjustments were made in respect of current and former Executives, to a total of approximately $2.7 million. Several adjustments below the Executive level were also made.

In taking these decisions, the Board has been mindful that returns to shareholders for the 2020 financial year have been well below what has been achieved in recent years. At the same time, the Board wants to acknowledge the considerable endeavours of employees across the Group, and to thank them as they have sought to provide high quality, uninterrupted service to our customers through difficult times and events.

Being guided by our purpose in the 2021 financial year and beyond

COVID-19 continues to have a severe impact on many of our customers and on the community more widely. Many people are facing difficult circumstances. We will continue to be guided by our purpose as we support our customers and employees in these challenging times.

Our purpose will also continue to guide the decisions we make, including those that relate to Executive pay. In determining Executive pay outcomes, we will still assess both financial and non-financial business performance. Our comprehensive risk assessment process will help ensure we deliver results in a sustainable way for all IAG stakeholders. We will continue to monitor the alignment of remuneration outcomes with business performance, the economic environment and the experiences of our stakeholders and we will exercise discretion where required.

24 IAG ANNUAL REPORT 2020

While the timelines for some proposed regulatory changes have been extended due to the impact of COVID-19, IAG continues to proactively mature its remuneration governance practices. In doing this, we are seeking to ensure our practices continue to operate effectively and will readily adapt to the future regulatory context of both the Financial Accountability Regime (FAR) and APRA Prudential Standard CPS 511 Remuneration (CPS 511).

As always, we look forward to receiving feedback on any aspect of this report and our remuneration arrangements, and we appreciate your ongoing support.

Jon Nicholson

Chairman, People and Remuneration Committee

25

CONTENTS	PAGE
A.	Key management personnel covered in this report	26
B.	Executive remuneration structure	27
C.	Linking IAG's performance and reward	32
D.	Executive remuneration governance	37
E.	Non-Executive Director remuneration	38
	Appendix 1. Statutory remuneration disclosure requirements	41
	Appendix 2. Executive employment agreements	43
	Appendix 3. Movement in equity plans within the financial year	44
	Appendix 4. Related party interests	45

A. KEY MANAGEMENT PERSONNEL COVERED IN THIS REPORT

This report sets out the remuneration details for IAG's key management personnel (KMP).

Following the announcement of Peter Harmer's intention to retire by the end of the 2020 calendar year, and the appointment of Nicholas Hawkins as Deputy Chief Executive Officer (CEO), Executive reporting lines have changed. As a result, the Board has determined that Executive KMP (Executive Team) will now comprise the Managing Director and Chief Executive Officer (Group CEO), Deputy CEO and direct reports to those two roles who:

• manage a business unit; or
• have accountability for the risk or financial control of the organisation; or
• have accountability to deliver a strategic priority.

The full list of KMP for the year ended 30 June 2020 is presented below.

NAME	POSITION	TERM AS KMP(1)
EXECUTIVES
Peter Harmer	Managing Director and Chief Executive Officer(2)	Full year
Julie Batch	Chief Strategy and Innovation Officer(3)	Full year
Nicholas Hawkins	Deputy Chief Executive Officer(4)	Full year
Michelle McPherson	Acting Chief Financial Officer(5)	From 8 April 2020
Mark Milliner	Chief Executive Officer, Australia	Full year
Craig Olsen	Chief Executive, New Zealand	Full year
Christine Stasi	Group Executive, People, Performance and Reputation	From 4 November 2019
David Watts	Chief Risk Officer	Full year

EXECUTIVES WHO CEASED AS KMP

No Executives ceased as KMP during the 2020 financial year.

NON-EXECUTIVE DIRECTORS
Elizabeth Bryan	Chairman, Independent Non-Executive Director	Full year
Simon Allen	Independent Non-Executive Director	From 12 November 2019
Duncan Boyle	Independent Non-Executive Director	Full year
Sheila McGregor	Independent Non-Executive Director	Full year
Jon Nicholson	Independent Non-Executive Director	Full year
Helen Nugent	Independent Non-Executive Director	Full year
Tom Pockett	Independent Non-Executive Director	Full year
George Savvides	Independent Non-Executive Director	Full year
Michelle Tredenick	Independent Non-Executive Director	Full year
NON-EXECUTIVE DIRECTOR WHO CEASED AS KMP
Hugh Fletcher	Independent Non-Executive Director	Ceased 25 October 2019

1. If an individual did not serve as KMP for the full financial year, all remuneration is disclosed from the date the individual was appointed as KMP to the date they ceased as KMP.
2. On 8 April 2020, IAG announced that Chief Executive Officer Peter Harmer had advised the Board of his intention to retire. A flexible nine-month period of transition has been agreed, and it is expected that Mr Harmer will cease employment with IAG by the end of the 2020 calendar year.
3. Effective 24 February 2020, Julie Batch was appointed to the role of Chief Strategy and Innovation Officer. Prior to this appointment Ms Batch was Chief Customer Officer.
4. On 8 April 2020, Nicholas Hawkins was appointed to the role of Deputy Chief Executive Officer. Prior to this appointment Mr Hawkins was the Chief Financial Officer.
5. On 8 April 2020, Michelle McPherson was appointed to the role of Acting Chief Financial Officer. Prior to this appointment Ms McPherson joined IAG as Chief Financial Officer, Australia on 6 April 2020.

26 IAG ANNUAL REPORT 2020

B. EXECUTIVE REMUNERATION STRUCTURE

I. Remuneration guiding principles

There are six guiding principles that underpin IAG's approach to remuneration. The following chart illustrates these guiding principles.

II. Summary of remuneration components

The table below describes the structure and purpose of Executive remuneration components for the year ended 30 June 2020.

TABLE 1 - REMUNERATION COMPONENTS

COMPONENT	STRUCTURE	PURPOSE
Fixed pay	Fixed pay comprises base salary and superannuation,	Remunerate Executives for performing their
	determined by reference to the experience and skills an	ongoing work.
	individual brings to the role, internal relativities between
	Executives and market pay levels for similar external roles.
	Details relating to fixed pay are presented in Table 2.
Short-term	STI is provided on an annual basis, subject to the achievement of	Reward annual performance across a range of
incentives	short-term goals and an assessment of risk management	financial and non-financial measures to support
(STI)	effectiveness. Half of the STI is delivered in cash and half is	the delivery of the IAG strategy.
	deferred for a period of up to two years, typically in the form of	Deferral of STI encourages retention of senior
	Deferred Award Rights (DARs).
		management and reinforces the link between
	Details relating to the STI plan are presented in Table 3.	shareholder value creation and Executive reward.

Long-term	LTI grants are determined annually by the Board. The grants are
incentives	in the form of Executive Performance Rights (EPRs) that have
(LTI)	performance hurdles over a four-year performance period, which
	align to IAG's strategic financial targets.
	Details relating to the LTI plan are presented in Table 4.

Create a direct link between Executive reward and the return experienced by shareholders through two hurdles:

• cash ROE evidences IAG's return on total shareholders' equity. Cash earnings performance is a key component of the ROE calculation and directly influences the dividend paid to shareholders; and
• relative TSR reflects the value created for shareholders through dividends and the movement in the share price, measured against the top 50 industrial companies in the S&P/ASX 100 Index.

27

Remuneration received by Executives is based on IAG's performance over a number of time periods, as illustrated in the following graph. The timeframe of potential payments to Executives is staggered progressively from one to four years to encourage decision- making which supports long-term, sustainable performance.

III. Remuneration mix

The following graph illustrates the mix of remuneration components provided to Executives (based on maximum potential earnings, as at 30 June 2020).

Each remuneration component is described in more detail below.

IV. Fixed pay

TABLE 2 - FIXED PAY

Overview	Fixed pay is set with reference to the median of the external market for comparable roles, considering
	the size and complexity of the role, and the skills and experience of the individual. For Australian-based
	Executives, the external market consists of financial services companies in the S&P/ASX 50 Index and
	companies that are of similar size to IAG. Local market peer groups are considered for overseas-based
	Executives.
	Increases to fixed pay are generally only provided when pay is below market levels, or there has been a
	material change in the responsibilities of the Executive.
	During the 2020 financial year, Julie Batch's fixed pay increased from $735,000 to $825,000 (following
	her appointment as Chief Strategy and Innovation Officer). No other Executives received increases to
	fixed pay during the year.

28 IAG ANNUAL REPORT 2020

V. Short-term incentive

The table below summarises key terms of the STI plan and deferred STI.

