EXECUTIVE
AND DIRECTOR
REMUNERATION

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.

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 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 PARC determined not to increase 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 Nomination 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 the remuneration report the company voluntarily discloses the actual remuneration received by Executives, in addition to meeting our statutory reporting obligations.

The PARC is confident that IAG’s remuneration frameworks support the Group’s financial and strategic goals now and into the future.

These two pages contain extracts from IAG’s 2015 remuneration report. The complete remuneration report is set out on pages 16 – 35 of the 2015 annual report.

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 Return on Equity (ROE) and relative Total Shareholder Return (TSR) targets. Based on three and four years of strong returns as measured by the ROE and TSR components of the Long Term Incentive (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.