FINANCIAL STATEMENTS

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Mercy Elliott
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1 FINANCIAL STATEMENTS CONTENT Statement of comprehensive income 39 Balance sheet 40 Statement of changes in equity 41 Cash flow statement 42 S TO THE FINANCIAL STATEMENTS 1 Summary of significant accounting policies 43 2 Critical accounting estimates and judgements 52 3 Insurance risk management 52 4 Financial risk management 56 5 Analysis of income 61 6 Analysis of expenses 62 7 Income tax 63 8 Segment reporting 64 9 Earnings per share Dividends Claims Reinsurance and other recoveries on outstanding claims Deferred insurance assets Unearned premium liability Investments Receivables Property and equipment Intangible assets Goodwill Trade and other payables Restructuring provision Interest bearing liabilities Notes to the statement of changes in equity Notes to the cash flow statement Acquisitions and disposals of businesses Details of subsidiaries Investment in joint ventures and associates Employee benefits Share based remuneration Superannuation Commitments Contingencies Related party disclosures Derivatives Capital management Net tangible assets Remuneration of auditors Parent entity disclosures Events subsequent to reporting date 108 PAGE 38 IAG ANNUAL REPORT 2012

2 STATEMENT OF COMPREHENSIVE INCOME Premium revenue 5 8,577 7,858 Outwards reinsurance premium expense 6 (734) (620) Net premium revenue (i) 7,843 7,238 Claims expense 6 (7,455) (8,493) Reinsurance and other recoveries revenue 5 1,664 3,404 Net claims expense (ii) 11 (5,791) (5,089) Acquisition costs 6 (1,130) (1,009) Other underwriting expenses 6 (716) (721) Fire services levies 6 (298) (248) Underwriting expenses (iii) (2,144) (1,978) Underwriting profit/(loss) (i) + (ii) + (iii) (92) 171 Investment income on assets backing insurance liabilities Investment expenses on assets backing insurance liabilities 6 (20) (19) Insurance profit/(loss) Investment income on equity holders' funds Fee and other income Share of net profit/(loss) of associates 5 (12) (8) Finance costs 6 (97) (86) Fee based, corporate and other expenses 6 (625) (434) Net income attributable to non-controlling interests in unitholders' funds 6 (9) (4) Profit/(loss) before income tax Income tax (expense)/credit 7 (178) (276) Profit/(loss) for the year OTHER COMPREHENSIVE INCOME AND (EXPENSE), NET OF TAX Actuarial gains and (losses) on defined benefit arrangements (73) 7 Net movement in foreign currency translation reserve 18 (4) Income tax (expense)/credit on other comprehensive income and (expense) 18 (46) Other comprehensive income and (expense), net of tax (37) (43) Total comprehensive income and (expense) for the year, net of tax PROFIT/(LOSS) FOR THE YEAR ATTRIBUTABLE TO Equity holders of the Parent Non-controlling interests Profit/(loss) for the year TOTAL COMPREHENSIVE INCOME AND (EXPENSE) FOR THE YEAR ATTRIBUTABLE TO Equity holders of the Parent Non-controlling interests Total comprehensive income and (expense) for the year, net of tax EARNINGS PER SHARE cents cents Basic earnings per ordinary share Diluted earnings per ordinary share The above statement of comprehensive income should be read in conjunction with the notes to the financial statements. 39

3 BALANCE SHEET AS AT 30 JUNE 2012 ASSETS Cash held for operational purposes Investments 15 12,953 11,893 Premium receivable 16 2,502 2,081 Trade and other receivables Reinsurance and other recoveries on outstanding claims 12 3,928 4,010 Deferred levies and charges Deferred outwards reinsurance expense Deferred acquisition costs Deferred tax assets Property and equipment Investment in joint ventures and associates Intangible assets Goodwill 19 1,625 1,644 Other assets Total assets 25,132 23,029 LIABILITIES Trade and other payables 20 1, Reinsurance premium payable Restructuring provision Current tax liabilities Unearned premium liability 14 4,942 4,355 Non-controlling interests in unitholders' funds Employee benefits provision Deferred tax liabilities Outstanding claims liability 11 11,709 10,889 Interest bearing liabilities 22 1,659 1,377 Other liabilities Total liabilities 20,608 18,449 Net assets 4,524 4,580 EQUITY Share capital 5,353 5,353 Treasury shares held in trust (55) (57) Reserves (68) (84) Retained earnings (887) (795) Parent interest 4,343 4,417 Non-controlling interests Total equity 4,524 4,580 The above balance sheet should be read in conjunction with the notes to the financial statements. 40 IAG ANNUAL REPORT 2012

