As we strengthen IAG, we have a clear focus on ensuring the sustainability of all facets of our business. This includes our financial viability, relationships with our customers, employee engagement, commitment to corporate social responsibility and management of environmental risks and impacts. We are taking a longer term view across our entire business, assessing future risks and emerging trends, and making sure that these inform today's decision making. We are determined to ensure that the success of our business means a strong viable future for the benefit of our shareholders, our customers, our people and the communities in which we operate

Our focus during the 2009 financial year has been to build a stronger and more sustainable business.

Our business involves managing risks, including those associated with weather events. Natural weather events have a direct link to IAG's claim costs and with climate change driving an increase in the frequency and severity of weather related events, the implications for IAG are direct and significant. While climate change and the environment will always be important, business sustainability is about balancing and recognising the interdependency between each of the five dimensions—economic, customer, workforce, community and environment.

During a period of rebuilding, our performance across all areas associated with business sustainability has been solid. In broad terms we have maintained our performance this year, despite difficult internal and external factors.

Outlook

We are proud that our approach to business sustainability has once again earned IAG recognition in the Dow Jones Sustainability Indexes and the FTSE4Good Index, and are committed to continued improvement across all of our business sustainability levers in the 2010 financial year.

This report contains a summary of our progress and performance. Detailed information is contained in the Business Sustainability section of our website.

Economic

In these challenging economic times, we have forged ahead, made improvements and worked hard to strengthen our brands and capital position. Maintaining a conservative investment strategy, securing the appropriate reinsurance cover and applying a disciplined approach to underwriting have been key. A five year summary of our economic performance can be found here.

Customers

To ensure the ongoing sustainability of our customer franchise, we need to meet and exceed our customers' and intermediaries' expectations, making every interaction our customers have with us a positive one. We need to differentiate ourselves in their eyes, giving them reasons to choose our brands for their insurance needs.

During the year, we maintained business volumes and customer satisfaction levels in our Australian and New Zealand operations, despite significant internal and external changes.

In our Australian Direct Insurance business (operating under the NRMA Insurance, SGIC and SGIO brands), we launched a range of new products to provide more options to customers, including third party fire and theft cover. We have a tailored home insurance policy for renters, a unique flood insurance option and bundled discount options for loyal customers. We also launched a number of environmentally sustainable insurance products for commercial customers in New Zealand.

CGU, our Australian intermediated insurer, has responded to demand from our distribution network for new products to meet changing customer needs. For example, to help deal with the issue of underinsurance, the CGU RightCover product helps small to medium sized businesses check that they are adequately insured.

As well as launching new products across the business, we are also offering new ways for customers to interact with us. In response to consumer feedback, we launched The Buzz, a dedicated internet business which takes the entire process from buying car insurance to making a claim, online.

Despite these initiatives, we know that the sustainability of our relationship with customers is largely determined by how we respond to claims. Being there when our customers need us most is why we exist.

Australia experienced a number of significant events throughout the year and we responded quickly to support our customers. Within 24 hours of the devastating Victorian bushfires this year, we provided a dedicated 24/7 emergency hotline for our customers, and CGU's people were on the ground at the relief centres throughout the state providing face to face assistance to customers. In the days and weeks following the bushfires, we were able to support our customers by arranging temporary accommodation and providing them with emergency financial assistance.

Workforce

Without skilled and engaged employees, it is impossible to build a sustainable organisation. It is our workforce which delivers on the promises we make to our customers, shareholders and the community and we work hard to attract and retain the best people to drive the future success of the company.

While the size of our workforce fell during the year as a result of our refined operating structure, our performance in employee measures was positive. Employee engagement is at 84% for the Group, absenteeism is static and turnover has decreased. The number of women in senior roles has fallen slightly, but our approach to workforce diversity—such as flexible work arrangements and 12 weeks' paid parental leave—remains industry best practice.

