Independent Assurance Statement

To the Board and Stakeholders of Insurance Australia Group (IAG):

IAG commissioned Net Balance Management Group Pty Ltd (Net Balance) to provide a statement, representing our independent opinion on the integrity of information presented within the IAG Sustainability Report 2007 (the 'report'). This is the fourth such report by the organisation. The report presents IAG's sustainability performance over the period 1st July 2006 to 30th June 2007. IAG was responsible for the preparation of the report and the information and assessments contained within it, for determining IAG's sustainability performance objectives, and for establishing and maintaining appropriate performance management and internal control systems from which the reported information is derived. This statement represents the assurance team's independent opinion. Net Balance's responsibility in performing our assurance activities is to the management of IAG alone and in accordance with the terms of reference agreed with them. Any reliance a third party may place on the Report is entirely at their own risk.

Assurance Objective
The objective of the assurance process is to provide IAG and its stakeholders with an independent opinion on the materiality, completeness and accuracy of the information presented in the report, and whether IAG has responded to stakeholders' concerns and adequately communicated those responses within the report. This is confirmed through assurance of the information provided at a broad desktop level, reviewing underlying systems, processes and competencies that support data presented.

Assurance Process and Limitations
Our approach to assurance provision is aligned to the AA1000 Assurance Standard and was undertaken between August and October 2007. IAG applies its own internal reporting guidelines for sustainability reporting ("the Criteria"), a concise version of which can be found in the Glossary in the report. Accordingly, the assurance process involved:

• Interviewing selected external stakeholders to ascertain their perception of the material sustainability issues faced by IAG, and the appropriateness of IAG's response to these issues in terms of their performance as well as external reporting. A total of eight interviews were conducted with institutional shareholders, government and regulators, non government organisations, suppliers and community groups;
• A review of IAG's key sustainability strategies, policies, objectives, management systems, measurement and reporting procedures, background documentation and data collection and reporting procedures;
• A review of the report for any significant anomalies, particularly in relation to significant claims as well as trends in data;
• A review of the internal control structure which management has established and from which the report data is derived;
• A review of the accuracy of all indicators included in the 'Key Indicators' section of the report;
• A review of the accuracy and source of statements made in the report through examination of over 80 selected data points and statements relating to Australian and New Zealand business data. The verified items were broadly selected to not only satisfy the principles of materiality, completeness and responsiveness, but also as supporting evidence for conclusions reached;
• A series of interviews with key personnel responsible for collating, writing and internally auditing various parts of the report in order to substantiate the veracity of selected claims;
• An overview of the embeddedness of IAG's key economic, environmental and social policies;
• A review of external media sources relating to IAG's sustainability performance, to ensure that no significant omissions were made.

The assurance process was subject to the following limitations:

• Our scope of work did not involve verification of the accuracy and robustness of financial data, other than that relating to environmental, social or broader economic aspects of performance as discussed above.
• The process was undertaken through a 'desktop' review of data provided by IAG. Interviews were conducted with indicator managers and internal auditors either in person or by telephone.

Our Independence and Credentials
Net Balance was not responsible for preparation of any part of this report. Net Balance has not undertaken any commissions for IAG in the reporting period concerning reporting or data collection. Independence was ensured by selecting an assurance team that had no other involvement with IAG during the reporting period that could impair the team's independence or objectivity. The team comprised of individuals with expertise in the insurance and finance sector and in environmental and social performance measurement. The assurance team has collectively undertaken over 60 assurance engagements in Australia over the past 10 years and is also led by a Lead Sustainability Assurance Practitioner (Lead CSAP) accredited by the Independent Register of Certified Auditors (IRCA UK).

Our Opinion
Based on the scope of the assurance process, the following represents Net Balance's opinion:

• The findings of the assurance engagement provide confidence in the reporting processes established. The level of data accuracy was found to be within acceptable limits, but some additional improvements to data management, including the reduction of manual aggregation and transcription processes and internal reviews of statements are recommended to reduce potential for minor anomalies. Data trails selected were easily identifiable and traceable, and the personnel responsible were able to reliably demonstrate the origin(s) and interpretation of data.
• The statements made in the report appropriately reflect environmental, social and economic performance achieved during the period.
• The internal review process established for both Australian and New Zealand data is appropriate and provides quality control around the data derived.
• All suggested changes were satisfactorily addressed by IAG prior to finalising the report.

Conclusions and Recommendations
The following key recommendations are made:

• Consistency between Australian and New Zealand definitions for certain data sets needs to be improved. This will also present a challenge when data from Asian and UK operations are included in the future.
• Community investment data requires further improvement to definition and collation.
• Clear lines of responsibility should be identified for each indicator and indicator managers should have greater responsibility for the accuracy of their indicators.
• That a process of internal auditing similar to that used for the numerical data be implemented for statements made in the report, and that each statement made is accompanied by verifiable source data at the time of writing.
• Data that is provided by external parties generally lacked the level of accuracy found in internally sourced data. This requires further process improvements.

Overall, the auditor is satisfied that the report is an appropriate representation of IAG's sustainability performance during the reporting period. Net Balance has provided suggestions for reporting improvement in some areas outlined in a more detailed report presented to IAG management.

On behalf of the verification team
29th October 2007
Melbourne, Australia

Terence Jeyaretnam
Director, Net Balance & Lead CSAP (IRCA UK)

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