Conference Call Transcript - IAG · events across Australia and New Zealand. In fact, the net...

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FINAL TRANSCRIPT

Conference Call Transcript

IAG.AX - Insurance Australia Group Ltd Annual General Meeting

Event Date/Time: Oct 25, 2011 / 11:00PM GMT

FINAL TRANSCRIPT

Oct 25, 2011 / 11:00PM GMT, IAG.AX - Insurance Australia Group Ltd Annual General Meeting

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C O R P O R A T E P A R T I C I P A N T S

Brian Schwartz IAG - Chairman

Mike Wilkins IAG - MD and CEO

Yasmin Allen IAG - Director

Philip Twyman IAG - Director

Peter Bush IAG - Director

Richard Talbot IAG - Director

C O N F E R E N C E C A L L P A R T I C I P A N T S

Jack Tilburn Shareholder

Mrs Cook Shareholder

Joe Nagey Shareholder

Ross Green Shareholder

Peter Starr Shareholder

Les Goldman Australian Shareholders' Association

Brian Gates Shareholder

Gregory Simone Shareholder

Reginald Lobb Shareholder

David Jackson Australian Shareholders' Association

Katherine Davney Shareholder

Henry Kincaid Shareholder

Philip Baxter Shareholder

Wendy Conlan Finance Sector Union - National Insurance Enterprise Council President

Josephine Wiseman Shareholder

Glen Wall Shareholder

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T R A N S C R I P T

Editor

(Video playing)

Brian Schwartz - IAG - Chairman

Good morning ladies and gentlemen and welcome to Insurance Australia Group's AGM. My name is Brian Schwartz. I'm the Chairman of Insurance Australia Group and in accordance with the Company's constitution I'm the Chairman of this meeting.

I trust the video we've just played has given you a broader understanding of our business and a sense of the direction in which we are taking the Group.

Throughout our meeting today we'll be touching on many of the themes presented in the video and I look forward to discussing these with you. It's past the appointed time. The Company Secretary has informed me that a quorum is present so I declare the meeting open.

On stage with me from my far left are non-executive directors, Hugh Fletcher and Anna Hynes, our Chief Executive and Managing Director, Mike Wilkins, our Group General Counsel and Company Secretary, Chris Bertuch, non-executive directors, Yasmin Allen, Philip Twyman and Peter Bush. Phillip Colebatch, a non-executive director, is unable to attend today's meeting due to a long standing commitment overseas and he

has sent his sincere apologies for his absence. Mr Brian Greig, sitting in front, representing the Company's auditor, KPMG, is present, as are members of IAG's senior executive team. I'd also like to welcome those shareholders viewing this meeting via the webcast. There are some housekeeping matters that I need to mention. As a courtesy to all attending today's AGM, I request that all mobile phones are

either turned off or set to silent mode for the duration of the meeting. This year we will again be using on line voting technology at the AGM. Shareholders, corporate representatives and proxy holders attending the

meeting were provided with a key pad and a data card when completing the meeting registration process. The key pad will be used to record your voting intentions on each item of business put to the meeting. An instruction slide will be shown when you are requested to vote to assist you in the process and staff will also be available to assist shareholders, if required, when it comes time to vote on resolutions before today's meeting.

For those unable to remain for the duration of this meeting, to vote on each resolution you will be able to register your voting intentions on a voting card at the desk located just outside the auditorium as you leave the meeting.

As I am one of the directors seeking re-election at the AGM please note that the Board has nominated Yasmin Allen, the Chairman of the Nomination, Remuneration and Sustainability Committee to act as Chairman of the meeting whilst Resolution 1 is dealt with.

For the first time this year we included, with our notice of meeting, a form providing shareholders with the opportunity to send questions to the Company and our auditor in advance of the AGM. As the shareholders of IAG your views are important to us and we have taken this initiative to

promote shareholder participation. We received questions and comments from around 360 shareholders and I thank all of those shareholders who have taken the time to write in.

We have sought to respond to as many of those questions as we can today in the addresses to be delivered by our Chief Executive, Mike Wilkins, by Yasmin Allen and myself. We've also published responses to the most frequently asked questions on our website, so please feel free to have a look there. We are, of course, happy to take further questions or provide further responses when we move to the resolutions to be put to shareholders today.

I now declare the polls to be open.

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Before we commence the formal business of the meeting, I would like to start by providing a brief overview of the Group's performance in the

2011 financial year. I will then ask our Chief Executive Officer to provide a more detailed review of our operational performance and strategy and an update on the Group's outlook for the current year.

2011 financial year was without doubt a challenging year for the entire insurance industry. Against this background I am therefore pleased to report that IAG's performance improved across its key financial metrics during the year. Revenue measured as gross written premium increased by some 3.4% to AUD8.1 billion. Our insurance profit was up 34% to AUD660 million and net profit after tax rose significantly from last year's

AUD91 million, to AUD250 million. The Group achieved these results notwithstanding that we experienced the most costly year on record for claims due to a number of natural peril

events across Australia and New Zealand. In fact, the net claims cost of these events were AUD610 million which was AUD175 million more than we had factored in to our pricing at the beginning of the year. We also incurred AUD83 million in additional reinsurance costs as a direct result of this peril activity.

Our ability to show improved results is testament to the strength and management of IAG and shows the actions we have taken over the past three years have created a much more robust group. We've made great progress but we know that we have more to do and we remain focused on

continuing to build on the platform we have created. The business in our home markets of Australia and New Zealand, which make up more than 90% of the Group's revenue, performed well. In

Australia our direct insurance business which operates under brands including NRMA, SGIC and SGIO and through a distribution joint venture arrangement, RACV Insurance delivered a strong performance. Our intermediated insurance business, CGU, continued to improve. This was achieved despite these businesses having to respond to some of the worst storm events on record.

Meanwhile, a series of earthquakes and aftershocks in New Zealand affected the reported profit of our business there but its underlying performance improved.

I'm proud of how our people, many of whom were personally affected by the natural perils, assisted our customers. I'm also pleased to say, our prudent reinsurance program demonstrated its worth by materially reducing the financial impact of these events on the Group.

Turning to UK, we had challenges of a different nature in that market as bodily injury claim inflation continued to affect the local industry. On the back of this, our UK business reported a loss for the year. However the actions we have taken resulted in an encouraging improvement in the

second half. My recent visits to the business in the UK have reinforced my confidence that we now have the right team and are pursuing the right strategy for

this business. We expect it to move break even in the 2012 financial year. Our Asian division achieved some significant milestones. We continued to expand our Indian joint venture and recently announced the

acquisition of a strategic interest in a general insurer in China. Once this is complete, IAG will have footholds in two of the fastest growing insurance markets in the world, India and China, which complement our existing businesses in Thailand and Malaysia.

On capital and dividends the Group continues to hold a level of capital above our long term benchmark. We believe it is prudent to have this capital buffer given the current volatility in global financial markets, and as we work through the implications of our regulator's current review of the industry's capital requirements.

At the end of the 2011 financial year we held 1.58 times the level of capital required by our regulator. This compares with 1.8 times at 31 December 2010. The movement during the period reflects the temporary impact of severe natural peril activity and specifically the Christchurch

earthquakes on gross balance sheet values and reinsurance costs. We expect this position to unwind as claims are settled, reinsurance recoveries are received and pricing increases are earned. We maintained very

strong ratings from Standard and Poor's with AA Minus financial ratings for each of our key wholly owned insurers, and a fully franked dividend of AUD0. 7 cents per share was paid to shareholders earlier this month, bringing the total dividend for the year to AUD0.16 cents per share, a 23% increase over last year.

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We decided to suspend the dividend reinvestment plan in respect of the final dividend. We took this decision after due consideration of the interests of all shareholders because for some time now the DLP has been calculated without a discount and the shares were brought on market to

meet DLP requirements. We are aware that some shareholders prefer a dividend reinvestment plan and we are committed to reviewing its operation each half year.

The Board and management team worked closely during the year to agree a new set of strategic priorities for the Group which were announced in June. While our overall corporate strategy has not changed, we have reset our priorities to build on the solid platform created by management over the past few years. Our emphasis is now on accelerating profitable growth in Australia and New Zealand, expanding our footprint in Asia,

while also restoring profitability in the UK as quickly as possible. We are confident that these reset strategy priorities will deliver further improvement in our top and bottom line performance in the 2012 financial

year. One of the resolutions you've been asked to vote on today is to adopt IAG's Remuneration Report. We know executive remuneration is a topic of

interest in the broader community and shareholders have a legitimate interest in our remuneration policies and outcomes. The Board is confident that IAG's remuneration structure is appropriately designed to achieve alignment between management interests and those of our shareholders. Reward superior performance and the performance hurdles are set high and ensure we can attract and retain the right people.

Yasmin Allen, the Chairman of our Nomination Remuneration & Sustainability Committee will speak to you in more detail about our approach to remuneration when we get to Resolution 6, after which you will be invited to ask questions about the Remuneration Report.

On the subject of diversity, we remain very committed to constantly strengthening our culture and one area to which we've paid particular attention during the year was enhancing the diversity of our workforce. We firmly believe that to drive the future success of the Company, we

need to build a workplace where we respect and value the different backgrounds and experiences of our people and harness the business benefits that diversity gives and perspectives bring.

At IAG we're concentrating on improving gender, age and ethnic diversity. Improving these areas can build competitive advantage by ensuring we are more closely aligned with our customers.

One early goal we set last year was to increase the number of women in senior management positions to one-third by 2015. I'm pleased to report as a result of initiatives underway this number has again increased during the year from 27% to 28%.

From a regulatory perspective we are participating in a number of reviews and parliamentary inquiries to help shape the future of our industry and improve the resilience of our communities to natural disasters. We take our leadership role of these matters very seriously. Our CEO will provide further detail on this shortly.

Before closing, I'd like to take this opportunity to thank the Directors for their commitment and valuable contribution and insights they provided throughout the year. During the year we welcomed a new Board Member, Peter Bush, whose experience expertise compliments the skill set of

our other Directors. We regularly seek independent advice on our effectiveness and consider the size and composition of the Board annually. These reviews have

satisfied us that the Board is the right size and collectively has the relevant experience, knowledge, diversity and skills required for the Company, taking into account its current size, its market position, complexity and strategic focus.

I'd also like to take this opportunity to thank our Chief Executive and his management team who have led the Group through this challenging year, as well as each and every employee for the important role that they play every day and you our shareholders for your ongoing support.

In closing, 2011 was a challenging year, but one in which we've demonstrated that the actions we have taken fundamentally strengthened the business. We have a talented management team who are keenly focused on delivering for shareholders. We expect our financial performance to improve in the current year and this is reflected in our guidance.

I now invite Mike Wilkins to provide some more detail on the operational and financial performance of the Group. Thank you Mike. Thank you.

Mike Wilkins - IAG - MD and CEO

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Thank you Brian and good morning ladies and gentlemen and I'd like to also extend my welcome to you here today and thank you for attending our AGM. As the Chairman said, IAG's results improved during the 2011 financial year. This is a pleasing outcome, given that it was achieved in a year that

was characterized by a significant number of natural perils. It demonstrates that the actions that we've taken over the past three years since we reset our strategic priorities have fundamentally strengthened the business and we now have a solid platform from which we can pursue profitable growth.

Before discussing the financial results in more detail, I thought it worthwhile to highlight some of the Group's achievements since we reset our strategy in July of 2008.

We set four core strategic priorities, all designed to improve the financial performance of the Group; first, to improve the performance in our home markets in Australia and New Zealand. Over the past three years, the collective underlying insurance margin of these businesses has

improved significantly. We've also made pleasing progress against our second priority, to pursue selective general insurance growth opportunities.

In Asia, we've launched a new general insurance joint venture in India which is in an ideal position to take advantage of the strong growth evident in that market. We've also increased our holding in our Malaysian joint venture from 30% to 49% and more recently, we announced that we've agreed to invest in a joint venture in China.

The final priorities were to move to a devolved model which was completed by the end of calendar 2008 and to drive operational performance and execution right across the Group.

We now have end to end business aligned around our customers, brands and markets, which means accountability and responsibility are closer to the end consumer of our products. We've also achieved our targeted AUD130 million in annual cost savings with embedded return on risk based capital as our portfolio management measure and we've invested in building further capability into our workforce.

Now I should add that we've had some disappointments along the way, notably, the poor performance of the UK business, but we are confident that our remediation plan will restore profitability to this business.

So when we look at all of that on balance, I'm very pleased with what the Group's achieved in that relatively short timeframe.

Now looking specifically at our performance for the 2011 financial year. As you can see gross written premium grew by 3.4% to AUD8.1 billion when compared with the previous year. When you exclude the effect of foreign exchange movements, the growth was higher at 4.8% and this was at the upper end of our 3% to 5% guidance range.

Our insurance profit represented an insurance margin of 9.1%, up from 7% in the previous year. This was within our guidance of 8% to 10% and that was the guidance that we provided in February 2011, although it was lower than the expectations that we held for the business at the outset of

the financial year and the Group's net profit after tax was AUD250 million up from last year's AUD91 million. These are sound results, particularly when you consider the extremely challenging conditions in which we were operating.

Both Australia and New Zealand experienced an unprecedented number of natural peril events during the year. Australia had some of its wettest months on record with events including tropical cyclones Yasi, Bianca and Tasha and severe rain and storms across Queensland, New South Wales and Victoria.

In New Zealand, three major earthquakes and many aftershocks hit the region around Christchurch and the country also experienced a severe countrywide snowstorm in September 2010. The related claim costs from all of these events totalled AUD610 million which was more than 30% higher than the previous year and AUD175 million above our allowances.

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There's also been a flow-on effect to our reinsurance costs. When combined, these costs reduced our insurance profit by around AUD260 million compared with our expectations at the beginning of the year. While this cost was high, it would have been much higher had it not been for our

reinsurance program. Reinsurance is the insurance that we buy to protect IAG against large and catastrophic losses and it's a critical part of our approach to capital and risk management. The worth of this cover was fully demonstrated during the year, as it significantly capped our natural peril claim costs which, without reinsurance, would have been in the billions of dollars.

Ahead of the renewal of our catastrophe reinsurance cover on 1 January 2012, the Group's current maximum exposure to a next event is approximately AUD200 million. This is in excess of the position disclosed at 30 June 2011, owing to the development of prior period events

which has further utilized existing covers. Residual protection under our aggregate reinsurance cover remains of the order of AUD25 million. When we renew our catastrophe reinsurance cover from January next year, we'll aim to purchase similar components as we had this year, but we

expect the cost to be higher as reinsurers increase premiums to recoup their own losses. This has implications for our own premiums, as these costs will have to be passed on to our customers.

On a final note on this subject, I'd like to publicly acknowledge the exceptional dedication of our people to helping our customers in the wake of these catastrophes. In my experience, it's been a very, very significant effort and one that I'm very proud of our people and what they've been able to do.

Turning now to the performance of our operating divisions. You can see on this slide that our Australian and New Zealand businesses represent around 90% of the Group's gross written premiums. Asia represents around 3% and the UK around 7%.

Our businesses in our home markets of Australia and New Zealand collectively increased revenue and improved underlying profitability and delivered a very solid insurance margin of almost 13%.

Our largest business, direct business in Australia, achieved strong revenue growth and an insurance margin of 19.5%.

These improved results reflect a tireless focus on customers, including the launch of new products and services and a major brand campaign. Tight underwriting and cost controls and higher reserve releases also contributed to the result.

