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If you are a Shareholder of IAG shares with a registered address in Australia or New Zealand as at 7.00pm (Sydney time)on 18 February 2009, you may be eligible to participate in the IAG Share Purchase Plan.

This SPP provides eligible IAG Shareholders with the opportunity to acquire up to $5,000.00 worth of IAG Shares without brokerage or other transaction costs.

Funds raised through the SPP and the Placement will be used to improve IAG's capital mix, and to provide additional financial flexibility which the Directors consider to be prudent in these challenging market conditions. Read more about capital raising.

IAG is seeking to raise approximately $100 million under the SPP.

The SPP Application form and Booklet will be dispatched to eligible shareholders from 27 February 2009 through to 4 March 2009.

The SPP is only available to eligible shareholders with a registered address in Australia and New Zealand as at 7.00pm (Sydney time) on 18 February 2009.

The Record date was 7.00pm (Sydney time) 18 February 2009.

The offer opens on Monday, 9 March 2009.

The offer closes at 5.00pm (Sydney time) on Friday, 27 March 2009.

If you are an eligible shareholder, you may apply for one of the following four different parcels:
• $1,500.00;
• $3,000.00;
• $4,000.00; or
• $5,000.00.

$5,000 is the current legal limit that a shareholder can purchase in any 12 month period. The limit applies to eligible shareholders who may receive more than one offer under the SPP because they hold Shares in more than one capacity.

No. If you are an eligible shareholder, your rights under this offer are personal to you and non-renounceable, so you may not transfer them.

Either
• the same $3.00 price per share as institutional investors paid in the Placement; or
• a price equivalent to the average market price of IAG ordinary shares over five trading days from 30 March to 3 April 2009 inclusive,
  
  whichever is the lesser..

Once the Issue Price has been finalised, it may be the case that the money you have sent us is slightly more than the cost of your Share allocation, but less than the cost of another single Share. In that case we will donate the residual application money of the Parcel you applied for, to a charity or charities nominated by IAG.

No interest will be paid on any application money returned to you either in the event of a scaleback or if your application is considered to be invalid.

Where a trustee or nominee is a registered holder of Shares and is expressly noted on the register as holding Shares on account of a beneficiary/s, the beneficiary/s will be taken to be the registered holder of those Shares for the purposes of the SPP. An application form, certification or issue of Shares to the trustee or nominee will be taken to be an application or certification by, or an issue to, the beneficiary.

The trustee or nominee must attach a spreadsheet providing the following details for each beneficial holder when sending in their Application Form:
1) Full name
2) Trust A/C (if applicable)
3) Address
4) Number of shares applied for
5) Amount of dollars paid
6) The grand total of shares applied for and dollar amount

The trustee or nominee must send one cheque for the application under the nominee's HIN. E.g. National Nominee to send one form, one cheque and a spreadsheet containing all the details stated above.

Only Shareholders with registered addresses in Australia and New Zealand at the record date, 7.00pm (Sydney time) on 18 February 2009 may be eligible to participate.

There is no facility available for Shares to be purchased by credit card. All payments must be made by BPay® from a cheque or savings account, cheque or money order in accordance with the instructions on the Application Form.

Cheques and money orders should be made payable to "IAG Share Purchase Plan" and sent in with the Application Form using the reply paid envelope enclosed with the mailing of the SPP documentation.

If the total value of applications for Shares under the SPP is more than $100 million, IAG may undertake a Scaleback. Should this happen you may be allocated less Shares than the Parcel of Shares for which you applied and the difference will be refunded to you.

Yes, customers should use the Biller code and BPay reference number shown on the Application Form, which is required to identify your holding. If you make your payment with BPay® you do not need to return your Application Form.

Your completed Application Form, together with your cheque or money order should be sent in the envelope provided to:

Insurance Australia Group Limited
C/- Computershare Investor Services Pty Limited,
GPO Box 253
Sydney NSW 2001 AUSTRALIA

New Zealand holders will need to affix the appropriate postage.

Or, deliveries can be made in person by visiting:

Computershare Investor Services Pty Limited,
Level 3
60 Carrington Street
Sydney NSW 2000

Yes. However all Application Forms, to be valid must be received by Computershare's Sydney office by the 5pm closing time on the closing day, 27 March 2009. Therefore your Application Form will not be valid if you lodge it at one of Computershare's other offices on the closing day, 5.00pm (Sydney time) 27 March 2009.