TABLE 3 - STI AND DEFERRED STI

STI

Overview	STI is the at-risk remuneration component designed to motivate and reward Executives for superior
	performance in the financial year.
Compliance gateway	To be eligible for an STI, Executives are required to satisfactorily complete compliance training
	courses which are designed to ensure participants know how to protect IAG's customers and operate
	in a fair and transparent manner compliant with appropriate regulations.
Behavioural gateway	To be eligible for an STI, Executives are	required to demonstrate appropriate behaviours in the way
	they achieve performance outcomes. The Group CEO's behaviour is assessed by the Board.
	Executives' behaviours are assessed by the Group CEO, who recommends eligibility to the Board.
STI opportunity	For the 2020 performance year, the maximum value of STI that could be granted is set out in Table
	6.
Funding	The Board considers the Group's cash earnings performance when determining overall STI funding
	for the year.
	In view of the 2020 financial year cash earnings, the Board determined not to make an STI
	allocation for the Group CEO and Executives.
Performance measures	Executive performance is measured against the Group Balanced Scorecard and individual goals
	using both financial and non-financial measures (for further details, refer to Table 5).
Performance evaluation	The PARC reviews the Group CEO's performance based on the Group Balanced Scorecard outcomes
	(as described in Table 5), and the effectiveness of risk management during the year, and then
	recommends an STI award for approval by the Board.
	The Group CEO reviews the performance of Executives based on the Group Balanced Scorecard
	outcomes and achievement against individual goals. The Group CEO then recommends an STI
	award for consideration by the PARC, which then recommends an STI award for approval by the
	Board.
	To ensure incentives provided to the Group CEO and Executives are appropriate, the Board assesses
	the risk management performance of IAG (including any prior year events that have come to light in
	the current year) prior to determining final incentive outcomes.
	For all individuals, the Board may apply discretion in determining the STI outcomes to ensure they
	appropriately reflect performance.
Instrument	Half the STI award is delivered in cash in September following the financial year end, and half the STI
	award is deferred for a period of up to two years based on continued service. The deferred
	component is typically paid in the form of DARs with no dividend entitlement until the rights vest and
	are exercised.
DEFERRED STI
Overview of DARs	DARs are rights over the Company's ordinary shares. DARs are granted at no cost to the Executive and
	no dividend is paid for any unvested, or vested and unexercised DARs.
	In 2018, the Board made an exception to the dividend policy for holders of DARs that were due to vest
	after the record date for final dividends during 2018 and 2019. This exception was made following
	IAG's decision to bring forward the date that annual results are announced to the market. Due to this
	change, the record date for final dividends was also brought forward to avoid a delay in distributing
	profits to shareholders. Consequently, holders of DARs that vested in September 2018 and some DARs
	that vested in September 2019 were no longer entitled to receive the final dividend, as the vesting
	dates fell shortly after the new, earlier dividend record dates. In recognition of this adverse
	consequence, the Board determined to make a cash payment to employees holding DARs at the
	September 2018 and September 2019 vesting dates, equivalent in value to the dividends they would
	otherwise have received if the record date had not moved. The payments relating to the September
	2019 vesting date are disclosed in this Remuneration Report. No further payments will be made in
	relation to this matter.
Number of DARs issued	The number of DARs issued is calculated based on the volume weighted average share price (VWAP) of
	the Company's ordinary shares over the 30 days up to and including 30 June before the grant date.

29

Exercise and vesting of	Executives who participate in the STI plan become eligible to receive one ordinary share of the Company
DARs	per DAR by paying an exercise price of $1 per tranche of DARs exercised. Vesting of DARs is subject to
	an Executive's continued employment with IAG at the vesting date or meeting the conditions to retain
	unvested DARs upon cessation, as outlined in the 'Malus and forfeiture conditions' section below.
Hedging of DARs	Executives may not enter into transactions or arrangements which operate to limit the economic risk of
	unvested entitlements to IAG securities.
Malus and forfeiture	The Board retains the discretion to adjust downwards the unvested portion of any deferred STI awards,
conditions	including to zero (refer to Section D for more information on the adjustment framework).
	Deferred STI awards will generally be forfeited if the Executive resigns before the vesting date, except in
	special circumstances (including redundancy, retirement, death or total and permanent disability).
	When an Executive ceases employment in special circumstances, any unvested rights may be retained
	on cessation of employment subject to the existing terms and conditions of the award including the
	vesting date, subject to Board discretion.
	In cases where the Executive acts fraudulently or dishonestly or is in breach of his or her obligations to
	IAG, the unvested rights will lapse.

VI. Long-term incentive

The table below summarises key terms of the LTI plan.

TABLE 4 - LTI

Overview	LTI grants are determined annually by the Board. The grants are in the form of EPRs that have
	performance hurdles aligned to IAG's strategic financial targets.
	Rights granted during the year will not vest and have no value to the Executive unless the performance
	hurdles are achieved.
LTI opportunity	For the 2020 performance year, the maximum value of LTI that could be granted to the Group CEO and
	each Executive is as below:
	 165% of fixed pay for the Group CEO;
	 140% of fixed pay for the Deputy CEO and the CEO, Australia;
	 80% of fixed pay for the CRO;
	 40% of fixed pay for the Acting CFO; and
	 125% of fixed pay for all other Executive Team members.
Instrument	If performance hurdles are achieved over the four-year performance period, rights can be settled with
	either the Company's ordinary shares or an equivalent cash payment. The Board may choose to
	exercise discretion to settle rights on vesting in cash in circumstances where it is restrictive to settle
	rights with shares, including in jurisdictions where legislative requirements prohibit share ownership in
	a foreign entity. Where rights are settled in cash, the value of the cash payment is determined based on
	the VWAP for the five trading days up to and including the vesting date.
Allocation methodology	The number of rights issued is calculated based on the VWAP over the 30 days up to and including 30
	June before the grant date.
Dividend entitlements	No dividend is paid or payable for any unvested, or vested and unexercised, rights.
Performance hurdles	The cash ROE performance hurdle (50% weighting) and relative TSR performance hurdle (50%
	weighting) are measured over four years.

30 IAG ANNUAL REPORT 2020

Performance hurdle -	Description	Cash ROE is measured relative to IAG's weighted average cost of capital (WACC).
cash ROE		For LTI awards granted prior to November 2018, there were six half-year periods
		measured. For LTI awards granted from November 2018 onwards, there are eight half-
		year periods.
		In 2019, a review of the cash ROE hurdle was completed, considering factors such as
		IAG's business strategy, market practice, changes to IAG's capital base and historic and
		projected ROE performance. Following this review, the vesting range was increased from
		1.2-1.6 times WACC to 1.4-1.9 times WACC for the November 2019 LTI grant onwards.
		The Board can reduce the cash ROE vesting outcomes in order to ensure that reward
		outcomes appropriately reflect performance.
		For awards vesting from 30 June 2020 onwards, the Board will consider the impact of
		changes in the cost of capital over the performance period. In the event that there have
		been material changes in the cost of capital, the Board can consider the extent to which
		this may have influenced vesting outcomes to ensure that reward outcomes
		appropriately reflect performance.
	Definition	ROE is calculated as cash earnings divided by the average total shareholders' equity.
		Cash earnings is defined as net profit after tax attributable to owners of the Company
		plus amortisation and impairment of acquired identifiable intangible assets and adjusted
		for unusual items after tax (non-recurring in nature). In determining vesting outcomes,
		the Board considers the overall quality of earnings over the performance period,
		including differences between the statutory profit and cash earnings, and movements in
		the cost of capital.
	Testing	Cash ROE is calculated by dividing the cash earnings of IAG by the average total
		shareholders' equity for a given period. This cash ROE figure is then expressed as a
		multiple of IAG's WACC. The cash ROE vesting outcome is based on the average cash
		ROE across the performance period (the six or eight half-year periods) divided by the
		average WACC over the same timeframe.
	Vesting (for	0% vesting for cash ROE less than 1.4 times WACC
	grants	20% vesting for cash ROE at 1.4 times WACC
	November
	2019	100% vesting for cash ROE at or above 1.9 times WACC
	onwards)
		Straight-line vesting between 1.4 times WACC and 1.9 times WACC
Performance hurdle -	Description	Relative TSR is measured against the top 50 industrial companies within the S&P/ASX
relative TSR		100 Index. Industrial companies are defined by Standard & Poor's as being all
		companies excluding those in the Energy sector (GICS Tier 1) and the Metals & Mining
		industry (GICS Tier 3).
		Companies which are no longer part of the index at the end of the performance period
		(e.g. due to acquisition or delisting) may be removed from the peer group.
	Definition	TSR measures the return a shareholder would obtain from holding a company's share
		over a period, taking into account factors such as changes in the market value of shares
		and dividends paid over that period. The relative measure compares IAG's TSR against
		that of companies in the peer group.
	Testing	Relative TSR performance for allocations made prior to November 2018 is measured
		between 30 September of the base year and 30 September of the test year.
		Relative TSR performance for allocations made from November 2018 onwards is
		measured between 30 June of the base year and 30 June of the test year.
		The opening and closing share price for the TSR calculation for IAG and peer group
		companies uses a three-month VWAP.
	Vesting (for	0% vesting for relative TSR less than the 50th percentile of the peer group
	grants	50% vesting for relative TSR at the 50th percentile of the peer group
	November
	2019	100% vesting for relative TSR at or above the 75th percentile of the peer group
	onwards)
		Straight-line vesting between the 50th and 75th percentile of the peer group

