REMUNERATION REPORT
LETTER FROM THE PEOPLE AND REMUNERATION COMMITTEE CHAIRMAN
Dear Shareholder
IAG is pleased to present its Remuneration Report for the year ended 30 June 2015.
The People and Remuneration Committee (PARC) reaffirms its commitment to delivering remuneration outcomes that reflect both
business performance and shareholder returns, as well as ensuring IAG is able to continue to attract and retain high quality
executives.
To achieve these objectives, IAG’s remuneration structure is underpinned by five key principles:
to align remuneration with the interests of IAG’s shareholders;
to motivate employees to achieve superior and sustainable performance and discourage underperformance;
to remain market competitive to attract and retain high quality people;
to clearly communicate the remuneration policy; and
to encourage constructive behaviours and prudent risk taking that support long term financial soundness.
The following table provides a summary of some key highlights for the year ended 30 June 2015:
2015 HIGHLIGHTS
SUMMARY
Fixed remuneration remains
competitive
IAG assesses the fixed remuneration of its Executives against the market. IAG provided Executives
with a 1.5% increase in the year ended 30 June 2015. On the recommendation of the Executive
team and in recognition of the difficult market conditions in which we are operating, in August 2015
the PARC determined not to provide further fixed pay increases to our Executive team for the 2016
financial year. Our goal continues to be to provide market competitive fixed remuneration that takes
into account an Executive's experience, skills, the internal relativities of IAG’s Executive team and
comparison with external roles.
Short term performance was
sound
Short term performance for the year ended 30 June 2015 was sound. Despite a decline in insurance
margin due to adverse natural perils, IAG evolved its operating model in Australia and continued the
integration of the former Wesfarmers business to secure its leading position in both Australia and
New Zealand. Reflecting these achievements, the average Short Term Incentive (STI) payment was
61% of the maximum achievable for the Group CEO and Group Executives.
IAG delivers sustained long
term performance
IAG once again exceeded its ROE and relative TSR targets. Based on three and four years of strong
returns as measured by the ROE and TSR components of the LTI plan, both hurdles were met and the
LTI for the Group CEO and Executive team tested during the year ended 30 June 2015 vested in full.
Shareholder interests are
aligned through a mandatory
shareholding requirement
IAG believes strongly in aligning the interests of Non-Executive Directors (NEDs) and Executives with
those of shareholders. To achieve this alignment, NEDs and Executives are required to hold a
significant number of IAG shares and all exceeded their requirement at 30 June 2015.
To satisfy IAG’s ongoing governance of reward and APRA regulations, we conducted an assessment to determine if any adjustment of
unvested or unexercised equity grants was required. The Board of Directors is satisfied that no adjustment is necessary.
The Board had an independent assessment of its remuneration undertaken. As a consequence, in the year ended 30 June 2015 the
Board increased the fees for the main Board and Committees by 3% to maintain its positioning against the market. In August 2015,
the People and Remuneration Committee determined not to increase the main Board fees for the 2016 financial year, consistent with
the approach adopted for executive fixed remuneration. It was determined to increase Committee fees (excluding the Nominations
Committee) to better align these fees to the market.
IAG is committed to ensuring the Remuneration Report presents executive remuneration in a consistent, concise and simple manner,
as well as complying with the Corporations Act 2001. As in previous years, in this report the company voluntarily discloses the actual
remuneration received by Executives, in addition to meeting our statutory reporting obligations.
The People and Remuneration Committee is confident that IAG’s remuneration framework supports the Group’s financial and strategic
goals now and into the future.
Yours sincerely
Elizabeth Bryan
Chairman - People and Remuneration Committee
16 IAG ANNUAL REPORT 2015