No, as your payment must accompany your Application Form, you must return your Application Form to the address displayed on the reverse of the form or alternately, you can pay by BPay®.

No, as your payment must accompany your Application Form you must return your Application Form to the address displayed on the reverse of the form or alternately, you can pay by BPay®.

Yes, we can replace lost Application Forms.

Allotment of the new Shares will occur on Monday, 6 April 2009 and holding statements confirming the number of shares allotted will be dispatched on Thursday, 9 April 2009. Share trading on these new shares will commence on 8 April 2009.

It is the responsibility of the shareholder to confirm their holding before trading. Shareholders who sell their Shares prior to receiving their holding statement do so at their own risk.

Shareholders can
• consult their stockbroker, accountant or professional advisor; or
• refer to the terms and conditions in the booklet forwarded to eligible IAG shareholders; and
• read the SPP related documents.

Shares issued under the SPP will rank equally with existing Shares quoted on ASX, with the same voting rights, dividend rights and other entitlements. However, shares issued under the SPP will not be eligible for the 2009 interim dividend.

In the event of a Scaleback the difference between the Shares you are allocated, after rounding down to a whole number, and the Parcel you selected will be refunded to you by direct credit to your nominated account held on the Share Register or by cheque to your registered address as soon as practicable.

Shares issued under this SPP will not be eligible for the 2009 interim dividend announced on 26 February 2009 but will participate in any future Ordinary dividend payments.

The biller code for BPay® payments does not become valid until the SPP officially opens on Monday, 9 March 2009. Please try again on or after this date if you wish to make your payment using BPay®.

On 15 April 2008, IAG confirmed that it had been approached by insurance company QBE with an unsolicited and incomplete proposal to take over the company via what is known as a scheme of arrangement.

A scheme of arrangement is a way of reorganising a company's capital structure to effect a merger with another company. A scheme must be agreed to at a meeting of shareholders by a resolution passed by more than 50% of the shareholders present and voting who represent 75% of votes cast on the resolution.

The Board of IAG carefully considered the proposal and rejected it after concluding that the broad terms, in particular price, were inadequate and not in the best interests of shareholders.

On 19 May 2008, IAG confirmed that it had received a marginally revised proposal from QBE. After further careful consideration, IAG’s Board of Directors announced on 20 May 2008 that it could not recommend QBE’s revised proposal, as it remains inadequate and incomplete. As a result, QBE withdrew its proposal on 21 May 2008.

On 10 April 2008, QBE outlined to the IAG Board a takeover proposal of 0.135 QBE shares plus 50 cents cash for each IAG share, which valued IAG at $3.75 a share. On 11 April 2008, IAG advised that the proposal was unacceptable as it did not adequately reflect the value of IAG.

QBE then responded with a proposal offering 0.142 QBE shares plus 70 cents cash per IAG share, representing a 1% premium based on the closing prices of both IAG and QBE on 11 April 2008.

On 14 April 2008, IAG informed QBE that its revised proposal was still inadequate and did not reflect the value of IAG or the synergies available to QBE from a takeover.

On 16 May 2008, QBE outlined a marginally revised takeover proposal, for 0.145 QBE shares and 90 cents cash per IAG share, which equates to $4.60 per IAG share (based on the closing share price of QBE on Friday 16 May 2008). After further careful consideration, IAG’s Board of Directors announced on 20 May 2008 that it cannot recommend the revised proposal, as it remains inadequate and incomplete. As a result, QBE withdrew its proposal on 21 May 2008.

IAG will maintain its focus on maximising value for IAG shareholders and will update shareholders of any further developments.

• Is priced opportunistically to take advantage of the short term weakness in IAG’s share price, primarily caused by a low point in the insurance cycles of IAG’s core markets;
• Does not adequately reflect the underlying value or the significant synergies and value which could be created by combining the two companies; and
• Is not a fully developed offer or bid, but a partial proposal which requires the Board to recommend to shareholders a proposal via a scheme of arrangement.

QBE’s proposal represents a premium of only 10% based on the price of IAG and QBE shares, the day before the announcement of discussions. IAG considers a 10% premium is insufficient given IAG’s value and the available synergies which could be achieved through a combination of the two businesses.

IAG is a unique asset with leading insurance franchises in Australia and New Zealand supported by a number of iconic brands. The underlying performance of the Group is improving and immediate actions are being taken to build upon this improvement, including cost savings initiatives, rate increases in certain classes, the tactical reallocation of our investment portfolio and the rebalancing of our UK business towards more profitable specialty classes.