It's about everything we do
Helping the environment, managing costs

Our environmental performance

Equivalent tonnes of CO₂ emissions
Electricity use
Tool of trade fuel consumption
Office paper consumption
Print paper consumption
Air travel

Because our operating costs are reflected in the price of premiums, we must be as efficient as possible to keep premiums at an accessible level for the wider community. Our obligations to our shareholders also mean we have a responsibility to manage our costs efficiently.

The economics of insurance are based on scale: pooling and diversifying a community's risk reduce the individual cost of insuring against those risks. As the leading general insurance group in Australia and New Zealand, we are in a position to deliver value to our customers by using our scale to keep costs at a minimum. We do this through efficient management and access to volume discounts across the supply chain - without sacrificing quality. Scale also benefits our shareholders, allowing risks to be spread across a large number of policies, which means greater stability of earnings from their investment.

It's about everything we do

We look to manage costs in every part of our business. We do this in a number of ways including:

• working to keep our administration costs down;
• looking for savings in our supply chain without sacrificing quality;
• using technology to increase our efficiency; and
• identifying opportunities to integrate our business and find synergies within our operations.

Helping the environment, managing costs

We work to reduce our CO₂ emissions not only to benefit the environment but also because of the financial advantages to our business.

Our size makes efficient cost management crucial to the successful running of our business. Even seemingly basic initiatives may have a major impact financially and environmentally. For example, following recent regulatory changes, we are now able to send out replacement sheets identifying changes in policy documents rather than sending out an entire new booklet (as was the case previously). We now send 2-4 A4 sheets of changes which can be stapled to the back of the original policy documents rather than 80 A4 sheets. This simple step will reduce printing and postage costs by $6.5 million over four years. In environmental terms for the 2006 financial year, this means savings of approximately 2,000 tonnes of CO₂ emissions, or 33% of IAG's total print and office paper use compared to current consumption levels.

Challenge: Meeting environmental targets

Below is a breakdown of performance across each of our key areas of environmental impact:

IAG's electricity use increased significantly over the last year due to two main reasons:

• greater technology demands - rapid growth in consumption at one of our major sites due to the increasing requirements of technology infrastructure; and
• better measurement and reporting - our systems and processes for capturing our electricity use have improved over the last year.

Next steps

We are currently in the process of developing an energy management plan to be rolled out across IAG's major sites. More information can be found in the 'Shining the light on electricity use' case study.

We are pleased to see that our overall fuel consumption has fallen in the past 12 months.

During this time, we have also increased the number of hybrid vehicles in our tool of trade fleet to approximately 10%.

Next steps

We are currently investigating reasons for our increase in kl/vehicle. We are also looking at providing greater transparency in regard to the way we use our tool of trade vehicles. We plan to do this through monthly division reports that include the kilometres travelled/vehicle. We aim to use this information to positively influence driver behaviour.

In addition to this, we plan to continue to add to the number of hybrid vehicles in our tool of trade fleet.

Our office paper consumption per FTE has remained unchanged. Over the past year we have implemented a number of initiatives to reduce office paper consumption and improve recycling.

Pleasingly, the volume of office paper for recycling is on the increase, indicating the effectiveness of internal campaigns promoting paper recycling.

Next steps

In the 2006 financial year, we will have more tailored divisional targets for reducing office paper consumption that will be supported by an action-planning process. For instance, our Group Legal team has already begun looking at a project for implementing a paperless filing system and we are looking to increase the availability of double-sided printing across our operations. We are also working on rolling out our paper recycling facilities across more sites.

Print paper

Our print paper consumption increased considerably over the last year. This is due to one major factor - a required reprint of policy documentation to our Personal Insurance home and motor policy customers which took place in July 2004.

Next steps

We will continue to focus on reducing the amount of print paper we consume. Our CGU division is aiming to increase its focus on eBusiness over the next year and in Personal Insurance, it's estimated that our new policy booklet project will result in considerable savings in print paper. In addition, our Shareholder Relations area is looking to significantly reduce the amount of print paper it consumes by improving its online services.

IAG's overall target to reduce air travel by 5% over the 2005 financial year has not been met. This is primarily due to a significant increase in international travel over the period which can be attributed to our corporate goal of establishing a foothold in Asia.

However, we are making an impact on our domestic travel which has shown significant improvements, falling by almost 5 million kilometres - a reduction of 24% points from the previous year.

Next steps

In retrospect, we believe our target to reduce air travel is inconsistent with our strategy for international growth. As such, we have decided that it is not appropriate to set reduction targets for international travel over the coming year.

We will, however, continue to track and report on our air travel (including international travel) and are investigating options for future targets relating to domestic travel. We will also continue our focus on videoconferencing and associated training.

Challenge: Meeting environmental targets
Case study: Shining the light on electricity use
Case study: CGU eBusiness solutions