31

Retesting	There are no opportunities to retest these performance hurdles.
Hedging of EPRs	Executives may not enter into transactions or arrangements which operate to limit the economic risk of
	unvested entitlements to IAG securities.
Malus and forfeiture	The Board retains the discretion to adjust downwards the unvested portion of any LTI awards, including
conditions	to zero (refer to Section D for more information on the adjustment framework).
	Unvested rights will generally lapse if an Executive resigns before the performance hurdles are tested,
	except in special circumstances. When an Executive ceases employment in special circumstances, any
	unvested rights may be retained on cessation of employment up to the point they vest, subject to Board
	discretion. Special circumstances include: redundancy, retirement, death or total and permanent
	disability. Any rights retained under these circumstances will remain subject to the original
	performance conditions.
	In cases where the Executive acts fraudulently or dishonestly or is in breach of his or her obligations to
	IAG, the unvested rights will lapse.

C. LINKING IAG'S PERFORMANCE AND REWARD

I. Linking IAG's short-term performance and short-term reward

IAG has three broad strategic priorities: 'customer', 'simplification' and 'agility'. The focus of each strategic priority is summarised on page 13 of the annual report.

The tables below summarise IAG's Group Balanced Scorecard objectives and outcomes for the year ended 30 June 2020. The objectives were agreed with the Board at the beginning of the financial year and were designed to focus Executives on delivering superior performance outcomes against the strategic priorities. Each Executive's performance is assessed based on their contribution to the objectives outlined below, as well as their individual performance.

TABLE 5 - GROUP BALANCED SCORECARD OBJECTIVES AND RESULTS FOR THE YEAR ENDED 30 JUNE 2020

OBJECTIVE AND	RATIONALE	MEASURE AND OUTCOME	COMMENT
WEIGHTING
FINANCIAL MEASURES (55% OF SCORECARD)
Profitability	IAG uses underlying profit as the	Not met	The outcome was largely driven by
(30%)	key profitability measure, as it	The Group's underlying profit was	the decline in the underlying
	presents a holistic view of the	insurance margin, particularly
	absolute earnings power of IAG's	slightly below the expectations set	during the second half of the
	core insurance-related business. It	at the commencement of the	financial year. This reflected the
	provides a view of the underlying	financial year.	combined impact of lower
	profitability of the underwriting, fee-		investment returns, higher
	based and associate businesses		reinsurance costs (associated with
	and is an important measure of		the unusually high level of natural
	how IAG generates value for		perils activity) and deterioration in
	shareholders.		the performance of some
			Australian commercial long-tail
			portfolios.
			COVID-19 had a broadly neutral
			overall impact on this measure.
Controllable	IAG's continued focus on	Not met	During the first half of the financial
operating expense	optimisation of its operating model	The Group's controllable operating	year, the Group delivered against
(15%)	and related cost-out initiatives	the controllable operating expense
	improves the efficiency with which	cost base for the 2020 financial	target under its optimisation
	IAG deploys its resources.	year was slightly above target.	program.

However, the headline metric for the 2020 financial year was impacted by the incurrence of incremental costs associated with IAG's COVID-19 response including those related to the recently announced retail branch closures in New Zealand.

32 IAG ANNUAL REPORT 2020

OBJECTIVE AND	RATIONALE	MEASURE AND OUTCOME	COMMENT
WEIGHTING
Growth	IAG continues to expand its product	Not met	The underlying GWP growth metric
(10%)	and service offerings to its	IAG's underlying GWP growth from	adjusts the equivalent reported
	markets, measured through gross	measure for portfolio divestments
	written premium (GWP) growth,	continuing operations was 1.8%	and foreign currency effects.
	creating value for its shareholders,	which did not meet the target of
	customers and partners.	3.0%.	If this result was adjusted for the
			estimated adverse impact on new
			business volumes associated with
			the onset of COVID-19 it would
			increase to approximately 2.5%,
			which would still be below target.
NON-FINANCIAL MEASURES (45% OF SCORECARD)
Customer advocacy	IAG's strategy is designed to 'put	Met	IAG continued to deliver customer
(7.5%)	the customer at the centre of	IAG sets a Customer Net Promoter	advocacy above the level of
	everything we do'. IAG considers	competitors during the 2020
	this essential to driving the ability	Score (NPS) target relative to its	financial year due to strong brands
	to grow profitably over the longer	peers. IAG's NPS for the 2020	and continued embedment of its
	term. IAG is focused on designing	financial year was +8 NPS points	customer advocacy programs.
	compelling product and service	above the competitive market
	offerings by developing a deeper	average, which met the target.
	understanding of customers' needs
	and the changing environment,
	allowing delivery of world-leading
	customer experiences, including
	through digital channels. IAG uses
	Customer Net Promoter Scores to

measure the impact of these initiatives for its customers.

Customer growth numbers (personal) (7.5%)

Customer growth numbers (commercial) (5%)

Employee advocacy (7.5%)

Together with customer advocacy	Not met	Although retention rate was
IAG also measures customer	IAG's personal customer growth	maintained, IAG did not meet the
growth as part of assessing the	personal customer growth target,
impact of IAG's ability to design	was 0.4%, not meeting the target	which was based on system
compelling product and service	of 1.8% to 2.2%.	growth.
offerings, for personal customers.
Together with customer advocacy	Not met	While the commercial growth
IAG also measures customer	IAG's commercial customer growth	target recognised IAG's need for
growth as part of assessing the	continued focus on improving the
impact of IAG's ability to design	was -3.3%, not meeting the target	underwriting quality of the
compelling product and service	of between -2.2% to -1.7%.	commercial book, the target was
offerings, for commercial		not met.
customers.
IAG seeks to motivate and engage	Met	IAG's employees recommend IAG
its employees around its purpose	IAG measures employee advocacy	as a place to work because of
to 'make your world a safer place'.	supportive leadership, approach to
Creating a strong organisational	using an eNPS. The target was an	workplace flexibility, employee
culture helps IAG deliver strong	eNPS score between +31 and +33,	benefits, work life balance and a
business results. IAG uses the	and the result was +50.	positive work environment.
Employee Net Promoter Score		The COVID-19 response resulted in
(eNPS) to measure its
effectiveness in fostering a strong		an increase in eNPS as employees'
organisational culture.		advocacy for IAG as a place to work
		was supplemented by support for
		the way IAG purposely responded
		to the pandemic.

33

OBJECTIVE AND	RATIONALE	MEASURE AND OUTCOME	COMMENT
WEIGHTING

Agility	A constructive and agile culture
(7.5%)	enables IAG to provide great
	experiences for its employees and
	customers. IAG tracks three agility
	indicators to measure progress
	towards creating an agile
	organisation. These are leadership
	effectiveness, connectedness and
	decision-making effectiveness.

Met

IAG's performance improved from the 2019 financial year for all three agility indicators of leadership effectiveness, connectedness, and decision- making. Each exceeded the target range.

IAG's agility indicator scores improved from the 2019 financial year. These indicators help IAG understand how our employees experience leadership and decision-making, and the degree of connection employees feel to the organisation.

This improvement from 2019 reflects an ongoing leadership focus on culture as evidenced during IAG's response to COVID-19.