Our Australian intermediated business, CGU, grew gross written premium for the first time in some years, reflecting better risk selection, rate increases and acquisitive growth. CGU announced its acquisition of HBF's general insurance business during the year, which is expected to add more than AUD100 million of revenue annually and will enable us to expand our distribution channels and presence in Western Australia.

The insurance profit of our New Zealand business was affected by the considerable claim costs and reinsurance expense arising from the Christchurch earthquakes. This saw the headline insurance margin reduced from 14.7% last year to 0.4% of 1% this year, but the underlying

performance of our business in New Zealand continued to improve. In Asia we've made pleasing progress. Our established businesses in Thailand and Malaysia continued to produce solid results and we expanded

the launch of our joint venture in India, SBI General. We also took steps to realize our long held ambition to enter China's general insurance market with our decision in August of 2011 to acquire a

20% strategic interest in Bohai Property Insurance which we expect to complete early in the 2012 calendar year. We're now pursuing additional growth opportunities in the markets in which we already have a presence, as well as other Asian markets.

Our UK operation reported an insurance loss of AUD181 million for the year. While this represents an improvement from last year, the result is still disappointing. It reflects the ongoing high level of bodily injury claim inflation in the UK market. We've already undertaken significant

action to restore profitability to the UK business and we relocated Ian Foy there to lead a new management team which has now accelerated this program of initiatives. We've achieved rate increases of up to 20% across the private motor book and we're implementing further significant rate increases across the broad portfolio. We've exited unprofitable broker relationships. We've stopped writing externally sourced aggregator private

motor business and we continue to exit other poorly performing businesses. We've also taken out additional reinsurance protection. We remain confident that the UK business will move towards break even in the 2012 financial year. We've also had positive developments with

the UK Government's announcement that it plans to ban referral fees and to regulate contingency fees charged by lawyers.

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Turning now to capital dividends and investments. As the chairman mentioned earlier, IEGs financial position remains strong. At the 30 June 2011 the Group held a level of capital 1.85 times the minimum required by our industry regulator, which remains above our long term internal

benchmark. As part of our usual capital management program, we've also signalled today that we're considering issuing at least 150 million New Zealand dollars of unsecured subordinated bonds to the New Zealand public.

This will provide additional flexibility in managing the Group's future refinancing requirements, one of which is the potential buy back of the reset preference shares which we're voting on later in the meeting. Return on equity continued to increase, as did dividends paid to shareholders.

Our investment portfolio, which had funds of nearly 12 billion dollars at the 30 June 2011, achieved a sound investment performance during the year. We continue to pursue a conservative investment strategy with a high quality investment mix. This investment approach is important in managing the impact of the current global volatility in financial markets on our investment returns.

We believe our non-financial performance is as important as our financial performance, as it measures the ability of our organization to continue delivering long returns over the longer term. I've highlighted on this slide some key indicators of how we've performed and full details of this can

be accessed on our website. Employee engagement across the Group was high and continues to exceed our survey provide as a benchmark for global financial services

companies. We're also very pleased with the strength of our customer retention and satisfaction measures across our key businesses. Our community investment increased as we continue to invest in opportunities that align with the businesses priority of helping to build safer communities. For example, in Australia, NRMA Insurance recently signed on as the major corporate supporter of the New South Wales State

Emergency Service. From an environmental perspective, I'm pleased to report that we've reduced the Group's Co2 emissions, supporting our goal to become carbon

neutral by the end of the 2012 calendar year. All of our efforts in these areas continue to be recognized externally, with IAG ranking well in all key global sustainability indices.

Ladies and gentlemen, the catastrophes of the past year have provided a stark reminder of the critical role the general insurance industry plays in the economic recovery of affected communities. Our businesses alone have received more than 150,000 claims related to the natural peril events in Australia and New Zealand since September 2010. These events have also demonstrated that more needs to be done to make our communities

resilient to natural perils and IAG's playing an active role in this. In Australia the focus has been on flood, which is not universally covered by insurance. While the significant majority of related insurance claims

are being paid -- and in IAG's case more than 90% -- these events have posed substantial challenges for the industry and its customers as there are a lot of people in high risk areas without appropriate cover. One of the reasons for the inability of most insurers to offer flood insurance products in the affected States is that adequate flood mapping data hasn't been made available by local governments and planning authorities.

Insurers can't responsibly underwrite a risk without understanding the extent of that risk. Equally, it would be unsustainable for us to pay claims that are not covered by a policy as we've not charged a premium for them and we don't have reinsurance to cover them. Our businesses have

committed to expand flood cover during 2012 as more flood mapping data is now becoming available. Having said that, more insurance products won't prevent floods from reoccurring. Insurers don't cause flood damage. The root causes are poor

planning and zoning decisions, inappropriate building standards and a lack of resolve in mitigation investments. Over the last four years, Government budgets for mitigation works have averaged just over 27 million dollars annually, while around six billion dollars has been spent on recovery and rebuilding. Clearly this is unsustainable, but the good news is that the Government agrees with this and has indicated a willingness

to review this situation. In New Zealand the focus has been on the earthquake recovery. To date our businesses have paid out over half a billion dollars in claims related

to the earthquakes. We've also been actively involved in the rebuild of Christchurch and we're contributing to discussions around prudential regulation, reinsurance and the capital requirements of the local New Zealand industry.

Now to the future. Before addressing the outlook for 2012, I'd like to recap on our revised strategic priorities for the Group which we announced in June of this year. These priorities are to accelerate profitable growth in our home markets of Australia and New Zealand, to boost our Asian footprint and we've a new goal for our Asian division to contribute 10% of the Group's GWP by 2016 and that's up from less than 4% currently

and to restore profitability to the UK business.

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These priorities involve taking on a more growth-oriented stance. However -- and this is important -- I should stress that we're not about to forsake the improved disciplines that we've built into the business over the past three years. Rather, we want to capitalize on those disciplines to

further our longer term aspirations for the Group. We've set clear initiatives to deliver on the new strategic priorities and we've made early progress against them. In our Australia Direct business

we'll increase the value of our existing customer base and attract new customers by using insights to meet evolving customer needs. We're continuing the turnaround in CGU by focusing on active portfolio management and underwriting expertise, sales-lead relationship based accounts management and customer and market insights.

In New Zealand we continue to build and maintain disciplined insurance skills across our business. In Asia we'll reach our new growth target in a number of ways, including growing organically and through acquisitions in both the markets in which we already have a presence and by entering

new markets. Finally, in the UK, we'll continue to work towards restoring profitability as quickly as possible. In the first few months of the 2012 financial year we've recorded encouraging gross written premium growth and we've experienced a period of

relatively benign natural peril activity. However our results do also include the adverse impact of volatile investment markets over the course of that first quarter.

The group remains on track to deliver its full year guidance of an improved insurance margin of 10 to 12% and gross written premium growth of 6 to 9%. Our guidance is, of course, subject to the usual caveats which are listed on this slide.

So in summary, we've delivered a sound performance in what's been an extremely challenging year. I'm proud of the Group's achievements and of the people right across our organization, all of whom showed exceptional commitment in what's been a tough year. I'm also confident that we've got the right strategy to deliver further improvements in the coming year.

Finally ladies and gentlemen, I'd like to thank you, our shareholders, for your ongoing support of our efforts. Thank you very much.


Thank you Mike and thank you Chris for passing me my glasses, otherwise I was going to be lost. There are seven items of business before the

Company's annual general meeting this morning and these are set out in the Notice of Meeting. Six of these are to be voted on at today's meeting. The only item of business to come before the meeting today will be those specified in the Notice of Meeting. No notice of other business has been

validly or duly given by shareholders pursuant to the Company's constitution or the Corporation's Act. Shareholders here today will have a reasonable opportunity to ask questions about and make comments on the business of the meeting and the management of the Company and to ask questions of the auditor's representative at today's meeting.

Questions to the auditor are limited to the matters specified in the Corporation's Act. I ask speakers to confine their questions and comments to matters that are relevant to the business of the meeting and to the particular resolutions that are being discussed during the meeting.

To allow all shareholders a reasonable opportunity to be heard, I ask that speakers restrict themselves to no more than two questions or comments at any one appearance at the microphone. I draw shareholders attention to the fact that the laws of defamation apply to statements made at today's

meeting. Please ensure that any statement you make is supported by facts and that it is otherwise justified. The purpose of the AGM is to discuss the matters of business set out in the Notice of Meeting and it is not the time or place to air complaints

about individual matters. If you do have questions of this kind, please raise them with the staff at the information desk that has been set up in the foyer to assist you. There are two microphones stationed in the auditorium. Anyone wishing to speak should, when advised that the floor is open for question, move to one of the microphones and take their turn at the queue. Only shareholders, corporate representatives and proxy holders are entitled to speak on the business before the meeting -- that is persons who were issued with a keypad and data card or red non-voting card when registering for this

AGM. Please show your keypad or red non-voting card to the microphone attendant to establish that you're entitled to speak.

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I remind speakers that I may give priority to a person who wishes to address the meeting for the first time. A speaker wishing to speak more than once may rejoin the queue for another turn. I will generally take comments and questions from each microphone in rotation. When you're next in

the queue, the attendant at the microphone will introduce you. Before we move to the business of the meeting, I confirm that the Minutes of the last Annual General Meeting of shareholders, held on the 22

October 2010, have been approved and signed by me as a chairman of that meeting in accordance with the provisions of the Corporation's Act. The Minutes were previously published on IAG's website and are available for inspection by shareholders at the information desk in the foyer.

The notice convening this meeting has been sent to all shareholders. Shareholders have also had the opportunity to view the notice of the Company's website. Unless there are any objections, I propose to proceed on the basis that the notice is taken as having been read to the meeting.

As there are no objections, the Notice of Meeting is taken to have been read. We will now move to the first item of business. This item is not subject to a vote and therefore does not require the use of the keypad technology.

Insurance Australia Group Limited's financial statements for the year ended 30 June 2011, the director statement and report and the auditor's report and the financial statements are before the meeting. A copy of these statements and reports was published in the 2011 Annual Report and was sent to those shareholders requesting printed copies. An email with a link to the Annual Report to the Company website was sent to a further

145,000 shareholders who requested it. The purpose of this agenda item is to provide an opportunity for shareholders to ask questions and make comments about the Company's

performance, operations and management. As I noted earlier the Company's auditor KPMG represented at today's meeting by Mr Brian Greig. Mr Greig is available to respond to questions relevant to the conduct of the audit of the Company's financial statements, the preparation and

content of the audit report, the accounting policies adopted by the Company in relation to the preparation of financial statements and the independence of the auditor in relation to the conduct of the audit.

In accordance with the Corporations Act shareholders were asked to submit written questions of the auditor. One relevant question was received prior to today's meeting and a response has been prepared by KPMG and sent to the shareholder. We've included the question and KPMG's reply with our responses on the AGM website. All questions to Mr Greig should in the first instance be addressed to me as Chairman and if appropriate

I will request Mr Greig to answer to the meeting. Now if anyone wishes to speak in relation to this item of business please make your way towards the microphone.

Q U E S T I O N A N D A N S W E R

Operator

Chairman, I'd like to introduce Mr Jack Tilburn.

Jack Tilburn - Shareholder

Yes, good morning to Mr Schwartz and the Board and good morning to all my fellow shareholders. Thank you very much. I'll try to be dynamic

and robust again on behalf of shareholders. I think you said Mr Schwartz that there was either two questions or two comments. Well, I'll have a big comment to start with and then one solid

question about auditing. I'd like to say that the annual report is worth eight marks out of 10 to be rewarded. It's got very good font size so that we can see it and read it and it's in good bold black ink. Most reports in Australia are very, very poor indeed but yours goes up again to eight marks out of 10. Also let me say that the annual review is quite good but I'll give it only seven marks out of 10. The matter of the annual report being on

a solid sustainable basis because it has responsible paper choice, it carries ISO 1401 Environmental Certification.

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The other comment I'll like to make. I do think that it's worth one of our shareholders, myself here now on behalf of shareholders, to say we thank you very much for the year's progress, results and performance and we thank the 13,000 staff who are the backbone of the Company. Those are

the very good assets, the people. Now, let me get onto the first big question of money. It's a matter of the money for the auditors. I think it's KPMG company - they're always very

rich in getting money unfortunately for the shareholders. The question is on note 36 page 111. Now note 36, ladies and gentlemen, page 111 with my eyesight reads remuneration of auditors KPMG. But the IAG has advisory services of taxation services AUD828,000 as against last year AUD839,000 so there was a small decrease of AUD10,000. But that figure by itself, repeat AUD828,000 is a very large figure, just under AUD1

million. Now I'm going to ask you what the hell they do for that large sum of money? Next to it is due diligence, the next line. Due diligence is AUD369,000 but last year Mr Schwartz it was only a minor AUD200,000 on your scale and my scale of paying a auditor who always wants very large sums of money.

So would you kindly explain what is involved in taxation services? Now, ladies and gentlemen, you'll laugh at this. I've been providing the taxation company for 65 or 70 years with my returns and I've never asked them - I've asked them twice what's going on, I never got a good

answer and then I had never employed a taxation agent in 65, 70 years. So I would like you to explain why we have these highly costly advisory services. Thank you.


Thank you Jack and thank you for your comments on the quality of the report. Certainly the team do work hard at it and it's for people like me

and you that need the darker font and the clearer writing so I agree with you and thank the team for doing that. On the audit fees a couple of comments. Firstly, it is important to note that the audit - the auditor and the fees that are paid to the auditor are reviewed each year and are discussed each year and we look to the market to make sure that they are competitive and we're comfortable they are. Interestingly, despite the particular issues that you note, the gross total fees for the year have actually dropped by over AUD1 million, which of course is a positive. But I think much of the question that you relate to is around advisory services and at the very least I'm sure that the due diligence reports are in

relation to the acquisitions that we've done during the year in relation to China, in relation to some acquisitions in Australia and also elsewhere in the world where we look. I would assume that the tax are pretty much in relation - Mike can you expand on the tax services specifically? I think they're consistent with what they have been in the past. I don't think there's anything in particular there.


Good morning Mr Tilburn. I think that a lot of the taxation services are standard activities looking to make sure that we are compliant with legislation and regulations in a number of the countries in which we're operating, but also making sure that we are as efficiently structured as we

possibly can be. Given that we operate in a number of countries it's important to make sure that cross border arrangements are appropriately dealt with and noted and KPMG are a major supplier to us in terms of ensuring all of that.

Mrs Cook - Shareholder

(Inaudible - microphone inaccessible) comment because my father, my late father was in charge of all the infrastructure of Belgium and that

included the fact that you couldn't (inaudible - microphone inaccessible) the pollution on any industry going through the atmosphere. You had to (inaudible - microphone inaccessible) and if the world didn't do this by another century it would be --


Thank you Mrs Cook. I think can we stick just to the business at hand at the moment which is the financial statements and we'd be happy to hear at the appropriate time from you. Thank you. But we have heard and thank you. I go to microphone one.

Operator

Chairman, I'd like to introduce Mr Joe Nagey.

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Thank you. Welcome Mr Nagey.

Joe Nagey - Shareholder

Thank you. Mr Chairman, I'd like to second Jack Tilburn's comments about management. Yesterday I had the pleasure of meeting Simon Phibbs from your department and in my previous occupation as a credit analyst I can confirm that your management is by all indications very strong and that's good.

