22 April 2008 Manager, Company Announcements Office ASX Limited Level 4, Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam IAG FINANCE (NEW ZEALAND) LIMITED (IAN) IAG Views Remain Unchanged Attached is an announcement lodged by QBE today, together with IAG’s response. Yours sincerely Glenn Revell Company Secretary IAG Finance (New Zealand) Limited ABN 97 111 268 243 Incorporated in Australia New Zealand Branch Level 10 151 Queen Street Auckland New Zealand T +64 (0)9 969 6130 www.iag.com.au QBE INSURANCE GROUP LIMITED ABN 28 008 485 014 Head Office 82 Pitt Street Sydney NSW 2000 AUSTRALIA Postal Address 22 April 2008 GPO Box 82 Sydney NSW 2001 AUSTRALIA Telephone: +61 (2) 9375 4444 Facsimile: +61 (2) 9231 6104 DX 10171 Sydney Stock Exchange The Manager Company Announcements ASX Limited Level 6 Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam, re: QBE’s proposal to merge with IAG Please find attached an announcement for release to the market. Yours faithfully, Duncan Ramsay Company Secretary Direct: +612 9375 4422 Mobile: +61 (0)408 037 220 Fax: +612 9231 6104 Email: [email protected] Enc. A Member of the QBE Insurance Group QBE INSURANCE GROUP LIMITED MARKET ANNOUNCEMENT QBE’S PROPOSAL TO MERGE WITH IAG To keep the market informed, QBE advises that its proposal to merge with IAG via a scheme of arrangement, which was open until 5:00pm yesterday and was rejected by the board of IAG, has at this stage been extended to 5:00 pm Monday, 5 May 2008. QBE extended its proposal as QBE believes the proposal represents a very attractive and unique opportunity to create a highly complementary global insurance business, which for IAG shareholders would: be substantially and immediately earnings accretive in year 1; provide significant benefits from QBE’s proven track record of successful integrations while sharing in the estimated $300 million of annual net pre tax synergies by 2010 and the excess risk margin diversification benefits of over $400 million that are expected to be realised from a merger of the two businesses; provide the opportunity to be part of a merged group that is ranked in the top 15 global general insurers; provide access to QBE’s strong international platform for future profitable growth and diversification; provide approximately a 12% premium above the three month VWAP prior to the proposal (a realistic measure given the current market volatility) – in addition to receiving IAG’s final FY08 dividend; and represent over 25 times FY08 IAG's earnings and over 14 times FY09 IAG’s earnings based on analyst consensus estimates. QBE understands the FY09 estimates assume a lower level of catastrophe claims. QBE’s proposal takes into account IAG's statement in February 2008 regarding profit improvements in 2H08 and FY09. While QBE acknowledges that 2007 and 2008 to date has been a more challenging period for the insurance industry in Australia, QBE has announced record profits in 2007 (up 30% from prior year) and record diluted earnings per share (up 25% from prior year). During the past four years of increased catastrophe claims for the industry, QBE’s profit has increased by 237% in total. This compares with IAG’s profit which has declined by 17% over the three years to 30 June 2007 and is expected to decline by 44% for the year to 30 June 2008 based on analysts’ consensus estimates – a combined decrease of 53% for the four years to 30 June 2008. Mr Frank O’Halloran, QBE Group CEO, said “When contrasted with a pure standalone option for IAG, our proposal allows IAG's shareholders to participate in immediate and sustainable wealth creation through QBE’s global and product spread." He added "We remain interested in seeing through our proposal if a friendly merger through a scheme of arrangement can be agreed. In any event, QBE will continue to focus on converting other opportunities in various parts of the world." As previously announced, the proposal is subject to IAG board recommendation, satisfactory due diligence, discussions with business relationship partners and signing a merger implementation deed (which would contain conditions including APRA, ACCC, NZ Commerce Commission and other regulatory approvals). Because of this, the need for normal shareholder and court scheme approvals and the provisions of any merger implementation deed if one were agreed, there can be no assurance that the proposal will proceed. QBE reserves the right to extend the period during which it is willing to discuss the proposal with IAG. 22 April 2008 MEDIA RELEASE 22 APRIL 2008 IAG VIEWS OF QBE TAKEOVER PROPOSAL REMAIN UNCHANGED Insurance Australia Group Limited (IAG) today advised that QBE’s extension of its takeover proposal until Monday, 5 May 2008 has not changed its considered views. As announced on Tuesday, 15 April 2008, the IAG Board considered the QBE proposal was incomplete and concluded that the broad terms, in particular the price, were inadequate. IAG Chairman, Mr James Strong said: “The QBE proposal remains unchanged as does the view of the IAG Board. The Board does not intend to respond any further to this takeover proposal and, as a result, the revised extension date is of no significance. “The Board and management are addressing the short term challenges facing the company such that it will be well positioned to benefit from the anticipated improvement in the insurance cycle. “The IAG Board will ensure it continues to act in the best interests of IAG’s shareholders and will keep shareholders informed of any further developments.” ENDS About Insurance Australia Group Limited Insurance Australia Group Limited (IAG) is an international general insurance group, with operations in Australia, New Zealand, the United Kingdom and Asia. Its current businesses underwrite more than $7.5 billion of premium per annum. It employs more than 16,000 people of which around 11,000 are in Australia. It sells insurance under many leading brands including NRMA Insurance, CGU, SGIO and SGIC (Australia); NZI and State (NZ); Equity Red Star and Hastings Direct (UK); and NZI and Safety (Thailand). For further information please visit www.iag.com.au Insurance Australia CORPORATE AFFAIRS INVESTOR RELATIONS Group Limited ABN 60 090 739 923 Carolyn McCann Michael Woods 388 George Street T 02 9292 9557 T 02 9292 3156 Sydney NSW 2000 M 0411 014 126 M 0411 012 220 Australia E [email protected] E [email protected] T +61 (0)2 9292 9222 www.iag.com.au 9403145_1 .