Risk maturity	Management of risk is integral to
(10%)	IAG delivering on its strategy, to
	meeting short-term objectives and
	achieving long-term sustainability.
	IAG conducts a formal assessment
	of risk management maturity and
	risk culture which is reviewed and
	approved by the Board and Risk
	Committee on a quarterly basis.
	Due to the importance of risk
	management to IAG, it is included
	as an explicit measure on the
	scorecard.

Met

IAG has continued to build on its risk maturity.

IAG's risk maturity met the target for the current financial year. The Risk Maturity Model will be further strengthened in the 2021 financial year to incorporate additional risk classes including insurance and reinsurance risk.

II. STI outcomes for the year ended 30 June 2020

The following table sets out the STI outcomes for Executives for the year ended 30 June 2020.

TABLE 6 - ACTUAL STI OUTCOMES FOR THE YEAR ENDED 30 JUNE 2020

					CASH STI		DEFERRED STI
	MAXIMUM STI				OUTCOME		OUTCOME
	OPPORTUNITY	ACTUAL STI OUTCOME
	(50%)		(50%)
	(% of fixed pay)	(% of maximum)(1)	(% of fixed pay)		(% of fixed pay)		(% of fixed pay)
Peter Harmer	150 %	- %	- %		- %		- %
Julie Batch	120 %	- %	- %		- %		- %
Nicholas Hawkins	130 %	- %	- %		- %		- %
Michelle McPherson	80 %	- %	- %		- %		- %
Mark Milliner	130 %	- %	- %		- %		- %
Craig Olsen	120 %	- %	- %		- %		- %
Christine Stasi	120 %	- %	- %		- %		- %
David Watts	80 %	- %	- %		- %		- %

1. The proportion of STI foregone is derived by subtracting the actual percentage of maximum received from 100% and was 100% on average for the year ended 30 June 2020 (compared to 40% in 2019).

The average STI for all Executives was 0% of the maximum STI opportunity.

34 IAG ANNUAL REPORT 2020

1. Linking IAG's long-term performance and long-term reward Details of LTI vested during the year are set out below:

Cash ROE - 100% vesting for the 2016/2017 LTI awards

The Board has determined that, for the performance period from 1 July 2017 to 30 June 2020, the average reported cash ROE of

1.51 times WACC will apply. This will equate to an 82% vesting outcome, which will be reflected in next year's Remuneration

Report. For the performance period from 1 July 2016 to 30 June 2019, the average reported cash ROE was 1.91 times WACC. In determining the final vesting outcome for this award, the Board considered the overall quality of earnings, including the differences between the statutory profit and cash earnings. Following this review, the Board determined that the award would vest in full.

The following graph illustrates IAG's cash ROE/WACC performance over the past three years.

Relative TSR - 100% vesting

On 30 September 2019, the relative TSR portion of the 2015/2016 LTI award was tested. IAG's TSR was ranked at the 75th percentile of the peer group, resulting in a 100% vesting outcome.

The following graph illustrates IAG's relative TSR, on an annualised basis, against the top 50 industrial companies in the S&P/ASX

100 Index for the 2015/2016 LTI award:

35

The following table shows the returns IAG delivered to shareholders for the last five financial years for a range of measures.

TABLE 7 - HISTORICAL ANALYSIS OF SHAREHOLDER RETURN

	YEAR ENDED	YEAR ENDED	YEAR ENDED	YEAR ENDED	YEAR ENDED
	30 JUNE 2016	30 JUNE 2017	30 JUNE 2018	30 JUNE 2019	30 JUNE 2020
Closing share price ($)	5.45	6.78	8.53	8.26	5.77
Dividends per ordinary share (cents)	36.00(1)	33.00	34.00	37.50(3)	10.00
Basic earnings per share (cents)	25.79	39.03	39.06	46.26	18.87
Reported cash ROE (%)	13.0	15.2	15.6	14.4	4.5
Three-year average reported cash ROE to WACC	2.00(2)	1.76(2)	1.83(2),(4)	1.91(4),(5)	1.51(4),(5),(6)

1. This includes the 10.00 cents (per ordinary share) 2016 special dividend.
2. Outcomes reflect IAG's average cash ROE to WACC prior to the Board considering the impact of the software impairments announced to the market on 19 August 2016. The impact of the software impairments was to reduce average cash ROE to WACC by 0.09 times in the three years to 30 June 2016, 0.08 times in the three years to 30 June 2017 and 0.09 times in the three years to 30 June 2018.
3. This includes the 5.50 cents (per ordinary share) 2019 special dividend paid as part of the capital management initiative announced in August 2018.
4. Outcomes reflect IAG's average cash ROE to WACC prior to the Board considering the impact of the write-down of Asian asset carrying values reported in the 2018 financial year. The impact of the write-down of Asian asset carrying values would have been to reduce average cash ROE to WACC by 0.03 times in the three years to 30 June 2018, and by the same amount in the three years to 30 June 2019 and in the three years to 30 June 2020.
5. Outcomes reflect IAG's average cash ROE to WACC prior to the Board considering the impact of the net gain on sale of the Thailand business in the 2019 financial year. The impact of the net gain on sale of the Thailand business would have been to increase average cash ROE to WACC by 0.13 times in the three years to 30 June 2019, and 0.14 times in the three years to 30 June 2020.
6. Outcomes reflect IAG's average cash ROE to WACC prior to the Board considering the impact of the net gain on sale of the India business and the recognition of the customer refund provisions in the 2020 financial year. The impact of the net gain on sale of SBI General would have been to increase average cash ROE to WACC by 0.23 times in the three years to 30 June 2020, while the impact of the customer refund provisions would have been to reduce the average cash ROE to WACC by 0.10 times in the three years to 30 June 2020.

IV. Actual remuneration received by Executives

The following table details remuneration received by Executives during the financial year, which includes:

• fixed pay and other benefits paid during the financial year;
• the value of cash STI awards earned in the financial year; and
• the value of prior years' deferred STI and LTI awards that vested during the financial year.

For remuneration details provided in accordance with the Accounting Standards, refer to Appendix 1.

TABLE 8 - ACTUAL REMUNERATION RECEIVED IN 2020 AND 2019

			OTHER BENEFITS					TOTAL ACTUAL
	FINANCIAL		AND LEAVE	TERMINATION		DEFERRED		REMUNERATION
	YEAR	FIXED PAY	ACCRUALS	BENEFITS	CASH STI	STI VESTED	LTI VESTED	RECEIVED
		$000	$000	$000	$000	$000	$000	$000
		(1)	(2)	(3)	(4)	(5)	(6)
EXECUTIVES
Peter Harmer	2020	1,900	26	-	-	638	3,179	5,743
	2019	1,858	136	-	709	655	2,049	5,407
Julie Batch	2020	767	1	-	-	201	924	1,893
	2019	728	3	-	269	200	462	1,662
Nicholas Hawkins	2020	1,200	6	-	-	374	1,907	3,487
	2019	1,200	33	-	480	399	1,480	3,592
Michelle McPherson(7)	2020	184	13	-	-	-	-	197
Mark Milliner	2020	1,100	36	-	-	297	1,730	3,163
	2019	1,079	117	-	432	1,306	-	2,934
Craig Olsen(8)	2020	802	38	-	-	232	957	2,029
	2019	785	62	-	339	202	448	1,836
Christine Stasi(9)	2020	492	281	-	-	-	-	773
David Watts	2020	875	16	-	-	423	-	1,314
	2019	704	32	-	176	-	-	912

1. Fixed pay includes amounts paid in cash, superannuation contributions plus the portion of IAG's superannuation contribution that is paid as cash instead of being paid into superannuation. Fixed pay also includes salary sacrifice items such as cars and parking as determined in accordance with AASB 119 Employee Benefits. Julie Batch received a fixed pay increase following her appointment as Chief Strategy and Innovation Officer.
2. Further details are provided in Table 13 in Appendix 1.
3. Payment in lieu of notice, which incorporates statutory notice and severance entitlements.
4. Cash STI earned within the year ended 30 June and to be paid in the following September (representing 50% of the award made for the financial year).
5. Deferred STI vesting on 12 August 2019 and 1 September 2019 was valued using the five-day VWAP of $7.82 and $7.97 respectively (1 September 2018: $7.65).
6. LTI vested was valued using the five-day VWAP at vesting date which was $7.82 for awards vested on 12 August 2019 and $7.72 for awards vested on 15 October 2019 (16 August 2018: $7.98 and 30 September 2018: $7.32).
7. Michelle McPherson commenced as Acting Chief Financial Officer on 8 April 2020. Her remuneration is presented for the period for which she served as a KMP.
8. Remuneration for Craig Olsen was determined in New Zealand dollars and reported in Australian dollars using the average exchange rate for the year ended 30 June 2020 which was 1 NZD = 0.94825 AUD.
9. Christine Stasi commenced as Group Executive, People, Performance and Reputation on 4 November 2019. Her remuneration is presented for the period for which she served as a KMP. Ms Stasi received a cash payment in February 2020 as compensation for incentives foregone on leaving her previous employer.