We believe it is important to have the right people with the right skills in the right roles. That's why we are continuing to invest in our people to ensure they have the necessary skills and support to implement our strategy and provide value to shareholders.

One example of this is our new performance management system in New Zealand—My Performance. This system is being used to help employees recognise what they need to do to contribute to the ongoing profitability of the Group, and rewarding them for their contribution.

At a Group level, we're focused on succession management, and have developed a Group framework that assists us to identify, assess and grow our future leaders. Driven by our executive team and board, this targeted program is addressing succession for all of our top tier roles.

Community

Insurance is the ultimate community product and relies on sharing risk across the community. As an insurer, we have a role to play in identifying and mitigating risk in the community, so our proactive involvement is important. It's an area where we can make a real difference. By sharing our knowledge, we can help to prevent crime, improve road safety and minimise damage caused by severe weather events.

This year our community investment has been more focused, driven by the operating brands which are closest to the communities they serve.

For example, we helped promote the government's New Year Safe Driving Campaign in Thailand, partnered with the Queensland Fire and Rescue Service to support a safe home program, and hosted the State Driver Reviver program in New Zealand to encourage holiday drivers to take a break during their road journey. We also continued our sponsorship of FarmSafe Australia to develop and implement educational and practical tools to help reduce injuries and prevent loss of life on farms.

In the UK, we launched ALERT (Automated Live Event Recording Technology), which enables fleet managers to monitor unsafe driver behaviour to reduce both collisions and premiums. In Australia, we also continued our long term involvement with a number of community partners, including the Volunteer Rescue Association, which in 2008/09 responded to almost 650 storm recovery and motor vehicle incidents, as well as the NRMA Insurance Community Grants program.

Our commitment to the community is most visible in the way we help communities in times of emergency, and the role we play in supporting communities rebuild and reduce their risk so they are better able to withstand catastrophic events in the future. Beyond the support for our own customers, in the aftermath of the Victorian bushfires we lodged submissions with the 2009 Victorian Bushfires Royal Commission to highlight a range of measures designed to help communities become more resilient to catastrophes. For example, we recommended further changes to strengthen building codes, continued review of land planning practices in bushfire prone areas, more equitable funding of essential fire fighting services, and educational programs to reduce the impact of underinsurance and non insurance on the community.

Environment

Managing the impact of natural perils is core business for IAG.

There have been a number of particularly significant events during the past financial year—including the tragic bushfires in Victoria, and a series of severe weather events in Queensland and northern NSW. These events have led to significant losses for our customers and the community and reinforce the need for our continuing focus in this area.

How we manage these environmental impacts directly links to our financial performance. By managing our own environmental footprint, we can reduce our carbon emissions and reduce our cost base; by integrating the impacts of climate change into our underwriting, we ensure that we are able to price weather related risk appropriately; and by helping communities to prepare and adapt for the threats of more extreme weather events, we are helping them to reduce the potential impact of these events on their lives.

We've continued to provide tools to assist customers in purchasing decisions, for example, the Greensafe Car Profiler provided by NRMA Insurance. We are also continuing to support education programs run at the grassroots level in the community through the NRMA Insurance CommunityHelp Grants program.

Our carbon footprint continued to fall during the year, due to significant reductions in electricity consumption, as well as a fall in air travel and print paper consumption, all of which bring us closer to our goal to be carbon neutral by 2012. Our UK operations are signatories to Climatewise, an initiative of The Prince of Wales's Corporate Leaders Group on Climate Change, which focuses on responding to the risks and opportunities posed by climate change. We have continued to support Earth Hour and are the first insurer in New Zealand to occupy one of the country's most environmentally friendly buildings. We also expect to achieve green star ratings for our CGU Melbourne headquarters and our offices in Parramatta in western Sydney.

We are encouraging our customers to reduce their emissions by developing products which reward people for sustainable behaviour such as the continued roll out of motor insurance discounts for fuel efficient cars.