However, my questions concern mainly the Board and the first one concerns - and this is going to be happening more and more often - going overseas to find other business. So my question is what has the audit risk management and compliance committee learned from its UK fiascos?

Secondly, on page eight why are the financial management experiences of directors - and this is not a personal comment by the way - Philip Twyman, Yasmin Allen and so forth signified or implied as satisfactory to discharge their responsibilities - and this is the quote from the financial

statements. That sound risk management and compliance frameworks are in place to identify, assess and manage risks when the IAG's risk appetite determined by the Board. Now I've looked and read those notes very carefully several times and the only director that comes up there that appears to have risk management skills is Yasmin Allen. So my question's very pointed to you as a risk officer, I would like to know what

experience they have in assessing risk? Thank you very much.


Thank you Mr Nagey. On your first question which is in relation to - thank you for your comments on management and we'd agree with you on those. In relation to UK I think it's fair to say that as you would imagine an awful lot of time has been spent reflecting on the UK and the lessons

that are to be learnt from the UK and there's a long list. We have a lot that we can and have learnt from it. I think fundamentally at the end of the day what we've done in the UK which are part of those learning's is we've put in place effectively a new management team and we're comfortable that we now have that management team in place.

I think the other question of the UK relative to perhaps some of the other markets that we're now looking at led us to ask ourselves the question what do we have specifically to offer in those markets that's different perhaps to what the local market has. I think that's a valuable lesson for us

as well, so when you do go into those markets have your own management team, that there's a strong management team in place and make sure that you have something specific to add. In the UK with hindsight I think the answer is we probably didn't have enough to add, whereas in Asia provided we have people in the right positions we do have something quite specific to add and one of the things wherever we invest in Asia that

we're insisting on is having our people in the key underwriting risk type areas. So those are some of the lessons. I think some of the other things that we've learnt in those markets is about the brokers that we've dealt with, the kind of business that we've written getting caught up I think in pricing in a market where pricing was the key issue, cutting of pricing. I think the other thing in the UK that will now help us - and I'm answering

a slightly different question, but Mike mentioned that the government in the UK have also - are looking to perhaps change the way referrals are done and that too will change. That wasn't as evident when we started and that's stuff that grew along the way. But in short the answer to your question is we've learnt a lot and we've actually implemented those learning's along the way.

In relation to the audit committee, I'm sure that Yasmin would be delighted to learn that you're the one - that she's the one that you've identified as having all the skills. But I think it's fair to say that we are very comfortable with the team that we have there and indeed the depth of skills that

they bring. Philip Twyman has been in the industry for his whole career as both a CEO and at the finance director level and he brings an enormous amount of skill and industry knowledge and understanding of the risk of the industry. Hugh Fletcher as well has been involved with the Company now for many years, has a background in the broader business world as well as in as I say our business and comes with a knowledge

not just of the industry and the risk attaching to the industry but to broader business. So it is an issue that I know they discuss at every audit and risk meeting what those risks are and the skills that we brought in not just on the Board committee but also outside of that, gives us comfort that we know what the risks are. Sometimes they're a bit difficult to manage because they're not always predictable but I am comfortable and the

Board is comfortable that we do have the skills in that committee. Thank you. I think we'll go back to two.

Operator

Chairman, I would like to introduce Mr Ross Green. Thank you.

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Ross Green - Shareholder

Thank you Mr Chairman. Just following on from Jack Tilburn's question regarding KPMG, the services that they provide to IAG. Do you call quotations for those services from other organizations that you deal in that particular matters?


The short answer is we don't on every matter every time, because some are for longer term type of arrangements with the Auditor and for some we do. So we certainly are aware of the market and what the fees that are payable in the market are, yes.

Ross Green - Shareholder

Because you know as insurance is very competitive, I for one have just signed up my car insurance with Allianz because IAG couldn't compete anywhere near the particular fees that are charged. I think in a competitive environment that we have today, then I believe the Board should exercise their right to call quotations for these services which are a very - an amount of money as Jack alluded to that the Board has to pay.


Thank you, Mr Green. I think one of the things that we learned in the UK is that the moment you focus purely on price you run down a certain track. I think ultimately it does come down to a lot more than price. It comes down to risk and being able to assess and understand the risk,

understand the industry, understand the Company. We do feel that in KPMG we have that experience and those skills. That doesn't mean that we don't have animated discussions on fees and challenge the fees. But I think it's one of those parts of the business where purely to buy those services based on price may leave us without an optimal service. I am sorry that you've gone to Allianz, hopefully we can win you back some

time.

Operator

Mr Chairman, I'd like to introduce, Mr Peter Starr.

Peter Starr - Shareholder

Good morning, Mr Chairman, Brian Schwartz, how are you?


Thank you.


Good morning, Mike, CEO, how are you? You are probably wondering what's coming, it's all right. Good morning ladies and gentlemen and

fellow shareholders, my name is Peter Starr I'm here representing myself also I hold quite a number of proxies for [Di MacInerny] Investments [Dire] Superannuation Fund and Victoria [Ferugia]. I've been a shareholder from day one so I'd like to think that, I'd like to take a little bit of time and speak this morning, if that's all right with you, Mr Chairman.

First of all I'd like to say that on behalf of you, Mike, and certainly your secretary Larinda, Gareth Walters and Peter, if I get the surname wrong, I'll spell it, Plustwik, Plustwik, is that it? On behalf of Ms Ferugia was pleased to get the letter and in relation to that. You may want to make a

comment in relation to what we talked about some weeks ago in relation to especially policy holders who are 35 years in the Group that's something the Board needs to think about and I hope it will be raised.

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Secondly, I noticed the investment of AUD100 million into China and following on what the gentleman Joe here said, you know I've been an avid speaker against what the debacle went on in the UK as you well know, Brian, and the previous chairman, Mr Strong knows too. Is that you

know I've seen the share price go from AUD6.40 down to AUD2.85 and I'm not blaming, because that's outside factors that have gone on in the (inaudible) back over the AUD3.00. Given that we raised capital at AUD3.00 and I participated along with all the people I represented. So what I question now comes about that AUD100 million investment in China.

That AUD100 million are we going to add, going to buy, I want to know specifics about that and also the UK business I hope it does return to a break even. You know I'll be a very happy shareholder along with the other people I represent because I've had to listen to that excuse and it

wears a bit thin, if I'm entitled to say that and I think I've earned that right. I probably express that for a number of shareholders here, not just for myself. So I'd like to talk about that AUD100 million that's going into

China and I have some other things to say but I'll let other people speak and come back.


Thank you, thanks, Mr Starr. I think, perhaps on China and then I'll ask Mike to comment on his meeting with you. The answer is that our investment in China at the moment is for 20% of BOHAI which is the maximum that we can invest in that market place. In a perfect world, and

all things being equal and if things go well, the answer is we would like to increase that holding if permitted to do so by local regulation. But at this point in time that's not on the cards. When it is it will be at the then market value. If we've done terribly well at growing the business then it'll be more than we paid today.

But the answer is that as I mentioned earlier from day one in China we have a number of very senior IAG people in very senior positions in that company. So we'll be able to have a good feel on it from day one. So nothing at the moment. On the first matter that you raised, in relation to your client, I'll ask Mike to comment. I am aware of it because Mike and I have spoken about it, and I don't know how many CEOs do meet and talk about specific client issues and indeed learn as I know he has from them. So I think I just say that because I know Mike won't and I think you are going to as well.


Just before maybe Mike speaks, I'd just like to say that it's a credit to the Company when a CEO and there are a number of CEOs who do speak, not only because we hold different shares in a number of organisations, but who are willing to speak and talk to people. David Brady is a good

example another one of the top of my head, I'd just mention. I think that's a credit where the CEO will speak and cares about the decisions. Because that shows to me that the person is switched on and you know--

Unidentified Audience Member

[In the Telstra] --


Yes that's all right, just, yes that's all right.


Mike, would you like to comment?


Thanks, Brian. Thanks, Peter, for your comments, very kind of you and I'll make sure that they're passed on to those staff members that you mentioned as well. I won't speak about the specifics, but will say that you and a couple of other policy holders and shareholders raised what to me

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is a very valid issue. As I've looked into it there is some lack of recognition for the longevity of customers who have been with us for a long time and who have supported us and who have represented very good risks for us.

What that's done is it has prompted us to start a review process around how we reward our most loyal customers whilst at the same times simplifying some of those processes. Because I think over the years we and a number of other insurance companies have actually seen

complications creep in with the best of intentions, I'm sure. But they've crept in. Particularly in our direct insurance business Andy Cornish and his team are looking at that right now. We expect to have something more to say to policy holders round the middle of next year about all of that. But it was a very valid issue that you raised and I was pleased that we were able to deal with it to the satisfaction, I hope, of all parties.


Mike, the client I represented was happy to get the letter and as I said the way you addressed it is professional. I wouldn't expect anything else. I think that's a credit and a credit to the Board to hear that, that we've got a CEO that does that. Just I'll make one quick thing and I'll step down for a while. It's good to see that we've got two ladies on the Board before we get any more things coming out of the--


(Inaudible - microphone inaccessible)


It wasn't my intention to do that. It's just good to see because we're likely to get some politician in Canberra to start legislating that we have got

to have more. I've always believed that and I voted and my group has voted for both of you when you stood for both re-election. So it's good to see that you are still there.


Thank you.

Operator

Mr Chairman, I'd like to introduce Mr Les Goldman.

Les Goldman - Australian Shareholders' Association

Les Goldman from the Australian Shareholders' Association. Look with respect to the UK business it was mentioned today that the UK business should return to a breakeven point. Can shareholders infer from that there shouldn't be any more impairment of the AUD163 million of goodwill that's still left on the balance sheet?


Thank you, Mr Goldman. I think obviously those assessments are made at each half year and if as has been mentioned we do return to breakeven then I assume that would beg he case but clearly that would need to be re-assessed at each half year.


Thank you, Mr Chairman.


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Thank you.

Operator

Mr Chairman, I'd like to introduce Mr Brian Gates.

Brian Gates - Shareholder

Ah yes, good morning, Mr Chairman. Sorry, oh right, sorry, I thought I was. First of all thank you to the customer service section (inaudible) on

their professionalism. Glad to see somebody you can actually talk to face to face these days. Also appreciate the major sponsorship of your state of emergency service. As far as the annual report, the two glaring omissions I seem to have found is the cost of disaster claims, natural disaster claims and of your UK losses on your UK operations. Another problem I have, everybody asks me is what is actually, what do you actually classify as flooding. Because I've had a lot of people give - had tell me about disputes they have had with the insurance companies as far as what is classed as flooding and what's classed inundation. Could

somebody clear that up for us please?


Mr Gates, could I ask you just to clarify the first question. I'm not sure I caught it exactly. You asked about the UK but I wasn't sure of the specific nature of the question, I'm sorry.


Oh right okay there was no mention in the Annual Report about the losses in the UK operation and also the cost of disaster claims?


Of total, not in the UK, total disaster?


Well in the Annual Report, yes.


Yes well I think the number is - I am not sure where but the number is mentioned and from memory I think it's AUD580 million (inaudible)

AUD615, AUD605,what have you got, Mike? AUD620, which is substantially ahead of where we had originally expected at the start of the year. From memory about AUD175 million more than we had originally expected.


Okay.


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In relation to the UK we have disclosed as we have gone along what the write-offs are. I don't have the absolute number now. The loss for the current year though was AUD181 million which was made up of AUD120 million in the first half of the year and an improved, if you can call it

that, less of a loss in the second half of some AUD61 million.


Okay. Flood, Mike? Thanks, Mike.


You explain this one.


Thanks very much, Brian. Flood definition varies from company to company, Mr Gates. It's - it is a vexed issue. We normally regard it, and I've got to say normally regard it, as an overflowing of some form of water course or other man made reservoir as opposed to something that is just a

water runoff occurring. In that area is where you then get quite some difficulty in interpretation. As a result of that yes it does lead to questions and in some cases disputes with policy holders.

The Government is moving and the insurance industry fully supports this, the Government is moving to put a standard definition of flood across the entire insurance industry, which I think will gives people some more certainty around what the definition of flood is. One of the things that I am pleased to say, and if I can be a little immodest about our organisation for the moment, I'm pleased to see that the Government is looking at

accepting our definition of flood as the industry standard definition. However, as I said during my presentation, insurers don't cause floods and unfortunately having a standard definition of floods will not stop

flooding occurring. What we do need to see is far more mitigation impacts. But going a little wider than your question, but we have also committed, as an organisation that all of our policies in Australia will offer flood insurance during the 2012 calendar year, subject to getting the appropriate flood mapping data that we need to be able to assess the risk. So we hope that we're going to see a simplified situation. Unfortunately,

there is no silver bullet in this one.


Actually, the State Emergency Service is on to it at the moment with the flood planning. Thank you.

Operator

Mr Chairman, I'd like to reintroduce Mr Jack Tilburn.


Thank you Mr Brian Schwartz. Ladies and gentlemen, I've got two quite big questions. The first one is a big macro-economics question and the

second one is a micro-economics question. Let's see if Mr Schwartz can help us out and tell us more about our Company. Sir, I refer you to the interest bearing liabilities on note 21, page 83. Interest bearing liabilities are very, very big. We have a debt of AUD1,377

million; also expressed as AUD1.37 billion. This appears a very big heavy weight of debt on our shoulders. So we may pay out interest paid of AUD86 billion, but I don't know that that is the correct and right figure. I couldn't find another one because on AUD1.37 billion I would have thought we would have been shoving out AUD200 million in interest repayments.

Now, the problem is that we have this huge, huge debt. So the question is, to break it down, so what is the IGA (sic) Company plan to diligently and responsibly reduce what I think is a very, very big debt for the Company. Debts, as we all know, if we read the papers and the television, are

giving Europe a second global financial crisis.

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Greece is completely bankrupt. They owe AUD480 billion. Italy is completely bankrupt, but they won't say it. They owe EU2 trillion. Spain is

there. Portugal is there. England is there and the PIGS companies (sic) are there. Ireland is there. So it's very, very bad. So I think that we should be trying to reduce.

Companies seem to, unfortunately, not reduce the way I would think they should. I will couple that with the other micro-economics question please, Mr Schwartz. The analysis of expenses - note 6, page 63. Now, ladies and gentlemen, this is a very intriguing question. I don't know the answer. Note 6, page 63 - the IAG Company has spent on software, research and development costs, I believe, AUD61 million.

This all appears very, very expensive. It is hardly believable. So are we, Mr Brian Schwartz, in competition with my old mate of Apple, Mr Jobs, and Microsoft's Mr Bill Gates? Are we in competition with those two companies for research and development in software? In two years, I

believe, we have spent AUD61 million plus AUD59 million - is AUD120 million, but what is our progress? What are we getting out of it? How is it helping IAG Company?

I understand research and development. People know that in general. Most companies are doing it to help the shareholders and their company progress. So it's over to you. Thank you, Mr Schwartz, Brian, for those two answers.


Thank you, Mr Tilburn. On the first point of interest the number is 86 million, not AUD86 billion. So on the AUD1.3 billion, roughly, of debt the

interest cost is AUD86 million, which is well within, I think, the number that you expected it might be. It is interesting to note that long term liability has actually reduced substantially over the last three years and has been diligently worked on by the team. We think, at that level, that is a reasonable level of liability we have about AUD700 million of that renewing over the coming 18 months. When we talk about some of the other resolutions we will talk about that as well. Our gearing - and Mike has just given me a note - is about 33%, which was in the range of 30% to 40% that we said. So we think that it is at the right level and we continue to manage it.