4 STATEMENT OF CHANGES IN EQUITY SHARE CAPITAL TREASURY SHARES HELD IN TRUST FOREIGN CURRENCY TRANSLATION RESERVE SHARE BASED REMUN- ERATION RESERVE RETAINED EARNINGS NON- CONTROLLING INTERESTS TOTAL EQUITY $m 2012 Balance at the beginning of the financial year 5,353 (57) (109) 25 (795) 163 4,580 Profit/(loss) for the year Other comprehensive income and (expense) (52) - (37) Total comprehensive income/(expense) for the year Transactions with owners in their capacity as owners Shares acquired and held in trust - (14) (14) Share based payment expense recognised Share based remuneration vested (17) Dividends determined and paid (250) (40) (290) Dividends received on treasury shares held in trust Balance at the end of the financial year 5,353 (55) (94) 26 (887) 181 4, Balance at the beginning of the financial year 5,353 (58) (61) 27 (775) 170 4,656 Profit/(loss) for the year Other comprehensive income and (expense) - - (48) (43) Total comprehensive income/(expense) for the year - - (48) Transactions with owners in their capacity as owners Shares acquired and held in trust - (14) (14) Share based payment expense recognised Share based remuneration vested (13) (2) - - Share based remuneration lapsed (7) Non-controlling interests in acquisitions during the year Dividends determined and paid (281) (97) (378) Dividends received on treasury shares held in trust Balance at the end of the financial year 5,353 (57) (109) 25 (795) 163 4,580 The above statement of changes in equity should be read in conjunction with the notes to the financial statements. 41

5 CASH FLOW STATEMENT CASH FLOWS FROM OPERATING ACTIVITIES Premium received 8,692 8,020 Reinsurance and other recoveries received 1,688 1,056 Claims costs paid (6,524) (5,991) Outwards reinsurance premium expense paid (796) (768) Dividends received Interest and trust distributions received Finance costs paid (88) (84) Income taxes refunded 3 6 Income taxes paid (253) (150) Other operating receipts 1, Other operating payments (3,094) (3,090) Net cash flows from operating activities 24 1, CASH FLOWS FROM INVESTING ACTIVITIES Net cash flows on acquisition of subsidiaries and associates (236) (37) Proceeds from disposal of investments and property and equipment 9,090 9,123 Outlays for investments and property and equipment (9,623) (9,048) Net cash flows from investing activities (769) 38 CASH FLOWS FROM FINANCING ACTIVITIES Outlays for purchase of treasury shares (14) (14) Proceeds from issue of trust units Outlays for redemption of trust units (104) (75) Proceeds from borrowings Repayment of borrowings (350) (4) Dividends paid to IAG equity holders (250) (281) Dividends paid to non-controlling interests (40) (97) Dividends received on treasury shares 2 1 Net cash flows from financing activities (17) (337) Net movement in cash held Effects of exchange rate changes on balances of cash held in foreign currencies 6 (42) Cash and cash equivalents at the beginning of the financial year 1,332 1,053 Cash and cash equivalents at the end of the financial year 24 2,066 1,332 The above cash flow statement should be read in conjunction with the notes to the financial statements. 42 IAG ANNUAL REPORT 2012

STATEMENT OF COMPREHENSIVE INCOME

STATEMENT OF COMPREHENSIVE INCOME * Premium revenue 5 9,135 8,046 Outwards reinsurance premium expense 6 (817) (700) Net premium revenue (i) 8,318 7,346 Claims expense 6 (5,800) (6,979) Reinsurance and