36 IAG ANNUAL REPORT 2020

V. Group CEO remuneration

Below are further details on drivers of the actual remuneration received by the Group CEO that are outlined in Table 8. The components of remuneration mix are shown with commentary on how performance has translated into remuneration outcomes.

D. EXECUTIVE REMUNERATION GOVERNANCE

I. IAG's approach to remuneration governance

IAG governs remuneration through the Board and the PARC as illustrated in the following graphic.

37

II. Use of remuneration consultants

During the year, no remuneration consultants were engaged, and no recommendations, as defined by the Corporations Act 2001, were provided by remuneration consultants.

III. Adjustment framework

Variable pay reinforces behaviours aligned to IAG's purpose, encouraging both prudent risk-taking and risk mitigation that protects the long-term financial soundness and reputation of the Group. The Board retains overriding discretion to adjust variable pay (upwards, downwards and to zero) including:

• where a person or group of persons has been found to have engaged in misconduct or exposed IAG to risk beyond its risk appetite or controls;
• where it is necessary to protect the Group's long-term financial soundness;
• to take into account the outcomes of business activities;
• where it is required by law or APRA Prudential Standards; or
• any other circumstances the Board determines are relevant.

Each year, the PARC makes a recommendation to the Board on whether to adjust variable pay for Executives based on risk management performance. Adjustments may be applied to variable pay awards for current and/or prior years using one or both of the following mechanisms:

• in-yearSTI adjustment; and
• adjustment of awarded but unvested variable pay (malus).

The PARC's recommendations are informed by the identification and assessment of material financial and non-financial risks across the Group by the Risk Committee. The Risk Committee uses a range of inputs to support its assessment of risk management performance, including:

• a report by the Chief Risk Officer;
• a report by the Executive General Manager, Group Internal Audit; and
• the Group CEO's insights and recommendations.

The Board determined to make a number of downward risk-related adjustments (malus adjustments) to deferred awards of senior leaders in relation to risk failures identified and assessed during the year. Malus adjustments were made to current and former Executives as well as some senior managers below Key Management Personnel.

IV. Mandatory shareholding requirement for Executives

Table 9 outlines the mandatory shareholding requirements for Executives.

TABLE 9 - MANDATORY SHAREHOLDING REQUIREMENT

	ORDINARY SHARES TO ACCUMULATE	PERIOD TO ACCUMULATE
	AND HOLD	(from date of appointment)
Group CEO	2 x base salary	Four years
Executives (other than the Chief Risk Officer)	1 x base salary	Four years
Chief Risk Officer	1 x base salary	Five years

The mandatory shareholding requirement for Executives is based on either the value of shares at acquisition or the market value at the testing date, whichever is higher. This allows Executives to build a long-term shareholding in IAG without being impacted by short-term share price volatility. Compliance with this requirement is assessed at the end of each financial year, using the 30-dayvolume-weighted average share price leading up to and including 30 June, the value of shares at acquisition, and the Executive's base salary from the start of the accumulation period.

All Executives appointed prior to 30 June 2016 met the mandatory shareholding requirement at 30 June 2020.

1. NON-EXECUTIVEDIRECTOR REMUNERATION I. Remuneration policy
   The principles that underpin IAG's approach to remuneration for Non-Executive Directors are that remuneration should:  be sufficiently competitive to attract and retain a high calibre of Non-Executive Director; and

• create alignment between the interests of Non-Executive Directors and shareholders through the mandatory shareholding requirement.

II. Mandatory shareholding requirement for Non-Executive Directors

Non-Executive Directors are required to accumulate and hold ordinary shares of the Company with a value equal to their annual Board fee. The Non-Executive Directors have three years from the date of their appointment to the Board to meet their required holding.

The mandatory shareholding requirement for Non-Executive Directors is based on either the value of shares at acquisition or the market value at the testing date, whichever is higher. This allows Non-Executive Directors to build a long-term shareholding in IAG without being impacted by short-term share price volatility. Compliance with this requirement is assessed at the end of each financial year, using the 30-dayvolume-weighted average share price leading up to and including 30 June and the value of shares at acquisition.

All Non-Executive Directors appointed prior to 30 June 2017 met the mandatory shareholding requirement at 30 June 2020.

38 IAG ANNUAL REPORT 2020

III. Remuneration structure

Non-Executive Director remuneration comprises:

• Board fees (paid as cash, superannuation and Non-Executive Director Award Rights);
• Committee fees; and
• subsidiary board fees.

The aggregate limit of Board fees (as approved by shareholders at the Annual General Meeting in October 2013) is $3,500,000 per annum.

Directors can elect the portion of fees contributed into their nominated superannuation fund, provided minimum legislated contribution levels are met.

a. CHANGES TO NON-EXECUTIVE DIRECTOR REMUNERATION DURING THE YEAR ENDED 30 JUNE 2020

In the year ended 30 June 2020, there were no changes to Board and Committee fees for the Insurance Australia Group Limited Board. There have been no changes to Board or Committee fees since the year ended 30 June 2017.

b. INSURANCE AUSTRALIA GROUP LIMITED BOARD FEES

A summary of fees for service to the Insurance Australia Group Limited Board is set out below:

TABLE 10 - BOARD AND COMMITTEE FEES (INCLUSIVE OF SUPERANNUATION)

		ROLE
BOARD/COMMITTEE	YEAR	CHAIRMAN	DIRECTOR/
			MEMBER
Board	2020	$577,116	$192,372
Audit Committee	2020	$50,000	$25,000
Risk Committee	2020	$50,000	$25,000
People and Remuneration Committee	2020	$50,000	$25,000
Nomination Committee	2020	N/A	N/A

c. SUBSIDIARY BOARD FEES

The fees for service provided to subsidiary boards were unchanged from the previous year. A summary of fees is set out below:

TABLE 11 - FEES FOR NON-EXECUTIVE DIRECTORS' SERVICE ON SUBSIDIARY BOARDS (INCLUSIVE OF SUPERANNUATION)

DIRECTOR	SUBSIDIARY BOARD	CAPACITY	ANNUAL FEE
Elizabeth Bryan	Insurance Manufacturers of Australia Pty Limited	Chairman	$184,800
Hugh Fletcher(1)	IAG New Zealand Limited	Chairman	$45,302
Simon Allen(1)	IAG New Zealand Limited	Chairman	$87,531

1. These amounts were paid to Hugh Fletcher and Simon Allen in New Zealand dollars for the period for which they served in the role and reported in Australian dollars using the average exchange rate for the year ended 30 June 2020 which was 1 NZD = 0.94825 AUD.

39

d. NON-EXECUTIVE DIRECTOR AWARD RIGHTS PLAN (NARS PLAN)

Non-Executive Directors may elect to receive some or all fees in rights over IAG shares. Structuring Non-Executive Director fees in this manner supports Non-Executive Directors build their shareholdings in IAG, which enhances the alignment of interests between Non-Executive Directors and shareholders as well as facilitating the achievement of mandatory shareholding requirements.