On the question of IT, it is a lot of money. It sounds like a lot of money. We got a lot of IT systems is the short answer to your question. That AUD61 million is simply the ongoing maintenance of our IT around the world. The reality is it's a never ending need to continue to upgrade to

enable us to deal even more efficiently with our customers or, indeed, with our shareholders. So that is an ongoing spend. Thank you.

Operator

Chairman, I would like to reintroduce Mr Joe Nagey.


Thank you. This comment concerns the China investment. I'm sure most of you would know - especially some of the more experienced people - China is a landmark place for disasters. You're going there for the first time, or there about the first time, so I would expect - and I hope the shareholders would expect - there are going to be some bumps along the way. So my query to you - and I'm pretty sure I'd be very disappointed if

you can't answer this positively - is you've got a strong action plan there that's going to be [monitored] very carefully because I'm sure there will be some problems in China. Almost every country that's gone there, initially, has had some unpleasant experiences there.

The second point is concerns of the comment in your financial statements that IAG, in quotes, posts on its website all investor and media material released to the ASX. One of the things that I'm somewhat critical about you is that when it comes to director nominations, when there are vacancies, you don't seem to get the information out so other people might stand for election. The point probably is this, is this is probably a

monopoly. I'm sticking my neck out on this one, so I'm sure you will belt me back on it. This is probably more for institutions than it is for individuals here; some of whom would probably be a welcome addition to the Board. Of course, there might be some of them that might not be a welcome addition to the Board. Thank you.


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Thank you, Mr Nagey. Hugh, I'm not sure why Mr Nagey looked at you when he spoke about China. You should know, Mr Nagey that amongst other people Mr Fletcher often gives us the same lecture as you've just given us. It is a topic that is squarely on our agenda. We do understand the

difficulties of the China market place. In fact, what management do at every Board meeting - including the one we had yesterday - is they've identified the top 10 issues that they think -

and we agree - need continual looking at. China will certainly be one of those, going forward. So we hear you. On the Directors' nominations, in simple terms Directors can be nominated 55 days prior to the date of the AGM. That is a standard each year. So

once the date of the AGM is known, then people have 55 days prior to that to nominate; and anyone can, and do.

Operator

Chairman, I would like to introduce Mr Gregory Simone.

Gregory Simone - Shareholder

G'day. To you, Chairman Schwartz, firstly, underwriting profit and loss - AUD171 million profit for what I assume to be the 2011-2012 financial year. Does this figure of AUD171 million include a full realization - that is emphasis on those two words - of the damages from the Christchurch earthquake? As you mentioned, Mr Wilkins, in your opening, cyclones Yasi, Bianca and Tasha and the Queensland floods are therefore making

the figure inclusive of any reinsurance bonus from those events. Secondly, in 2000 IAG's independent advisor from Ernst & Young stated in a memorandum sent to members about, and I quote, the business

success of insurance is highly attributable to the good will generated by the Road Service and advocacy functions of association and the ability to cross-sell to association members.

NRMA's Road Service annual report on page 28 points to a downgrade of 8%; roughly AUD13 million plus or minus 100,000 shares, of its investment portfolio in IAG. That was from 19% in 2010 to 11% this past financial year. Doesn't IAG's memorandum with NRMA Motoring Services specifically require NRMA Motoring Services to maintain 29.3 million shares; a holding that currently stands at 16 million shares?

What is the expression of this, which seems to be a clear breach, in the financial reports, and have all contracts drawn up from NRMA since demutualisation with NRMA continue to be met? If so, why not? If not, why not?


Thank you, Mr Simone. That is a lot of questions. I will try and remember some. Hopefully, Mike will as well. I think, on your first question, which is does the AUD171 million include, I think you said, full and complete costs in relation to Christchurch and the floods and other - the answer is yes. They are after reinsurance, so they show the net costs of reinsurance and, obviously, the costs of taking up the cover as well.

So I think if you have a look on the page that you refer to, which is page 39, there are claims expenses of some AUD8.4 billion and then recoveries from the reinsurer of some AUD3.4 billion. So the answer to your question is yes.

In relation to the NRMA and our relationship with the NRMA, the answer is we have a very good relationship with the NRMA. Yes, they did sell down some shares. Yes, it was contrary to what had originally been agreed. I think that if you were to speak to the NRMA, as we have, and as we

regularly do, they took a view on advice that their portfolio was too heavily geared towards one single investment in IAG. So we've had discussions with them, post that event, and we've got comfortable on the logic and on the rationale for it, and equally comfortable

that there are no other areas where there are breaching any of our agreements. I think, contrary to what has been written on the subject, our relationship with them remains very good.

Operator

Chairman, I would like to introduce Reginald Lobb.

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Reginald Lobb - Shareholder

20 years ago I was involved in two particular areas of interests working with disaster welfare in New South Wales. NRMA, as a mutual, were up there, right at the top, in regard to paying out on claims. 20 years ago, 15 years ago I was involved in staff development. NRMA were up there at

the top of their staff training and staff development. There has been comment this morning that some of the vehicle premiums are cheaper elsewhere. There has also been comment - and I think that

is true - there has also been comment about discounts on policies et cetera. Our insurances nearly all fall due within a week. We have received the NRMA renewal statements and offers. Certainly, the premiums have gone up, but there is an amazing variety of options. There are discounts shown on nearly all the policies, which include rental tenancy premiums.

I'm hopeful that the staff in NRMA offices throughout the State are well equipped to work through those issues, because we'll be going into our local NRMA office shortly to work through. We have been told that by virtue of the fact that we have insured a new vehicle with NRMA there

will be discounts, further discounts on all these policies. I hope that works out to be so. I was rather amused to find that one of the policies - our house policy, building policy - we received a new premium suggestion and it had

something to do with pets. Now I gave it to my wife; I said will you have a look at this please? And I said look that might be an idea - we have a goat down the back paddock - and I thought we might be able to insure the goat. I had to move her before I got here today - she's a menace actually - but she does a good job eating all that rubbish.

Now then I found out that - my wife said, no, no, you can't, it's only for cats and dogs, and I said why is NRMA sending out changed policies so that we can insure cats and dogs - which we don't have any; we never will thankfully - and she said, well they're just trying to be competitive.

In summary, there is a great variety of products and I'm just hopeful that those people that are going to advise or that person that will advise us in a day or two, is well equipped to do so, because the complexity is quite large. Thank you.


Mr Lobb perhaps I can answer that question for you. We take a lot of trouble to make sure that our staff are well equipped to help our customers in all facets of their relationship with us. I'm very confident that our people - when you go into your local branch - will be able to help you with

that, and indeed if you'd like to speak to somebody, we have a number of our customer service people outside today that we're happy to also speak with you.

On the product that did include some pet cover, it is an optional inclusion in a new product that we have been offering called Home Plus which goes above our standard home insurance cover and one of the facets - but only one I emphasize - is that we also provide cover for your pets. But there are a number of other valuable benefits that are also in that which our customer service people will be happy to talk to you about.

Having a dog myself, I've got to say, on a standalone basis, I don't think IAG will ever go into just standalone pet insurance, because the vet bills that I have had to pay over the last few years have been pretty significant - and Andy Cornish tells me that he's not sure that I'm a good risk for

Home Plus.


What about goats?

Operator

Chairman, I'd like to introduce Mr David Jackson.

David Jackson - Australian Shareholders' Association

Thank you Mr Chairman. My question actually revolves a little bit around staff, which a couple of people have already mentioned.

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The number of staff is just over 13 million throughout the world with IAG - sorry thousand, I'm sorry, I'm sorry - confused by so many noughts -

and it's gone up from 12,481 in the year, which is about a 4% increase. Your annual review is very useful in this regard because it does show what the staff turnover is by the various divisions and unfortunately it

doesn't make very good reading. For example, the Australian division - which is obviously the largest - the turnover rate is something in the region of 19%. In New Zealand it's something of the order of 15%, 16% and in the UK it has oscillated between 16% and 19%.

Now from my experience in running a company, whenever staff leaves there's an awful costs in re-recruiting new staff. It seems to me that there's something seriously wrong with the IAG's personnel - using the old phrase - policies in that the staff turnover rate is so so high.

I mean I have just calculated quickly; it means if you've got 13,000, over 2000 people will be leaving during the year, in the coming year, and that's a very very large number - one in five almost - more than one in five I mean; one in six; one in four maybe; I don't know.

So that was my first question. Perhaps you could deal with that one first Mr Chairman.


it's a long question and much of what you say of course is correct. It is expensive to continue to have staff turnover at those sorts of levels. Having said that, as you would imagine, something we understand quite deeply and spend a lot of time on - and a large part, in fact our staff

turnover at this specialist level in the organization is about 10% and where we're getting such or much greater turnover is in the call centers. It's very difficult, and in fact the numbers that we have in our call centres are now at or better than the benchmarks that are set. It's very difficult to retain people in the call centres because of the environment that they are in. Having said that, we obviously need the call centres and we have a lot of call centres, but they come with - that's one of the costs of running

major call centres - not just for us but for anybody who runs a call centre.


That probably explains why Mr Chairman if you phone up the claims department you're regularly waiting 15 minutes to actually speak to

somebody. I have had that personal experience, and this was - 15 minutes is still a very long time. It should be like two or three minutes at the most.

So I think there's a serious problem there which is costing the IAG a lot of money and I will be interested to see whether QBE and some of the other insurance companies are having similar problems.

My second question is to do with claims. You mentioned Mr Chairman that I think it's what - they were described as national peril claims were of the order of AUD620 million last year, which was AUD175 million more than the previous - more than your estimate.

On the other hand if you look at the annual summary, the five year summary, you notice that actually the claims that are shown as net claims in the paper there are actually very similar to what they were in the previous year. So actually your claims experience is not that disastrous it would seem to me overall.

Would you like to comment on that?


Mr Jackson our claims were AUD620 million net of reinsurance - sorry, our natural perils claims were AUD620 million net of the reinsurance

recoveries that we had.

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The gross claims cost related to the three earthquake events in Christchurch, the four floods, three cyclones, and a bushfire - which I think I need to throw in as well - were in the billions of dollars, and the Chairman mentioned that previously when he was answering an earlier question, but

our overall claim costs for the year was about AUD8.5 billion, that compared with AUD5.9 billion from the previous year. So the gross costs are much higher, however we practice what we preach and we've had very good reinsurance protection and recoveries from all

of that. So I think that looking at the net claims cost, we have managed our exposures pretty well and reinsurance has protected us, which is why the

comments that you made about the five year summary demonstrate that, but at a gross level we have had significant claims coming from these natural perils - particularly in the last financial year.

I mentioned during my presentation that we had dealt with over 150,000 claims coming from those events in Australia and New Zealand in a nine month period, which was much much higher than we would have expected to have incurred.


But on the other hand, as I said, I mean if you look at that summary, the claims have been flat for four years since 2008.


It's a net figure--


Yes, that's right.


--and as I said, the protections have been provided by our reinsurance, which I think is a very good and very comprehensive program to protect the capital position of the Group.


If I may be allowed just one more question - the gross written premium increase that you are forecasting for 2012 is in the range of 6% to 9% if I heard correctly.


Yes.


Looking again at the five year summary, you haven't achieved that, except in 2007 - anywhere near it. So I'm just wondering whether that estimate is really a good estimate and are all your executives going to be measured by achieving that level of estimate?


It will certainly be one of the measures, yes, and will it be achieved? Mike has given, has commented already that we are still comfortable with the numbers that we have given.

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So the answer remains yes.

Thank you.

Operator

Chairman, I'd like to introduce Mrs Katherine [Davney].

Katherine Davney - Shareholder

Good morning Chairman and fellow shareholders. I wasn't going to come out yet, but I notice people have mentioned about the NRMA and IAG. Now, my husband and I are both members of NRMA and we have had shares since IAG has been de-mutualised. One thing that we have found

that at NRMA meetings people are not aware that insurance is a complete separate identity. I don't know how many of you might have read the business part of The Telegraph this morning, because I'm sure you were all very busy

preparing for today's meeting - in the business comments, the Share Watch - Insurance Australia is down 0.95%, AUD3.12 per share. Comment - for the first time since de-mutualisation more than a decade ago, the NRMA's sitting Board has been re-elected.

Now maybe I'm a little bit slow, but I thought we were re-electing today. As NRMA members we did have to pre-elect our sitting members on the Board of the NRMA. I feel that the time has come that we should be separate from the NRMA brand, MVI - motor vehicle insurance - I think that IAG has grown to such a state they should be able to take accolades on their own shoulders and they should also be able to take any bats on their

shoulders. Now I would assume that whoever wrote this has got it wrong and they really mean the NRMA, but you - after all this time, you're still getting

people who should be quite educated, making this sort of mistake, and I do feel we've grown up enough to be able to take the bats as well as the accolades on our shoulders.


Thank you. I think you're correct, and if that's what they have said, they did get it wrong. The result that they referred to was the NRMA

Motoring and Services election, and that they did announce this morning that the existing board had been re-elected. So that is correct. I think in relation to our brand it's fair to say that the NRMA brand -- insurance brand is an enormously valuable brand; far too valuable for us not to trade with that brand. I think that it's quite remarkable given what you describe, and given the potential for that to happen, that there isn't that much confusion in the marketplace. I think people understand clearly that IAGs brand is NRMA Insurance, and NRMA Motoring and Services is purely the motoring

services and other businesses. Having said that our brand as recently as yesterday is on the agenda continually as well, and we continue to explore what's right in which

marketplace. But I think it's fair to say that the strong view of management and the Board is that the NRMA brand is a very good brand that we will continue to trade under.

Operator

Chairman, I'd like to introduce Mr Henry [Kincaid].

Henry Kincaid - Shareholder

Thank you very much, Mr Chairman. I'd like to mention about the UK operations. With regards to UK operations do you intend to go into the European Union, and secondly have you thought of, say, the RAC or AA in the UK for some community engagement?

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Thank you Mr Kincaid. The answer is no, we don't intend to expand beyond our current investment in the UK into any other part of Europe at this point in time, and the focus will be more on growing our home markets as well as Asia where we have identified opportunities, and remediate

in the UK. But, no, we're not looking at any expansion beyond that.

Henry Kincaid - Shareholder

Thank you.

Operator

Chairman, I'd like to reintroduce Mr Peter Starr.


Thank you Mr Schwartz. Just noticed there that we've got a much younger looking Glen Rivell - but it's sort of tongue in cheek I say that.


I just -- it might be -- I was a bit surprised that there wasn't any sort of announcements given that [Rivell] was there last year, and the Chairman didn't make any -- or Mike didn't mention anything so.

I'd just like to say that we valued very much Mr Rivell on behalf of the shareholders that I represent. Glen was also very available; I'd often wander down from my place at 48 there at Martin Place no appointment, Glen was available, he'd also see me I had a matter to discuss. So I hope, Chris, you're going to be in the same vain.

Taking another point, Mr Schwartz from what Joe has spoken about, and similar to the lady that spoke about the Board. If that statement is wrong, and I do believe it is wrong -- what they've said -- that needs to be clarified at the media briefing please. I'd like that done. Thank you.

