Insurance Australia : 2020 Remuneration report (A) (2.34 MB)

REMUNERATION REPORT

LETTER FROM THE CHAIRMAN OF THE PEOPLE AND REMUNERATION COMMITTEE

Dear Shareholder,

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

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

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

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

Remuneration outcomes reflect our business results and risk performance

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

Fixed pay

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

Short-term incentives (STI)

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

Long-term incentives (LTI)

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

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

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

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

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

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

24 IAG ANNUAL REPORT 2020

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

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

Jon Nicholson

Chairman, People and Remuneration Committee

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

A. KEY MANAGEMENT PERSONNEL COVERED IN THIS REPORT

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

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

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

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

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

EXECUTIVES WHO CEASED AS KMP

No Executives ceased as KMP during the 2020 financial year.

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

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

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B. EXECUTIVE REMUNERATION STRUCTURE

I. Remuneration guiding principles

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

II. Summary of remuneration components

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

TABLE 1 - REMUNERATION COMPONENTS

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

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

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

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

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

III. Remuneration mix

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

Each remuneration component is described in more detail below.

IV. Fixed pay

TABLE 2 - FIXED PAY

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

28 IAG ANNUAL REPORT 2020

V. Short-term incentive

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

TABLE 3 - STI AND DEFERRED STI

STI

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

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

VI. Long-term incentive

The table below summarises key terms of the LTI plan.

TABLE 4 - LTI

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

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

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

C. LINKING IAG'S PERFORMANCE AND REWARD

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

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

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

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

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

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

32 IAG ANNUAL REPORT 2020

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

measure the impact of these initiatives for its customers.

Customer growth numbers (personal) (7.5%)

Customer growth numbers (commercial) (5%)

Employee advocacy (7.5%)

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

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OBJECTIVE AND	RATIONALE	MEASURE AND OUTCOME	COMMENT
WEIGHTING

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

Met

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

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

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

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

Met

IAG has continued to build on its risk maturity.

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

II. STI outcomes for the year ended 30 June 2020

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

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

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

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

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

34 IAG ANNUAL REPORT 2020

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

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

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

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

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

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

Relative TSR - 100% vesting

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

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

100 Index for the 2015/2016 LTI award:

35

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

TABLE 7 - HISTORICAL ANALYSIS OF SHAREHOLDER RETURN

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

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

IV. Actual remuneration received by Executives

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

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

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

TABLE 8 - ACTUAL REMUNERATION RECEIVED IN 2020 AND 2019

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

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

36 IAG ANNUAL REPORT 2020

V. Group CEO remuneration

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

D. EXECUTIVE REMUNERATION GOVERNANCE

I. IAG's approach to remuneration governance

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

37

II. Use of remuneration consultants

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

III. Adjustment framework

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

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

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

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

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

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

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

IV. Mandatory shareholding requirement for Executives

Table 9 outlines the mandatory shareholding requirements for Executives.

TABLE 9 - MANDATORY SHAREHOLDING REQUIREMENT

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

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

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

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

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

II. Mandatory shareholding requirement for Non-Executive Directors

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

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

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

38 IAG ANNUAL REPORT 2020

III. Remuneration structure

Non-Executive Director remuneration comprises:

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

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

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

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

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

b. INSURANCE AUSTRALIA GROUP LIMITED BOARD FEES

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

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

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

c. SUBSIDIARY BOARD FEES

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

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

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

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

39

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

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

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

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

40 IAG ANNUAL REPORT 2020

APPENDIX 1. STATUTORY REMUNERATION DISCLOSURE REQUIREMENTS

I. Total remuneration for Executives

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

TABLE 13 - STATUTORY REMUNERATION DETAILS (EXECUTIVES)

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

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

41

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

II. Total remuneration details for Non-Executive Directors

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

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

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

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

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

42 IAG ANNUAL REPORT 2020

APPENDIX 2. EXECUTIVE EMPLOYMENT AGREEMENTS

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

TABLE 15 - EXECUTIVE EMPLOYMENT AGREEMENTS

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

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

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

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

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

No KMP contracts were terminated during the reporting period.

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

43

APPENDIX 3. MOVEMENT IN EQUITY PLANS WITHIN THE FINANCIAL YEAR

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

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

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

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

44 IAG ANNUAL REPORT 2020

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

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

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

PERFORMANCE

TEST

HURDLE

AWARD

GRANT DATE

BASE DATE

DATE

ACHIEVEMENT LAST EXERCISE DATE

2019/2020 - TSR(1)

17/04/2020

01/07/2019

30/06/2023

N/A

17/04/2027

2019/2020 - ROE(1)

17/04/2020

01/07/2019

30/06/2023

N/A

17/04/2027

2019/2020 - TSR

(1)

12/11/2019

01/07/2019

30/06/2023

N/A

12/11/2026

2019/2020 - ROE

(1)

12/11/2019

01/07/2019

30/06/2023

N/A

12/11/2026

2018/2019 - TSR(1)

29/03/2019

01/07/2018

30/06/2022

N/A

29/03/2026

2018/2019 - ROE(1)

29/03/2019

01/07/2018

30/06/2022

N/A

29/03/2026

2018/2019 - TSR

(1)

05/11/2018

01/07/2018

30/06/2022

N/A

05/11/2025

2018/2019 - ROE

(1)

05/11/2018

01/07/2018

30/06/2022

N/A

05/11/2025

2017/2018 - TSR(1)

30/04/2018

30/09/2017

30/09/2021

N/A

30/04/2025

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

30/04/2018

01/07/2017

30/06/2020

N/A

30/04/2025

2017/2018 - TSR

(1)

03/11/2017

30/09/2017

30/09/2021

N/A

03/11/2024

2017/2018 - ROE

(1),(2)

03/11/2017

01/07/2017

30/06/2020

N/A

03/11/2024

2016/2017 - TSR(1)

24/03/2017

30/09/2016

30/09/2020

N/A

24/03/2024

2016/2017 - ROE(1)

24/03/2017

01/07/2016

30/06/2019

100%

24/03/2024

2016/2017 - TSR

(1)

02/11/2016

30/09/2016

30/09/2020

N/A

02/11/2023

2016/2017 - ROE

(1)

02/11/2016

01/07/2016

30/06/2019

100%

02/11/2023

2015/2016 - TSR(1)

31/03/2016

30/09/2015

30/09/2019

100%

31/03/2023

2015/2016 - TSR

(1)

02/11/2015

30/09/2015

30/09/2019

100%

02/11/2022

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

APPENDIX 4. RELATED PARTY INTERESTS

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

I. Movements in total number of ordinary shares held

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

TABLE 18 - MOVEMENT IN TOTAL NUMBER OF ORDINARY SHARES HELD

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

45

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

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

II. Movements in total number of capital notes held

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

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

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

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

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

ROUNDING OF AMOUNTS

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

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

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

Peter Harmer

Director

46 IAG ANNUAL REPORT 2020