TABLE 12 - NON-EXECUTIVE DIRECTOR AWARD RIGHTS PLAN (NARS PLAN)

Participation	Each Non-Executive Director may agree with IAG to have a proportion of their base Board fee
	provided as NARs. Participation in the NARs Plan is voluntary.
Performance measures	There are no performance conditions attached to the NARs Plan, which reflects	good governance
	practices by ensuring that the structure of Non-Executive Director remuneration does not act to bias
	decision-making or compromise objectivity.
	A service condition is attached to the vesting of the NARs. The full annual allocation of unvested
	NARs is issued at the grant date, with tranches vesting each month to align the vesting of NARs with
	the payment of Non-Executive Director fees. As the grant date for NARs is part way through a
	financial year, a proportion of the NARs granted is immediately vested.
Instrument	Grants under the NARs Plan are in the form of rights over the Company's ordinary shares. Each NAR
	entitles the Non-Executive Director to acquire one ordinary share in IAG subject to satisfaction of a
	service condition.
Allocation methodology	The number of NARs offered is determined by dividing the	amount of base fee nominated by the five-
	day VWAP up to and including the grant date, rounded to the nearest NAR.
Voting rights	Non-Executive Directors have no voting rights until the NARs are exercised and the Non-Executive
	Director holds shares in IAG.
Exercise price	As NARs are purchased by Non-Executive Directors via fee	sacrifice arrangements at grant, Non-
	Executive Directors do not have to pay any amount to exercise NARs.
Expiry date	NARs expire on the date that is 15 years from the grant date, or any other date determined by the
	Board (Expiry Date). NARs that are not exercised before the Expiry Date will lapse.
Hedging of NARs	Non-Executive Directors may not enter into transactions or arrangements which operate to limit the
	economic risk of unvested entitlements to IAG securities.
Forfeiture conditions	In the event a Non-Executive Director ceases service with the Board, any vested NARs may be
	exercised for shares in IAG in the subsequent trading window. Any unvested NARs will lapse. Under
	certain circumstances (e.g. change of control), the Board also has sole and absolute discretion to
	deal with the NARs, including waiving any applicable vesting conditions and/or exercise conditions by
	giving notice or allowing a Non-Executive Director affected by the relevant event to transfer their
	NARs.

40 IAG ANNUAL REPORT 2020

APPENDIX 1. STATUTORY REMUNERATION DISCLOSURE REQUIREMENTS

I. Total remuneration for Executives

Statutory remuneration details for Executives as required by Australian Accounting Standards are set out below:

TABLE 13 - STATUTORY REMUNERATION DETAILS (EXECUTIVES)

					OTHER
					LONG-
				POST	TERM
				EMPLOY-	EMPLOY-	TERM-					AT-RISK
	SHORT-TERM EMPLOYMENT	MENT	MENT	INATION				TOTAL	REMUN-
			BENEFITS	BENEFITS	BENEFITS	BENEFITS	SUB-TOTAL	SHARE-BASED PAYMENT	ERATION
			Leave		Long						As a % of
			accruals		service			Value of
	Base		and other	Superan-	leave			deferred	Value of		total
	salary	Cash STI	benefits	nuation	accruals			STI	LTI		reward
	$000	$000	$000	$000	$000	$000	$000	$000	$000	$000	%
	(1)	(2)	(3)	(4)	(5)	(6)		(7)	(8)		(9)
EXECUTIVES
Peter Harmer
2020	1,875	-	(2)	25	28	-	1,926	562	1,565	4,053	52
2019	1,833	709	109	25	27	-	2,703	512	1,562	4,777	58
Julie Batch(10)
2020	742	-	(10)	25	11	-	768	192	500	1,460	47
2019	703	269	(8)	25	11	-	1,000	160	493	1,653	56
Nicholas Hawkins(11)
2020	1,175	-	(12)	25	18	-	1,206	353	874	2,433	50
2019	1,175	480	97	25	(64)	-	1,713	303	896	2,912	58
Michelle McPherson(12)
2020	176	-	244	8	1	-	429	-	-	429	-
Mark Milliner
2020	1,075	-	20	25	16	-	1,136	291	973	2,400	53
2019	1,054	432	101	25	16	-	1,628	329	910	2,867	58
Craig Olsen(13)
2020	802	-	38	-	-	-	840	234	528	1,602	48
2019	785	339	62	-	-	-	1,186	177	519	1,882	55
Christine Stasi(14)
2020	476	-	276	16	5	-	773	31	23	827	7
David Watts(15)
2020	850	-	3	25	13	-	891	455	178	1,524	42
2019	679	176	24	25	8	-	912	102	27	1,041	29

1. Base salary includes amounts paid in cash plus the portion of IAG's superannuation contribution that is paid as cash instead of being paid into superannuation, and salary sacrifice items such as cars and parking, as determined in accordance with AASB 119 Employee Benefits. Julie Batch received a fixed pay increase during the 2020 financial year.
2. Cash STI earned within the year ended 30 June and to be paid in the following September (representing 50% of the award made for the financial year).
3. This column includes annual and mid-service leave accruals, 30% tax rebate on car allowances for certain KMPs who have salary sacrifice arrangements on cars, the ex- gratia payment for DARs affected by the change in record date, and other short-term employment benefits as agreed and provided under specific conditions. Other benefits provided to Craig Olsen include salary continuance insurance.
4. Superannuation represents the employer's contributions.
5. Long service leave accruals as determined in accordance with AASB 119.
6. Payment in lieu of notice which incorporates statutory notice and severance entitlements.
7. The deferred STI is granted as DARs and is valued using the Black-Scholes valuation model. An allocated portion of unvested DARs is included in the total remuneration disclosure above. The deferred STI for the year ended 30 June 2020 will be granted in the next financial year, so no value was included in the current financial year's total remuneration.
8. This value represents the allocated portion of unvested EPRs (unvested LTI). To determine the value of EPRs, a Monte Carlo simulation (for the relative TSR performance hurdle) and Black-Scholes valuation (for the cash ROE performance hurdle) have been applied. The valuations takes into account the exercise price of the EPRs, life of the EPRs, price of ordinary shares of the Company as at the grant date, expected volatility of the Company's share price, expected dividends, risk free interest rate, performance of shares in the peer group of companies, early exercise and non-transferability and turnover which is assumed to be zero for an individual's remuneration calculation.
9. At-riskremuneration is dependent on a combination of the financial performance of IAG, the Executives' performance against individual measures (financial and non- financial) and continuing employment. At-risk remuneration typically includes STI (cash and deferred remuneration) and LTI.
10. Julie Batch was appointed to the role of Chief Strategy and Innovation Officer on 24 February 2020. Prior to this appointment she was Chief Customer Officer. Ms Batch's remuneration is shown for the full financial year.
11. Nicholas Hawkins was appointed to the role of Deputy CEO on 8 April 2020. Prior to this appointment he was the Chief Financial Officer. Mr Hawkins' remuneration is shown for the full financial year.
12. Michelle McPherson commenced as Acting Chief Financial Officer on 8 April 2020. Her remuneration is shown for the period for which she served as KMP. In August 2020 Michelle McPherson will receive a $509,176 cash payment and in November 2020 a $765,824 DARs allocation as compensation for incentives foregone from her previous employer. The portion that relates to service in the current year is shown above.
13. Remuneration for Craig Olsen was determined in New Zealand dollars and reported in Australian dollars using the average exchange rate for the year ended 30 June 2020 which was 1 NZD = 0.94825 AUD.

41

1. Christine Stasi commenced as Group Executive, People, Performance and Reputation on 4 November 2019. Her remuneration is shown for the period for which she served as KMP. In February 2020 Christine Stasi received a $250,000 cash payment and in April 2020 received 51,000 DARs as compensation for incentives foregone from her previous employer.
2. David Watts commenced as Chief Risk Officer from 11 September 2018 and his remuneration in the prior year is shown for the period for which he served as KMP.

II. Total remuneration details for Non-Executive Directors

Details of total remuneration for Non-Executive Directors are set out below:

TABLE 14 - STATUTORY REMUNERATION DETAILS (NON-EXECUTIVE DIRECTORS)

				OTHER LONG-
				TERM		SHARE-
	SHORT-TERM			EMPLOYMENT	TERMINATION	BASED
EMPLOYMENT BENEFITS	POST-EMPLOYMENT BENEFITS	BENEFITS	BENEFITS	PAYMENT	TOTAL
IAG Board	Other
fees	board and
received	Committee		Retirement
as cash	fees	Superannuation	benefits
$000	$000	$000	$000	$000	$000	$000	$000

NON-EXECUTIVE DIRECTORS
Elizabeth Bryan
2020	440	169	21	-	-	-	125	755
2019	485	169	21	-	-	-	113	788
Simon Allen(1)
2020	112	117	13	-	-	-	-	242
Duncan Boyle
2020	176	91	25	-	-	-	-	292
2019	176	91	25	-	-	-	-	292
Sheila McGregor
2020	88	39	20	-	-	-	83	230
2019	44	23	19	-	-	-	124	210
Jon Nicholson
2020	176	68	23	-	-	-	-	267
2019	176	68	23	-	-	-	-	267
Helen Nugent
2020	176	46	21	-	-	-	-	243
2019	176	46	21	-	-	-	-	243
Tom Pockett
2020	178	68	21	-	-	-	-	267
2019	178	68	21	-	-	-	-	267
George Savvides(2)
2020	176	46	22	-	-	-	-	244
2019	10	1	1	-	-	-	-	12
Michelle Tredenick
2020	88	39	20	-	-	-	83	230
2019	135	23	19	-	-	-	53	230
NON-EXECUTIVE DIRECTOR WHO CEASED AS KMP
Hugh Fletcher(3)
2020	59	61	7	-	-	-	-	127
2019	176	186	21	-	-	-	-	383

1. Non-ExecutiveDirector appointed part way through the year ended 30 June 2020.
2. Non-ExecutiveDirector appointed part way through the year ended 30 June 2019.
3. Non-ExecutiveDirector ceased as KMP part way through the year ended 30 June 2020.