I know that the ACCC and also the -- we have a bit do with the shareholders association -- I notice there's a new person representing today. But I know one of the things being talked about is that for institute -- not institutions, but for retail shareholders to have a voice on the Board, this is a

thing that's been slowly progressed and progressed more. Certainly on behalf of the shareholders I represent, which I'm one, and all the other blokes I've got today, we would be -- we'd have no problem in

having somebody like Joe on the Board representing the shareholders. I say that because he is well qualified, he's been here to all the meetings, and you know he's -- I think that's a good thing.

I think that's the thing that the ASIC and the regulators are looking at now because given about remuneration -- that's going to be talked about later on -- and things like that. I think it's an important point because often just recently -- the last couple of days both Pacific brands and GUD had their remunerations voted down, you know.

So, yeah, in that respect so yeah.


Thank you, Peter. I think I watched with interest Mr Nagey's reaction to you putting him up for the Board, he did look slightly shocked, but I think it is worth commenting, it may not be quite the time. But the reality of the process for electing directors is quite substantial, and what we do each year is look at what we call a skills matrix: so what do we need, and what do we have, and are there gaps? We use both our own people as

well as external sources to finesse that.

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So it is something we take very seriously, and equally when it comes to rem, and we'll talk about it later, we listen a lot. We talk to people as we have to you and to your clients, we talk to the advisory groups, we talk to our institutional shareholders to get a feel for where the markets at. So

we certainly don't take it lightly at all. Finally, as to this younger Mr Rivell next to me, I have no doubt that he will be as responsive as Glen was. There was an announcement at the

time that was made, but you're right we didn't welcome him today. So I certainly do so. Thank you.


Can he stand up now?


Here -- no, no do you want to stand up?

Operator

Chairman, I'd like to reintroduce Mr Joe Nagey.


Thank you. My apologies, Mr Chairman and to the members here, this concern with remuneration can we get onto that? Or should I --


No, I think if we could leave it until later, Joe, thank you.


Alright, there are three questions there on it, but okay, that's fine.


Thank you.


Oh, no, hang on one moment. There is one that was asked to me by [Ian Scandriff], and I don't understand this one well. Perhaps others will

understand it. But the issue here I understand it is that there's a move going on to take the registration off car windows, and I was asked whether -- and they claim that's going to happen. You know that the slip of paper you put on there. I don't understand that at all, but does anyone--


We don't, no, afraid not.


It has been talked about.

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I'm not aware of any registration move to do that, but in fact not overly aware of the discussion. It's one that we'll look into.


Okay, Ian asked me to ask you whether you'd agree with it. So I won't ask you of that because if you don't know about it you can't talk about it.


Yep.


Sorry.


I believe based on the fact there are no more questions from the floor, thank you for all who have asked the questions.




If you like to certainly.

Operator

Chairman, I'd like to introduce Mr Philip Baxter.

Philip Baxter - Shareholder

I'm sorry, Mr Chairman, I was behind him but I thought we were discussing financial matters rather than wide-ranging. What does strike me as very important and no one's mentioned is the fact that yesterday we were awarded a shonkey award.

Now, you know, that in relation to all the tremendous work you're all doing it might seem a minor thing, but we seem to be lumped together with all insurers, general satisfaction, but not just dissatisfaction but shonkey dealings. Now that's terribly bad PR. It's only a minor thing on the

surface but it's going to do a great deal of harm to the industry. It seems to me that you're slipping up on the PR. Now there's another question I'd had which seems to be lumped together which is the directors' remuneration increase. Now you must have been a bit apprehensive because you didn't say how much in your general review. You said it was average. That's all very well, but it's a very inept time to bring it out because we're getting revolutions in the capital cities. So it might have been better if that had been deferred.

So what I'd like to know with this [shonkey] award is how do you rate in relation to other companies? Are you just as bad as they are? Or we've had our wonderful explanation of how it's all very logical, you know, we get -- you by the -- what the legal thing says, and you're doing that. So, but, at the same time you're saying that the government's going to bring out a legislation which will unify things by definition.

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Now that means that you are not taking the initiative -- I don't see there's much initiative in the industry as a general thing which relates to the remuneration. There's other ways of attracting workers rather than money. Now if you had a company which was looked as a worthwhile place to

work without any money at all you get good directors, good staff without the [reward]. There are such companies where people virtually pay to work.


Mr Baxter I think you're now probably moving more into remuneration. You have asked a couple of questions which perhaps we can respond to -

-


My main concern is that fact lacking the right public relations and answering the people on the doorstep, yeah, thanks.


Thank you, thank you. Just for those who are unaware of what Mr Baxter is referring to, there is a magazine called Choice magazine that I presume to enable it to sell more magazines has an award each year which is called the Shonk of the Year, or the something of the year equivalent to that, and they last night awarded that, not to us, but to the industry as a whole. I think that the industry responded quite well in fact, and

described it as irresponsible. I think that's what it was. I think those are easy, cheap shots to make. But we won't be responding further because we wouldn't want to be giving it any more credibility than it deserves.

from 2007 to 2010. In consultation again with our institutional shareholders and some of our major shareholders, and the remuneration governance people we came to the view that there was simply no logic in it. So the increase last year -- and somebody will tell me I'm wrong -- by a half a %, but it was three-and-a-half or four percent -- four percent. Thanks Chris.

P R E S E N T A T I O N


Okay, I think there are now no more questions on the floor, and I believe that shareholders as a whole have now had a reasonable opportunity to ask questions. As I indicated earlier for those shareholders who are unable to remain for the whole meeting, or for the voting on the resolutions

voting on the resolutions may be completed manually. As you leave the meeting please return your keypad and your data card to staff member, and register your voting intentions on a voting card

which will be made available at desks outside the auditorium. There have been a large number of votes casts directly and by proxy, and those shareholders here today are obviously only a small minority on

the 835,000 members on the Company's register. In addition each share in the Company carries the right to one vote and the poll reflects those voting entitlements more fully. Accordingly I will not ask for a show of hands but direct that we move straight to a poll for each resolution. I believe this is the fairest way to proceed.

The returning officer, Mr Will [Mongrovious] has given me a report as to the results of direct and proxy voting instructions received for each item of business. I have accepted his recommendations as to the admission and rejection of proxies and direct voting instructions and have made

rulings accordingly. The preliminary results on the voting, proxies and votes from attendees at today's meeting for each resolution, will be displayed on the screen at

the close of the poll on each of the resolutions. Once the polls have been closed and the votes compiled a report on the final results will be announced to the Australian Securities Exchange and then be published on the Company's website at www.iag.com.au and be made available at the Company's registered office.

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There are four candidates standing for three board positions. Resolution 1 and 2 each relates to the re-election of directors to the Board.

Resolution 3 and 4 each relate to the election of new directors. In order to be re-elected or elected a candidate must receive more votes validly cast in favour of their election than against. If all candidates

receive such a majority the three candidates receiving the most votes in favour of the election will be elected as directors. Accordingly I will advise the preliminary outcome of election and re-election of directors at the conclusion of the vote on resolution 4.

I now propose to proceed to a discussion on each of the resolutions 1 to 4. These items of business will be discussed in succession and a poll taken after discussion of each resolution for attendees to register their vote.

Each candidate will address the meeting in the order of resolutions as set out in the notice of meeting. After each candidate addresses the meeting shareholders will be invited to speak to the re-election or election of that candidate. As resolution 1 is for my own re-election as a director I will now step down as chairman and hand over to Yasmin Allen until the vote on resolution 1 is concluded.

Yasmin Allen - IAG - Director

Thank you, Brian. Resolution 1 is that Brian Schwartz be re-elected as a director. The text of resolution 1 is set out in your notice of meeting. The board unanimously recommend that you vote in favour of the re-election of Brian Schwartz. I would now like to invite Brian to address the meeting.


Thank you, Yasmin. Ladies and gentlemen, I'm very conscious that you've already heard a lot of me today so I'll be as concise as I can. My background and qualifications are set out in the Notice of Meeting sent to you as shareholders.

In brief after a long career as Chief Executive of Ernst & Young, Australia and then Investec Bank, I chose to take on the new challenge some six years ago of becoming a board director. That's when I joined IAG's board and I became Chairman last year.

As you've already heard me say my first year as Chairman has been a challenging one, not just for IAG but for the industry as a whole. Nonetheless the Board has been very active and our focus has resulted in some very good things that I think have been achieved.

We've improved results in a very difficult environment. We've re-set the Company strategy with a focus on Australia and New Zealand, growing our Asian presence and remediating the UK business. We have a focus on succession management and we're in a much stronger position today

than we have been in recent years. Board renewal which is ongoing with the appointment this year of Peter Bush, a recent board review confirmed that the Board is cohesive and

productive. As a result of this I believe the Company is on a sound footing with strategic clarity and the right team in place. It's my nature to continually broaden, as well as share, my knowledge through involvement in complementary activities that interest me.

I do this not only because I enjoy it but because I believe it's vital that companies and boards can benefit from fresh perspectives. That's why I'm also involved in activities to support diversity in corporate Australia and at IAG specifically. I'm deputy chair of the Football Federation of Australia and I sit as a director on boards of two listed companies.

I believe these activities help me do a better job as Chairman of IAG and have never compromised my IAG board commitments. I'm keen to continue to work on your behalf with my colleagues on the Board and the executive team to enhance the performance of our company and to

deliver shareholder value to you. I look forward to your continued support. Thank you.


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Thank you, Brian. Now if anyone wishes to speak to the resolution please make your way now to the microphone. I note we have one question microphone 2, thank you.


Operator

Chairman, I'd like to reintroduce Mr Jack Tilburn.


Thank you.


Yes, acting Chairwoman, Yasmin, thank you very much and ladies and gentlemen just a short, sharp and snappy reflection and perspection (sic) for a vote for Mr Schwartz our present Chairman. An agreeable, pleasant, harmonious Chairman who respects and regards shareholder democracy

at our Annual General Meeting here today and also last year. Most Chairmen, ladies and gentlemen, behave and conduct on the DAC syndrome, dictatorship, arrogance and contempt of our shareholders. So

Mr Schwartz I give you my yes vote and I ask other shareholders to join with me and wish you the very best for the next three years.


Thank you very much.


Thank you, Mr Allen and we reiterate your support and recommendation of Brian. The next question microphone 1.

Operator

Chairperson, I'd like to reintroduce Mr Peter Starr.


Thank you.


Ms Allen, just a question through you to Brian who is standing. You will see out your full term, Brian?


Yes, I will.


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Okay. In light of that we intend - all the proxies and the votes I have will all be voting for your re-election.


Thank you.


And I will too.


Thank you.


We have a question at microphone 2?

Operator

Chairman, I'd like to reintroduce Mr Gregory Simone.


Pens at the ready. No oath, no affirmation, no worries. So no excuses please. Through Chairwoman elect, Yasmin Allen, first has Mr Schwartz been able to negotiate IAG becoming the general insurance provider for Westfield London Development Shepherd's Bush and its London

underground railway and Westfield Almeida Junior Shopping Centres, Rio de Janeiro, Brazil, both of which you would know are home for the next two summer Olympics? If so, why so? If not, why not?


Thanks, Brian.


Thank you. The answer is Mr Schwartz has a bit of a conflict in trying to do that and stays well clear of getting involved in both sides of such a transaction so that's up to the management of the Company and I think beyond the scope of the Chair.


Secondly, through Chairwoman elect, Yasmin Allen, knowing that Mr Schwartz has to have his nose in all the business that is IAG Insurance and Mr Schwartz guarantee that IAG's strategic investment in Bohai Property Insurance Property Limited was a straight cash into the Chinese

company's bank accounts? Can he rule out that the figure of AUD100 million plus or minus AUD100,000 was not used for requests for goodie bags with AUD20,000 pearl necklaces, AUD5 million for investment books and advertising promotions, AUD10.3 million for investment viability reports, AUD2.5 million for Chinese Communist Party consultancy fees or individuals by the name of Peter [Hargitai]?

All of this predicated upon an approximate AUD100,000 investment if we are to believe the untold FIFA World Cup bid of a 50,000 fold increase in a AUD100,000 investment. Personally I'd like that figure to be doubled. If so, why so? If not, why not?

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Yes, I can give you that assurance.


Okay, thank you. Another question at microphone 1, thank you.

Operator

Chairperson, I'd like to reintroduce Mr Reginald Lobb.


Just a procedural question. We are going to vote, I presume on each of these four applicants for re-election, election as the names come up. This is a little different to what many of us have been accustomed to, to have a piece of paper in front of us with four names, four squares and then direction to vote for three people.

I think we need to be aware - I think persons in this room need to be aware that if we wish to vote for the last - the fourth person - we have to drop one of the others. I just ask for that to be clarified so that we are all aware that if we or somebody wants to vote for Mr Talbot we have to

choose not to vote for the other three?


No, that's not correct. You can vote for all people coming up for election and the three with the most votes will be elected to the Board.


Thank you.


Any other questions?

Operator

Chairperson, I'd like to reintroduce Mr Joe Nagey.


Apologies but that last question raised in my mind another question. The annual report and discussion of it is like when we were all children going to school, it was like your report card. I wonder why we have to have a vote for the Board, which is in a sense looking at how you perform, until we finish completely the annual report? That's the first question. I've asked that question before and I never get a satisfactory answer. I'm not sure if I've asked it of IAG but I think that should be on the back end.

The other point is can the report on the Board be made public? If not, why not? I won't go if so, why so but you know--


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Do you want me take that?


Do you want me to take it?


Yes.

Brian Schwartz. It's done by an external person and individual feedback is given to firstly the total board and then to individual members of the Board. I think that if it were to be made public it would probably reduce the effectiveness of it because I suspect that people would feel a bit inhibited about going into a lot of detail.

It's very detailed, it's very open and honest and it's designed to be that way. I think on the first question I think we as a company have actually moved the discussion from beginning to end with our financial reports I think in years gone by. I think that the first session is designed to perhaps

cover all of the issues and then we address all the binding votes and then go to rem afterwards. To be honest it's not something we've debated in recent time and we'll certainly give that some consideration. Thank you.


Right, if there's no more questions that concludes the discussion on resolution 1. I now direct that the poll for resolution 1 be taken and that attendees register their voting intention by pressing the appropriate number on their keypad which is shown on the screen.


For Mr Schwartz we press 1?

Unidentified Company Representative

Yes.


1, 4, yes thank you. If you have any other questions our attendants are on the floor who can help you. Does anyone need any help? Is it closed?


No.


No, still counting. That's pretty good. That will be all right. All right. Thank you. I now declare the poll closed on resolution 1. Thank you ladies

and gentlemen. Your votes have been added to the direct and proxy votes already received by the voting deadline and the preliminary vote result of resolution 1 is now shown or is about to be shown on your screen - 99%, very good.

Based on this preliminary vote Brian Schwartz has received more votes cast in favour than against. I would now like to hand the meeting --

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Many more.


Many more, yes that's correct. I would now like to hand the meeting back to Brian. Thanks, Brian. P R E S E N T A T I O N


Thank you Yasmin, and thank you very much ladies and gentlemen. Resolution 2 is that Philip Twyman be re-elected as a Director. The text of

Resolution 2 is set out in the Notice of Meeting. The Board unanimously recommends that you vote in favour of the re-election of Philip Twyman to the Board. I now invite Philip to address the meeting.

