IV. NZD subordinated bonds
The NZD subordinated bonds were issued with a face value of NZ$325 million (equivalent to $246 million at date of issue) by the
Company.
Key terms and conditions:
Fixed interest rate of 7.5% per annum payable quarterly;
The bonds mature on 15 December 2036 with the issuer having the option to redeem at par from 15 December 2016 and at
subsequent interest payment dates subject to approval from APRA;
If the bonds are not redeemed by 15 December 2016, the interest rate will equal the sum of the five year New Zealand swap rate
on 15 December 2016 and each fifth anniversary thereafter plus a margin of 3.78% per annum; and
The bonds may also be redeemed by the issuer upon certain events subject to APRA's approval.
V. AUD subordinated convertible term notes
The AUD subordinated convertible term notes were issued with a face value of $350 million by Insurance Australia Limited (IAL), a
wholly owned subsidiary of the Company.
Key terms and conditions:
Investors are entitled to interest paid quarterly at a floating rate equal to the three month bank bill swap rate (BBSW) plus a
margin of 2.80% per annum;
The notes mature on 19 March 2040 unless converted or redeemed earlier, subject to rights of conversion or redemption;
IAL has an option to redeem the securities at face value between years five and six and for certain tax and regulatory events (in
each case subject to APRA’s prior written approval);
The securities are convertible into IAG ordinary shares at the option of holders on certain dates from year eight;
If APRA determines IAG or IAL to be non-viable, the securities will convert into IAG ordinary shares or, if that is not possible, the
securities will be written off; and
The number of IAG ordinary shares received on conversion will be based on a volume-weighted average price (VWAP) over a
certain period, less a discount of 1%. The number of IAG ordinary shares will be capped at a maximum number set by reference
to the VWAP of IAG ordinary shares at the issue date (50% of that VWAP for conversion at the holder’s option and 20% of that
VWAP for conversion on non-viability).
C. FAIR VALUE INFORMATION
The interest bearing liabilities are initially measured at fair value (net of transaction costs) but are subsequently measured at
amortised cost. Based on market conditions at any point in time, the carrying value of the liabilities may not be representative of the
fair value of the liabilities.
The fair value for all interest bearing liabilities is calculated using their quoted market price (fair value hierarchy level 1).
NOTE 21. NOTES TO THE STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED
2015
2014
2015
2014
Number of
shares in
millions
Number of
shares in
millions
$m
$m
A. SHARE CAPITAL
I. Ordinary shares
Balance at the beginning of the financial year
2,341
2,079
6,775
5,353
Shares issued under institutional placement, net of transaction costs
90
219
500
1,186
Shares issued under Share Purchase Plan, net of transaction costs
-
43
-
236
Balance at the end of the financial year
2,431
2,341
7,275
6,775
All ordinary shares on issue are fully paid. Ordinary shares entitle the holder to a vote at a general meeting of the Company and to
participate in the dividends and the proceeds on winding up of the Company in proportion to the number of, and amounts paid on, the
shares held. Dividends, if declared, are subject to there being distributable profits available and not breaching APRA capital adequacy
requirements.
II. Changes during the year
On 16 June 2015, IAG issued 89,766,607 new fully paid ordinary shares at $5.57 per share, for $500 million total consideration.
B. STRATEGIC RELATIONSHIP WITH BERKSHIRE HATHAWAY
As part of the strategic relationship with Berkshire Hathaway, the Company and National Indemnity Company ('NICO') entered into a
subscription agreement dated 16 June 2015 ('Subscription Agreement'). The components of the Subscription Agreement may impact
future ordinary share capital of the Company. The terms of the Subscription Agreement were released to the ASX on 16 June 2015
(attached to the Appendix 3B on that date).
I. Put option
IAG has an option to place up to a further 121,569,233 new shares at a maximum issue price of $6.50 per share to NICO within 24
months after the date of the Subscription Agreement. Under standstill terms of the Subscription Agreement, NICO will not increase its
shareholding in IAG above 14.9% for the agreement period.
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