42 IAG ANNUAL REPORT 2020

APPENDIX 2. EXECUTIVE EMPLOYMENT AGREEMENTS

Details are provided below of contractual elements for the Group CEO and Executives.

TABLE 15 - EXECUTIVE EMPLOYMENT AGREEMENTS

	Group CEO and Australian Executives	Chief Executive, New Zealand
Employing entity	Insurance Australia Group Services Pty Limited	IAG New Zealand Limited
Term	Unlimited term - may be terminated by written notice from either party or by IAG making a payment
	in lieu of notice.

Annual remuneration review Requires an annual review of remuneration. Does not require IAG to increase fixed pay, pay STI or offer an LTI in any given year.

Termination of employment	The employment of an Executive may be terminated at any time with 12 months' notice or payment
with notice or payment in	in lieu of notice. Payment in lieu of notice will be calculated based on fixed pay.
lieu of notice	If an Executive terminates voluntarily, they are required to provide six months' notice.
	Subject to the relevant legislation in the various jurisdictions, termination provisions may include the
	payment of annual leave and/or long service leave for the Executives.
Termination of employment	The employment of an Executive may be terminated without notice and without payment in lieu of
without notice and without	notice in some circumstances. Generally, this would occur where the Executive:
payment in lieu of notice	 is charged with a criminal offence that could bring the organisation into disrepute;
	 is declared bankrupt;
	 breaches a provision of their employment agreement;
	 is guilty of serious and wilful misconduct; or
	 unreasonably fails to comply with any material and lawful direction given by the relevant
	company.

Redundancy arrangements During the year, the Board reviewed redundancy arrangements for Executives in light of developments in the regulatory environment, market trends, and shareholder and community expectations. The Board determined to limit redundancy payments for Executives to 12 months' fixed pay. Grandfathering arrangements apply for Nicholas Hawkins and Julie Batch, who had their existing redundancy entitlements of 66 weeks and 54 weeks of fixed pay respectively preserved.

The Chief Executive, New Zealand Craig Olsen is employed by a New Zealand entity and is not subject to the Australian redundancy policy. Under his employment agreement in the event of redundancy, Craig Olsen is entitled to a 12-month notice period, or payment in lieu of notice, subject to any adjustments that may be required to ensure compliance with the termination benefits provisions in the Corporations Act 2001.

No KMP contracts were terminated during the reporting period.

Peter Harmer advised the Board of his intention to retire at the end of the 2020 calendar year. On retirement, Mr Harmer will retain all of his unvested share rights and any deferred STI. Those rights and deferred STI will continue to vest per the standard Board-approved schedule and remain subject to any future risk adjustments.

43

APPENDIX 3. MOVEMENT IN EQUITY PLANS WITHIN THE FINANCIAL YEAR

Changes in each Executive's holding of DARs and EPRs and each Non-Executive Director's holdings of NARs during the financial year are set out below. The DARs granted during the year ended 30 June 2020 reflect the deferred portion of the STI outcome for the year ended 30 June 2019. The EPRs granted during the year ended 30 June 2020 were in relation to the LTI plan. The NARs granted during the year ended 30 June 2020 represent the total number of rights a Non-Executive Director has agreed to receive as part of the payment of their base Board fees.

TABLE 16 - MOVEMENT IN POTENTIAL VALUE OF DARS, EPRS AND NARS FOR THE YEAR ENDED 30 JUNE 2020

		RIGHTS ON	RIGHTS GRANTED	RIGHTS EXERCISED	RIGHTS LAPSED	RIGHTS ON	RIGHTS	RIGHTS
		ISSUE AT							ISSUE AT	VESTED	VESTED
		1 JULY							30 JUNE	DURING THE	AND
										YEAR	EXERCIS-
											ABLE AT
											30 JUNE
		Number	Number	Value	Number	Value	Number	Value	Number	Number	Number
				$000		$000		$000
		(1)		(2)		(3)
EXECUTIVES
Peter	DAR	118,693	90,300	675	(80,843)	581	-	-	128,150	80,843	-
Harmer	EPR	1,399,071	399,100	2,044	(408,995)	2,942	-	-	1,389,176	408,995	-
Julie	DAR	37,623	34,300	257	(25,473)	183	-	-	46,450	25,473	-
Batch	EPR	435,072	117,000	599	(118,732)	854	-	-	433,340	118,732	-
Nicholas	DAR	70,503	61,200	458	(47,403)	341	-	-	84,300	47,403	-
Hawkins	EPR	808,102	213,900	1,096	(245,319)	1,764	-	-	776,683	245,319	-
Michelle	DAR	-	-	-	-	-	-	-	-	-	-
McPherson EPR	-	-	-	-	-	-	-	-	-	-
Mark	DAR	54,952	55,000	411	(37,602)	270	-	-	72,350	37,602	-
Milliner	EPR	816,382	196,100	1,005	(221,309)	1,592	-	-	791,173	221,309	-
Craig	DAR	44,296	43,200	323	(29,346)	211	-	-	58,150	29,346	-
Olsen(4)	EPR	460,866	43,300	222	(123,026)	885	-	-	381,140	123,026	-
Christine	DAR	-	51,000	310	-	-	-	-	51,000	-	-
Stasi(5)	EPR	-	119,400	462	-	-	-	-	119,400	-	-
David	DAR	108,300	22,400	168	(54,150)	389	-	-	76,550	54,150	-
Watts	EPR	84,200	89,100	456	-	-	-	-	173,300	-	-
NON-EXECUTIVE DIRECTORS
Elizabeth	NAR	6,678	15,951	125	(17,318)	125	-	-	5,311	15,951	5,311
Bryan
Sheila	NAR	8,584	10,634	83	(15,680)	113	-	-	3,538	10,634	3,538
McGregor
Michelle	NAR	3,116	10,634	83	(10,212)	73	-	-	3,538	10,634	3,538
Tredenick

1. Opening number of rights on issue represents the balance as at the date of appointment as KMP or 1 July 2019.
2. The value of the DARs granted during the year is the fair value at grant date calculated using the Black-Scholes valuation model. The value of the DARs granted on 12 November 2019 and 17 April 2020 was $7.48 and $6.09 respectively. This amount is allocated to remuneration over years ending 30 June 2020 to 30 June 2022. The value of the cash ROE portion of the EPRs granted on 12 November 2019 and 17 April 2020 is the fair value at grant date, calculated using the Black-Scholes valuation model, which was $6.80 and $5.45 respectively. The cash ROE portion of the EPR grants is first exercisable after the performance period concludes on 30 June 2023. The value of the relative TSR portion of the EPRs granted on 12 November 2019 and 17 April 2020 is the fair value at grant date, calculated using the Monte Carlo simulation, which was $3.45 and $2.29 respectively. The relative TSR portion of the EPRs is first exercisable on 30 June 2023. The amount is allocated to remuneration over the years ending 30 June 2020 to 30 June 2023. The value of the NARs granted during the year is the fair value at grant date calculated using the Black-Scholes valuation model. The value of the annual NARs granted on 15 September 2019 was $7.85. This amount was allocated to remuneration over the year ended 30 June 2020.
3. Rights vested and exercised during the financial year. The value of the rights exercised is based on the annual VWAP for the year ended 30 June 2020, which was $7.19.
4. Craig Olsen was incorrectly not awarded a full allocation of EPRs in the current year. These EPRs will be awarded next year under the same terms and conditions as the 2020 financial year EPRs. Table 13 reflects the accounting value of the intended 2020 financial year allocation of 126,900 EPRs.
5. Christine Stasi received 51,000 DARs in April 2020 as compensation for incentives forgone on leaving her previous employer.