Philip Twyman - IAG - Director

Thank you Brian and good morning ladies and gentlemen. Thank you for giving me the chance to address your meeting this morning. I am proud

to have spent the last three years working on behalf of you, the shareholders at IAG. Since you elected me to the Board, IAG has worked hard to establish a clear and practical strategy for the Group as well as reinvigorate some of its core businesses and to exit underperforming businesses.

Your Board and management are very closely aligned with this strategy and the Board will continue to focus on improving shareholder returns and is working alongside management to make the most of our opportunities. Now, my background and experience enable me to be actively involved in this process particularly in the areas of insurance risk (inaudible) and strategic thinking and financial analysis. I've spent my whole life working for insurance groups both here and overseas and I've worked as an executive and as a director of insurance groups both large and small and I've seen some great successes and some really awful failures.

So this means I have a deep understanding of how companies like IAG work and most importantly the difference between an executive role and a director's role.

Since you appointed me to the Board of IAG, the Board has asked me to chair the Audit and Risk Committee and this committee has been particularly important through the period of the GFC and the biggest natural peril events we've ever had; Australian floods and New Zealand

earthquakes. We've seen all too often companies coming unstuck in similar circumstances because they've had very weak reporting or risk management

practices. IAG, on the other hand, has retained its solid financial position. In this committee role I am ably assisted by a strong finance and risk management team together with my fellow directors Hugh Fletcher, Yasmin Allen and Peter Bush and each of them bring complementary skills to the committee.

As a Director as a Chair of this committee, I will continue to ensure that IAG remains transparent and accountable in its financial reporting a and that both financial and operating risk continue to be rigorously assessed. I'm delighted that the Board is structured to enhance debate and decision

making because as shareholders you require your investment to take measured risks to generate returns. In my experience with companies here and overseas I think we have a world class management team who understand the balance between risk

and reward and they are working for the long term. I'd like to thank this opportunity to thank our executives for their hard work during a very challenging year.

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I'd also like to confirm that I have both the time and the energy to fulfil my duties as a non-exec Director at IAG. My depth of experience in the financial sector and more broadly is such that I believe I can bring value for shareholders and if you re-elect me I will continue to do so. Thank

you very much.


Thank you Philip. If anyone wishes to speak in relation to this resolution please make your way towards the microphone queue.



I would agree.


Thank you. We take that. That concludes - if there is - we just have Mr Nagey.


My apologies.


Not at all.


And my apologies to Mr Twyman. Mr Twyman, I was referring not so much to your experiences in insurance but I was referring to the business of making acquisitions and acquisition risk. That was where I was trying to make the differentiation when I used Yasmin Allen in that respect. It was special risks and obviously with the experience in London it wasn't really fully thought out. I'm not blaming you for that or any members of

the Board because they don't know what went on but I'm just saying to you that's something that's always on my mind when it comes to acquisitions.

Philip Twyman - IAG - Director

Thank you very much Mr Nagey. Because when I was in London the companies I was with probably acquired and sold 50 or more companies.

Some went well, some less well and most importantly I learned a lot from that. Thank you. P R E S E N T A T I O N


Thank you Philip. If there is no further discussion I now direct that the poll for resolution to be taken and that attendees register their voting

intention by pressing the appropriate number on their keypad as shown on the screen. Be with you in a moment, it's taking its time. We think that

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that is it. Thank you ladies and gentlemen. Your votes have now been added so the direct and proxy votes received by their voting deadline and the preliminary results of Resolution 2 should now be shown on the screen.

Based on this preliminary result, Philip Twyman has received more votes cast in favour of his election than against. Congratulations Philip.

Resolution 3 is that Peter Bush be elected as a director. The text of Resolution 3 is set out in the Notice of Meeting. The Board unanimously recommends that you vote in favor of the election of Peter Bush to the Board. I know invite Peter to address the meeting.

Peter Bush - IAG - Director

Thank you Brian and I welcome this opportunity to speak briefly to you as the shareholders of your company. I retired about 18 months ago from

line management and since then have pursued a career, if you like, as a non-executive director and currently hold two other board seats at Pacific Brands and on Nine Entertainment.

My career has spanned some 40 years, largely in fast moving goods, consumer goods companies and through the general function of marketing in those companies. Towards the end of my career I've held several senior management roles and a number of chief executive roles. My core skills are in fast moving consumer goods marketing and indeed marketing and marketing strategy and my appointment and recruitment to the Board in

December last year was a direct result of a review of the Board and looking for the portfolio of complementary skills across the Board to compliment the other skills that were already in existence there.

I think at this particular time in history, my skills on this Board are most pertinent, in that as the market place is evolving in the way customers interact and relate with brands, because of the development on the internet and more importantly and/or as importantly the range of changes that are going on in people's quest for greater value and greater concern about the kinds of products they are buying. These kinds of skills are heightened in thinking about how we go to market and how we manage our brand and how we relate most importantly to all our customers and build those long term relationships with our customers.

I believe that my skills, together with the broader skills that exist on the Board, are a great blend for a very, very confident and functional board. I thank you.


Thank you Peter. If anyone wishes to speak in relation to this resolution, please make your way towards the microphone queue and I understand there is a question at microphone one.


Operator

Chairman, I'd like to re-introduce Mr Peter Starr.


Thank you.


Thank you Mr Chairman. I just have a question through you. MrÂ Bush would be well aware of what the remuneration report and the voting down of Pacific Brands. So - and what's gone on there and the share price. So he's well aware of that. I hope that in the votes I'm about to cast,

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again through you Mr Chairman, is that the actual specifics he's going to bring to the Board and will you have any conflicts with the other two directorships Mr Bush? That's my concern. Thank you.


Look, the general comment that I can make at this point in time, I think in respect to my other directorships I would say that at this point in time my dance card is full. In that sense, in terms of workload I sought - when I decided to pursue a non-executive director's career, I sought to pursue between two and three - sorry, between three and four boards and frankly I've landed with three and believe very strongly that that's an

appropriate workload. I will say that in the first 12 months, because of a pre-existing board schedule, I have unfortunately missed and I don't think it's reflected in the

current phase, but certainly in next year's meeting you will see that I have missed a board meeting, I think two board meetings, due to another schedule that pre-existed and took priority. But I can assure you that those conflicts have been removed for the next calendar year because I've been able to plan them better.


Given that response, I intend to vote for you and the proxies I hold.


Thank you.


Thank you.


And so do I.


Thank you.



Thanks. That concludes the discussion on resolution 3 and I know direct that the poll for resolution 3 be taken and that attendees register their

voting intention by pressing the appropriate number on their keypad as shown on the screen. I think that's done and I now declare the poll closed on resolution 3.

Thank you ladies and gentlemen. Your votes have been added to the direct and proxy votes received by the voting deadline and the preliminary results of resolution 3 are now shown on the screen.


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Based on this preliminary result, Peter Bush has received more votes cast in favour of his election than against. Congratulations Peter. Resolution 4 is that Richard Talbot be elected as a director. The text of resolution 4 is set out in the Notice of Meeting. The Board unanimously recommends that you vote against the election of Richard Talbot to the Board. I know invite Richard Talbot to address the meeting. Mr Talbot.

Richard Talbot - IAG - Director

Well, this is my daughter's father of the bride speech. It's not the right one. I'd better see if I can get the right one here. Hello. Actually, she was just married three weeks ago, so I'm a very proud father of the bride.

I've been nominated to stand by shareholders who would like to see all NRMA insurance policy holders Queensland flood claims paid out. It's an honour to receive their nomination.

Some of you may know that IAG started out in the mid 1920s as a member and insurer in NRMA Insurance. It began by budging the product of another insurer MMI and selling it at a discount. This was well received by its members, who were also members of its parent organization, the NRMA Road Service and its founding president was JCÂ Watson, who was Australia's first Labor Prime Minister.

The 1925 NRMA Insurance Directors Report read the provision of cheaper and more liberal insurance on behalf of members maybe regarded as one of the most important undertakings entered upon. The phenomenal success already achieved in the short period of working, is intensely gratifying. Members are urged to accord their individual support to the scheme, remembering that any surplus accruing will be used to further reduce premiums and in providing additional benefits for members. Well, Watson and his founding directors weren't wrong.

From time to time along the way NRMA Insurance has given back surplus profits to its policyholder members with insurance rebates and I'm proud to be able to say that I played a role in the last rebate scheme of the early 1990s when some AUD$300 million was returned to policyholders via discounted and rebated premiums. Now, you'll see back then policyholders came first. So when events like the Coffs Harbour

and later the Wollongong floods came along, claims were paid out because at the heart of the NRMA Insurance operation was that it was being run for the benefit of policyholders and not for the profit of shareholders. That was in fact the essence of what made NRMA Insurance so great and provided - and proved to be a willing formula for the best part of three-quarters of a century.

The other privately owned insurers hated this and couldn't compete with NRMA Insurance's great way of looking after its policyholders. So the push was on within the insurance industry network to de-neutralize NRMA Insurance, to bring it back to the field. A decade ago the CEO of QBE

Insurance said to me that the de-neutralization of NRMA Insurance is the best thing that ever happened to QBE and that they were really worried and what they were really worried about was that I might again stop it from happening.

So in the 1990s the then encumbered board were keen to lock up the [board] in control by listing NRMA Insurance on the AXS and then get the big director an executive share bonus schemes going, just like you see operating in the remuneration report you're being asked to approve today.

So in 2000 we're finally listing this outfit on the AXS. An Information Memorandum was published to the 2 million NRMA members and I kept a copy. Some of you may remember it. I kept a copy and in the short statement I was able to make in today's Notice of Meeting, to you I quoted the few lines from that IM regarding the promises that nothing was going to change in the way claims were going to be handled or policyholders

were to be treated. Well, a decade on and flood victim policyholders of NRMA Insurance in Queensland are finding out the hard way that those written undertakings don't account for much. Here in New South Wales where most of the mums and dads IAG shareholders live, we don't hear much about the plight of the Queensland flood victims, especially many months down the track. Now while other insurers like Suncorp have paid up all the claims, we find NRMA Insurance hasn't paid out all the claims. I've asked to be told the number and value of those outstanding claims. But this information

has been denied to me. Recently the Queensland floods commission of enquiry has asked for the same information. They've even had to threaten IAG's legal team with issuing a warrant against this organization to get this information.

So I put it to you, instead of spending millions of dollars on such things as sponsoring overpaid footballers and unnecessary multi-million dollar remuneration packages, this organization's resources would be much better spent by looking after its policyholders in their hour of need. Paying out the Queensland flood victims' claims can be seen as a commercial decision to protect the Company's good name built over many generations.

Indeed, I've been party to taking such decisions before and I believe it is in the organization's best interests to do so again.

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Thank you.


Just one thing if I may, The Mitchell Library, the State Library of New South Wales has accepted my, I think it's about 120 boxed document,

boxed collection of all my NRMA years and if any of you are interested in the history of this organization and how demutualisation's are run and come about, it's up there for all to see for future generations and law students, historians, and just the normal mums and dads. Thank you.


Thank you Mr Talbot. If anyone wishes to speak in relation to this resolution, please make your way towards the microphone. Q U E S T I O N A N D A N S W E R

Operator

Chairman I'd like to re-introduce Mr Joe Nagey.


This is highly unusual what we just heard and I feel it would be appropriate, it may not be right for the Board meeting, but I think Mr Schwartz should respond to the implied criticisms made by the last speaking concerning your performance in the Queensland floods before I ask my question, Mr Talbot.


It is a bit unusual but I'm happy to respond. I think it's fair to say that what - and I could go through each one and perhaps comment and not agree with much of what was said but I won't, I think I'll just make a broad comment and that is that what actually we agreed to was we would make decisions on claims in line with the wording and intent of the relevant insurance policy. That's what we've always said, that's what we do today

and it's what we did then. I think for us to sell or to have home and contents flood insurance and we don't charge a premium for, and that we don't include therefore in our

risk, wouldn't for you shareholders be a very sustainable business model at the end of the day I think that would be my overriding observation.


All right my question is this, I'll just preface it by saying that I speak as a biased speaker or as a biased questioner, I have known Mr Talbot since

my failed attempt to join the NRMA board, I got to know him very well and let me say again, that he's a fighter and a lot of things that he did for NRMA, turned NRMA around from those hectic days at the end of the last century. My question to Mr Talbot is though, what has he learned from his unhappy experience, that resulted in him being put of the Board of NRMA. Thank you.


Look, I suppose we all live and learn, we all make mistakes I've made plenty of them over the years. But people asked me in the lead up to, I guess the float of 2000 when they wanted to split the joint up, bearing in mind that when they first tried to demutualise the entire NRMA, that was the road service that owned the insurance company and the insurance company combined.

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The board of the time said that it should never be split up. Anyway they went and split it up in 2000 and the road service - there's a lady who commented earlier on about how people are confused (inaudible) the journalists. I think there's market research has been taken to show that 80%

of people still believe that the NRMA is the one organization. That's the insurance company and the road service. But the road service actually doesn't have a right to ever again sell insurance. It has a restraint of trade placed upon it and it can only exist as basically a road service and travel company and things like that. IAG, you know NRMA insurance when it was originally listed on the stock exchange changed its name later to

IAG. NRMA insurance is just a label now but the important thing is this, from this company's point of view, that NRMA insurance, the NRMA

insurance label is the flag-ship, is the big money spinner of this organization IAG. Now if you trash the name, NRMA insurance but not paying peoples claims, people who have lost everything up there over the border, but if you trash the name of your most successful product, of your flag-ship product, well that's not good corporate practice and if you wondered why it was, the share price is AUD3.00 and I know some of you've

bought at, you mentioned earlier today you bought it when it was AUD3.00 a decade ago and it's AUD3.00 still now. Well if you're going to go around trashing the name by not paying out peoples claims, they'll walk.

Why would you insure with an insurer that doesn't pay up when you need it. You'd go to someone that would pay up. Now I put it to you, that's it's in this organizations interests to not worry about any fine print or any technicalities, we certainly didn't worry about it then and the times that we paid out Wollongong and Coffs Harbour and that, but we looked after people and as a result they kept coming back.


I think you've answered the question, thank you. Another question terminal one - terminal.

Operator

Chairman I'd like to reintroduce Mr Peter Starr.


Thank you, Mr Chairman, just an issue I have in what Mr Talbot is saying too and on behalf of the shareholders I'm representing is that he says that, you know we're not paying claims and this is - let me tell you. I was an interested party at the Queensland thing sitting in the back row. It was another insurance company that had nothing to do with our insurance company who had actually, their CEO had lied to the person said oh we

had to take compensation and he looked like a big goose on TV when he was presented with that. So I notice our CEO was nowhere near that nonsense, nor he would be, I say. But I'd just like some clarification on behalf of the other shareholders here and the shareholders I'm representing in relation to those direct claims that Mr Talbot has said that IAG is not looking after people who were insured. Please?


Is your question to answer that statement that IAG is not looking after its customers? I think it's fair to say, Mr Starr that we obviously follow this very closely. If you look at our customer satisfaction, our customer satisfaction currently sits at over 80%, which is a very high number in an industry, where, as you've heard, it's very emotive and becomes emotive at times.




Can I finish? Thank you.

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That is the philosophy of the Company is to pay claims. To pay claims where people have paid premiums in relation to that specific risk. To make ex gratia payments as has been suggested by some would cost hundreds of millions of dollars of shareholders' money for risk that wasn't covered

in the first place. It simply isn't logical and it simply isn't something that we could ever contemplate doing. But we will pay every claim on which cover has been taken out and which is validly made.