44 IAG ANNUAL REPORT 2020

I. LTI awards outstanding during the year ended 30 June 2020

Details of outstanding LTI awards made to Executives in the year ended 30 June 2020 are shown in the table below.

TABLE 17 - LTI AWARDS OUTSTANDING DURING THE YEAR ENDED 30 JUNE 2020

PERFORMANCE

TEST

HURDLE

AWARD

GRANT DATE

BASE DATE

DATE

ACHIEVEMENT LAST EXERCISE DATE

2019/2020 - TSR(1)

17/04/2020

01/07/2019

30/06/2023

N/A

17/04/2027

2019/2020 - ROE(1)

17/04/2020

01/07/2019

30/06/2023

N/A

17/04/2027

2019/2020 - TSR

(1)

12/11/2019

01/07/2019

30/06/2023

N/A

12/11/2026

2019/2020 - ROE

(1)

12/11/2019

01/07/2019

30/06/2023

N/A

12/11/2026

2018/2019 - TSR(1)

29/03/2019

01/07/2018

30/06/2022

N/A

29/03/2026

2018/2019 - ROE(1)

29/03/2019

01/07/2018

30/06/2022

N/A

29/03/2026

2018/2019 - TSR

(1)

05/11/2018

01/07/2018

30/06/2022

N/A

05/11/2025

2018/2019 - ROE

(1)

05/11/2018

01/07/2018

30/06/2022

N/A

05/11/2025

2017/2018 - TSR(1)

30/04/2018

30/09/2017

30/09/2021

N/A

30/04/2025

2017/2018 - ROE(1),(2)

30/04/2018

01/07/2017

30/06/2020

N/A

30/04/2025

2017/2018 - TSR

(1)

03/11/2017

30/09/2017

30/09/2021

N/A

03/11/2024

2017/2018 - ROE

(1),(2)

03/11/2017

01/07/2017

30/06/2020

N/A

03/11/2024

2016/2017 - TSR(1)

24/03/2017

30/09/2016

30/09/2020

N/A

24/03/2024

2016/2017 - ROE(1)

24/03/2017

01/07/2016

30/06/2019

100%

24/03/2024

2016/2017 - TSR

(1)

02/11/2016

30/09/2016

30/09/2020

N/A

02/11/2023

2016/2017 - ROE

(1)

02/11/2016

01/07/2016

30/06/2019

100%

02/11/2023

2015/2016 - TSR(1)

31/03/2016

30/09/2015

30/09/2019

100%

31/03/2023

2015/2016 - TSR

(1)

02/11/2015

30/09/2015

30/09/2019

100%

02/11/2022

1. Terms and conditions for LTI plans from 2015/2016 to 2019/2020 relating to relative TSR and cash ROE are the same.
2. The cash ROE portion of LTI plan 2017/2018 has been tested and is expected to vest at 82% of maximum. Vesting details will be included in the Remuneration Report for the year ending 30 June 2021.

APPENDIX 4. RELATED PARTY INTERESTS

In accordance with the Corporations Act Regulation 2M.3.03, the Remuneration Report includes disclosure of related parties' interests.

I. Movements in total number of ordinary shares held

The relevant interests of each KMP and their related parties in ordinary shares of the Company are disclosed in the table below.

TABLE 18 - MOVEMENT IN TOTAL NUMBER OF ORDINARY SHARES HELD

					NET
		SHARES	SHARES	SHARES	MOVEMENT OF
		RECEIVED ON	RECEIVED ON	RECEIVED ON	SHARES DUE	TOTAL SHARES	SHARES HELD
	SHARES HELD	EXERCISE OF	EXERCISE OF	EXERCISE OF	TO OTHER	HELD	NOMINALLY AT
	AT 1 JULY	DARS	EPRS	NARS	CHANGES(1)	AT 30 JUNE	30 JUNE(2)
	Number	Number	Number	Number	Number	Number	Number
2020
NON-EXECUTIVE DIRECTORS AND EXECUTIVES
Elizabeth Bryan	75,458	-	-	17,318	-	92,776	92,776
Simon Allen(3)	-	-	-	-	-	-	-
Duncan Boyle	31,894	-	-	-	-	31,894	31,894
Sheila McGregor	7,786	-	-	15,680	-	23,466	23,466
Jon Nicholson	33,761	-	-	-	-	33,761	23,584
Helen Nugent	26,630	-	-	-	-	26,630	26,630
Tom Pockett	32,057	-	-	-	176	32,233	-
George Savvides	-	-	-	-	8,660	8,660	8,660
Michelle Tredenick	4,368	-	-	10,212	-	14,580	-
Peter Harmer	1,131,722	80,843	408,995	-	(400,000)	1,221,560	-
Julie Batch	93,174	25,473	118,732	-	-	237,379	-
Nicholas Hawkins	175,000	47,403	245,319	-	(297,722)	170,000	-
Michelle McPherson(3)	448	-	-	-	-	448	448
Mark Milliner	108,072	37,602	221,309	-	(209,204)	157,779	174
Craig Olsen	264,591	29,346	123,026	-	(225,000)	191,963	14,445
Christine Stasi(3)	-	-	-	-	-	-	-
David Watts	28	54,150	-	-	(54,004)	174	174

45

					NET
		SHARES	SHARES	SHARES	MOVEMENT OF
		RECEIVED ON	RECEIVED ON	RECEIVED ON	SHARES DUE	TOTAL SHARES	SHARES HELD
	SHARES HELD	EXERCISE OF	EXERCISE OF	EXERCISE OF	TO OTHER	HELD	NOMINALLY AT
	AT 1 JULY	DARS	EPRS	NARS	CHANGES(1)	AT 30 JUNE	30 JUNE(2)
	Number	Number	Number	Number	Number	Number	Number
NON-EXECUTIVE DIRECTOR WHO CEASED AS KMP(4)
Hugh Fletcher	85,023	-	-	-	887	85,910	38,016

1. Net movement of shares relates to acquisition and disposal transactions by the KMP and their related parties during the year.
2. Shares nominally held are included in the column headed total shares held at 30 June and include those held by the KMP's related parties, inclusive of domestic partner, dependants and entities controlled, jointly controlled or significantly influenced by the KMP.
3. Opening number of shares held represents the balance as at the date of appointment.
4. Information on shares held is disclosed up to the date of cessation.

II. Movements in total number of capital notes held

No KMP had any interest directly or nominally in capital notes during the financial year (2019: nil).

1. Relevant interest of each Director and their related parties in listed securities of the Group in accordance with the Corporations Act 2001

TABLE 19 - HOLDINGS OF SHARES AND CAPITAL NOTES AS AT 30 JUNE 2020

	ORDINARY SHARES		CAPITAL NOTES
	Held directly(1)	Held indirectly(2)	Held directly	Held indirectly
Elizabeth Bryan	-	92,776	-	-
Simon Allen	-	-	-	-
Duncan Boyle	-	31,894	-	-
Sheila McGregor	-	23,466	-	-
Jon Nicholson	10,177	23,584	-	-
Helen Nugent	-	26,630	-	-
Tom Pockett	32,233	-	-	-
George Savvides	-	8,660	-	-
Michelle Tredenick	14,580	-	-	-
Peter Harmer	1,221,560	-	-	-

1. This represents the relevant interest of each Director in ordinary shares issued by the Company, as notified by the Directors to the ASX in accordance with section 205G of the Corporations Act 2001 until the date the financial report was signed. Trading in ordinary shares of the Company is covered by the restrictions which limit the ability of an IAG Director to trade in the securities of the Group where they are in a position to be aware, or are aware, of price sensitive information.
2. These ordinary shares of the Company are held by the Director's related parties, inclusive of entities controlled, jointly controlled or significantly influenced by the Director, as notified by the Director to the ASX in accordance with section 205G of the Corporations Act 2001.

ROUNDING OF AMOUNTS

Unless otherwise stated, amounts in the financial report and Directors' Report have been rounded to the nearest million dollars. The Company is of a kind referred to in the ASIC Corporations Instrument 2016/191 dated 24 March 2016 issued by the Australian Securities and Investments Commission. All rounding has been conducted in accordance with that instrument.

This report meets the remuneration reporting requirements of the Corporations Act 2001 and Accounting Standard AASB 124 Related Party Disclosures. The term remuneration used in this report has the same meaning as compensation as prescribed in AASB 124.

Signed at Sydney this 7th day of August 2020 in accordance with a resolution of the Directors.

Peter Harmer

Director

46 IAG ANNUAL REPORT 2020