Let me say having heard that answer on behalf of the shareholders I represent that's the approach that I want to see taken.


Thank you.

Operator

Mr Chairman, I'd like to re-introduce Mr Philip Baxter.


Thank you, Mr Chairman, Board. Having heard Mr Talbot it's reinforced my feelings that it's hard to put into words. But I feel that you are too much devoted to the cash side of things rather than any social impact. People aren't always just living for money, I'm just living. The thing is I

think you are getting out of touch with the change in people's feelings about how valuable is the corporate side of things and money and you are forgetting and losing the plot over engaging with people. That's all.


Thank you, Mr Baxter. I think it's not something I would agree with. I think that as a company we are very focused on things other than only

financial, even though ultimately as shareholders I know that's what your primary objective is. But even in terms of measuring remuneration for our people we always split the assessment of their performance based on financial and non-financial measures. In fact it's as high as 50% each way. So I'd agree with you that it is very important and indeed it is something that we do actually live.



That concludes discussion on Resolution 4. I now direct that the poll for Resolution 4 be taken and that attendees register their voting intention by pressing the appropriate number on their keypad as shown on the screen. Thank you. I think I can now safely declare the poll closed on

Resolution 4. Thank you, ladies and gentlemen. Your votes have been added to the direct and proxy votes received by the voting deadline and the preliminary result of Resolution 4 is now shown on the screen.

Based on this preliminary result, Richard Talbot has not received more votes cast in favour of his election than against. Accordingly, and as indicated based on the preliminary results I can now confirm that Peter Bush has been elected and Philip Twyman and myself have been re-elected to the Board. Congratulations to all of us, thank you.

Resolution 5 is in relation to selective buy-backs. This resolution is put to the meeting in accordance with the Corporations Act as a selective buy-back requires shareholders' approval. If approved it will provide the Company with the flexibility to allow for a possible selective buy-back on

the Reset Preference Shares on the reset date of 15 June 2012 next year subject to APRA's prior approval. I should stress that the Company has not determined that it will conduct a selective buy-back. A decision on the exchange of the Reset Preference Shares will only be made closer to the time. If anyone wishes to speak in relation to this item of business please make your way towards the microphone.

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It looks like there are no questions on this topic, and we're losing people, so we will keep moving. That concludes the discussion and I now direct

that the poll for Resolution 5 be taken. That attendees register their voting intention by pressing the appropriate number on their keypad as shown on the screen. I now declare the poll closed on Resolution 5. Thank you, ladies and gentlemen, your votes have been added to the direct and proxy votes received by the voting deadline and the preliminary result of Resolution 5 is now shown on the screen. Based on this preliminary

result this resolution has been carried, thank you. The final resolution is the adoption of the Remuneration Report. This resolution is put to the meeting in accordance with the Corporations Act.

The resolution is that the Company's Remuneration Report for the financial year ended 30 June 2011 be adopted. The Remuneration Report is set on pages 19 to 35 of the Company's 2011 Annual Report and provides extensive disclosure of director and executive remuneration. Before we move to discussion on this resolution, the Chair of the Nomination, Remuneration and Sustainability Committee, Yasmin Allen, would like to

make some additional comments about IAG's approach to executive and directors' remuneration. I invite Yasmin to address the meeting.


Thank you, Mr Chairman, good afternoon, ladies and gentlemen. In developing our approach to remuneration at IAG the Board is focused on ensuring that our remuneration framework reflects our overall strategy and in step with shareholder and community expectations. Our aim is to

attract and retain high quality people at IAG who have the skills to run our business for the long term. We believe it's equally important that incentive plans are designed to align their interests with the long term interests of shareholders.

To achieve these outcomes we offer opportunities for career development and a positive work environment. We offer competitive pay which is benchmarked annually using external advisers but positioned at the middle of the market. We offer the opportunity to achieve short and long term incentives. Our incentive plans are the key mechanisms to align reward with performance. This is demonstrated by the fact that under these plans around three quarters of an executive's overall remuneration is at risk and can only be achieved if challenging goals are met. In the 2011 financial year the executive team achieved about half of their overall potential remuneration. While this was an improvement

compared with the previous year reflecting our improved overall performance it also indicates that rewards are affected by performance. Our short term incentive plan is directly linked to our corporate strategy and we measure performance using a balanced score card. This score card includes both financial goals such as return on capital and profit and non-financial goals such as customer satisfaction, employee engagement,

effective risk management and internal process improvements. Every employee has a balanced score card with goals that ensure all efforts are directed towards the delivery of the Group's overall strategy.

On average the short term incentive payments made to IAG executives in the 2011 financial year were about 60% of the maximum they were able to achieve and two thirds of this short term incentive is paid in cash. The remaining gone third is provided as a grant of share rights which vest over two years. This two year deferral directly links the incentive to the value of IAG's thus further aligning with the interests of shareholders. It

also helps retain executives and ensures a focus on business performance beyond the current year. Our long term incentive plan is designed to reward performance over three to five years and can only be realized if the Group meets two challenging performance hurdles. One based on return on equity, the other on total shareholder return.

If these hurdles are not achieved executives receive no value from their long term incentives allocation. If they are met it means the Group is outperforming. We are confident that our approach to remuneration meets the objectives I have mentioned. However, we continually review our

remuneration structure to ensure it remains effective. Where modifications can be made to better align interests and drive performance we will actively consider and implement those. For example, last year following new regulatory guidelines we have changed our deferred short and long term incentive plans to provide the Board with discretion to claw back rewards to prevent any inappropriate reward outcomes.

This year we have provided extra disclosure in our Remuneration Report to make it more transparent and reader friendly. For example we've included an additional table at the front of the report to show the actual remuneration received by the CEO and executives during the year. This is in addition to the statutory disclosure tables, which includes accounting valuations for share based payments that may not actually be received. In summary the Board will continue to ensure IAG's remuneration practices remain in step with community expectations and also support our

objectives to reward superior and sustainable performance. To attract and retain high quality people, to strike a balance between rewarding short term and long term performance and, importantly, to align remuneration with the returns that you as shareholders receive. Ladies, and gentlemen, I recommend the Remuneration Report to you. Thank you.

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(Inaudible - microphone inaccessible).


No. No, you will need to just wait a little while please. Thank you Yasmin. If anyone wishes to speak in relation to this resolution please make your way towards the microphone and I note there is a

question at microphone one. Q U E S T I O N A N D A N S W E R

Operator

Chairman, I'd like to re-introduce Mr Joe Nagey.


You will be happy to see my backside leave. I'm a little bit puzzled by Yasmin's explanation of this, and you will see why as I ask these questions, although she did say that the Company is making an effort to claw back some of these things where people don't perform, that's exactly what my whole questions are about - in two examples.

First of all, is the Board - how does the Board justify rewarding seven executives AUD3.9 million in short-term incentives in addition to these people receiving AUD8.4 million in fixed remuneration? When market capitalization has fallen from AUD10.2 billion to AUD7.1 billion and IAG has an ROE of 9.8%. Now a bottom line to all this is my philosophy that a business firm is in the business, especially a publicly listed firm, is in the business of

creating and delivering value to its shareholders, its owners. The ownership here, the value of the ownership is dropping, so why should these people get an increase? That's my question on that one.

Secondly, concerning England, you have paid bonuses to UK CEO Utley - and I hope I pronounced his name correctly - of AUD1.6 million, which included an AUD942,000 separation, termination allowance. I agree with that one. If he was screwing up he should have been kicked out a

lot sooner. And you have also - and the business is failing and it may be failing for quite some time in spite of what we've heard today.

So I'm just wondering how you can justify that - paying these amounts of high salaries to firms like that. Why aren't you putting them on longer term incentives, and if they do perform, they turn the business around, then pay them. I get very uptight when I see them, when the business loses

money and they still get, they walk off with a handful of cash. It bothers me greatly, as I'm sure it does other people here. And finally, if I can just say one more thing, when you think of what happened to Martin Place, what's happening on Wall Street, that's why - and

that's why Yasmin I can't quite agree with your comments about aligning - how does IAG determine its remuneration policies align in step with community and shareholder expectation? You must have been out of the country when these things were happening.

Apologies if I sound smart-ass, pardon my language.


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Thank you Joe. A couple of responses. Firstly on Neil Utley, the CEO of the UK, I think that it should be clear to anybody reading the accounts, or certainly to anybody here we should make it clear, that what Mr Utley received was purely contractual. He received no performance

entitlement at all, and all that he received was what had been locked in some years before as part of his contract. There were things like long-service leave, payouts that had been agreed. But there was no performance entitlement that he received.

In relation to your second question, it's a question that obviously is at the fore of what the Board discusses and in fact had you looked at last year's report you would have noted that short-term incentives actually reduced, from memory, by about 12%. The reason that they reduced last year was because we had an awful year.

Now I'm not suggesting that this year we have had a wonderful year, but we have certainly had a lot better year than we had last year, which begins to get recognized in incentive schemes that we have in place.

So to understand the incentive scheme, only 25% of remuneration of our executives is based on the base salary - only 25% - the rest is based on performance. And in fact Yasmin alluded to the fact that only about 50% of the entitlement was received by executives because the performance

didn't reach the level that is expected. So again, as I indicated earlier, our performance isn't measured purely on financial measures, which has been suggested by others. It's measured

on a range, a balanced scorecard of both financial and non-financial, and 50% is financial and 50% is non-financial. So it is possible to score on some of those measures which entitles you some incentive, but not total.

In addition, the long-term incentive is a very substantial part of everybody's entitlement and for the first time this year a portion of it - certainly not all of it - but a portion of it, in relation to total shareholder return has kicked in. The reason that has kicked in is because in relative terms -

and I say that in relative terms - our performance has been better over the last - since we in fact reset our strategy - than our peers in the marketplace and indeed outperformed the market over that time.

So we're certainly not at all not hearing the argument that you give or indeed that we have heard around the table, but that's rationale for making those payments. Thank you.

I think we've got another one. Let's go to two, because that's in order.

Operator

Chairman, I'd like to introduce Wendy Conlan.

Wendy Conlan - Finance Sector Union - National Insurance Enterprise Council President

Thank you, Mr Chairman, for the opportunity to speak to the Board and also to the shareholders. I'm a staff member of four years and also the FSU National Insurance Enterprise Council President. It's important that this meeting hear the

perspective of IAG employees who have continued to deliver to customers during the most recent natural disasters. Employees have worked hard over the disaster period. Many of us worked longer and harder as we took calls from devastated customers,

assessed their properties, and processed their claims. We are seeking to know whether you are prepared to recognize the contribution of all employees and their efforts in striving to provide best

everyday excellent customer service, and who have ensured that the Company has returned strong results in the most difficult time by agreeing to pay all staff a decent pay outcome for 2012 and for future years that allows everyone's salary to keep pace with and better the cost of living and to acknowledge their contribution to improve productivity.

We think you can do this by recognizing employee efforts beyond the poor offer of a safety net increase of 1.5% in 2012 and a minimum increase of not less than 1% in 2013. This compares to the cost of living increases which is currently at 3.6% and the increases Directors will attract.

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IAG employees have indicated very strongly that in their next enterprise agreement they want a fair, transparent pay system that provides an annual safety net increase to help employees keep up with the cost of living increases. Will IAG commit to providing a fair, transparent pay

system which provides a proper safety net for all employees and also reduces staff turnover?


Thank you Wendy. Let me reinforce the comment you made right at the beginning, that both we and, I know, all shareholders are very appreciative of the enormous amount of effort that has been put in this year in what's been not just a difficult year for our policy holders, but for

our people as well. So let me acknowledge that right up front. You raised a lot of questions. I think I'd just like to clarify some of them and comment on some of them. Firstly, I should say - and we need to be

a little cautious - that this is a shareholder meeting and we shouldn't allow it to become an enterprise bargaining session because, clearly, it isn't, and it shouldn't be.

Nonetheless, I think you certainly deserve comment on the issues you raised. Where we are at at the moment, and the point that you make, is the 1.5% is a minimum; it is a guaranteed minimum amount. It is not what will be given. In fact, if one looks at the last 10 years the average payment that has been made - the average increase that has been made is some 4%. So it is well ahead of the kind of numbers that we are talking about,

and that is not the 1.5%. So people shouldn't confuse what actually is paid versus the safety net, which is what is being discussed by the FSU. I think there was another issue that you raised. Mike, I've missed something. My mind has just gone on--


You need to comment on the staff members and their desire to actually--


Yes. I think your comment about staff members' desire to achieve reward for performance. Let me say, we're with you. Indeed, all of the

remuneration - you heard just about executive remuneration; that they only received 50% of their entitlement because they didn't deliver all that we'd hoped for. We, as an employer, would absolutely agree that pay for performance and to differentiate between - otherwise if we just have one solution for everybody, we don't land up with a perfect scenario for anybody at the end of the day. That would be the only other comment that I

would make. Thank you very much, and thank you for raising the point. Microphone one.

Operator

Chairman, I would like to reintroduce Mr Peter Star.


Thank you, Mr Chairman. Ms Allen, just in relation to the STIs and the LTIs, which everyone knows here, I'm pretty sure, is short and long, wouldn't it be better to maybe - if you're looking at the shareholder return, and given that we were a AUD6.60 Company prior to the GFC, and we're now just over AUD3.15 my office informs me - so the meeting must have gone over well.

Given that the second half of the year has been bad as far as the impact because of what's gone on in Europe, the Board's not to blame for that, and I understand that. It's just that in tying remuneration is a big thing in as far as what we vote on to give you - and that's an important thing that I take seriously on behalf of myself and the other shareholders and the properties I represent, as well as Joe and the other people that have spoken. So I'd just like to - maybe if we could just address that, about the longer term. I think if it's a longer term thing that if you're on the Board and you achieve those things, if the things are a longer time to invest or those things to come about, I think that's maybe a better way than STIs. It's really

a bad thing in general. One other thing, Mr Schwartz, I've been asked to mention - this is to the whole Board - is that some shareholders and a lot of shareholders - you

raised in the beginning of your speech about the DRP. I've left it until now to raise that. The shareholders I represent take the DRP and they value

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the DRP. They believe in the Company. They want to hold and continue to hold. I think that you need to really look at that thing about reintroducing it and also with a discount.

Most other ASX companies do run a DRP. So I want you to be very aware of that. I'd be remiss if I didn't raise that because that's what I was asked to raise as a specific. Just getting back to what - I do appreciate what you said, Ms Allen, in the thing. Maybe if we can look at the longer

term, as to short term things - and I do appreciate like you've been asked to take - you're going to give 100%. So, obviously, you've got some recognition of what's being said and how the shareholders - the mums and dads and other shareholders - feel about these things, because it is an important issue.


Thank you, Mr Star. You're right. We have a range of different hurdles that executives need to reach before they are paid out. In terms of the - you mentioned specifically the total shareholder return. That is one of the hurdles for our LTI.

Now, you will be interested to note that that has not paid out for quite a few years because our performance has not reached the targets that we set ourselves in terms of our shareholder performance.

This year a very small proportion of that paid out because our shares - for a very short period of time - started to outperform the market. Obviously it is relative to the market or it's relative to the top 50 industrials. That removes the movement in our share price to do with external factors that are not under our control, such as the European debt crisis et cetera.

As I said in my speech, there are a range of other things that we look at too. The short term is important. The outcome of the short term does help determine your long term. So we do reward our employees based on the short term and the long term.


Thank you Yasmin. On the DRP, thank you for that. We gave it a lot of consideration. We have already received some feedback. Rest assured that each six month term we will have another look at it to see if, indeed, that is the best treatment, going forward.


I appreciate that, Mr Schwartz, because to the shareholders I represent - and maybe other shareholders who haven't spoken yet - it is important. Some people like to receive the dividend and that would probably - I think if you had that flexibility within a company of this size, I think it's a good thing, and a good thing going forward.


It is certainly part of our ongoing capital management. Thank you. I think we're at microphone two.

Operator

Chairman, I would like to reintroduce Jack Tilburn.


I've run out of paper.


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Mr Brian Schwartz and the Board of IAG and fellow shareholders, I'm sorry that some have gone away. It is a long meeting, but that's the way the cookie crumbles. I have to come down very hard and heavy on this remuneration report. Firstly, an apology for the public address system,

which I think is very seriously distorted. Part 1 will be an introduction to the matter of the remuneration report. Part 2 will be a suggestion for the remuneration report location on the

notice of meeting items of business, which should be after the financial report, in my opinion, Mr Brian Schwartz, because it is so much related to finances and economics. I think being on the end, number six, is not right and proper.

Part 3 of my speech will be a quick and snappy examination of the complex remuneration report. So, firstly, an introduction -- I go back to the Sydney Morning Herald, ladies and gentlemen, Monday 17 October. My friend, Ross Gittins, the senior economist, wrote as follows. In America, Diane Coyle, PhD from Harvard University and orthodox economist, writing in her latest book The Economics of Enough. I've re-titled it for

Australia The Economics of Corporate Greed. She states, quote, the whole merry go round of bonuses and performance related pay is a sham. In almost every occupation it is almost impossible

to identify the contribution made by any individual to profits and performance. Complicated modern organizations all depend on team work and collective contributions.

That's enough. I'd love to get her book. Now, I went to part 3. I've done the part 1 introduction of that marvelous book and orthodox economist. Please put the remuneration report after

financial reports for next year. It should not be number six. Now, the guts and muscles of any remuneration report is just what, one, are the Directors get paid? Number two, what are the top echelon

executives getting paid? Also regard, Ms Yasmin Allen, should be made in your speech to principle number 8 on page 11 of the annual report; namely remunerate fairly and responsibly.

Well, everybody in the auditorium would have a different view on that, of course, because there are 200 people here. There would be 200 different viewpoints. Close examination of page 30 reveals very, very big salary jumps. For example, the CEO, Mr Wilkins, goes up from AUD4.2 million to AUD5.7 million. That is AUD1.5 million increase - AUD1.5 million increase and jump. It is 36 basis points, 36% increase.

The Australian Reserve Bank of Australia inflation rate, we're told, is only 3%, 3% RBA, as against 36 points for Mr Wilkins. So we ask the Chairman straight away, Mr Schwartz, why? Why was this increase made?

Let me finish up on the executives, the elite. Mr Breheny gets a AUD200,000 increase. Mr Cornish gets AUD600,000 increase. Mr Foy, who has been appointed to run the UK AUD1 billion losses, up AUD900,000. Mr Hawkins, a financial officer - I want to see him - up AUD200,000. Mr

Murphy up AUD500,000. The IAG has paid out AUD2,800,000; nearly AUD3 million, on my fingers, going out as extra increases - jumps in pay. Is it all fair and reasonable? Is it all unfair and unreasonable? So over to you, Mr Schwartz, to explain to us about the large increases and large jumps, which I don't think Ms Yasmin Allen got on to.




We will get there shortly, Cecilia. Jack, thank you. Firstly, on your point of the rem, report, I think you raise a good point. I'm not sure why it's

always landed up at the last agenda item. We'll have a look at that. It does make some sense. On rem, and I know Yasmin's champing to answer this. So go on, Yasmin, you speak first. I'll speak after you, go on.


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Alright, thanks Brian. I agree with you the remuneration report is complex. We've tried to simplify that by adding those two pages at the front to show you what executives are actually paid. So instead of looking at page 30, which does look at longer term remuneration that will be paid if

challenging hurdles are met, the summary of what they're actually paid is on page 20. If you look at the CEO rem, the fixed pay actually went up 4.3%. In fact last year the CEO's remuneration fell 30% and that reflected the poor

performance of the business in that year. There was an increase in the incentive plan for the CEO and the executives this year. As I said in my speech though, nothing, up to only half of their potential. Because whilst there was an underlying improvement in the business, it

wasn't at the targets that we require longer term for this business and for shareholders. So recognizing the significant improvement to come for both incentive plans, if we reach the targets, and for shareholders, if we reach our targets.

In terms of why there is incentive remuneration, we have listened to our shareholders. Shareholders, they want to see remuneration linked to performance; that's what they tell us every time we go out and visit them. In fact I went out as the Chair of the Nomination Remuneration Committee and visited a lot of proxy holders, a lot of shareholders, and that's what they want they to see. So in fact we have 75% of our

remuneration for our executives is at risk. As I said before, only half of that's paid out. So I hope that answers most of your questions. I think there might have been one other one.


I think specifically on the CEO's remuneration, it's important to note that Mike has been in that role only for three years I think, and much of the remuneration, particularly the long term incentives, only begin to kick in now. So what you've actually got is some long term incentives that the entitlement only kicks in after three years. Also, and Yasmin has pointed out before, the disclosure that you referred to is potential rather than actual, and the actual of course will be a lot less. So what we've got with Mike is substantial increases, but all that's happening is the accounting requirement is beginning to kick in. Whether

he earns it or not will come to tell in years to come. Hopefully that answers the question. Thank you, Jack. I think we're at microphone two again.


Can I make my vote on the way out?


You can vote on your way out, thank you for joining us. They'll tell you what to do at the top if you take that with you. Thank you.

Operator

Chairman, I'd like to re-introduce Philip Baxter.


Thank you, Mr Chairman. Concerning Yasmin's deposition, I feel it's devious not to get figures. With - she refers to the two pages of the front of things, and then while she's telling us about the increases it's only vague backhanded references in proportions and numbers. So you learn about from Mr Nagey what the numbers are which are way above my comprehension.

But to get a - earlier on in your talk about the general achievements at IAG, you give real numbers, but when it comes to talking about the salaries and remunerations you just give sort of backhanded numbers. So I find that evasive, and I shouldn't really have to find out the numbers from another shareholder.

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Now it could be looked at, but it's a bit different from having them in an equal value speaking. So I don't get the same sense of what they mean without that reference. Thank you.


Thank you, Mr Baxter. Mr Baxter I think you must be one of the few shareholders who thinks we should give more information on remuneration than we currently do. It's very complex, and indeed if you look at the remuneration report on page 20 by person it will give you the total breakdown of fixed, of termination payments, of short term and long term incentives, and the totals compared for two years.

So I think that probably does give you the information. Thank you. Any other questions? We're on microphone two.

Operator

Chairman, I'd like to introduce Josephine Wiseman.


Thank you.

Josephine Wiseman - Shareholder

Yeah I have a simple question, Mr Chairman. Is the identity of those voting for and against the motion retained on the record?


No, I'm told that it's not.


The information is used by the returning officer for the purpose of verifying the votes only, it's not made available to or retained by the Company.

Operator

Chairman, I'd like to re-introduce Les Goldman.


Les Goldman, from the Australian Shareholders' Association. Look as part of my role - I mean I read probably around 150 directors' reports a year - and I mean everybody talks a lot about shareholder alignment, but it's surprising to me how few of those reports appear to make - to me at least, make a genuine attempt to demonstrate to shareholders in a language that they can understand shareholder alignment.

I'm not sure that it's necessarily about more disclosure, but it's perhaps about the type of disclosure that's being made. Perhaps even - I mean a number of people have mentioned quantum and perhaps disclosure how the quantum relates to the broader market. There may well be many

investors that would applaud a company that was paying slightly below the median rather than above the median. But my question then to the Board is, well, would you consider committing to including in next year's annual report some summaries in order to

give shareholders more information regarding shareholder alignment?

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Thank you, Mr Goldman, and as Mr Goldman's aware we actually spent some hour-and-a-half discussing this and other issues before the meeting as we do with many of the governance advisers and associations.

Indeed I think this year for the first time on page 29 we have made some attempt to begin to disclose that information, as we discussed at the meeting. It's not easy to actually get it all in a simple format to explain it. But we are aware of the issue, and as I say, we've started trying to get

there. Clearly we haven't got there fully because there've been several questions that still raise it. So we'll keep working at it. Thank you.


Thank you.

Operator

Chairman, I'd like to re-introduce David Jackson.


Thank you, Mr Chairman. Again I'm sort of harping on about the quantum issue. I was unaware we're going to get a representative from the FSU

here today, but it was quite interesting to hear what she had to say. She's talking about fixed remuneration, which apparently guaranteed something like 1.5%, but I understand that you expect to pay more than that.

So one of my questions is why, if you're only prepared to give remuneration of 1.5% increases to some employees, why is it necessary to give the CEO 6.9% in his fixed increase, and 6% for the CFO for example? Particularly when the total package, as we've heard earlier, is going to be plus 34% which I think for a company which has produced pretty average sort of results for not just one year but for a number of years.

So that would be my first question. Could I have an answer to that one please?


Yeah I think just to clarify what the discussion we had with the representatives of the FSU is they have a 1.5% guaranteed minimum, but in fact

what I said was for the last 10 years the average that was paid was 4%. So I think that's your starting point. The 1.5% is simply part of the negotiation that's ongoing.

In relation to the fixed pay of the CEO his in fact was 4% for the current year - if you allow me, I can see you're beginning to bristle - and also the Group exec which I think was at some 4.6%. As I tried to explain just a little while ago, the CEO's remuneration has kicking into it now, as a result of him being here for three years, two things. One is an improved year-on-year performance, but equally importantly and not insubstantial,

the LTI kicking in because it kicks in only after three years. As that kicks in it will reflect in the rem disclosure and quite honestly I hope that we come back in a couple of years' time and he's earned it all, because if he has then we'll all do very well out of it.


I'm just confused in that case because if you refer to page 30, the base salary there shows 1868 -- AUD1,868,000 for 2010, and AUD1,996,000, almost AUD2 million for 2011. That is, by my reckoning, 6%.


Yeah it - there is some change in disclosure year-on-year. The actual amount that was paid during the year was 4%, the increase.

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So where --what's the other 2%?


I don't have it off the top of my head.


So there's another--


No, hold on, here it is, we'll give it to you, page 31. It talks about base salary, includes amounts paid in cash and salaries sacrifices. Items such as superannuation, cars including 30% tax rebate on car expenses, parking and annual leave accruals as determined in accordance with the accounting standards. Prior year base salary was restated to include the 30% tax rebate on car expenses for certain KMPs who have salary

sacrifice arrangements on cars. That's the answer to your question. It was there actually.


The other thing on disclosure is that the page 20 which Ms Allen refers to doesn't give a comparative figure for 2010; it only gives 2011 figures as far as I can see.


Yep, that's correct. Indeed that's different information, it's not statutory disclosure. That's an attempt by the Board to give additional information to enable people to understand the actual paid versus the potential.


I think the attempt could be a lot better, Mr Chairman, if it gives them figures.


Thank you.


My next question is that you say that a lot of the incentives are long term, but looking at the potential long term incentive for the Chairman - for the CEO it's actually 150% of the base salary, whatever that might be, AUD2 million or something close to it. So and then there's another 150% which is long term. So it seems to me that if everything - if we had a brilliant year, and let's hope for shareholders' point of view we do have a brilliant year, we would be paying Mr Wilkins AUD8 million. Or he would be entitled to AUD8 million in terms of the package, if we had a brilliant year.


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I think you're using lots of statistics to arrive at a number that you want to, but I think the amount disclosed is the maximum that he can earn in any one particular period of time. I think, again Mr Jackson, we have spent a good hour-and-a-half with the ASA discussing these issues, and I

think you do have our answers. We may well disagree on some issues, but I think that's the answer.


But I think, Mr Chairman, I think that you're not - your Board is not alone in this. I mean most other boards are hiding behind all sorts of numbers and figures--


Yep.


--and paying yourself far too much based on the results that have been achieved in recent years--


Yep, Mr Jackson can I stop you for a second? You said paying ourselves far too much.


Correct.


The Board actually gets a 4% increase, that's ourselves in this instance because you referred to the Board--


Well I'm referring particularly to the executives.


Right I'd just correct that.


Yes. I mean it's outrageous, and you've only got to be reading the newspapers in the last few weeks to realize that what I'm saying is many of the

articles could have been written by the Shareholders' Association, which I'm a member as you know. It's outrageous and it continues to be outrageous and it's not a small thing to be saying that the country and the world, the GFC is largely responsible for these executives who have been hoodwinking boards and the Boards have become so weak, the Boards have said okay well we give in; it's not my money really, we'll give in and we'll give you what you want. They're grossly overpaid for what they do.


Right. Thank you. That's terrific. Can I just say that you're generalizing wildly. You're speaking about a whole range of boards. You're not speaking about this one. You talk about the newspaper over the last four weeks--

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I'm talking about all boards and your Board as well.


Excuse me Mr Jackson. Can I finish? I am chairing the meeting. You're generalizing, you're casting aspersions, you are throwing a whole range of things - which you have done to us before - and quite honestly we have done an awful lot of work going and talking not just to the Shareholders' Association, but to every governance organization in this country and we feel that we have heard and we have acted and as you will

see they agree with us.


I don't think they do. Many of them don't. (Inaudible) vote against 50% of all the rem reports--


But not ours. You're going, you're generalizing again, with respect. Thank you very much. Any other questions?




We can.

Operator

Chairman, I'd like to introduce Glen Wall.

Glen Wall - Shareholder

I'm Glen Wall, I'm also part of the Occupy Sydney, and I'm also a shareholder. I notice that Yasmin Allen said that she is aware of community

expectations. If you have a look around the city you will see homeless all over the place. They are also part of this community. I don't know what community

you mix in, but I'm sure majority of the community believe that remunerations are far too high under the current conditions. That's all I have to say, but be aware we are not happy worldwide. Thank you.



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Thank you Mr Wall. There indeed are no more questions. That concludes the discussion on resolution six. As noted in the Notice of Meeting, any undirected proxies held by me as Chairman of the meeting, other Directors or other key management personnel or any of their closely related

parties will not be voted in respect of the resolution. I now direct that the poll for resolution six be taken and that attendees register their voting intention by pressing the appropriate number on their

keypad as shown on the screen. I think I can safely declare the poll closed on resolution six.

Thank you ladies and gentlemen, your votes have been added to the direct and proxy votes received by the voting deadline and the preliminary result of resolution six is now shown on the screen.

Based on this preliminary result, the resolution has been carried.

Can I - in seeing that result, just thank Yasmin and indeed all the people who have worked tirelessly on this. We have heard the community. We have been out and we have listened to the issues that exist and we have tried to reflect them in our remuneration policies. We will continue to do that and again just to thank the team for having achieved that.

The business of this meeting has now been completed. As I indicated earlier, the final result of the polls will be provided to the Australian Securities Exchange and will be placed on the Company's website and posted at the Company's registered office tomorrow.

I now declare this meeting closed subject to the determination of the results with the polls.

On behalf of the Board of Directors of the Company I would like to take this opportunity to thank shareholders for attending today's meeting and for contributing to the discussion of the business before the meeting.

Thank you very much.

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